Managing Employees in the SERVICE SECTOR

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<ul><li><p>7/29/2019 Managing Employees in the SERVICE SECTOR</p><p> 1/23</p><p>MANAGING EMPLOYEES IN THE SERVICESECTOR: A LITERATURE REVIEW AND</p><p>CONCEPTUAL DEVELOPMENT</p><p>Jonathan R. AndersonUniversity of West Georgia</p><p>ABSTRACT: Our economy is slowly shifting from a manufacturing base to a</p><p>service base. Yet, management literature has been slow to respond. We know</p><p>little about the unique challenges faced by managers in the service sector. This</p><p>paper reviews literature on research on management practice and employee</p><p>perceptions that lead to positive customer outcomes. Specifically, relational</p><p>coordination efforts by a manager are suggested to lead to specific employee</p><p>behaviors that have been correlated with customer outcomes. This literature</p><p>review and conceptual development are presented here in hopes that future re-</p><p>search will take a deeper look at the challenges faced by service sector managers.</p><p>KEY WORDS: service management; customer-service employees.</p><p>INTRODUCTION</p><p>The United States Department of Labor and the Bureau of Labor</p><p>Statistics (1999) state that the service producing sector of the economy</p><p>is projected to grow by 19.1 million wage and-salary jobs between 1998</p><p>and 2008. This represents nearly 95% of total employment growth over</p><p>that period. In the later year, the service-producing sector will account</p><p>for almost three out of every four jobs in the [United States] economy</p><p>(p.1) Additionally it has been noted that the service sector now domi-</p><p>nates employment and GNP figures for the United States and, more</p><p>broadly, the economically developed world (Bowen &amp; Hallowell, 2002).</p><p>As our economy moves from a manufacturing base to a service base,</p><p>management scholars have been slow to respond to the unique chal-</p><p>lenges faced by service sector firms (Bowen &amp; Ford, 2002). In practice,</p><p>despite the long run of service dominance, we still find two things to be</p><p>true. One, key indicators of customer satisfaction with services confirm</p><p>Journal of Business and Psychology, Vol. 20, No. 4, Summer 2006 (2005)</p><p>DOI: 10.1007/s10869-005-9002-5</p><p>501</p><p>0889-3268/06/0600-0501/0 2005 Springer Science+Business Media, Inc.</p><p>Address correspondence to Jonathan R. Anderson, Management and Business Systems,University of West Georgia, Carrollton, GA 30118-3030. E-mail:</p></li><li><p>7/29/2019 Managing Employees in the SERVICE SECTOR</p><p> 2/23</p><p>that in direct phrasing, Service stinks Second, the academic man-</p><p>agement literature still offers little in the way of comprehensive treat-</p><p>ment of the differences between managing service organizations and</p><p>managing goods-producing organizations (Bowen &amp; Hallowell, 2002).</p><p>As the service sector grows, some have even suggested that the</p><p>quality of service in organizations is actually declining (Oliva &amp; Sterman,</p><p>2001). Yet, as the service sector becomes the dominant sector in our</p><p>economy, it is imperative that management scholars better understandthe role of management practice in increasing employee service perfor-</p><p>mance (Bebko, 2000; Schlessinger &amp; Heskett, 1991).</p><p>Much of the management literature focuses on the distinct nature of</p><p>managing in the manufacturing sector (Batt, 2002). Early work in sci-</p><p>entific management and human relations focused on management</p><p>practices that intend to increase employee productivity (McGregor, 1960;</p><p>Taylor, 1911). In a manufacturing setting both the design of the job</p><p>(Hackman &amp; Oldham, 1980) and the reward systems (Skinner, 1953) candirectly influence the performance of an employee. Additionally, man-</p><p>agement behavior directly influences the production level and quality of</p><p>an employee.</p><p>A manufacturing organizations output (whatever the widget is)</p><p>will eventually end up in the hands of a customer. This customer willbuild an opinion of the organization based on the effectiveness of the</p><p>widget. If the widget works, the company is viewed as successful. The</p><p>customer may refer friends to the companys products and return formore widgets at a later time. In a manufacturing setting the quality of</p><p>the widget is a buffer between variables such as employee attitude,</p><p>employee satisfaction, employee performance, and customer perceptions</p><p>of the organization. An organization can place many control systems</p><p>between the employee and the final widget the customer holds. This is</p><p>not the case in the service sector.</p><p>Customers perceptions rather than widget quality are the drivingforce behind management practice in the service sector (Maxham &amp;Netemeyer, 2002). Service sector firms are aware that if a customer is</p><p>satisfied with the organization, the customer will likely do business with</p><p>the firm many times in the future (Curasi &amp; Norman, 2002). Unlike the</p><p>manufacturing firm, a service sector firms reputation is built on the</p><p>quality of service delivery, not on the quality of a widget. Therefore,</p><p>there is no buffer between an employees attitude, an employees satis-</p><p>faction, or an employees performance and the customers perception of</p><p>the organization. Key participants in any service transaction are service</p><p>employees. It is they whom customers meet on entering a department</p><p>store or boarding an aircraft. Thus, a single employee may tint a cus-</p><p>tomers image of a service enterprise (Rafaeli, 1989). This challenge is</p><p>amplified when, as is the case in many service sector firms, the customer</p><p>JOURNAL OF BUSINESS AND PSYCHOLOGY502</p></li><li><p>7/29/2019 Managing Employees in the SERVICE SECTOR</p><p> 3/23</p><p>interacts with an employee who works in the lowest level of the organi-</p><p>zation.</p><p>As our economy moves from a manufacturing base toward a service</p><p>base, it is essential for firms to understand the new economics of service,</p><p>[such that] frontline workers and customers need to be the center of</p><p>management concern (Heskett, Jones, Loveman, Sasser, &amp; Schlesinger,</p><p>1994). Hesket et al. (1994) suggests that this new focus on the customer</p><p>as a measure of the bottom line will alter management practice withinorganizations.</p><p>Yet, little is known about the influence of a managers behavior on</p><p>employee outcomes and how those employee outcomes in turn influence</p><p>customer perceptions of organizational performance in a service sector</p><p>setting (Tellefsen &amp; Nermin, 2002). Improving customer outcomes</p><p>through improved management practice relies on this triadic link.</p><p>Understanding this process of management behavior influencing em-</p><p>ployee perceptions, and employee perceptions influencing customer out-comes, is critical to improving management practice in the service sector</p><p>(Pugh, Dietz, Wiley, &amp; Brooks, 2002). The aim of this paper is to help</p><p>scholars better understand management practice in the service sector by</p><p>addressing several research questions. First, does a managers behavior</p><p>toward an employee influence how the employee perceives the organi-zation and his or her work? Second, does the employees perception of</p><p>management and the organization influence how an employee interacts</p><p>with a customer and is a customers outcome influenced by the employ-ees perceptions of the organization? Finally, do employee perceptions</p><p>have a mediating effect between management practice and customer</p><p>outcomes? These questions will be addressed throughout this paper on</p><p>the manageremployeecustomer triad level. The intended contribution</p><p>of this paper is to identify the relationships between constructs that</p><p>provide a framework for understanding and managing employees in a</p><p>service sector setting.Organizations in the service sector work continually at building and</p><p>maintaining customer loyalty. Many service organizations spend large</p><p>sums of money as they work to create customer satisfaction with im-</p><p>proved interactions between employees and customers. Yet, it is difficult</p><p>to directly measure the influence of these programs on organizational</p><p>performance. This paper will add substance and direction to programs</p><p>that aim to increase customer outcomes through employee perceptions</p><p>and managers behaviors. If an organization intends to create better</p><p>relationships between management and employees in an effort to</p><p>increase positive customer outcomes, this paper provides a framework for</p><p>evaluating customer-service programs and their intended impact on</p><p>organizations.</p><p>J. R. ANDERSON 503</p></li><li><p>7/29/2019 Managing Employees in the SERVICE SECTOR</p><p> 4/23</p><p>MANAGING EMPLOYEES IN THE SERVICE SECTOR</p><p>Managers in the service sector are faced with increasing challenges.</p><p>The span of control of these managers continues to grow, while the de-</p><p>mand for customer satisfaction is also on the rise. With more employees</p><p>to manage and greater demands on performance, service sector manag-</p><p>ers can easily feel restricted in their ability to develop relationships with</p><p>employees on the dyad-level. Indeed, managing employees in a servicesector setting provides unique challenges for managers, particularly if</p><p>the manager attempts to develop quality dyadic relationships with</p><p>employees. Bowen and Ford (2002) suggest that managing employees in</p><p>the service sector is different than managing employees in the manu-</p><p>facturing sector on several fronts: first, the process of delivering a service</p><p>involves the customer in the production process; second, service</p><p>employees must respond to each situation in a unique manner; third,</p><p>emotional labor is an important part of the work in a service setting;and fourth, service employees not only perform work, they are required</p><p>to manage the service delivery process. It is the human element of service</p><p>delivery that distinguishes management practice in a service setting</p><p>from management practice in a manufacturing setting. A typical em-</p><p>ployee in a service setting has direct contact with customers; this cus-tomer contact generally takes place between employees at the lowest</p><p>levels of the organization. If a service sector employee is frustrated with</p><p>the work environment, this frustration does not only influence the em-ployees performance on the manufacturing line (as it would in a man-</p><p>ufacturing setting), it can directly influence a customers perception of</p><p>the organization (Schlesinger &amp; Heskett, 1991).</p><p>Schneider, Parkington, and Buxton (1980) saw the importance of</p><p>linking manager behavior to customer outcomes mediated by employee</p><p>performance and perceptions. The authors studied the influence of</p><p>organizational culture on employee perceptions and then linked em-ployee perceptions to customer outcomes. They collected data from 23branches of a large bank. Samples of employees and customers from each</p><p>branch were surveyed. Each employee was asked to respond to questions</p><p>about the culture of the bank, and customers were asked to respond to</p><p>questions about the banks service. Correlations between the employee</p><p>responses and the customer responses reveal that employees and cus-</p><p>tomers generally agreed on the level of service provided to the customer</p><p>by the bank; additionally, branch service orientation or service culture</p><p>(created by management) correlated with customer perceptions of overall</p><p>quality of service. This study suggests that employees can identify the</p><p>culture or service orientation of an organization (created by manage-</p><p>ment) and that a customers perception of service quality may correlate</p><p>with these employee perceptions.</p><p>JOURNAL OF BUSINESS AND PSYCHOLOGY504</p></li><li><p>7/29/2019 Managing Employees in the SERVICE SECTOR</p><p> 5/23</p><p>Building on this work, a series of projects studied the macro-level</p><p>relationship between organizational culture or organizational policies</p><p>and customer perceptions of organizational performance. This approach</p><p>suggests that the culture of service within the organization (created by</p><p>management) will lead to higher levels of customer satisfaction. This</p><p>relationship has been supported in studies in an insurance organization</p><p>(Schlesinger &amp; J, 1991), 57 branches of a large bank (Johnson, 1996), a</p><p>hospital setting (Niedz, 1998), and a large retail store (Borucki &amp; Burke,1999). These studies all suggest that a customers perception of the</p><p>quality of service is correlated with the service climate in the organiza-</p><p>tion. This research builds support for the importance of organizations</p><p>building a culture of service in an effort to increase customer satisfaction;</p><p>however, it does not speak to the process that managers should follow as</p><p>they work to improve employee perceptions and customer outcomes.</p><p>Another approach has been to address this question on the em-</p><p>ployeecustomer dyad level. That is, how do the perceptions of employeeslead to customer outcomes? In a retail banking setting, an employees</p><p>perception of obstacles in the workplace has been correlated with lower</p><p>levels of customer satisfaction (Brown &amp; Mitchell, 1993). In a survey of</p><p>774 customeremployee transactions in the hotel, restaurant, and air-</p><p>lines industries, employee attitudes were correlated with customer out-comes (Bitner, Booms, &amp; Mohr, 1994). In a survey of 160 offices in a</p><p>service-oriented organization empirical support was found for a positive</p><p>relationship between employee attitudes and customer satisfaction(Schmit &amp; Allscheid, 1995). Using a qualitative approach, a positive link</p><p>was found between employee relationship building and repeat customer</p><p>satisfaction in a retail sales setting (Beatty, Mayer, Coleman, Reynolds,</p><p>&amp; Lee, 1996). Using data from seven different service areas, three diverse</p><p>samples, and two methods of measuring a service relationship, results</p><p>suggest that a customer who was able to develop a relationship with one</p><p>customer-service person was more satisfied than a customer whorepeatedly changed customer contact employees (Gutek, Bhappu, Liao-Troth, &amp; Cherry, 1999). Employee organizational citizenship behaviors</p><p>have been linked to higher customer outcomes (Yoon &amp; Suh, 2003); and it</p><p>has been found that both climate variables and employee variables play a</p><p>central role in determining customer outcomes (Yoon, Beatty, &amp; Suh,</p><p>2001). From this literature we can summarize two things. First, there</p><p>seems to be a relationship between the culture of an organization or the</p><p>policies set by management and employee perceptions of the organization</p><p>and management (Piercy, Lane, &amp; Nikala, 2001); and second, there is a</p><p>relationship between an employees perceptions and customer outcomes</p><p>(Svensson, 2001). However, to date we do not yet understand the</p><p>relationship between a managers behavior, employee perceptions, and</p><p>J. R. ANDERSON 505</p></li><li><p>7/29/2019 Managing Employees in the SERVICE SECTOR</p><p> 6/23</p><p>customer outcomes on the triad level. This is one large shortcoming of</p><p>current writings on management in the service sector.</p><p>MANAGERIAL BEHAVIOR</p><p>In the literature, attempts at addressing these questions have used</p><p>high-involvement management practices as a proxy for managerial</p><p>behaviors. Recent research has linked high-involvement work practices</p><p>with an employees perceptions of his or her role in the organization (Wu</p><p>&amp; Lee, 2001). High-involvement work practices generally include at leastthree areas of management practice: high skills required by employees,employee discretion, and employee collaboration (Batt, 2002). High-</p><p>involvement work place practices are often aimed at enco...</p></li></ul>