Managing the boundary spanner—Customer turnover connection

MANAGING THE BOUNDARY SPANNER- CUSTOMER TURNOVER CONNECTION

Steve Lovett San Diego State University

David Harrison Meghna Virick

University of Texas-Arlington

Service-providing boundary spanners are becoming increasingly important in modem organizations. Minimizing the turnover of effective boundary spanners is clearly important, but since some turnover is inevitable, organizations must deal with turnover’s consequences as well as its causes. In this article we propose a model for examining and managing one of the most important of those consequences: the increased risk of losing customers as a result of the loss of a boundary spanner who dealt with that customer. In some cases the customer actually follows the boundary spanner to a new organization, in others the loss of the boundary spanner simply prompts the customer to begin searching for alternative service providers. Our model is based on a distinction between customer perceptions of the non-imitability of a firm and the non-imitability of an individual boundary spanner. We present several suggestions as to how two levels of HR managers-the HR executive and the operating level HR manager-can work together to manage the problem.

THE BOUNDARY SPANNER-CUSTOMER TURNOVER CONNECTION

Having built up a following of customers, a salon’s most popular hairdresser leaves to start his own business and takes a significant fraction of the salon’s customers with him. A favorite teacher leaves her preschool and starts working out of her home; most of her new students come from her former employer. Across town, a law firm’s rising young star does essentially the same thing. Her former mentor, the firm’s senior partner, first explodes with a furious tirade

Direct all correspondence to: Steve Lovett, San Diego State University, Imperial Valley Campus, 720 Heber Avenue, Calexico, CA 92231. E-mail: [email protected]

Human Reeouree Management Review, copyright 0 1997 Volume 7, Number 4.1997, pages 405-424 by JAI Press Inc. All riehta of remoduction in anv form reserved. ISSN:1053-4322

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about disloyalty and the ethics of the latest generation, but then remembers in a quiet moment of reflection how decades earlier he himself had started his firm in much the same way.

Turnover as an organizational problem has been extensively studied, and there is a large body of fairly consistent evidence on its causes (Michael & Dixon 1994; Singh 1993; Tett & Meyer 1993; Williams & Livingstone 1994). However, much less is known about turnover’s consequences, and since all employees eventually quit, retire, or leave in some way, these must also be considered. One important consequence is the risk of losing customers when boundary spanning employees leave-the boundary spanner-customer turnover connection.

This article is directed toward both human resource researchers and practitioners. Its purpose is to call attention to this connection and begin a search for more effective ways to manage it. Two levels of human resource managers can contribute to the management of the connection. The tool of the HR executive is the design of the organization and of work patterns within the organization (Nadler & Tushman 1997), while those of the operating level HR manager are selection, training, performance appraisal and compensation (Fisher 1989). Together these HR managers can work to minimize the risk of losing customers when the individuals occupying boundary spanning positions leave, and do do so without reducing the quality of the overall relationship with the customer.

The boundary spanner-customer turnover connection may exist anytime boundary spanners provide services to customers. The connection is likely to be strongest when boundary spanners are core service providers, such as the hairdresser, the preschool teacher, and the lawyer described in the vignettes that open this article. However, the connection may apply even in situations in which boundary spanners provide supplementary services; a shipper may transfer her business from one trucking company to another to follow a particular sales representative because she trusts him, because she likes him, or because he knows about and has been able to meet her shipping needs. Alter- natively, his leaving might simply prompt her to begin searching for alternative service providers.

To date, the boundary spanner-customer turnover connection has not been researched directly. However, we continue with a short summary of related research, and an explanation of how our model differs from previous models.

Previous Research

The problem described in the opening vignettes is well recognized in organizations that have experienced it, but not in the management literature. The most recent and comprehensive treatment of the costs of employee turnover is that of Tziner and Birati (1996). These authors do recognize a cost due to the loss of customers resulting from “the inability to supply them with services or products on schedule” (p. 115). But the problem that they are describing is one of a generalized decrease in productivity, and is quite different from the subject

MA~GING THE BOUNTY SPANNER 407

of this article-a more direct connection resulting from specific boundary spanner-customer attachments.

Likewise, previous researchers who have dealt with an employee turnover- customer turnover linkage have proposed explanations based on indirect connections. For example, Schneider and Bowen (1985) suggest that the cause of both employee and customer turnover is a poor service environment, which in turn is caused by poor HR practices. Ulrich et al. (1991) propose a similar though slightly different explanation. Low employee attachment to a firm results in poor service, which in turn results in customer turnover.

We consider both of the models noted above to be valid and useful. However, we wish to complement them by proposing a more direct connection. The loss of a customer may be the direct consequence of the loss of a well-known and well- regarded boundary spanner-the dissolution of a personal relationship. Our model also differs in its implications for practitioners. The basic result of both the Schneider/Bowen and Ulrich models is that organizations can improve customer retention by improving employee satisfaction, attachment and perhaps retention. We agree. However, our model approaches the problem of customer retention from a different perspective; its purpose is to find ways to retain customers despite the inevitable HR reality of employees who leave the firm. And there is a tremendous need for improvement in management practices in this regard. Current management practices, in particular the non- compete agreement and the “up-or-out” system, are sadly inadequate.

Cunent Practices

Non-compete agreements are a common but clumsy method of managing the boundary spanner-customer turnover connection. They typically prohibit employees from working within their employer’s industry in an area served by the employer for a specified period after leaving. However, barring a career change or a move to another location, such agreements effectively tie the employee to the organization for life, and many individuals are becoming increasingly re- luctant to sign them (Arnott 1994). Furthermore, the non-compete agreement is frequently unenforceable. Many courts today challenge contracts that attempt to restrict or restrain trade (Murray 19941, and more than 15 states have enacted legislation to limit or bar the use of non-competition agreements alto- gether (Key & Cooper 1992).

The “up-or-out” system found in many professional service firms may be viewed as another method of dealing with the boundary spanner-customer turnover connection. In these systems professionals are hired as salaried employees for an apprenticeship period, after which time they are either promoted to partner status or dismissed. Perhaps such systems give the best service providers sufficient rewards to entice them to stay with the firm, while removing others before they have had time to establish strong ties with customers. Still, such systems are problematic because they result in the dismissal of many experienced employees who didn’t quite “make the cut,” and who are often more productive than their replacements.

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Malos and Campion (1995) used an option model to explain the up-or-out system. The hiring of an employee is analogous to the purchase of an option: the employee’s promotion to partner is the exercise of the option, and the dismissal of the employee who is not promoted is the abandonment of the option. However, while an option purchased in a financial market comes with a fixed expiration date, the professional passed over for partnership may in many cases prefer to remain as a salaried employee rather than leaving the firm. The up-or-out system is ~satisfa~ory because it forces turnover, even of boundary spanners who are making positive contributions to a fnm.

To summarize, research about ways to manage the boundary spanner-customer turnover connection is lacking, end current management practices deal with the problem in ways that may do more harm than good to both the organization and the employee. This situation is particularly unfortunate in view of recent trends which make the m~agement of the connection even more important.

The Growing Importance of Managing the Connection

Managing the boundary sp~er-~us~rner turnover connection is difIlcult because the HR practices that encourage boundary spanners to develop high- quality relationships with customers may also be those that increase the likelihood of losing the customers if the boundary spanner leaves. Only through the recognition and management of the boundary spanner-customer connection can organizations retain these customers despite the eventual loss of employees.

The issue is important simply because customers are more apt to form relationships with individual boundary spanners than with firms (Berry 1995), because of the frequency with which boundary spanners take customers with them when they leave the organization, and because of the high costs of losing valued customers. For example, an article by Murray (1994) illustrates the case of a customer service representative with MAI Systems, a California- based computer company in Irvine, who left to join a rival company in the same city and took 80 customers with him. Another example is the departure of Timothy Schlindwein, chairman of the investment firm Stein Roe & Famham, which capped an exodus of 15 professionals and a devastating loss of customers accounting for over $1 billion in assets. Incidentally, this turnover coincided with the expiration of the non~orn~~ clauses of several of the firm’s former partners (Barr 1994).

In the future, we expect the importance of managing the boundary spanner- customer turnover connection to increase for at least three reasons. First, the U.S. economy in general is becoming more service-oriented. For example, ac- cording to the Small Business A~inistration, services will account for nine out of ten of the industries that will log the fastest employment growth through 2005 fMcCune 1995). Second, there has been a trend toward restructuring since the 198Os, as organizations have eliminated layers of management and flattened the chain of command. Organizations now have larger proportions of

MANAGING THE BOUNDARY SPANNER 409

front line individuals or boundary spanners in their structures to take advantage of the insights available from dealing directly with clients and the market. In turn, these boundary spanners have been empowered to deal more autono- mously with a firm’s market.

Third, there is now a greater emphasis in organizations on keeping existing customers rather than continually searching for new ones. Reichheld and Sas- ser (1990) maintain that reducing customer “defections” by only 5% can raise profits by anywhere between 25% and 85% in various industries. The growing emphasis on “relationship marketing” (Berry 1983,1995; Gronroos 1994; Mor- gan & Hunt 1994) also reflects this thinking. Berry first objected to the marketing discipline’s almost exclusive focus on acquiring rather than retaining customers, and proposed a shift to relationship marketing, which he defined as “attracting, maintaining, and . , . enhancing customer relationships” (1983, p. 25). Later, Berry and Parasuraman (1991) developed a framework identify- ing three levels of relationship marketing. The first and least secure is the use of pricing incentives to retain customers-an airline’s frequent flier program is an example, The second level depends on social bonds. The third level and strongest level is the use of structural bonds, in which a customer’s specific needs are designed into a supplier’s service-delivery system.

What is lacking, however, is a more comprehensive framework with which to view the problem. When do social bonds result in stronger customer-boundary spanner versus customer-firm relationships? What kinds of structural bonds can be developed? The answer, we believe, lies in customer perceptions of the non-imitability of the individual boundary spanner versus that of the firm.

This conception of the boundary sparer-customer turnover connection draws on ideas from the resource-based view of the firm. Barney (1991) proposed that sets of resources which are valuable, rare, non-substitutable and not easily imitable provide an organization with a sustainable competitive advantage, and this framework has been found to be useful in explaining the role of human resource practices on firm performance (Becker & Gerhart 1996).

That positive boundary spanner relationships with customers are valuable, rare and non-substitutable is the theme of a large body of literature in relationship marketing (Albrecht 1988; Zeithaml, Parasuraman, & Berry 1990). Wright and McMahan (1992) point out that, while specific actions taken by individuals are imitable, unique histories and social complexity make the behavior of individuals non-imitable. But, by the same argument, groups of individuals or organizations can also behave in non-imitable ways. Thus, our model revolves around the perceived non-imitability of boundary spanners individually versus the non-imitability of the organizations they belong to.

THE MODEL: INDIVIDUAL VERSUS FIRM NON-I~~A~ILI~

The overall model is shown in Figure 1. Seabright, Levinthal, and Fichman (1992) have already provided evidence of the main effect shown in the center of

410 HUMAN RESOURCE MANAGEMENT REIVIEW VDLUME 7, NUMBER 4,1997

Customer Trust in the Firm

Perceived Social

Obligation to Firm

1

Firm-Level Learning

About Customer

Firm-Level

of Firm

Turnover of Boundary

Risk of t

+

t+

) Customer Turnover

I Perceived

I Customer

Trust in the BSP

< /

Social Learning Obligation About

to BSP Customer \

Figure 1. Opponent Process Model of Factors Determining the Strength of the Boundary Spanner Turnover-Customer Turnover Connection

the model-that turnover of service delivering boundary spanners increases the risk of customer turnover-and this is our first proposition. The two moderators shown above and below the central effect in Figure 1 are the perceived non-imitabilities of the firm, which reduces the boundary spanner-customer turnover connection, and that of the indiuidu~l boundary spanner, which increases the connection. Our model is therefore an opponent process model, or one in which two substantively similar forces work against each other in gener- ating some outcome (see, for example, Landy 1978). These two opposing kinds of non-imitability are the subject of our second set of propositions.

Finally, we seek to demonstrate the usefulness of this approach by offering four additional sets of propositions concerning four potential determinants of non-imitability for individual boundary spanners and for the organizations they belong to. These are shown at the top and the bottom of the model: trust, social obligations, learning, and customization. For example, a customer’s trust in an individual boundary spanner increases the perceived non-imitability of


that individual, making the boundary spanner-customer turnover connection stronger. On the other hand, a customer’s trust in a firm increases the perceived non-imitability of the firm, lessening the connection. The same can be said for individual versus firm social obligations, learning and customization.

Proposition 1. Boundary spanner turnover increases the risk of customer turnover.

Stated formally, the probability of customer turnover, given recent boundary spanner turnover, is greater than the base-line probability of customer turnover:

P(CT,IBST,-1) > RCTJ.

where CT indicates customer turnover BST indicates boundary spanner turnover, and t indicates a time period.

More interesting and useful, however, is an examination of the conditions under which this inequality-the boundary spanner-customer turnover connection-is strong or weak. In the remainder of this article, we will argue that the key to reducing the connection without damaging the overall relationship with the customer lies in increasing organizational non-imitability.

Non-Imitability of the Boundary Spanner versus the Organization

The relationship marketing, strategic HR, and organizational theory literatures all propose that when the services provided by an organization through a boundary spanner are perceived to be non-imitable (or difficult to imitate), customers can be retained. The key question is whether the customer perceives the locus of non-imitability to be the boundary spanner or the organization.

When a boundary spanner leaves an organization, customers may perceive that the relationship they formerly had with that person could not be replicated by any other individual, not even by a replacement from within the same organization. In such a case, customer retention is based solely on individual or boundary spanner non-imitability, and the boundary spanner-customer turnover connection is strong-customers would be inclined to follow the leaving boundary spanner to a new organization, or at least to begin a search for new supplier organizations.

On the other hand, customers may perceive that the relationship they had with the boundary spanner could be replicated within the same organization but not by another organization. This is to the organization’s advantage; we will refer to it as organization-level non-imitability. This is what makes the inequality of equation 1 weak, reducing the boundary spanner-customer turnover connection, and making the organization’s relationships with customers a source of sustainable competitive advantage.

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Proposition 2a. The non-imitability of a boundary spanner strengthens the boundary spanner-customer turnover connection.

Proposition 2b. The non-imitability of an organization weakens the boundary spanner-customer turnover connection.

In other words, individual non-imitability makes the inequality shown in equation 1 strong, and organizational non-imitability makes it weak. However, attempting to reduce individual non-imitability is unlikely to be to the organization’s advantage- for example, as we’ll discuss later, attempting to reduce a customer’s trust in an individual boundary spanner is clearly ludicrous. Our focus is therefore on increasing organizational non-imitability.

How, then, can firms build organizational non-imitability? In each of the following four sections we present a set of propositions focusing on the four specific sources of individual and organizational non-imitability shown in Fig- ure 1. Throughout, we argue that the key to managing the boundary spanner- customer turnover connection without reducing the quality of the overall relationship with the customer lies in the efforts of the HR executive and the operating level HR manager to work together to increase organizational non- imitability.

Trust

Morgan and Hunt (1994) place trust at the center of their model of relationship marketing, and Berry considers trust to be “perhaps the single most powerful relationship marketing tool available to a company” (1995, p. 242). Building trust is time consuming, and so contributes to non-imitability.

As a basis for customer-firm or customer-boundary spanner relationships, trust reduces the costs of transactions by promoting the willingness to accept incomplete agreements (ones that don’t cover every possibly contingency that might develop), by lowering the perceived need to monitor all procedures and safeguards (Bendapudi & Berry 1997), and also by reducing the threat of opportunistic behavior (Berry & Parasuraman 1991). Trust develops over time because the transactions are increasingly assumed to be continuing rather than single-instance, discrete exchanges.

Mayer, Davis, and Schoorman (1995) define three interrelated factors of trustworthiness: ability, benevolence, and integrity. For our purposes, ability can be defined as the competence of service delivery, or simply service quality, which has been shown to be the major determinant of service switching (Rust & Zahorik 1993). However, the perceived locus of that quality is critical: customers may attribute service quality to an individual (“John over at ABC company does good work”), or to an organization (“ABC has good people”).

Mayer et al. define benevolence as “the extent to which a trustee is believed to want to do good to the trustor” (1995, p. 718). They define integrity in terms of a more general adherence to an acceptable set of principles. We usually think of benevolence and integrity as characteristics of individuals, but both benevolence and integrity can be attributed to organizations as well. They may

MANAGING THE SOUNDS SPANNER 413

be attributed to unknown individuals representing an organization, or may be perceived to be a part of an organization’s culture. Perhaps the negative example works best here; Parasuraman, Berry, and Zeithaml(1991) describe inter- views with automobile insurance customers who mistrusted their insurance companies (not individuals within the companies) because they believed the companies to be dishonest or deceptive.

Proposition 3a. A customer’s trust in an individual boundary spanner has a positive effect on boundary spanner non-imitability, which heightens the risk of customer turnover when the boundary spanner leaves.

Proposition 3b. A customer’s trust in an organization has a positive effect on organization-level non-imitability, which reduces the risk of customer turnover when the boundary spanner leaves.

Trust in either an individual or an organization is beneficial, but in order to reduce the boundary spanner-customer turnover connection organizations must focus on the latter, making the organization as well as the boundary spanner an object of trust. Organizations work to do this in a number of ways. Product or service guarantee, for example, are backed by organizations rather than individuals. Simple follow-up or courtesy calls to ensure that things are going well (especially from someone other than the boundary spanner) might also help to build organizational trust. Formal organizational communications with customers can be another tool to establish trust. In fact, such communications are a part of the solution that Parasuraman et al. (1991) recommend to the problem of mistrust of automobile insurance companies described above; the company should communicate with customers to explain the reasons for rate hikes, denial of claims, or other difficult actions. Co~~ications can help to build a sense of perceived similarity or famili~ty with an o~anization as well. For example, Skrudland Photo Services in Austin, Texas puts a quote from scripture on every one of their film mailers, which likely builds a sense of shared values or identity between the firm and its regional customers (Bend- apudi & Berry 1997).

But let us remember that the first component of trust identified by Mayer et al. is ability. The operating level HR manager can help the organization to move the perceived locus of trust to the organization by working to minimize variance in ability across individual boundary spanners. From the customer’s perspective, one boundary spanner must be seen as relatively substitu~ble for another in terms of quality of service. If a boundary spanner leaves, he or she must be replaced with someone who has the same levels of talent, interpersonal savvy and experience.

The first step toward accomplishing this seamless replacement occurs on the way into the organization, through selection. The need to reduce variance in customer service can be met, in part, by selecting those with high levels of requisite abilities for creating and maintaining customer contact. From meta- analysis, we know that basic cognitive ability is important, as well as two of the “big five” personality dimensions: extroversion and conscientiousness (Barrick

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& Mount 1991). Also, by selecting candidates who have a better “fit” with the organization’s values or culture, organizations can make customer perceptions of consistency among boundary spanners more likely. Since the people most able to evaluate this fit are probably the current occupants of boundary spanning positions, this translates into a strong argument for including selection of new members among the responsibilities of empowered teams (Wellins, By- ham, & Wilson 1991).

Trust is also built on expertise (Swan, Trawick, & Silva 1984) so boundary spanner training also affects customers’ trust in an organization. If a specific individual rather than the organization itself is perceived to hold that expertise, then customers are more likely to leave when a boundary spanner quits. But this problem can be counteracted by strong training policies, which must be a high priority for firms seeking to build organizational non-imitability. In general, boundary spanners would have to have repeatedly “experienced” in some form of training the majority of the situations that would likely develop with customers, and know appropriate responses. Training might therefore emphasize role-playing exercises, involve some apprenticeship period, include step-level testing (to make sure that particular procedures and engagements were mastered before moving on to the next, more difficult transaction), and realistic customer scenarios (e.g., situational tasks) such as requests, complaints, and ongoing give-and-take or negotiation. Both orientation and ongoing training are needed to ensure consistent expertise among boundary spanners, and also, incidentally, to encourage consistent benevolence toward customers and integrity throughout the organization.

The paragraphs above deal with selection and training, which are tradi- tionally the responsibilities of the operating level HR manager. However, the HR executive can play an equally important role. Her task is to design work patterns within the organization so that multiple connections with the customer are maintained, or so that customers are likely to encounter more than one boundary spanner in their transactions with the firm and are therefore more likely to place the locus of trust in the firm as well as in the person. This is by no means a new idea, and examples of these multiple connections can be surprisingly simple. For instance, a child’s attachment to and a parent’s trust in a teacher in a day-care/preschool facility helps keep parents from removing their children from the school. However, if a child’s teacher quits to join a competing day-care, the child often accompanies the teacher to the new location (Friedman & Smith 1993). The object of trust, in this case, rests in the individual and not the organization. Day-care centers therefore often attempt to maintain two channels to the customer. One is the relationship between the teacher and the child, and the other is the relationship between the center manager and the parent. Maintaining the two parallel links reduces the probability of customer turnover when one link is eliminated.

Customer service teams are another means of achieving multiple connections. Certainly, there are costs associated with assigning a customer to a team rather than a single boundary spanning individual. Coordination costs in-

MANAGING THE BOUNDWY SPANNER 415

crease because team members must communicate with each other about customers. Also, customers may simply prefer to deal with one individual for long periods of time. However, dealing with a single individual also means that the customer is likely to perceive his or her counterpart in the repeated transaction to be the boundary spanner, not the organization. An important benefit of customer service teams is that, as customers are satisfied in their dealings with a number of individuals, the locus of their trust is shifted toward the org~zation.

Social Obligation

It is well-recognized that exchanges between organizations and their customers are based on social as well as economic motivations Price, Arnould, & Diebler 1995). Frenzen and Davis explain the value added of the social aspects of exchange by distinguishing between two kinds of utility: acquisition utility is that derived from a good or service, while exchange utility is that “derived from contributions made to strong social relations” (1990, p. 2). Acquisition utility is “alienable” or independent of the parties to the exchange. Exchange utility, on the other hand, is “inalienable” or inseparable from the parties involved, and therefore difficult to imitate.

Frenzen and Davis propose that individuals may develop “social capital” over time, and the work of Foa (1993) provides an explanation of how this occurs. There is a limited set of persons with whom one would exchange resources that are high in particularism, such as love, affectionate regard, prestige or personal services. However, money is low in parti~ula~sm and can be exchanged more generally. As a relationship develops, the parties become more willing to transact particular resources, which reinforces the relationship. Boundary spanners provide services (high particular&m) to customers, who offer only money (low particularism) in return. Customers may perceive this asymmetrical exchange to be unsatisfactory, and so supplement the exchange with sectional regard or prestige. The result is a stronger customer-boundary spanner relationship, but not necessarily a stronger customer-firm relationship.

However, more dispersed customer-to-organization social obligations may also develop. For example, alumni often feel an obligation to a university that is not dependent on any one individual. In fact, even organization-to-organization obligations can exist. Fichman and Goodman refer to bonds resulting from a relation specific “culture” which is u . . . shared by members of the customer and supplier organizations. It provides guidance and social meaning to both organizations, and it exists independently of any member of the customer- supplier organizations” (1996, p. 303).

Proposition 4a. A boundary spanner’s social obligations to and from the customer have a positive effect on boundary spanner non-imitability, which heightens the risk of customer turnover when the boundary spanner leaves.


Proposition 4b. An organization’s social obligations to and from the customer have a positive effect on organization-level non-imitability, which reduces the risk of customer turnover when the boundary spanner leaves.

Organizations would be ill-advised to discourage particular exchanges between boundary spanners and customers; these exchanges may be highly valued by customers. But again, organizations can reduce the boundary spanner- customer turnover connection by focusing on the latter of the above propositions. In fact, many organizations promote social relationships as a marketing strategy. State Farm Insurance advertising, for example, presents images of social connections between agents and customers, and the image promoted is that all State Farm agents develop close social ties. In addition, organizational actions can encourage customers to feel that they are transacting with the organization itself’, The Saturn division of General Motors encourages individual salespeople to maintain contact with car buyers, but the initial purchase is celebrated by the entire dealership. Birthday and service reminder cards are sent from the dealership as a whole, which also sponsors free car care semi- nars, safety training, and barbecues (Bemowski 1995; Seralln & Johnson 1993). The salespeople give a group send-off cheer as a customer drives a new car off the lot. Finally, Saturn invited all of its more than half of a million customers to a 1994 summer “homecoming” party, and actually drew over twenty thousand, who saw live entertainment and craft fairs, and toured the factory (Bendapudi & Berry 1997).

Once again, HR executives can encourage dispersed or organizational social obligations by designing work patterns so that customers come in contact with various organizational members, and again this is not a new idea. Customers are often “shared” within an organization, and often feel social obligations to other individuals besides the boundary spanner, such as the owner of a small business. Particularly for small businesses less able to compete on a cost basis, such social obligations are often an important source of competitive advantage.

The importance of multiple social connections is another argument in favor of establishing teams to interact with customers. One example of benefits of this team approach can be found in the trend toward “team selling,” and away from allowing a single salesperson to handle all transactions with an important customer (Conlin 1993). Indeed, as the products and services exchanged in our economy become more complex it is often impossible to allow salespersons to operate as Uloners.n Here, we wish to add one more argument to support the HR executive who wishes to reorganize a sales force on a team basis-doing so helps to establish multiple social bonds, shifting the emphasis in customer retention from individual to organizational non-imitability and reducing the likelihood that an important customer will follow an individual salesperson to another organization.

However, the HR executive will need the help of the operating level HR manager to implement such a team selling system. The process starts with selection. An individual with a good “fit” with the rest of the organization is


more likely to work well in a sales team and to include other team members in social encounters with customers, cont~but~g to multiple social bonds. Train- ing is also needed. Many good salespeople are simply accustomed to being the organization’s only link to a customer, and cannot be expected to learn to “share” customers overnight, Finally, while including the salesperson’s contributions to establishing multiple social connections with a customer in an evaluation and reward system is clearly a difficult task, it is one that cannot be ignored in the process of building o~~zational non-imi~bility.

Learning

Berry and Parasuraman’s final level of relationship marketing depends on structural bonds (1991). These bonds may be developed through investments in specialized equipment. However, recently researchers have demonstrated the importance of a less tangible but perhaps even more significant bond-one based on learning.

For example, Seabright, Levinthal, and Fichman, in their investigation of “attachments” as a counter force to the dissolution of relationships between auditor and client firms, found a significant effect for individu~ but not for organizational attachment. They speculate that “This result may reflect the particular nature of the relationship studied. Auditor-client arrangements de- pend on human capital investments but require little, if any, investments in physical capital” (1992, pp. 153-154). These “human capital investments” are what we mean by learning.

Since learning is time consum~g, it is difficult to imitate. Indeed, Pine, Peppers and Rogers (1995) present the “learning relationship” with customers as the key to customer retention. To the extent that it is embedded primarily in individual employees it increases the non-imitability of those individuals; to the extent that it is a characteristic of the structure or systems within an organization it increases the non-imitability of the firm.

Proposition 5a. A boundary spanner’s learning about a customer has a positive effect on boundary spanner non-imitability, which heightens the risk of customer turnover when the boundary spanner leaves.

Proposition 5b. Organizational learning about a customer has a positive effect on org~ization-level non-imi~bility, which reduces the risk of customer turnover when the boundary spanner leaves.

Organizations can reduce the boundary spanner-customer turnover connection by focusing on the latter proposition- by making unique customer information an orgun~u~~~~Z objective. Boundary spanners, in the course of their dealings with customers, gain valuable insights and knowledge about them, and the methods which they use to store, retrieve, and distribute this information influence the effectiveness of organizational memory or learning (Huber


1991). The transfer mechanism between individual and organizational learning is the key to managing this issue.

Many organizations are finding ways to make the transfer effectively. Fre- quently these are technology-based solutions. Reichheld and Sasser (1990) describe how the office products discounter, Staples, uses a database to store and analyze point of sale information for individual customers. When customers break an established pattern of purchases Stables telemarketers call to ask why, and the responses can be entered into the database. However, “low-tech” solutions are also possible. Another company, West-Manitowoc, which makes bridge-building cranes, compiles and copyrights a “sales atlas” that contains pages on each prospective customer (Arnott 1994).

However, a difficulty here is that the most valuable knowledge about customers is often “relationship-oriented” or personal, and such tacit information is difficult to transfer through either a database or a sales atlas. Once again, an alternative kind of transfer mechanism could be the use of teams rather than individuals as a unit of interaction. This would involve customer contact with more than one boundary spanner, which disperses learning and reduces the boundary spanner-customer turnover connection.

Whether an organization is able to use boundary spanning teams or re- mains dependent on individuals to transfer knowledge about customers to the organizations, the key to success will be support by the operations level HR manager, especially in the areas of training, performance appraisal and compensation. If boundary spanning is done by individuals, they must be trained in the use of information transfer channels, and the individuals’ use of these channels should play a role in performance appraisal and even compensation. If boundary spanning teams are used, then individuals must be trained in team skills, and teamwork could be reinforced through group rather than conventional individual performance appraisals or reviews. Also, rather than offering individual commissions or incentives for service sales or customer satisfaction, the whole service team could be commissioned or incented.

Finally, we note that learning occurs on the customer’s side of the equation as well. Central to organization non-imitability is the customer’s knowledge that a relationship providing similar service can be obtained from other members of the organization; the customer’s awareness of alternatives to a boundary spanner within the organization will make them less likely to leave the organization should the boundary spanner leave.

Customization

Customization, or the adaptation of a service to fit the specific needs of the customer, is a fundamental part of quality service (Garvin 1987). To the extent that customers perceive customization of service to be done at the boundary spanner’s initiative, the boundary spanner-customer turnover connection is strengthened. For example, the loss of an employee at a photo store who changes his or her processing depending on how customers like their prints is


likely to contribute to customer turnover. The loss of one who uses default settings for all customers is not.

However, customization can be done at the organizational level. A recent development in the organizational literature deals with “mass customization” (Hart 1995; Port 1994). This is the use of flexible processes and structures to produce customized products or services at the low cost of a mass-production system. Mass customization has been found to be an increasingly viable option in a number of industries from financial investments-where portfolios can be tailored to customers’ individual needs-to printing-where catalogs can be targeted to small market segments.

Proposition 6a. The boundary spanner’s customization of the service de- livered has a positive effect on boundary spanner non-imitability, which heightens the risk of customer turnover when the boundary spanner leaves.

Proposition 6b. The organization’s customization of the service has a positive effect on organization-level non-imitability, which reduces the risk of customer turnover when the boundary spanner leaves.

Many firms are already reducing the boundary spanner-customer turnover connection by emphasizing the second of these propositions. Organization- level customization is becoming more common, and again technology is often an important tool. For example, Pine et al. (1995) describe the case of Individu- al, Inc., which provides clients with a customized news and information service from daily searches of about 400 different sources. First, the client is asked to rate each of a set of articles as to its relevance to his or her needs, and these responses are entered into the search program. After only a few rating cycles, Individual, Inc. is able to obtain a high percentage of articles rated as at least “somewhat relevant,” and the client is then only asked to provide the ratings periodically. But other examples of organization-level customization may be more “low-tech,” including such simple adaptations as special purchasing procedures or just-in-time delivery.

One way in which HR executives and operations level HR managers can work together to contribute to systematic or mass customization is by creating systems of “managed” empowerment. Empowering boundary spanners means that the organization relinquishes some of its own power, but if that empowerment is perceived to be an organizational practice, then the customer will be more likely to stay with the organization even when the boundary spanner leaves. Customers must perceive that they were handled in a “customized” way, but also that very similar customizations would have also occurred with other boundary spanners in the firm. The key, then, is to create systems that encourage customization and provide the tools to achieve it, but that also direct that customization, maintaining it within boundaries.

Let’s return to the photo processing example above. Suppose that the HR executive of a chain of photo stores is able to convince the rest of the top management that mass customization is an appropriate competitive tool. Op- erations level HR managers then go to work designing training programs. The


goals of these programs are, first, to make employees aware that customization is a part of their jobs, second, to assist employees with the difficult task of helping customers to communicate their unique tastes, and third, to ensure that the employees possess the technical skills to meet these unique customer needs. The operations level HR managers also design evaluation and reward systems whereby employees who are able to meet customers needs are identified, rewarded, and given opportunities for growth, perhaps in training other employees to develop their own customer service abilities. The result of such a program would be organization-wide or mass customization and, since other photo stores would not be able to quickly imitate the program, an increase in organizational non-imitability.

A current example of an organization practicing effective managed empowerment is the Ritz-Carlton hotel chain. Employees are empowered to do whatever is necessary to resolve customer complaints without consulting supe- riors, including breaking routines or spending company money. However, there are known spending limits, and the “do’s and don’ts” of customer service are communicated to employees during intensive training sessions. The result is a kind of service industry mass customization, and the key to the Ritz-Carlton’s success (McDowell 1993). Another example is Nieman-Marcus, the high-end retail department store chain, which has a deceptively simple rule for their salespeople (boundary spanners): “use your best judgement.” However, those salespeople are extensively trained in handling customer interactions and have well-defined ideas about how far their judgement can go and what lati- tude they have in making those decisions.

Finally, we should point out that it is the customer’s perception of whether customization is being done by the firm or by the individual boundary spanner that matters, and this perception can be affected either positively or negatively by the boundary spanner’s communication with the customer. For example, many of us have experienced the situation in which a boundary spanner attempted to create the impression that a customized or extra service was the result of his or her efforts in spite of company policy (“1 went to bat for you with management, and finally convinced them to give you this credit extension.“) Of course, this destroys the perception that the firm is investing in the relationship with the customer. Efforts to avoid this problem should start with a well-known policy of flexibility in dealing with customers, and continue with boundary spanner training-boundary spanners should be impressed with the importance of avoiding the suggestion that there is a conflict between the boundary spanner and the rest of the firm, especially with respect to dealing with that customer’s needs.

To summarize, then, four potential determinants of both individual non- imitability (which is beneficial, but strengthens the boundary spanner-customer turnover connection) and organizational non-imitability (which is the key to reducing the connection) are trust, social obligations, learning and customization. Next, since this article is directed toward both researchers and practitioners, we conclude with some suggestions for researchers, and finally a summary of how practitioners can manage the connection.

MANAGING THE BOUN~RY SPANNER

CONCLUSIONS

421

Directions for Research

The propositions within our model are testable via conventional research strategies. Here, we will focus on the proposed determinants of non-imitability of the boundary spanner and the firm, and begin by noting that the distinc- tions between the non-imitability of the two are not apparent unless the boundary spanner leaves the firm. A vital element of a research strategy would therefore be comparisons of customer relationships following or not following the turnover of the boundary spanner.

Anderson, Auquier, Hauck, Oakes, Vanaele, and Weisberg (1980) identify two types of comparative studies. The usual cohort design proceeds from independent to dependent variable; the researcher would compare a sample of customers for whom boundary spanner turnover did occur with a sample in which it did not, to see whether they differ with respect to retention. This type of study is less economical when the outcome under study is rare: a large number of customers would have to be tracked to generate enough variance in turnover. The case-control design proceeds from dependent to independent variable. In this application, the researcher would identify “cases,n in which the firm-customer relationship terminated, and “controls,” in which the relationship did not terminate, The two groups would then be compared to see whether they differed with respect to the independent variable, boundary spanner turnover.

More firm-customer relationships might be expected to continue than to terminate with time periods suitable for cross-sectional research, so the case control method would be more appropriate for investigating the above propositions. The propositions involving the determinants of non-imitability would be verified if a difference between cases and controls were found in the presence of the determinant, but not in its absence.

Customer turnover or the loss of a customer might be measured through the use of archival or organizational records. Since customers rarely “officially” terminate a relationship, the key would be to identify customers that made regular transactions for some period, but then ceased to do so. The independent variable, turnover among boundary spanners, could also be obtained through org~izational records. ~eas~ements of the determinants of non- imitability might be obtained from archives in some cases, but in others would be difficult to operationalize without tapping individual perceptions. In such cases, the subjective reports of boundary spanner supervisors, of the boundary spanners themselves, or of customers might be used.

Managing the Connection

The boundary spanner-customer turnover connection is rapidly becoming one of the more important I-IR m~agement issues of our time, first of all


because organizations continue to lose customers when boundary spanners leave. In addition, current methods of managing the issue, such as the non- compete agreement and the up-or-out system, may actually do more to harm than to help the organization. As the U.S. and world economies move toward a greater emphasis on service and customer retention, this issue can only increase in importance.

In this article we have identified several specific solutions. We described how selection and training can be used to ensure consistency or minimize variance in service quality among boundary spanners, thereby increasing organizational non-imitability. Customer service teams can result in multiple transaction oriented as well as social connections between the organization and the customer and also dispersed learning, especially when these are coupled with team-based evaluation and reward systems. Creating transfer mechanisms or channels between individual and organizational knowledge, training boundary spanners to use these channels and rewarding them for doing so is another way to manage the connection. Finally, systematic or managed empowerment can be used to produce a type of service industry mass customization.

All of these are specific means of managing the connection more subtly and more effectively. However, we hope that the most important contributions of this paper is our basic framework, based on the distinction between individual and organizational non-imitability, which human resource scholars and practitioners can use to find new and more effective ways to manage the boundary spanner-customer turnover connection.

ACKNOWLEDGMENTS

This article is a revised version of a paper originally presented in the Human Resources Division program at the 1996 Academy of Management meetings in Cincinnati, Ohio. The authors wish to thank Gary McMahan and Charles Greer for their comments on earlier drafts of this article.

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Managing the boundary spanner—Customer turnover connection