Managing People

for Service Advantage

Hire the Right People

“The old saying ‘People are your most

important asset’ is wrong.

The RIGHT people are your most

most important asset.”

“The old saying ‘People are your most

important asset’ is wrong.

The RIGHT people are your most

most important asset.”

Jim Collins

The Cycles of Failure, Mediocrity and Success

Too many managers make short-sighted assumptions about financial implications of: Low payLow investment (recruitment, training)High turnover human resource strategies

Often costs of short-sighted policies are ignored:Costs of constant recruiting, hiring & trainingLower productivity & lower sales of new workersCosts of disruptions to a service while a job remains unfilledLoss of departing person’s knowledge of business and customersCost of dissatisfied customers

Cycle of Failure

Customer turnover

Failure to develop customer loyalty

No continuity in relationship for

customer

Customer dissatisfaction

Employees can’t respond to customer

problems

Employees become bored

Employee dissatisfaction; poor service attitude

Repeat emphasis on attracting new customers

Low profit margins Narrow design of

jobs to accommodate low skill level

Use of technology to control quality

High employee turnover; poor service quality

Payment of low wages

Minimization of selection effort

Minimization of training

Emphasis on rules rather than service

Empl

oye e Cyc

le

Custom

e r

Cyc

le

Source: Schlesinger and Heskett

Employee cycle of failure

Begins with a narrow design of jobs to accommodate low skill levels, an emphasis on rules rather than service and the use of technology to control quality

Strategy of low wages is accompanied by minimal effort on selection of training

Consequences include bored employees who lack the ability to respond to customer problems,become dissatisfied and develop a poor service attitude.

Outcomes for the firm are low service quality and high employee turnover

Because of weak profit margins, the cycle repeats itself with the hiring of more low paid employees to work in this unrewarding atmosphere

Customer cycle of failure

Begins with repeated emphasis on attracting new customers

Become dissatisfied with employee performance and the lack of continuity implicit in continually changing faces

These customers fail to develop any loyalty to the supplier

This requires an ongoing search for new customers to maintain sales volume.

Cycle of Success

Cy

Low customer turnover

Customer loyalty

Continuity in relationship with

customer

High customer satisfaction

Extensive training

Employee satisfaction, positive service attitude

Repeat emphasis on customer loyalty and

retention

Higher profit

marginsBroadened job designsLowered turnover,

high service quality

Above average wages

Intensified selection effort

Employ

ee cle

Custom

er Cycle

Train, empower frontlinepersonnel to control quality

Source: Heskett and Schlesinger

Strategies for managing people

The Wheel of Successful HR in Service Firms

Leadership that:

Focuses the entire organization on supporting the frontline

Fosters a strong service culture with passion for service and productivity

Drives values that inspire, energize and guide service providers

1. Hire theRight People

3. Motivate & Energize Your People

2. Enable Your People

Be the preferred employer & compete for talent market share

Intensify the selection process

Empower FrontlineBuild high performance service

delivery teams Extensive Training

Utilize the full range of rewards

Service Excellence& Productivity

Recruitment

The right people are a firm’s most important asset: take a focused, marketing-like approach to recruitment

Clarify what must be hired versus what can be taught

Clarify nature of the working environment, corporate values and style, in addition to job specs

Ensure candidates have/can obtain needed qualifications

Evaluate candidate’s fit with firm’s culture and values

Fit personalities, styles, energies to the appropriate jobs

Select And Hire the Right People: (1) Be the Preferred Employer

Create a large pool: “Compete for Talent Market Share”

What determines a firm’s applicant pool?

Positive image in the community as place to work Quality of its services The firm’s perceived status

There is no perfect employee

Different jobs are best filled by people with different skills, styles or personalities

Hire candidates that fit firm’s core values and culture Focus on recruiting naturally warm personalities

Observe Behavior

Hire based on observed behavior, not words you hear Best predictor of future behavior is past behavior Consider group hiring sessions where candidates given group tasks

Personality Testing

Willingness to treat co-workers and customers with courtesy, consideration and tact

Perceptiveness regarding customer needs Ability to communicate accurately and pleasantly

Select and Hire the Right People:(2) How to Identify the Best Candidates

Select and Hire the Right People:(3) How to Identify the Best Candidates

Employ Multiple, Structured Interviews

Use structured interviews built around job requirements Use more than one interviewer to reduce similar to me effects

Give Applicants a Realistic Preview of the Job

Chance to have “hands-on” with the job Assess how the candidates respond to job realities Allow candidates to self select themselves out of the job

The Organizational Culture, Purpose and Strategy Promote core values, get emotional commitment to strategy Get managers to teach “why”, “what” and “how” of job.

Interpersonal and Technical Skills Both are necessary but neither is sufficient for optimal job

performance

Product/Service Knowledge Staff’s product knowledge is a key aspect of service quality Staff need to be able to explain product features and to position

products correctly

Enable your people

Factors Favoring Employee Empowerment

Firm’s strategy is based on competitive differentiation and on personalized, customized service

Emphasis on long-term relationships vs. one-time transactions

Use of complex and non-routine technologies

Environment is unpredictable, contains surprises

Managers are comfortable letting employees work independently for benefit of firm and customers

Employees seek to deepen skills, like working with others, and are good at group processes

Motivate and Energize the Frontline

Job content

Feedback and recognition

Goal accomplishment

Use the full range of available rewards effectively, including:

The Inverted Organizational Pyramid

Frontline Staff

Top Mgmt

Middle Mgmt

Legend: = Service encounters, or ‘Moments of Truth.’

Traditional Organizational Pyramid

Inverted Pyramid with a Customer & Frontline Focus

Customer Base

Frontline Staff

Middle Mgmt & Top Mgmt

Support Frontline

Service-Profit Chain Model

• Most applicable to service environments.

• Model is based on a set of cause and effect linkages between internal and external performance, and defines the key performance measurements on which service-based firms should focus.

Source: Adapted from J. L. Heskett, T. O. Jones, G. W. Loveman, W. E. Sasser, Jr., Jr., and L. A. Schlesinger, “Putting the Service-Profit Chain to Work,” Harvard Business Review, March–April 1994, pp. 164-174.

The Service-Profit Chain Model

Causal Links in the Service Profit Chain

Customer loyalty drives profitability and growth

Customer satisfaction drives customer loyalty

Value drives customer satisfaction

Employee productivity and retention drive value

Employee loyalty drives productivity

Employee satisfaction drives loyalty and productivity

Internal quality drives employee satisfaction

Top management leadership underlies chain’s success