Human Resources Management Is Crucial

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chology and of business management at the. University ... jects with Chase Manhattan Bank, AT&T, and GEICO. ... delivery of superior customer service quality.

New research reveals the ties hetween human resources practices and customers' ratings of service quality.

The Service Organization:

Human Resources Management Is Crucial BENJAMIN SCHNEIDER

et's tkke a close look at whaf appears to be an irituitively obvious proposition: • Wlhen employees see their organization as leaving a strong service orientation, cusi|omers report more positive service experiences. Thig correlation emerged from a study of the banting indusitry, conducted a decade ago and published in an article entitled, "The Service Organization; Climate is Crucieil." Service climate jwas defined as employees' perceptions th^t (a) practices and procedures were in place to IraciHtate the delivery of excellent service, an4 (b) management rewarded, supported, and Expected excellent service. We iieed to examine this finding, not because th^ correlation is invalid (the relationship, in jfact, has been validated repeatedly sin
perceive that management emphasizes quality and customers, job security, good management, cooperation, and the setting of goals and objectives, customers receive higher quality products. Ryder Truck has been conducting an ongoing effort to examine the relationship between employees' attachment to Ryder and customers' attachment to the company. The work has proceeded under the hypothesis that Ryder's management practices have an effect on employees' reactions, and these, in turn, have an effect on customer reactions. In particular, the model focuses on management's HRM practices. Ryder has demonstrated that when management puts negative pressure on pay advancement, equipment, supervision, and communication, the employee reaction is low motivation, dissatisfaction, and tension. Ultimately, this results in poorer quality service and negative customer reactions. In addition to studies in which the names of the companies have been made public, similar results have been obtained in the following kinds of industries: Banking. A study of 30 banks (not branches, but banks) in the Midwest showed some support for the employee-customer h}^othesis. (Some data, however, were not in line with the basic hypothesis. We will rettirn to these findings later.) Retailing. A study of over 200 retail outlets of a large chain of stores showed quite strong relationships between employee attitudes and customer satisfaction. Of interest in this ptirticular project was the availability of store profitability daLa. Interestingly, customer satisfaction was not related to store profitabilit)'; indeed, sometime.s the relationships were negative. (Again, we will return to this finding later.) In sum, these studies as well as our results present quite dramatic proof that much of what happens inside a service organization cannot be hidden from the consumers with whom the organization's employees interact. In a real sense, the results support a conception of service organizations as open systems, i.e., systems open to the larger environment in which they function. A systems perspective also empha44

sizes that the various subsystems (e.g., departments) of the organization are interdependent and reciprocally interacting. These conclusions heightened our curiosity about the full set of organizational ingredients that employees and customers identified as keys to providing service quality. That is, what were the individual elements of organizational climate, or culture, that added up to a shared passion for customer service? Finding answers to this question required more than survey research.

ELEMENTS OF A PASSION FOR SERVICE: A QUALITATIVE STUDY We began this phase of our research by identifying a broad range of facets of organizational activity. We then explored which of those facets correlated, at a statistically significant level, with what we called service passion. Service passion was defined as an index that svimmarized employee comments about the service orientafion of their organizations. It was measured by coding employee responses during open-ended interviews in terms of both the amount of time they spent talking about service and the favorabiity with which they discussed service. Interviews in which employees spoke both a lot and favorably about service were said to represent a positive service passion. Interviews in which employees spoke at length about service, but in unfavorable terms, were said to have a negative passion for service. We spoke with 97 groups of employees from three different financial services companies to collect the data used for this study. The groups typically consisted of three or four people. They were asked only one question: • Would you describe the climate or culture of your organization and the role of service in it? Employees were always curious as to what we meant by climate or culture. Rather than provide a definition, we let them tell us what they thought ive meant. Often, participants responded with words like ''comfortable/' "ambitious," "cheap," "aggressive," or "caring" as global descriptors of the climate.


• Courtesy/Competency - behaviors indicating to customers that staff care (e.g., "Tellers care about customers as people in my branch"). • Utility/Security - feelings that the bank has the necessary services and that one can feel secure with money in this branch (e.g., "The bank offers a wide range of services"). • Adequate Staff - indications Ithat the staffing levels are sufficient and not transient (e.g., "My branch seems to have enough employees to handle its customers"). • Employee Morale - perceptions of good morale in the branch (e.g., "Employees complain about the branch" [reverse scored]). • iBrandi Administration - how well the branch seems to be administered and run (e.g., "When I've opened new accounts or had to change old ones something usually got messed up").

Next, the interviewer asked employees to give the basis (or bases) of fheir global impressions. These responses provided information on the kinds of practices and procedures that characterize the organization, as weU as the kinds of behaviors employees see as being rewarded, supported, and expected. We call the policies, practices, and procedtires the routines of organizations.; We label the behaviors that get rewarded, supported, and expected as the behaviors of organizations. Routines and behaviors define for us the psychology of an orgahization—^the organization's dimate. Duririg the inteitview sessions, note-takers recorded all the infoirmation that emerged from the group about the cUmate of the organization and the role of service in it. Employees talked aboyt evejything mider the sun—equipment, co-wprketi relationsMps, supervisory behavior, and so forth. In our subsequent coding and analyses, we identified ttiirty-three different thenies. The thirty-three themes were representative cpf six meta-themes (see Exhibit 4). The qpiestion of interest to us in ainalyzing thesQ themes was the following: When employees tiave a positive passion for service, what are the other kinds of themes for which they have passion? The data we used to answer this question came from coding each interview for passion on the thirty-three themes and then looldiig for correlations witli the service passion

theme (the emphasis given to service in the unit). A summary of these results is presented in Table 2. This table shows the statistical coitelation between the service passion theme and all of the other themes. It can be seen that: 1. When service passion is high, the unit reveals a passion for doing the things direlctly tied to service. Employees speak a lot, and favorably, about the service delivery process (.47) and the product offered consumers (.2^), as well as about the soHdtation and/or responsiveness of the unit to customer opinions. The latter issue is especially critical, as shown by the very strong statistical correlation of .72. 2. When service passion is high, the ipiiaployees in the unit also speak favorably (arid a lot) about various HRM issues like performajnte feedback (.46), intemal equity of compensai[i«M (.43), training (.40), and staff quality (.34). EsjpiedaUy critical for a passion for service are favdrable and lengthy discussions about hiring procedures, i.e., who gets hired and how the hiifeg gets done. This is shown by the very strong statistical correlation of .64 between hiring procedures passion and service passion. 3. When service passion is high, then sdrite other resources are also high. For example, there is stronger service passion when offiiie conditions and facilities (.36) and automation systems (.27) receive a lot of positive passion:, ,=LS well. 45