CHAPTER 15
Organizing for Change
Management and
Service Leadership
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Overview of Chapter 15
Effective Marketing Lies at the Heart of Value Creation
Integrating Marketing, Operations, and Human Resources
Creating a Leading Service Organization
In Search of Human Leadership
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Effective Marketing
Lies at the Heart of
Value Creation
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The Service Profit Chain (Fig. 15.3)
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Links in the Service Profit Chain (Table 15.1)
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Firm Value Created by Customer Satisfaction
(Fig. 15.4)
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Integrating Marketing,
Operations, and
Human Resources
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Interdependence Between Functions
(Fig. 15.5)
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Service Leaders Integrate Functions
Implementation of Service Profit Chain requires
complete understanding of how marketing,
operations and human resource functions relate to a
firm’s strategy
Integrated functions create value for the firm
Strategies are defined and driven by a strong,
effective leadership team
Has a coherent vision of what it takes to succeed
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Defining the Three Functions
Marketing Function
Target “right” customers and build relationships
Offer solutions that meet their needs
Define quality package with competitive advantage
Operations Function
Create, deliver specified service to target customers
Adhere to consistent quality standards
Achieve high productivity to ensure acceptable costs
Human Resource Function
Recruit and retain the best employees for each job
Train and motivate them to work well together
Achieve both productivity & customer satisfaction
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Creating a Leading
Service Organization
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From Losers to Leaders: Four Levels of Service
Performance (1)
Service Losers
Bottom of the barrel from both customer and managerial perspectives
Customers patronize them because there is no viable alternative
New technology introduced only under duress; uncaring workforce
Service Nonentities
Dominated by a traditional operations mindset
Unsophisticated marketing strategies
Consumers neither seek out nor avoid them
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From Losers to Leaders: Four Levels of Service
Performance (2)
Service Professionals
Clear market positioning strategy
Customers within target segment(s) seek them out
Research used to measure customer satisfaction
Operations and marketing work together
Proactive, investment-oriented approach to HRM
Service Leaders
The crème da la crème of their respective industries
Names synonymous with outstanding service, customer delight
Service delivery is seamless process organized around customers
Employees empowered and committed to firm’s values and goals
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Moving to a Higher Level of Performance
Firms can move either up or down the performance
ladder
Organizations that are devoted to satisfying their
current customers may miss important shifts in the
marketplace
As a result, they may face difficulties attracting
demanding new consumers with different
expectations
Companies defending their control of their
competitive edge may have encouraged competitors
to find higher-performing alternatives
Organizations with a service-oriented culture may
turn otherwise as a result of a merger or acquisition
that brings in new leaders who emphasize short-term
profits
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In Search of
Human Leadership
Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 15
Leadership vs. Management
Leadership
Concerned with development of vision and strategies, and
empowerment of people to overcome obstacles, make vision happen
Emphasis on emotional and spiritual resources
Works through people and culture
Produces useful change, especially non-incremental change
Management
Involves keeping current situation operating through planning,
budgeting, organizing, staffing, controlling, and problem solving
Emphasizes physical resources—raw materials, technology, capital
Works through hierarchy and systems
Keeps current system functioning
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Setting Direction vs. Planning
Planning
a management process, designed to produce orderly results, not
change
Setting direction
involves creating visions and strategies that describe a
business, technology, or corporate culture in terms of what it
should become over long term and articulating feasible way of
achieving goal
Many of best visions and strategies combine basic insights and
translate them into realistic competitive strategy
“Stretch” – a challenge to attain new levels of performance and
competitive advantage that might as first seem to be beyond the
organization’s reach
Planning follows and complements direction setting, serving as useful
reality check and road map for strategic execution
See Service Insights 15.2 : Can Cirque du Soleil Stretch Further?
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Individual Leadership Qualities
Love for the business
See service quality as foundation for
competing
Recognize key role of employees
Driven by a set of core values they pass on
Make communication a priority
Work with a team on decision-making
Know when to change when necessary
Walk the talk
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Leadership, Culture and Climate (1)
Leadership traits are needed of everyone in
supervisory or managerial positions, including those
heading teams
Effective communication is essential for a leader
Organizational culture:
Shares understanding regarding what is important in the
organization
Shares values about what is right or wrong
Shares understanding about what works and what doesn’t
work
Shares beliefs, and assumptions about why things are
important
Shares styles of working and relating to others
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Leadership, Culture and Climate (2)
Organizational climate
The tangible surface layer on top of the
organization’s underlying culture
Factors of influence:
-Flexibility, Responsibility, Standards that
people set, Perceived aptness of rewards, Clarity
people have about mission and values, Level of
commitment to a common purpose
Creating a new climate for service, based
on understanding of what is needed for
market success, may require
radical rethinking of HRM activities,
operational procedures, and the firm’s reward
and recognition policies
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Summary of Chapter 15: Change Management
and Service Leadership (1)
Service profit chain provides useful summary of behaviors
required of service leaders to manage effectively
Marketing, operations, and human resource management
functions need to be closely coordinated and integrated in
service businesses
Four levels of service performance
Service losers
Service nonentitites
Service professionals
Service leaders
Service leadership is not based on outstanding performance
within a single dimension, but must cut across marketing,
operations and human resources
Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 21
Summary of Chapter 15: Change Management
and Service Leadership (2)
To be effective, leaders need to understand difference
between leadership vs. management, as well as
setting direction vs. planning
Role modeling is one of traits of successful leaders
Leaders play a big part in nurturing an effective
organizational culture that transforms an organization
into a successful one
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