In a previous post I highlighted some of the challenges that are inherent in managing public services due to the nature of being ‘public’. However, there are also challenges that come with managing a ‘service’. These challenges apply across private and public services, and whether delivered by public, private or Third sectors.
These issues are quite important to recognise for all managers given the continuing rise of the service sector across the world. In fact services account for 62.9% of global GDP.
The key characteristics of services are intangible, heterogeneous, inseparable, and perishable as defined by Zeithaml, Parasuraman and Berry 1990 (although some, notably Lovelock and Gummesson, 2004, have questioned this classification).
Services are largely intangible. They are about having an experience. Of course there are some physical characteristics associated with most services, such as the quality of chairs in a fine dining restaurant, but what makes services unique from goods is the extent to which perceptions of service quality are impacted by environmental factors and customer-provider interactions. These intangible factors are very difficult to control or manage.
Take, for example, a business offering guided bus tours of the Scottish highlands. There are a number of physical features of this service such as the comfort of the seats on the bus. But ultimately much of the service experience will be influenced by factors entirely outside of the control of the business – weather, the interaction with staff, the behaviour of other customers on the bus (to name but a few). These intangible factors make service interactions very unpredictable and difficult to control.
The fact that services are intangible also means that they are not easily stored for future use. So if there is excess capacity this cannot be stored to be sold at another time. In other words, services are perishable.
Take, for example, a street performer. If they do not attract a significant audience for their performance that equates to lost income. They cannot get that time back. Hence the pressure within many services to get ‘bums on seats’. Consequently, pricing is key – particularly with services that have high fixed costs and a fixed capacity such as with cinemas, restaurants and bus tour companies.
Inseparability of production and consumption
Most services are produced at the same time as they are consumed. So the street performance will be consumed at the same time as it is ‘produced’. This means that quality control is much more difficult than with goods. It also places significant pressure of service staff to always ‘perform’ at a consistent level. This requirement of service workers to perform is best described by the Hochschild (1983) concept of emotional labour. Numerous studies have shown that the strain of constantly having to perform can lead to stress-related illnesses. This blogpost by Flip Chart Fairy Tales highlights a number of other reasons why people in service occupations tend to have more sickness absence that in other occupations.
As an example of the inseparability of production and consumption take transplant surgery. The medical staff must perform consistently under the most extreme pressure with every single patient. Mistakes can cost lives and, unlike with manufacturing, are often not easily rectified. Yet quality inspection and control can only happen at the same time that the ‘customer’ is receiving the service. Furthermore the speed of service delivery is critical. Under these circumstances it is truly impressive what our health workers do on a daily basis. Hence those who use a service, such as the NHS are likely to be more satisfied with the service than those who do not as outlined in this Ipsos Mori report.
The intangibility and the fact that production and consumption take place at the same time means that the service provided may be slightly different every time. This has significant advantages in terms of customisation and innovation. But it is also costly and can lead to dissatisfaction if a minimum service level is not met.
So a service experience, like a rock concert, may be different every time. Take for example Bruce Springstein’s recent Hyde Park gig where he sung the song, Take Em As They Come, especially for one of his fans in the crowd. The flexibility of many services allows for this sort of innovation and customisation. However, this may be experienced by different people in different ways – even at the same time. The need for some control is also highlighted by the fact that the same Hyde Park gig ran over time to such an extent the organisers were forced to turn off the speakers in order to comply with the terms of their licence.
Nonetheless, the more a service is standardised (which improves efficiency) the less personalisation can be achieved (potentially affecting effectiveness). Imagine if a barber gave every customer the same hair cut. It might be very cheap and efficient but would almost certainly affect customer satisfaction. Given the increasing focus on efficiency over effectiveness it is perhaps not surprising that public attitudes towards the NHS are falling.
These factors, when taken together, mean that services are very difficult to manage. When you include the publicness of public services, as well as the complex problems many such services have to deal with, it is perhaps not surprising that they are not always perfectly efficient. Indeed it has been pointed out on this excellent set of posts by Flip Chart Fairy Tales (Part 1; Part 2) just how difficult efficiency gains are in service industries.
This is not to say that we shouldn’t even try to create efficiencies – but it might help to start with realistic expectations.
Hochschild, A. (1983) The Managed Heart: Commercialization of Human Feeling. California: University of California Press.
Lovelock, C. and Gummesson, E. (2004) “Whither services marketing?”, Journal of Services Research, Vol. 7 No.1, pp.20-41.
Zeithaml, V.A., Parasuraman, A. and Berry, L.L. (1990) Delivering Quality Service. New York: Free Press.