week 9

The Role and Importance of the Internal Customer

Seminar Objectives

• Highlight the central role of the internal customer in delivering service excellence.
• Examine the concept of customer-supplier value chains.
• Identify approaches to sustaining an internal service culture.

Discussion Questions

• How important has the “people factor” been?
• Does it leave an impression?
• Role within the organization and contribution made.
• Importance to customers.
• What can be done to develop the people power of the organization?

The People Factor

• Quality techniques and controls do not work alone.
• Tangible and intangible elements define service experience.
• Quality of people will make or break the situation.
• Quality service is created by people, delivered by people, and sustained by people.
• Consider the service profit chain!

Service Profit Chain

The "Service Profit Chain" describes the relationship between:

• Internal Service Quality
• Employee Satisfaction
• Employee Retention
• Employee Productivity
• External Value
• Service Customer Satisfaction
• Customer Loyalty
• Revenue Growth
• Profitability

This chain illustrates how employee satisfaction directly impacts customer satisfaction, loyalty, and ultimately, profitability.

Importance of Staff

• The service environment is defined by the staff member the guest interacts with.
• Potential to make or break a service encounter.
• Staff are a source of competitive advantage or a threat.
• Employee actions and reactions are vital for customer satisfaction and competitive market positioning.
• Due to the nature of the individual, this is a volatile issue!

Common Misconceptions

• Customer service is only a front line/front of house issue.
• “The customer is not my concern”.
• It’s someone else’s responsibility.
• Think of the end result.
• Role in achieving this result?

Result of Actions

• Customer service experience is defined at the “moment of truth”.
• How to get the best from people at the moment of truth?
• Time -> Potential Customer -> You -> Your Organization -> Customer Contact -> Ongoing Customer -> Dissatisfied Customer.

Management Response

Approaches to removing volatility and assuring quality:

• Replacing the human touch with technology.
• Reducing employee discretion and standardizing their role.
• Making it possible for contact staff to use their discretion:
  • They must want to do so (internal marketing).
  • Be equipped/allowed to do so (empowerment).

Internal Marketing

• In the service business, you can’t make happy guests with unhappy employees.
• How to ensure sustained employee commitment?
• Market the mission internally.
• “… selling the job to employees must precede selling the service to customers” (Mudie, 1988).
• The job must become the product and the employees the customer.

Internal Service Quality

• Just as external service quality is a vital antecedent to customer satisfaction, internal service quality is a vital antecedent to employee satisfaction.
• Employees must be viewed/treated as customers, suppliers, and partners in their own right.
• Quality of service delivered to external customers is often determined by the quality of service rendered internally - introduces the concept of service chains.
• Stresses the necessity of having the right quality throughout the service chain.

Dynamics of Value Chains

• Gives rise to the concept of value chains which culminates in the experience provided to the external customer.
• But, it originates ‘far upstream’ with the supplier’s supplier who is external to the organization.
• In turn, each link adds value to the process.
• All employees are vital links in this chain.

Customer-Supplier Value Chains

• Illustrates the interconnectedness of suppliers and customers both internally and externally.

Serving Internal Customers

• Important point is dependency.
• Internal customers are colleagues who DEPEND on internal service provider’s outputs for their own ability to perform successfully.
• Dependency refers to the quality, timeliness, and costliness of the outputs provided which then become inputs to the next link in the chain.
• Any delays, defects, or cost overruns directly affect the ability of the next link to render satisfactory service to its customers.

Internal and External Obligations

• Not enough to simply understand obligations to the customer - also understand obligations to each other.
• Suppliers and customers can be external or internal, are mutually dependent, need to cooperate closely, and are links in value chains.
• How can we foster such an approach?

Characteristics of Internal Marketing

• Establish an appropriate organizational service culture.
• Develop a marketing approach to human resource management.
• Disseminate marketing information to employees.
• Implement a recognition and reward system.
• Empowered workforce with authority and responsibility to deliver.

Establishing a Service Culture

• The organization’s culture must support serving the customer.
• Positive attitude towards the customer.
• A service culture that supports customer service through policies, procedures, reward systems, and actions.
• Requires strong support from management.

Organizational Service Culture

• Pattern of shared values and beliefs that gives members of an organization meaning providing them with the rules of behavior in the organization.
• Directs behavior and gives a sense of purpose and pride.
• Empowers employees, turns the organization upside down.
• Two things are crucial:
  • Attitude management / management attitude
  • Communications management / consultation

Marketing Approach to HR

• Employees are just like customers - need to attract and retain them.
• To do this you need to research their wants and needs just like customers.
• Importance of selection and involvement is crucial.
• Creates a sense of belonging / team spirit.

Dissemination of Information

• Employees must be part of the planning and implementation process.
• Must be aware of the company mission, vision, goals, and what part they play in achieving those goals.
• Importance of internal communications.

Reward and Recognition

• Employees want to know how they are performing and an organization needs to provide feedback.
• Need to reward and recognize those who serve the customer well and meet objectives - source of positive motivation.
• What methods might they employ?

Employee Empowerment

• Process of decentralizing decision making.
• Giving more discretion and autonomy to front-line employees.
• Change in traditional hierarchical structure responsibility removed & devolved.
• Service leadership philosophy responds directly and quickly to customers improves morale improves operational efficiency and employee productivity.

Achieving Internal Service Quality

• Recruit the right people / hire good attitudes.
• Canvass employee views on improvement.
• Involve everyone in service development.
• Develop an understanding of their needs (BA).
• Listen to and act upon improvement suggestions.
• Improve the working environment.
• Recognize and reward efforts.
• Equip and empower them to do so.
• Market the mission to employees.

Summary

• Moments of truth are made or lost as a result of the people touch.
• Employee satisfaction is therefore a prerequisite to customer satisfaction.
• Must create a service culture that motivates and ensures employee commitment gives them the authority and responsibility to make “moments of truth - moments to remember”.
• Internal service quality is the key.

Closing Comment

• “… The quality of our people determines the quality of the service we give to our customers and thus our success in the marketplace”. (Rocco Forte)

Additional Reading

• Azzolini, M. & Shillaber, J. (1993). Internal Service Quality: Winning From the Inside Out, Quality Progress, (November): 75-78
• Davis, T.R. (1992). Satisfying Internal Customers: The Link to External Customer Satisfaction, Planning Review, (January/February): 35-40
• Dodson, R.L. (1991). Speeding the Way to Total Quality, Training & Development, (June): 35-42
• Jones, P. (1997). The Hospitality Service Profit Chain: An Effective Research Design, International Journal of Hospitality Management, Vol 18 No 3: 289-296
• Lawrence, H.V & Wiswell, A.K. (1998). How to Make Internal Customers Cooperate, Training & Development, (March): 45-48
• Mahler, J. & Hennessey, J.T. (1996). Taking internal Customer Satisfaction Seriously at the U.S. Customs Service, Public Productivity & Management Review, Vol 19 No 4: 487-497
• Monty, J.C. (1990). Service Excellence: The Human Connection, Quality Progress (October): 23-24

Reflection Questions

• What are the important links in the service profit chain? What role does the employee have in ensuring that the benefits of this chain are realized?
• What is meant by the concept of internal customer service and how does it relate to external customer service?
• How might a service organization go about creating and internal service culture?
• What is meant by the statement, “internal customers should be treated as ‘nearly equal’ to external customers”? Do they deserve better treatment? If so, why?