Session 7 Controlling 1
Basics of Organizational Control Definition The process of taking the necessary preventive or corrective actions to ensure that the organization s mission and objectives are accomplished as effectively and efficiently as possible Purpose To get the job done despite environmental, organizational, and behavioral obstacles and uncertainties. 2
Steps in the Control Process Set Standards Measure Actual Performance Compare Performance to Standard Do Nothing Solve the Problem Revise Standard Take Corrective Action if Necessary 3
Types of Organizational Control Feedforward control The active anticipation and prevention of problems, rather than passive reaction Concurrent control Involves monitoring and adjusting ongoing activities and processes to ensure compliance with standards Feedback control Gathering information about a completed activity, evaluating that information, and taking steps to improve similar activities in the future 4
Three Types of Control 5
Components of Organizational Control Systems Objectives Measurable reference points (targets) for corrective action. What do we need to accomplish? Standards Guideposts on the way to achieving obejctives. What guidelines and standards do we need to follow? An evaluation-reward system Measure and reward individual team contributions to attaining organizational objectives. How will our results be measured and how will we be rewarded? 6
Symptoms of Inadequate Control An unexplained decline in revenues or profits A degradation of service Employee dissatisfaction Cash shortages Idle facilities or personnel Disorganized operations Excessive costs Evidence of waste and inefficiency 7
Crisis Management: The Basics Definition Systematic anticipation of and preparation for internal and external problems that seriously threaten an organization s reputation, profitability, or survival Two Biggest Mistakes Regarding Organizational Crises 1. Ignoring early warning signs of an impending disaster. 2. Denying the existence of a problem when disaster actually strikes. 8
Key Elements a Crisis Management Program 9
The Quality Challenge Defining Quality Conformance to requirements (Crosby). A subjective response by customers to the adequacy of product or service quality in meeting their expectations/needs/requirements. 10
Effective Control Product Quality Five types of product quality Transcendent quality Product-based quality User-based quality Manufacturing-based quality Value-based quality 11
Service Quality Unique characteristics of service industry: Intangibility: creative advertising, no patient protection, importance of reputation Perishability: cannot inventory, opportunity loss of idle capacity, need to match supply with demand Heterogeneity: customer participation in delivery process results in variability Simultaneity: opportunities for personal selling, interaction creates customer perceptions of quality Customer Participation in the Service Process: attention to facility design but opportunities for co-production Bottom line: consumer judgment is the key 12
The Service Package Supporting Facility: The physical resources that must be in place before a service can be sold. Examples are golf course, ski lift, hospital, airplane. Facilitating Goods: The material consumed by the buyer or items provided by the consumer. Examples are food items, legal documents, golf clubs, medical history. Information: Operations data or information that is provided by the customer to enable efficient and customized service. Examples are patient medical records, seats available on a flight, customer preferences, location of customer to dispatch a taxi. 13
The Service Package (cont d) Explicit Services: Benefits readily observable by the senses. The essential or intrinsic features. Examples are quality of meal, attitude of the waiter, on-time departure. Implicit Services: Psychological benefits or extrinsic features which the consumer may sense only vaguely. Examples are privacy of loan office, security of a well lighted parking lot. 14
The Gaps Model of Service Quality Customer Gap Provider Gaps Factors Leading to the Gaps 15
The Customer Gap Expected Service Perceived Service 16
Customer Gap Components customer expectations are the standards of or reference points for performance against which service experiences are compared are what a customer believes should or will happen 17
Sources of customer expectations Marketer-controlled factors Pricing Advertising Sales promises Factors that the marketer has limited ability to affect Innate personal needs Word-of-mouth Communications Competitive offerings 18
Customer Perceptions How customers perceive services, how they assess whether they have experienced quality service and whether they are satisfied. Keep in mind that perceptions are always considered relative to expectations. Because expectations are dynamic, evaluations may also shift over time-from person to person and from culture to culture. Also keep in mind that the entire discussion of quality and satisfaction is based on customers perceptions of the service -not some predetermined objective criteria of what service is or should be. 19
Gaps Model of Service Quality Customer Gap: difference between customer expectations and perceptions Provider Gap 1: not knowing what customers expect Provider Gap 2: not having the right service designs and standards Provider Gap 3: not delivering to service standards Provider Gap 4: not matching performance to promises 20
Gaps Model of Service Quality CUSTOMER Customer Gap Expected Service Perceived Service COMPANY GAP 1 GAP 3 GAP 2 Service Delivery Customer-Driven Service Designs and Standards GAP 4 External Communications to Customers Company Perceptions of Consumer Expectations 21
Provider Gap 1 CUSTOMER Expected Service GAP 1 COMPANY Company Perceptions of Consumer Expectations 22
Provider Gap 2 CUSTOMER COMPANY Customer-Driven Service Designs and Standards GAP 2 Company Perceptions of Consumer Expectations 23
Provider Gap 3 CUSTOMER COMPANY GAP 3 Service Delivery Customer-Driven Service Designs and Standards 24
Provider Gap 4 CUSTOMER COMPANY Service Delivery GAP 4 External Communications to Customers 25
The Gaps Model The key to closing the Customer Gap is to close Provider Gaps 1-4 Gaps Model used as the organizing framework throughout the course 26
Key Factors Leading to the Customer Gap Customer Gap Customer Expectations Provider Gap 1: Not knowing what customers expect Provider Gap 2: Not selecting the right service designs and standards Provider Gap 3: Not delivering to service standards Provider Gap 4: Not matching performance to promises Customer Perceptions 27
Key Factors Leading to Provider Gap 1 Customer Expectations Gap 1 Inadequate marketing research orientation Insufficient marketing research Research not focused on service quality Inadequate use of market research Lack of upward communication Lack of interaction between management and customers Insufficient communication between contact employees and managers Too many layers between contact personnel and top management Insufficient relationship focus Lack of market segmentation Focus on transactions rather than relationships Focus on new customers rather than relationship customers Inadequate service recovery Lack of encouragement to listen to customer complaints Failure to make amends when things go wrong No appropriate recovery mechanisms in place for service failures Company Perceptions of Customer Expectations 28
Key Factors Leading to Provider Gap 2 Gap 2 Customer-Driven Service Designs and Standards Poor service design Unsystematic new service development process Vague, undefined service designs Failure to connect service design to service positioning Absence of customer-driven standards Lack of customer-driven service standards Absence of process management to focus on customer requirements Absence of formal process for setting service quality goals Inappropriate physical evidence and servicescape Failure to develop tangibles in line with customer expectations Servicescape design that does not meet customer and employee needs Inadequate maintenance and updating of the servicescape Management Perceptions of Customer Expectations 29
Key Factors Leading to Provider Gap 3 Customer-Driven Service Designs and Standards Gap 3 Deficiencies in human resource policies Ineffective recruitment Role ambiguity and role conflict Poor employee-technology job fit Inappropriate evaluation and compensation systems Lack of empowerment, perceived control, and teamwork Customers who do not fulfill roles Customers who lack knowledge of their roles and responsibilities Customers who negatively impact each other Problems with service intermediaries Channel conflict over objectives and performance Difficulty controlling quality and consistency Tension between empowerment and control Failure to match supply and demand Failure to smooth peaks and valleys of demand Inappropriate customer mix Overreliance on price to smooth demand Service Delivery 30
Key Factors Leading to Provider Gap 4 Service Delivery Gap 4 Lack of integrated services marketing communications Tendency to view each external communication as independent Not including interactive marketing in communications plan Absence of strong internal marketing program Ineffective management of customer expectations Absence of customer expectation management through all forms of communication Lack of adequate education for customers Overpromising Overpromising in advertising Overpromising in personal selling Overpromising through physical evidence cues Inadequate horizontal communications Insufficient communication between sales and operations Insufficient communication between advertising and operations Differences in policies and procedures across branches or units External Communications to Customers 31
Moments of Truth Each customer contact is called a moment of truth. You have the ability to either satisfy or dissatisfy them when you contact them. A service recovery is satisfying a previously dissatisfied customer and making them a loyal customer. 32
Expressing Dissatisfaction Public Action Action Seek redress directly from the firm Dissatisfaction occurs Take legal action Complaint to business, private, or governmental agencies Private Action No Action Stop buying the product or boycott the seller Warn friends about the product and /or seller
Approaches to Service Recovery Case-by-case addresses each customer s complaint individually but could lead to perception of unfairness. Systematic response uses a protocol to handle complaints but needs prior identification of critical failure points and continuous updating. Early intervention attempts to fix problem before the customer is affected. Substitute service allows rival firm to provide service but could lead to loss of customer. 34
Effective Control Service Quality Group Exercise Describe an experience during which you experienced excellent service. Describe an experience during which you experienced substandard service. First, think about both of those on your own, then share with your team members. Can you come up with a list of common characteristics for all your experiences of each type? 35
TQM: The Basics Definition Creating an organizational culture committed to the continuous improvement of skills, teamwork, processes, product and service quality, and customer satisfaction Four Principles of TQM: Do it right the first time Be customer-centered Make continuous improvement a way of life Build teamwork and empowerment 36
Deming Management The application of W. Edwards Deming s ideas to revitalize productive systems to make them more responsive to the customer, more democratic, and less wasteful organizations. Key Points of Deming Management Quality improvement drives the entire economy The customer always comes first Don t blame the person, fix the system Plan-do-check-act (PDCA Cycle) 37
Everyone Benefits from Improved Quality 38
Deming s PDCA Cycle 39
Deming s 14 Points Constant purpose New philosophy Give up on quality by inspection Avoid constant search for lower-cost suppliers Seek continuous improvement Train everyone Provide real leadership Drive fear out of the workplace Promote teamwork Avoid slogans & targets Get rid of numerical quotas Remove barriers that stifle pride in workmanship Education and selfimprovement are key The transformation is everyone s job 40
Characterizing Change Anticipatory changes planned changes based on expected situations Reactive changes changes made in response to unexpected situations Incremental changes subsystem adjustments required to keep the organization on course Strategic changes alerting the overall shape or direction of the organization 41
Types of Organizational Change 42
Resulting Types of Change Tuning: active anticipation and avoidance of problems rather than waiting for sth. to go wrong; most common, least intense, and least risky type of change. Adaptation: dealing with incremental changes, but changes are in reaction to problems, pressures, or events. Re-orientation: frame bending because organization is significantly redirected (what to do about past?) Re-creation: frame breaking most intense and risky type of organizational change 43
Individual Reactions to Change Changes they like Changes they don t like 44
Reasons for Resistance to Change Surprise Unannounced significant changes threaten employees sense of balance in the workplace. Inertia Employees have a desire to maintain a safe, secure, and predictable status quo. Misunderstanding and lack of skills Without introductory or remedial training, change may be perceived negatively. 45
Reasons for Resistance to Change (cont d) Emotional Side Effects Forced acceptance of change can create a sense of powerlessness, anger, and passive resistance to change. Lack of Trust Promises of improvement mean nothing if employees do not trust management. Fear of Failure Employees are intimidated by change and doubt their abilities to meet new challenges. 46
Reasons for Resistance to Change (cont d) Personality Conflicts Managers who are disliked by their subordinates are poor conduits for change. Poor Timing Other events can conspire to create resentment about a particular change. Lack of Tact No showing sensitivity to feelings can create resistance to change. 47
Reasons for Resistance to Change (cont d) Threat to Job Status/Security Employees worry that any change may threaten their job or security. Breakup of Work Group Changes can tear apart established on-the-job social relationships. Competing Commitments Change can disrupt employees in their pursuit of other goals. 48
Strategies for Overcoming Resistance to Change Education & communication Participation & involvement Facilitation & support Negotiation & agreement Manipulation Explicit & implicit coercion 49
Characteristics of Effective Controls 1. Employees must accept controls. 2. Measures must be appropriate. 3. Provides diagnostic information. 4. Allows for self-feedback and selfcontrol. 5. Must provide timely information. 50
Characteristics of Effective Controls, (cont d) 6. More effective when employees have control over results measured. 7. Must not contradict each others (such as quality and quantity). 8. Should allow for random variation from standard. 9. Cost effective (provide good return on investment) 51