What's HR Got to do with it? A Look at its Effects on the Bottom Line in Service-Based Organizations
Jae, Lee Eun; Batt, Rosemary; Moynihan, Lisa
[Excerpt] For a long time it was assumed that service-based organizations could compete on the basis of differentiation or on the basis of low prices, but not both. Great customer service was thought to require customized offerings that were necessarily time-consuming and costly to provide, whereas low prices could be achieved only by offering standardized services delivered in high-volume. More recently, however, spurred on by the Total Quality Management movement in manufacturing, an increasing number of service providers in hospitality, retail, healthcare, and other industries have rejected the conventional wisdom and adopted a so-called hybrid marketing strategy aimed at delivering personalized products and services at very competitive prices. In the telecommunications industry, for example, representatives in service and sales centers (hereafter call centers) are called upon to deliver great customer service by being highly responsive to each caller’s particular concerns while also generating revenue by offering a range of add-on services to meet individual's particular needs or preferences. At the same time, though, these reps are expected to be highly efficient by minimizing the amount of time they spend on each call thus increasing the volume of calls handled per shift. Companies then put in place various HR practices intended to facilitate the simultaneous pursuit of these two seemingly contradictory outcomes. Research shows that this often results in relatively high levels of employee stress, burnout, absenteeism, and turnover. Thus far, though, no study has parsed the effects of existing HR practices on the attainment of the hybrid model’s two key operational outcomes – service quality and labor efficiency – or, ultimately, on the bottom line. The present study aims to fill this gap. As shown in Figure 1 on page 2, it examines the full range of linkages across four HR practices under the control of call center managers (discretionary work design, training, and two forms of compensation), the two operational outcomes (service quality and labor efficiency), and the firm’s preferred measure of profitability (net revenues per call). More specifically, the study addresses two basic questions. First, in call centers pursuing a hybrid marketing strategy which operational outcomes makes the greatest contribution to units’ financial outcomes? Are both equally necessary or is it better to excel at one while being simply okay on the other? Second, which locally-determined human resource practices – either singly or in combination – are most likely to result in the best blend of operational outcomes and, thus, the highest levels of unit profitability?
service; HR; bottom line; labor; labor efficiency; internal staffing; training