2.4
Although much of the general theory and practice described in this book applies to all opera-tions, each sector of the service economy (such as fi nancial services, tourism, leisure, charities, government, hospitals, business-to-business services) has its own set of specifi c challenges.
Managing a for-profi t consultancy with a small number of high-value clients poses rather dif-ferent problems to managing an aid agency in a disaster-struck, heavily populated region of a developing country. This section describes some of the differences between the various types of services and outlines some of the particular challenges faced by each sector. In reading this section, it is necessary to be aware that each of these services will also have issues relating to aspects such as:
● The volume of transactions in a given time period. The hypermarket has very different
operation challenges from the local grocery store, not least in simply managing the fl ow of hundreds of customers in the store.
● The mode of service delivery. The retail sector provides a good example of this diversity, with face-to-face service in traditional stores, remote service through mail order, telephone shopping or web-based services.
We will deal with these ‘process’ differences in the next section. Here we explore some of the key differences in service provision between fi ve broad sectors of the service economy (see Table 2.2 ):
● business-to-business (B2B) services
● business-to-consumer (B2C) services
● internal services
● public (G2C) services
● not-for-profi t services.
It is important to remember that we use the term ‘customer’ as an all-embracing term that covers users, consumers, internal customers, etc.
2.4.1 Business-to-business (B2B) services
B2B services are provided by businesses for other businesses or organisations. IBM Global Services, for example (see Chapter 1 ), provides a range of services to its business customers, including computer installation and maintenance and a range of management consulting services. Other B2B services include outsourced catering services, buildings’ maintenance or leasing and supporting equipment, fi nancial services and market research. Some of the chal-lenges for B2B services include:
● Dealing with multiple contacts in the organisation. Consultants may have to work with a
wide range of employees in their client organisations and so maintain relationships at dif-ferent levels in the organisation ( Chapter 4 ).
● Working with a complex set of relationships. The users or recipients of a service will fre-quently not be the purchasers, and this purchasing group may in turn be different from those who commission or specify the service standards (see Chapter 4 ).
● B2B relationships may last for a long time. The challenge here is for the relationship not to be-come too ‘cosy’, with the customer or supplier being taken for granted (see Chapters 4 and 6 ).
2.4.2 Business-to-consumer (B2C) services
B2C services are those that individuals purchase for themselves or on behalf of another indi-vidual. They range through leisure services such as hotels, restaurants and sports provision, retail services such as shops and supermarkets, fi nancial services such as banks and insurance providers, through to professional services such as lawyers and accountants. The challenges faced by most B2C services include:
● The organisation may deal with many different customers each day. Each has their own
special needs and expectations of the service provided and, to make matters more diffi cult, these may change for the same individual from day to day (see Chapters 4 and 5 ).
● Because the operation serves so many customers, it faces a major challenge in keeping the experience fresh for the next new customer. It may be the fi rst and only time the customer experiences this service, although the customer may be just one out of hundreds that an individual member of staff sees in a day (see Chapters 7 and 8 ).
● Many B2C service operations have the added complication of the need for consistency across many points of contact with customers, frequently spread nationally if not globally (see Chapter 9 ).
2.4.3 Internal services
Most managers are involved in providing and receiving internal service, not just internal services such as personnel, fi nance, purchasing and IT support, but also the day-to-day serv-ice they provide to each other, such as information and support. Indeed the Internal Servserv-ice Rule highlights the importance of internal service provision: the level of external customer service will never exceed the level of internal customer service. The challenges posed by inter-nal service provision include:
● Getting people within an organisation to recognise the service and the importance of the
service they provide to each other, and treat it, assess it, measure it and improve it in just the same way as they deal with external service (see Chapters 3 to 11 ).
● Demonstrating that the internal services, such as IT and fi nance, provide at least as good
‘value for money’ as an external alternative. This is a challenge faced by many IT depart-ments, for example, whose users often feel that they could obtain cheaper equipment more rapidly from the local computer store or via the internet (see Chapters 3 and 6 ).
● Adapting the service to business needs. If the service provision is effectively a commodity, it can be outsourced (see Chapter 6 ). Internal service providers must demonstrate their ability to tailor their offerings to the changing business needs in a way that external provid-ers cannot (see Chapter 15 ).
● Gaining acceptance from their internal customers. Centrally funded services are frequently viewed with suspicion by local operating units and may not receive the co-operation re-quired to carry out their tasks effectively ( Chapter 6 ).
2.4.4 Public services (G2C)
These services are provided by central or local government for the community at large.
Funding comes through the various forms of business and individual taxation, which is then largely allocated by policies set by government. Examples include police, prisons, hospitals and education. Specifi c challenges for public sector services include:
● The provision of ‘best-value’ services. Public services are under continual scrutiny. As a
result, aspects of service operations that might be taken for granted by their private sector colleagues must be carefully justifi ed in these organisations (see Chapter 9 ).
● Rationing supply of service. Public sector organisations cannot use the pricing mechanism to regulate demand. With essential services, this can be a very sensitive issue. The health service must make policy decisions as to how much resource can be devoted to heart op-erations, to maternity services, and so on. Expenditure on intensive care units, accident and emergency provision and very expensive drugs is particularly sensitive since lives are at stake, but inevitably there will be times when demand outstrips supply or costs exceed budgets (see Chapter 11 ).
● Multiple stakeholders. Public services suffer from having many ‘customers’. With B2C serv-ices it is reasonably clear who the customers are, and if this group is satisfi ed, generally speak-ing the organisation should be successful. This is not the case with the public sector, where the recipients of the service, as individuals, have little power to infl uence. Politicians and service managers themselves may have far more power to decide current priorities (see Chapter 4 ).
● A confused service concept. The service concept provides direction for the organisation (we devote Chapter 3 to the discussion of the role of the service concept). Some public services are provided for the good of society at large and are not necessarily loved by those who have to deal with them. Prisons, police services and tax collectors may fall into this category.
2.4.5 Not-for-profi t services
Charities of various types form the majority of these services. Most engage in a mixture of fund raising, providing information about the cause or issue that concerns them, and some form of social action. An organisation such as Oxfam must gather funds for famine relief and then organise to supply and distribute aid as required (see Case Example 2.4 ). Challenges for these services include:
● Managing a workforce of volunteers who, though highly motivated, may not always follow
the organisation’s procedures (see Chapter 10 ).
● Managing the allocation of resources to ensure that maximum funds fl ow to the benefi ciaries of the organisation, while developing effective processes and people (see Chapters 7 to 11 ).
● Dealing with differences between the activities that might infl uence and impress donors, but which might confl ict with the requirements of their ‘customers’ (see Chapter 3 ).
● Working in a highly emotional area, sometimes being overwhelmed by demand for service (see Chapter 11 ).
Oxfam is a major international development, relief and campaigning organisation dedicated to fi nding lasting solutions to poverty and suffering around the world.
It is a confederation of 15 international organisations (country-based Oxfams) working with over 3,000 local partner organisations and alongside communities in 98 countries. It has three main activates: fi rstly, responding quickly to emergencies providing life-saving assistance to people affected by disasters; secondly, helping people living in poverty take control of their lives. Third, as a part of global movement for change, Oxfam spends time raising public awareness about the causes of pov-erty and pressing decision makers to change policies and practices to reduce poverty and injustice.
Case Example 2.4
Oxfam InternationalSource: Helen Jones
2.4.6 Different services within a sector
Just as each particular sector has its own set of challenges, there can be signifi cant differences between service operations within sectors. This may relate to the way the organisation has chosen to compete or which customer segments are to be served. Table 2.3 outlines some key Each year Oxfam International launches emergency responses when lives, health, and livelihoods are threatened by disasters; natural disasters, such as earthquakes and storms, or political confl icts, such as riots and wars. In 2008–09 it worked on over ten major disaster areas where over 1,500,000 people were affected. The emergency programmes are usually run by Oxfam’s regional and country offi ces. The organi-sation’s headquarters provides advice, materials and staff, deploying emergency support personnel (ESP) on short-term assignments when and where their skills are required. Shelters, blankets and clothing can be fl own out at short notice from the emergency warehouses. Engineers and sanitation equipment can also be provided, including water tanks, latrines, hygiene kits and containers such as the ‘Oxfam bucket’, which is light, easy to carry and transport, and has a sealable lid.
Every emergency is different, with differing security situations, aid needs, logistical problems and access issues. The responses of other agencies, such as governments or other relief agencies, will also be differ-ent, depending on the nature and location of the disaster. Oxfam relies on its local team, with support from headquarters as necessary, to assess each situation and decide whether and how the organisation can make a difference. Furthermore, local teams and partners are sometimes able to provide warnings of impending disasters, giving more time to assess need and enable a multi-agency response.
Importantly, when an emergency is over, Oxfam often continues to work with the affected communities through its local offi ces and partner organisations, to help people rebuild their lives and livelihoods.
With more than one billion people living in poverty across the world, Oxfam, like other aid and develop-ment organisations, has no shortage of ‘non-emergency’ work. Oxfam is recognised as a global expert in water and sanitation. Around 80 per cent of diseases and over one-third of deaths in the developing world are caused by contaminated water, and this can escalate in crises. Oxfam also puts pressure on govern-ments to invest in agriculture and develop policies to help poor people benefi t from international trade. It also promotes education and works with communities to provide education opportunities and with governments to train new teachers for poor countries.
All this work comes at a cost. The organisation’s total expenditure on programmes in 2009–10 was €596.3 million which has to be raised through its affi liate organisations. Oxfam GB, for example, raised a total of £318 million, from legacies, gifts and donations and through events such as the Trailtrekker team endurance event and a Bookfest. The organisation also sells items donated by the public as well as Fair Trade products – food and handicrafts from around the world, giving small-scale producers fair prices, training, advice and fund-ing support. Orders for items can be made by mail or over the internet through Oxfam GB’s online shop, or through its network of 250 charity shops staffed by over 20,000 volunteers.
Table 2.3 Comparing airline operations
Low-cost airline Full-service airline
Business model High volume, low cost Global network, profi t made on business travel Network Short haul, with no connections
to other carriers
Long haul, with connections to global partner airlines
Cabin service Basic, no food, no frills Range from economy to fi rst class Locations Secondary, low-cost airports Primary airports to allow interconnections Volume Multiple fl ights per route each day Range from three fl ights per day to one fl ight
per week for less popular destinations Booking system Direct through own website, and/or own
contact centre
Usually through intermediaries (travel agents) or websites
differences between two B2C organisations operating in the same sector: a ‘low-cost’ airline and a ‘full-service’ airline.
One of the challenges for service operations managers is to match the style of oper-ations, decisions about processes, people and technology to the overall strategy of the organisation ( Chapter 15 ). To do this, the operations manager must have a clear under-standing of how the operations function contributes to the overall success of the organisa-tion (see Chapter 1 ).
2.4.7 A merging of distinctions
Over the last few years the distinctions between different types of organisations that we have outlined above are starting to disappear: ‘Old borderlines are evaporating, old categories are merging. The divisions between commercial, public-sector and non-profi t organisa-tions are becoming blurred. All organisaorganisa-tions now act on the same stage, and need to justify their place on that stage.’ 4 Some non-commercial organisations, public sector organisations and charities, for example, emulate the private sector; they have chief executives, strategic plans, marketing departments and talk about ‘customers’. Public organisations, although they do not have competitors, recognise that their customers judge their service against for-profi t organisations. Charities and government bodies have money-making arms. The British Council, for example, which promotes British culture around the world, also runs for-profi t language schools. Universities, charities and faith organisations talk openly about market share.
On the other hand, some commercial organisations commit themselves to adhere to the principles of corporate social responsibility (CSR). Some appoint board members to check that company decisions support human rights, environmental goals and conservation projects, for example, to demonstrate that the organisation stands for something beyond the usual commercial goals. Sir Richard Branson, who heads up the Virgin group of companies, supports a wide range of non-commercial activities, including supporting AIDS work and wildlife and habitat conservation in Africa. Finding himself in a position of power and in-fl uence after working hard to establish a profi table set of companies, he is keen to fulfi l his lifelong ambition of ‘trying to change the world’. He explains: ‘I’d always thought that Virgin should be more than just a money-making machine, and that, as Virgin has the wealth of a small nation, we should use that wealth to tackle social issues . . . Companies do have a re-sponsibility to tackle them.’ 5