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HRM in service organisations
Venkatesh G | 17 Sep 2013

Services are dominating the business landscape today in ways that are unimaginable and unfathomable. India has moved from an agrarian economy to a service based economy with services contributing to as much as 57% to our GDP.


We are all living in a ‘knowledge era’ that is dominated by technology all the way. Technology has become all-pervasive and this is impacting business in a powerful way- something that could not have been envisaged even a decade ago. Technology has started ruling the services sector like never before.

Today, cakes and pizzas can be ordered on line. Banking can be done sitting at home. Payments of insurance premium and utility bills can be made through the Internet. Cinema tickets can be booked on line.

The services sector in India has contributed in no small measure to the growth of employment in developing countries like India and China. Much has been written about the growth of software industry in India. BPOs and ITES (IT-enabled services) have redefined the way business is being conducted. Many large businesses are either setting up captive BPOs or outsourcing their non-core activities and processes in an attempt to focus more on their core areas and achieve operational efficiencies.

Despite all the hype and hoopla surrounding services, a key challenge continues to stare us in the face. The challenge of controlling attrition in service firms is proving to be a mighty one. Motivating service employees can be an Achilles ’ heel for the HR manager as the behavior of the service employees has an element of unpredictability about it. Productivity of employees is extremely vital for service delivery in a scenario when customer’s expectations are dynamic and the external environment is subject to vagaries of changes in customer’s tastes and preferences.

Indiahas gained the dubious distinction of obtaining the second rank when it comes to theft in the retail sector. Retail sector, while generating massive employment opportunities is also a victim of malicious intentions of service employees. The retail sector has to cope with increased expectations of customers while at the same time trying to internalize the best service practices so that service employees deliver to the best of their capabilities.

Traditional service marketing theory distinguishes the characteristics of services marketing from goods marketing in a cogent manner. Services are intangible, perishable, inseparable and heterogeneous. The linkages between operations and marketing are much more pronounced in services than in any other sector. Balancing demand and supply is another challenge in services. The service employee is expected to segue from one customer to another customer bearing in mind that customer satisfaction is a vital component of value addition to the service business.

Every customer, in the face of competition, can prove to be fastidious and this is something every service organization has to deal with. People - especially the frontline employees - represent the ‘visible’ component of a service and such employees can make all the difference between rendering an excellent service and rendering a mediocre one. The vivid impression that a customer gets about the service during the initial interface with the service employee is described as the ‘Moment of Truth’ or ‘the service encounter’. Several such moments of truth strengthen the customer’s perspective about the service delivery.

The Human Resources function in such service organizations can often find itself being subsumed by the enormity of the challenge in motivating employees who are expected to deliver flawless service all the time. Despite the fact that a dissatisfied and an unproductive service employee can portray a picture of ambivalence to an unsuspecting customer, a service organization bears the risk of losing business to such customers once they are dissatisfied.

So, what exactly is the role of HR in such service organizations? While the business is constantly focused on enhancing the service experience for the customer, the HR has to constantly strive to enhance the motivational levels of service employees who are a crucial link in the service profit chain.

Suitable reward and recognition schemes are important for business sustenance and for controlling attrition. Periodic performance reviews supplemented by suitable training wherewithal is also crucial. Service organizations work 24 x 7 and so the HR function needs to develop a heightened sense of empathy towards its employees. It may require the company to bend backwards to motivate and encourage employees. In today’s world, the businesses are more receptive to any effort or initiative that helps translate the efforts of the organization into profits for the business.

Many service organizations conduct ‘etiquette training’ for their employees. This includes ‘telephone ‘manners and ‘email ‘manners. Many of the senior personnel in service organizations have absolutely no compunctions about sharing their contact details with customers who may want to share a positive or adverse feedback with the top management of the service firm.

Customer complaints are increasingly being treated with a higher degree of sensitivity. The real reason for this is that service organizations are left with little choice but to embrace these complaints and use them to re-engineer their business processes. Many customers are overcome by lethargy to even complain and some do not know whom to approach. In such a scenario, the customer who complains becomes a messiah who highlights the gaps in the service process. Research has proved that customers who complain are more loyal to the organization. Service organizations are privy to this fact and this is the reason why many service organizations acknowledge customer complaints and go about resolving the complaints within a defined time frame.

HR function has a crucial role to train employees in dealing with customer complaints. The general trend is to treat customer complaints as constructive feedbacks aimed at improving the processes in the organization. A process is characterized by dynamism and anything that is static can seldom be classified as a process.

Psychological factors play a crucial role in recruiting and selecting a front line employee who is expected to interact with customers directly. Mental strength is an attribute that is widely perceived as so crucial for success as a frontline employee. This is the reason the HR function has to demonstrate ‘enabling’ behaviors aimed to assure the service employee that the organization stands behind them. Any attempts by service employee to treat customer complaints as personal attacks are scuppered through appropriate counseling.

Every service organization has a well-defined rubric as part of their process and this serves as a tool for taking decisions aimed at enhancing the customer experience. Services are ‘experiences’ and businesses have realized that these experiences can be a key source of service differentiation. In an era when every business runs the risk of their services becoming commoditized due to the onset of competition, augmenting the service experience can prove to be a viable means of differentiation to gain brownie points with the customers.

Human mind has infinite power – but the problem is that on most occasions, it is pre-occupied with too many inanities that dot it courtesy the normal day-to-day affairs and the humdrum surrounding it.

Creativity is a product of a fecund mind that can cook up innovative ideas to enhance business value. Services that operate in a dynamic environment have all the more reason to adopt an innovative approach to garner loyalty from customers who are proving to be more and more demanding. Innovation is a dominant attribute in every aspect of service – whether it is designing a service to tweak it and make it more fit for purpose or targeting innovative distribution channels.

Cross-selling is no longer the prerogative of banks that were using the phone banking service employees to leverage a positive reaction from a customer during a service encounter to sell insurance, fixed deposits , mutual funds and credits. Service employees, when they are suitably motivated, can also prove to be effective internal brand ambassadors for the business as they can, if they want to, resolve customer queries on other services that a firm is offering.

If the HR function in service organizations can recruit more self-motivated and highly productive employees, then that can be a panacea for most of the problems afflicting the service organization. Innovative HR practices are no longer an option…