What is service productivity? Explain strategies for improving it?


What is service productivity? Explain strategies for improving it?

Ans.    The productivity of process is related to how effectively input resources are transformed into value for customers.

According to Gronroos, for the needs of manufacturers of physical products, there are widely used productivity concepts and measurements instruments. However, in service processes, the underlying assumptions of these concepts and models do not hold. For example, manufacturing-based productivity models assume that any change of input in the production process does not lead to quality changes in outputs. However, in a service context, changes in the production resources and systems do affect the perceived quality of services. Therefore, using manufacturing-oriented productivity models in service contexts are likely to mislead organizations.

Since the service economy is now the largest portion of the industrialized world’s economy, its development has significantly raised the importance of maximizing productivity excellence in service organizations.

The quantity and quality of service sector cannot be treated in isolation, because it may be impossible to separate the impact on the entire service experience. Hence, both the quantity and quality aspects must be considered together to provide a joint impact on the total productivity of the service organizations.

According to Kontaghiorghes, Service sector productivity can be defined as the ratio of:

= Service Sector productivity

Strategies for Improving Service Productivity:

1.      Increased use of technology: Service sector productivity is heavily dependent on fast developing technologies and automation. For eg Customers not only interact with a contact person, they also transact using an ATM or a computer (website). According Normann, there are five main reasons for using information technologies:

(a)     Reducing costs by substituting service officers for information technologies.

(b)     Standardizing services.

(c)     Increasing availability (24-hour access to services using appropriate machines or computers).

(d)     Linking customers into the service system.

(e)     Affecting customer and personnel relationships and behavior.

2.      Training and development: The importance of ‘people dimension’ in the service performance cannot be undermined. For e.g. it is the receptionist who first interacts with the customer or the hairstylist who cuts the hair etc. To a large extent, it is on the basis of interaction with this ’employee’ that the customer forms his perception. Therefore, employees and staff must not only be trained in functional/technical skills but also in soft skills. Training should be looked as an investment and not a cost.

3.      Universal beliefs: To improve the productivity of services, certain beliefs must be understood, accepted and practiced by all. For e.g. quality and customer service must be seen as an invaluable partner, not just for gatekeepers or receptionists but even managers and directors.

4.      Recruitment planning: Improving service productivity requires assistance from human resources. It should understand what each department requires so it can find the best employees. They can take inputs from each department and design job descriptions which help find the best fit employee. Better suited employees lead to increased productivity

5.      Reducing service level: By allotting less time to a service offering, productivity can be increased. For e.g., a doctor gives less time to his patients so he can see more patients in a given day. However, care should be taken that quality does not suffer, otherwise it would lead to customer dissatisfaction

6.      Increase or diversify service offerings: This is another way of increasing productivity. For e.g. a doctor can start a pathology lab in his premises, or hotels can add event planners to their list of service offerings etc.

7.      Changes in demand and supply: These forces play a role in determining the service productivity. For e.g. to meet an increased demand, companies can hire part- time employees and where capacity is restricted, companies can promote non peak times

To summarize, in the words of Paul Krugman, ‘Productivity isn’t everything, but in the long run it is almost everything. A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker.’

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MT UVA- University, Vocational and Affiliated Education for BMS


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