Executives usually think of productivity as something to be maximized. In service businesses, that implies that firms often dedicate lots of focus to design automated procedures that reduce their dependence on individuals -generally their most high-priced resource. But to increased profitability, increased productivity will not always lead in service companies. The authors examined data from more than 700 U.S. companies in service industries in 2002 and 2007. Their analysis indicated that, to get certain amount of technology, there's an inverted U relationship between productivity and profitability in service businesses. Quite simply, service companies become more unprofitable when they are either overly productive or not productive enough.
But over time, the optimum productivity amount increases because technology advances over time. The writers found that several variables cause the productivity level that was perfect to be lower or higher. The optimal productivity level isn't set in stone. As technology advances, the optimal productivity level increases. An example is offered by online travel reservation systems. The authors argue that productivity in a service company must be treated as a strategic choice variable that depends on the company as well as the technology. One crucial question is the relative importance of customer satisfaction to the business model. When the situation reinforces the provision of better service quality (correspondingly high profit margin, high price, low market concentration along with low wages), organizations must accentuate customer satisfaction more; when the opposite factors are present ( the high market concentration, high wages, low margin along with low price), they are able to stress service productivity.Should Your Business Be Less Productive case study solution
PUBLICATION DATE: April 01, 2014 PRODUCT #: SMR482-HCB-ENG
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