Quality Management in Professional Service Firms

Proceedings of the 11th International Conference on ISO9000 and TQM (ICIT), Hong Kong, China, April 2006

Quality Management in Professional Service Firms: John Haywood-Farmer Revisited Dr. Alex Douglas Reader in Service Quality Management, Liverpool John Moores University, UK. Email: [email protected]

Ms. Lindsey Muir Principal Lecture in Strategy, Liverpool John Moores University, UK. Email: [email protected]

Dr. John Davies Senior Lecturer in Quality Management, University of Salford, UK. Email: [email protected] ABSTRACT This paper examines service delivery quality within Professional Service Firms [PSFs]. Such firms include Medical and Legal Practices, Accountants, Estate Agents, Architects, Surveyors, Engineers and Civil Engineers. The Haywood-Farmer 3Ps Conceptual Model of service quality is utilised to determine whether such PSFs have the right balance of the 3Ps, i.e. Professional Judgement, Physical Facilities and People’s Behaviours to deliver quality services and therefore satisfy customers. Results from a survey of PSFs show that they do not provide a balanced service and that it is the physical facilities that are rated significantly lower than the other two dimensions. This may have an impact on both customers’ perceived quality levels and satisfaction ratings which may ultimately adversely affect business performance. Keywords:

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Service Quality Management, Professional Service Firms

Introduction

The service sector is extremely diverse with different types of services displaying different characteristics [Laing, et al, 2002, Verma, 2000]. Indeed, Laing et al. [2002] predict that the complexity in the management of services in the future is likely to become even more diverse. Verma [2000] found that a key management challenge for all the different types of services examined was quality and specifically, quality of service delivery. This research attempts to examine quality management within a distinct subset of services, the Professional Services Firm, arguably, a type of service which has received relatively little attention in academic research. Nearly twenty years ago John Haywood Farmer [1988] developed a three dimensional model for classifying service organisations and a conceptual model of service quality. The legitimacy of these models, particularly the service quality model, has not been challenged or questioned. The aim of this paper is to revisit the Haywood-Farmer Models [1988] and determine their applicability to Professional Service Firms [PSFs] in the management of their service quality.

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Classification of Services

Much work has been done over the years at identifying and classifying distinguishing features of services. This classifying of services is important because the management challenges are different across various types of services [Verma, 2000] and a classification scheme would allow similar services to be grouped

together for management purposes. Of particular interest are the works of Dotchin and Oakland [1994], Haywood-Farmer [1988], Lovelock [1983], Maister [1982] and Schmenner [1986]. Based on their work several service attributes were identified that would allow management to control and manage service operations and to allow for their classification. These attributes were; labour intensity, contact, interaction, customisation, the nature of the service act, and the direct recipient of the service. Schmenner’s [1986] service classification was the first scheme to classify services into Service Factory, Service Shop, Mass Service and Professional Service. This scheme was developed utilising the two dimensions of degree [high or low] of labour intensity and degree [high or low] of interaction and customisation thereby producing a 4-cell model. Hayward-Farmer [1988] further developed this model by combining degree of labour intensity with the degree [high or low] of customer contact with the service process and then producing a three-dimensional classification scheme, although this model did not label each octet it did identify some examples of services in each. Dotchin and Oakland [1994] utilised all six attributes mentioned above and identified five groupings of similar services – Service Shop, Professional Services, Mass services, Service Factory and an additional group called Personal Services. This paper is about Professional Service Firms.

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Professional Service Firms [PSFs]

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The Business Environment

The environment in which PSFs operate has become increasingly competitive which might imply that providers cannot continue to merely rely on their reputation alone as a guarantee to success. Having thrived traditionally in any business climate with steadfastly loyal clients deregulation has changed the competitive environment of PSFs, no longer sheltering them from the harsh realities of the commercial world [Kay, 2002]. However, perhaps the single biggest change for all professionals employed in PSFs is the fact that power is shifting from the professional to the client or customer. This has meant a change to a more cooperative, flexible, responsive and adaptable approach to service delivery in order to gain the confidence of clients and customers [Maister, 2003]. 3.2

Characteristics of Professional Services

Professional services are characterised by several variables, often different from more traditional firms [Gabbott and Hogg, 1998, Haywood-Farmer and Nollet, 1994, Lapierre, 1997]. These include special qualifications to practice in that profession and, the presence of a professional organisation or regulatory body, which regulates what those professionals and practicing firms do through a code of conduct, rules or ethics. Those providing the services need a high degree of expertise and specialisation, often this is something that the purchaser does not possess and are not therefore in a position to solve the problem or issue themselves. Crosby et al. [1990] suggested that relationships with clients were likely to be long term. Maister [1982] described a PSF as consisting of both professional and non-professional staff with each group organised and managed differently, i.e. non-professional staff along traditional lines and professional staff in a “fluid pyramid” of about three levels representing different levels of seniority and duties. Sharma and Patterson [1999] argued that it was personnel operating at what they called the “boundary” with the client who had the opportunity to add value in their dealings with the client and this interaction could differentiate the firm in the client’s eyes and give a perceived level of quality service. However, although they demonstrate extreme technical diversity Haywood-Farmer and Nollet [1994] argued that PSFs also had a wide range of managerial characteristics in common and those were associated with the classification of PSFs as high in customer contact, customer interaction and customisation as well as being highly labour intensive with a generally intangible service offering aimed at things.

3.3

Defining Professional Service Firms

There appear to be many attempts at defining services using different criteria. Hirvonen and Helander [2001] define professional services as “….services based on the knowledge and expertise of a professional”. Haywood-Farmer and Nollet [1994] define “professional” as “….members of the most highly respected occupations, commonly known as professions. Medicine, engineering, law and accounting are examples….” For the purposes of this paper PSFs are defined as “services based on the knowledge and expertise of a professionally qualified individual [or individuals] and supplied by a team of professional and nonprofessional staff.” This therefore includes such services as Legal and Medical Practices, Estate Agents, Accountants, Surveyors, Engineers and Architects.

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The Haywood-Farmer Conceptual Model of Service Quality

Haywood-Farmer [1988] developed a conceptual model of service quality, which separated the attributes of a service into three groups – called the three Ps. Such groupings were aimed at simplifying the identification by service managers of what customers expected from the service. The 3 Ps were then assembled, one each at the point of an equilateral triangle. 4.1

P1: Professional Judgement

This group of attributes includes judgement, advice, autonomy, diagnostic ability, self-motivation, knowledge and discretion. Quality is associated with staff acting professionally by exercising judgement. It is these attributes that are the core service provided by the firm. Clients come to the firm because they lack the necessary expertise to provide the service for themselves at an acceptable level. 4.2

P2: Physical Facilities, Processes and Procedures

This group includes the physical facilities in which the service is produced, delivered and used as well as anything that is sold as part of the service and the systems and procedures that allow the service to be produced, delivered and used. Therefore, for services this includes the location and physical condition of the servicescape all of which can influence customers’ expectations of the service. This is where customers interact with the firm and its employees and they will pass judgement on the quality of those interactions. This can be influenced [whether rightly or wrongly] by the signals given out by the physical environment. Bitner [1992] identified two forms of behaviour based on an individual’s reaction to the servicescape – approach and avoidance. Firms need to encourage the positive or approach behaviours in both employees and customers. The servicescape can also have a physiological impact on people by being too hot, cold, bright or noisy [Bitner, 1992] all of which might lead to avoidance behaviours. 4.3

P3: People’s Behaviour and Conviviality

This group concerns the service providers’ behaviour and includes grooming, dress, warmth, friendliness, politeness, attitude, timeliness, and communications as well as dealing with problems and complaints. This is an important part of the service encounter that involves at least two people. Winsted [2000] researched the medical and restaurant industries to determine positive and negative behaviours of service delivery personnel. Positive behaviours included inter alia, attentiveness, competence, courteousness, helpfulness, warmth and sincerity. Negative behaviours included bad attitude,

abruptness, arrogance, indifference, rudeness and treated as a number. Interestingly, 90% of the 137 behaviours identified were found to significantly correlate to satisfaction. 4.4

The Proper Balance of Elements

Haywood-Farmer [1988] argued that the choice of elements from the three groups was an important strategic managerial decision as was the combination and blend of elements. However, over concentration on any one or two elements to the exclusion of any one or two could be disastrous in terms of not meeting customers’ needs and leading ultimately to poor perceptions of service quality. He concluded that the proper balance of quality attributes [3Ps] would be near the centre of the triangle. In other words, all three groups of components are important with no one group emphasised to the detriment of any other group. The next section of this paper reports the results of a survey of PSFs in the UK to determine whether such firms have the balance of service quality components recommended by Haywood-Farmer.

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Method

A questionnaire was designed around the service attributes identified by Haywood-Farmer [1988] with the aim of determining whether the sample of PSFs was delivering the correct balance of service attributes. All three Ps were covered utilising 28 questions. The questionnaire asked PSF managers to rate the various areas of their business using a five-point Likert scale ranging from 1 = very bad to 5 = very good. The questionnaire was piloted among PSF managers before the final survey was conducted. A total of 300 questionnaires were sent to PSFs in the Merseyside region of the UK. Professional Service Firms included Estate Agents, Legal Practices, Accountants, Surveyors and Architects. A total of 37 usable responses were received, giving a response rate of 12%, which is about average for this type of survey. The analysis was conducted using SPSS v 12. Cronbach’s Alpha was used to test the internal consistency of the questionnaire and it scored 0.90, demonstrating that the questionnaire was reliable.

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Results

The responses were input into SPSS and the mean and standard deviation was calculated for each question and then for all questions in each category. i.e. P1, P2 and P3. The Cronbach’s Alpha scores were also calculated for each category of questions. The results are shown in the tables below. 6.1

P1

Professional Judgement

Table 1 below shows the mean score for each of the seven questions used to evaluate managements’ perceptions of staff professional judgement. Qs 1-7 Management Perception of Staff Professional Judgement Mean Standard Deviation Q1 Professional judgement overall 4.36 0.59 Q2 Quality of advice 4.53 0.61 Q3 Diagnostic ability 4.19 0.62 Q4 Self-Motivation 3.94 0.79 Q5 Knowledge of products and services 4.17 0.77 Q6 Discretion 4.42 0.73 Q7 Problem-solving ability 4.25 0.69 Mean for P1 overall 4.27 0.18 Table 1: Results for Professional Judgement – P1 The 7 questions in this category had a Cronbach’s Alpha score of 0.757.

6.2 P2 Physical Facilities Table 2 below shows the mean score for each of the eight questions used to evaluate managements’ perceptions of the physical facilities Qs 8-15 Management Perception of the Physical Facilities Mean Standard Deviation Q8 Business facilities overall 4.11 0.63 Q9 The location of your business 3.94 0.92 Q10 The layout of your premises 3.56 0.84 Q11 The size of your premises 3.50 0.85 Q12 Decoration 3.50 0.81 Q13 Furnishings 3.56 0.69 Q14 Lighting 3.81 0.58 Q15 Customer friendliness 4.22 0.68 Mean for P2 overall 3.78 0.27 Table 2: Results for Physical Facilities – P2 The 8 questions in this category had a Cronbach’s Alpha score of 0.907 . 6.3 P3 People’s Behaviours. Table 3 below shows the mean score for each of the thirteen questions used to evaluate managements’ perception of staff behaviours. Qs 16-28 Management Perception of Staff Behaviours Mean Standard Deviation Q16 Staff overall 4.17 0.45 Q17 Appearance 3.86 0.64 Q18 Warmth 4.08 0.37 Q19 Friendliness 4.36 0.54 Q20 Politeness 4.33 0.63 Q21 Attitude 4.14 0.64 Q22 Attentiveness 4.17 0.70 Q23 Speed of service 3.86 0.72 Q24 Verbal communications 4.03 0.65 Q25 Non-verbal communications 4.08 0.65 Q26 Tact 3.98 0.61 Q27 Anticipating customers’ needs 3.83 0.94 Q28 Dealing with complaints 4.03 0.88 Mean for P3 overall 4.07 0.16 Table 3: Results for Peoples’ Behaviours – P3 The 13 questions in this category had a Cronbach’s Alpha score of 0.882. The three means for the 3Ps were respectively 4.27, 3.78 and 4.07. An analysis of variation [ANOVA] was conducted in order to compare the three means to determine whether the difference between them was significant. The analysis showed that the mean for P2 [Physical facilities] was significantly lower than those of the other 2Ps [Sig. 0.001].

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Conclusions

The PSFs in this study are not delivering a balanced service. The physical facility is rated significantly lower than people’s behaviours and professional judgement. This may have a detrimental affect on the firm’s ability to attract and keep customers. The design of the servicescape is a service variable that is within the control of the management of the firm and can offer customers tangible cues and/or clues to the

quality level of the generally intangible service. These tangible clues together with the behaviours of staff are what Gronroos [1984] termed functional quality, i.e. they impact on how the service is delivered. These take on a much more significant role when the technical quality [Gronroos, 1984] i.e. the outcome of the service, cannot be evaluated by the client. Thus it is the process dimensions that may govern customers’ perceptions of quality and deliver competitive advantage through customer satisfaction. In the words of the old song, “It ain’t what you do it’s the way that you do it – that’s what gets results” [Maister, 2003].

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