Three Outcomes of Service

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Consequently, in the delivery of service, errors, mistakes and failures are inevitable,requiring the need for service recovery (Hart et al., 1990). Indeed, Tax and Brown (1998)suggested that managing complaints well and recovering customers, i.e. dealing withthem after a service failure and (usually) a complaint, should be the cornerstone of anorganisations customer satisfaction strategy.

Research into service recovery has been rapidly developing over the past 20 yearswith the emergence of service economies and customer-focused strategies employed byincreasing numbers of organisations. However, the vast majority of the literaturecurrently takes a marketing view of recovery, primarily concerned with the impact oncustomer satisfaction. Thus, the outcome of service recovery is often dened in termsof returning a dissatised customer to a state of satisfaction (Berry and Parasuraman,1991; Lewis and Spyrakopoulos, 2001; Zemke and Schaaf, 1990). Boshoff (1997), forexample, suggested that according to the service quality literature, the outcomes of service recovery are improved customer satisfaction and improved service qualityperceptions leading to positive behaviour intentions such as repeat purchases andloyalty.

However, there seems to be an emerging realisation both by practitioners and in theacademic literature that service recovery is not just about recovering the dissatisedcustomer to regain their satisfaction and loyalty. There is also a view that a, if not the,prime purpose (outcome) of service recovery is to help drive improvement through anorganisation. Spreng et al. (1995), for example, were some of the rst to point out thatalthough service recovery procedures (i.e. the way service recovery is managed andexecuted) can be expensive, they should be viewed as opportunities tomake improvements. Such improvements should lead both to cost reductions,through the removal of inefcient and ineffective processes, and also to fewer failuresin the future and thus fewer dissatised customers. However, few papers appear to beconcerned with the operational outcomes associated with service recovery, such as

investigating the issue, nding root cause and making improvements to processes.A search of the ABI/Inform Global (Proquest) database (up to and including 2006) forscholarly articles published in the area of service recovery revealed 107 contributionswith the words service recovery in the titles, abstracts or keywords. Excluding ten of which were published in conference proceedings, out of the remaining 97 papers onlyseven were published in operations management (OM) journals ( Decision Sciences 2, Journal of Operations Management 2, International Journal of Quality & Reliability Management 2, and Production and Operations Management 1). The remainderwere found in service management journals ( Journal of Service Research, the International Journal of Service Industry Management and Managing Service Quality ,for example) marketing journals (such as Marketing Management , Journal of Interactive Marketing , European Journal of Marketing ), sector specic journals (such as Public Personnel Management , Cornell Hotel and Restaurant Administration Quarterly andgeneral management journals (such as MIT Sloan Management Review and Journal of Business Strategy) . Figure 1 shows the proportions of papers published in each type of journal.

It would appear that the OM community has not yet recognised the importance of service recovery or the opportunities that it may afford.

This may not be surprising since, despite the size of the service economy, which istypically around 70-85 per cent of GDP of developed nations, service and service

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operations seem to feature little in OM journals. A search on the word service in thetitles, abstracts and keywords of the two leading OM journals, JOM and IJOPM (up toand including 2006) identied 191 service operations papers in JOM and 145 in IJOPM ,accounting for 28 and 11 per cent of their total outputs, respectively. This suggests thatthese journals appear not to reect the size of the service economy or the importance of service operations versus production OM.

In one of the papers on service recovery published in Decision Sciences the authorsstated that:

. . .although previous research has extensively examined customer satisfaction inservice-failure and recovery encounters, few studies have explored recovery solutions froma service rms perspective. In particular, the cost of providing effective service recovery hasrarely been considered in past research. Likewise, there is a lack of research on the linkbetween the value of a customer to the rm and its recovery decisions (Zhu et al., 2004, p. 494).

An additional outcome of service recovery, which has been the focus of an even smalleramount of work, is employee attitude. Dealing with complaining customers may be adifcultandsometimes upsetting experience,made even morestressful if theorganisationhas customer-unfriendly policies and inadequate recovery procedures. Poor recoveryprocesses can be the cause of much stress for employees (Bowen and Johnston, 1999).

We would therefore argue that service recovery can be seen as leading to threeoutcomes; customer recovery (satised customers), process recovery (improvedprocesses) and employee recovery (satised staff). The next sections provide a reviewof the literature in each of these three areas. This leads to a simple model of the threeoutcomes of recovery that is tested to evaluate the impact of the service recovery

process on these outcomes and their respective impact on nancial performance.

Customer recoveryThere appear to be four main themes in the extensive service recovery literatureconcerned with recovering the customer; how to satisfy the customer following afailure, the impact of recovery on loyalty, the impact of recovery on delight and theimpact of recovery on prot. While the earlier contributions in the eld were mainlynormative, more recent work has been empirically-based.

Figure 1.Categorisation of papers

published in servicerecovery (to the end o

200

35%

39%

13%

6%

7%

ServicesMarketingSector specificGeneral managementOM

Three outcomesof servicrecovery

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How to satisfy the customer following a failureMuch of the literature on service recovery is focused on the steps or procedures forrecovering, that is satisfying, the customer following a service failure (Andreassen, 2001;Boshoff, 1997; Boshoff andLeong, 1998; Colgate, 2001; DeWitt andBrady, 2003; Hess etal.,2003; Johnston, 1998; Johnston and Fern, 1999; Smith and Bolton, 2002; Taylor, 2001;Van Ossel and Stremersch, 1998; Weun et al., 2004). Summarising these contributions, itwould appear that recovering the customer involves seven key activities:

(1) Acknowledgement . Acknowledging that a problem has occurred (Bitner et al.,1990).

(2) Empathy. Understanding the problem from a customers point of view (Johnstonand Fern, 1999).

(3) Apology. Saying sorry (Kelley et al., 1993).(4) Own the problem. Taking ownership of the customer and the issue (Barlow and

Mller, 1996).

(5) Fix the problem. Fixing, or at least trying to x the problem for the customer(Michel, 2004).(6) Provide assurance. Providing assurance that the problem has been/will be

sorted and should not occur again (Barlow and Mller, 1996).(7) Provide compensation. Providing a refund, and/or a token and/or compensation,

depending on the severity of the problem (Boshoff, 1997).

The impact of recovery on loyaltyIt is also recognised that recovering the customer will have an important impact oncustomer loyalty and their re-purchase intentions (DeWitt and Brady, 2003; Dube andMaute, 1996; Feinberg et al., 1990; Halstead and Page, 1992; Mattila, 2001; Maxham,2001; Swanson and Kelley, 2001; Tax et al., 1998).

The impact of recovery on delight Further, it has been found/suggested that recovery can lead to higher levels of satisfaction than is achieved through normal (good) service delivery. This is sometimesreferred to as the service paradox (Bjorlin Liden and Skalen, 2003; McCollough andBharadwaj, 1992; McCollough and Gremler, 2004; Michel, 2002).

The impact of recovery on prot Tax and Brown (1998, p. 86) argued that the relationship between service recoveryand prot can be clearly seen by examining the service prot chain. They argued thatprot is affected by customer loyalty, which results from customer satisfactiongenerated from good service recovery procedures. Their research, like others (Johnston,2001) suggests that dealing well with problems and failures indeed has a strong impacton nancial performance.

It would also appear that many customers are dissatised with the wayorganisations handle their complaints. Tax and Brown (1998, p. 76), for example, notedthat the majority of customers are dissatised with the way companies resolve theircomplaints. Indeed, it has been reported that more than half of attempted recoveryefforts reinforce dissatisfaction (Hart et al., 1990).

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Furthermore, in some parts of the economy the number of complaints about the waycomplaints have been handled is on the increase. There have been many reports in thepress from consumer councils in the UK about the increasing number of complaintsthey receive about the way organisations handle complaints. For example, complaintsto the Consumer Council for Water about Severn Trent Water, which serves more thaneight million customers in the UK, rose by 54 per cent in 2005-2006 ( BBC News, 2006a).More recently the same council reported an overall rise in complaints about the way allwater companies handled consumer complaints in 2006-2007 citing Severn Trent asbeing worse than the average. Dame Yve Buckland, Chair of the Consumer Council forWater, said In some cases these problems are compounded when customers cannoteven reach the companys staff on the phone to complain ( BBC News, 2007). This risein complaints about complaints appears in other sectors, for example, the AirTransport Users Council said the number of written complaints it received in 2006 hadnearly trebled ( BBC News, 2006b). According to Energywatch, the consumer watchdog,British Gas was not only the UKs most expensive energy provider, but it also providedthe worst customer service. Energywatch said it received 15,433 complaints aboutBritish Gas in the six months to September 2006, more than double in the same periodin 2005 ( BBC News, 2006c).

Process recoveryThe extant literature on service and service recovery in the OM area recognises theneed to undertake OM-based research. Leal and Pereira (2003, p. 646) stated thatEmpirical research in quality improvement in service organisations has been growingin recent years but it still lags behind the developments observed in manufacturing.Simons (2004, p. 11) supported the concern about limited research in this area,However, while service recovery has anecdotal support, the literature has so far not

offered management tools for analytically evaluating a systems needs for recoverymeasures or assessing their potential benet. Goldstein et al. (2002) stated that there isan absence in the OM literature about the role of nancial measures in the design of service delivery systems, including service recovery systems.

Yet process improvement is what many customers wish to see happen. Researchcarried out for the Citizens Charter Unit in the UK (MORI, 1997) found that about50 per cent of people complain in order that the organisation might improve itsservices. More recently one national survey, The National Complaints Culture Survey(2006), has indicated that the prime customer expectation is to have the problem xed.Tokenism and even compensation are not the key customer requirements. The surveyalso found that the offer of free goods or services following poor service was onlydeemed important by less than 5 per cent of those questioned. Furthermore, when thereis a problem, customers most want organisations to apologise and x the originalproblem not just for themselves but for future users.

The literature to date does address several process improvement issues followingservice failures; failure types and impact, proling service failures, the link betweenoperational factors and customer outcomes, the link between operational processes andnancial outcomes, the impact of system reliability on service recovery, an operationalframework for service recovery, process improvement, collecting failure data, andanalysing and interpreting failure data.


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Failure types and impact Zhu et al. (2004) introduced the notion of process recovery to differentiate betweenoutcome failures; failures from a customer perspective and process, operational,failures. This is the term we have adopted here. They developed an analytical modelfor determining the optimal allocation of a rms service recovery resources, linkingoutcome and process recovery to customer types and importantly also to cost, whichis an area in need of more research (Zhu et al., 2004; Rust et al., 1995). Their work,although primarily focusing on outcomes for the customers, takes into account the typeand magnitude of failure but not the operational processes to deal with the failures.

Proling service failuresCraighead et al. (2004) focused on proling service failures and assessing theappropriate treatment (improvement) required to deal with different failure types.However, only two of the variables in their model are concerned with processimprovement (x problem and quickly nd the problem), though xing the problemappears to be primarily aimed at solving the issue for the customer rather thanoperational process improvement.

The link between operational factors and customer outcomesLeal and Pereira (2003) investigated the impact caused by operational factors (internalmeasures) on customer perceptions (external measures) and linked them to the requiredOM actions. Whereas the customer-focused research often uses critical incident orcomplaint-based methodologies or hypothetical scenarios (Michel, 2001), their researchemployed operational tools of root cause analysis and tree diagrams to identify thefailures modes and identify appropriate management priorities and actions.

The link between operational processes and nancial outcomes

Simons (2004) paper focused on providing support to managers who need to balancethe cost of recovery efforts with their benets to the companys bottom line. Simonsalso questioned the focus of service recovery on dealing with customers who have beenthe recipient of poor service and suggested that it should focus more on dealing withthe mechanisms that generate errors and improve correction capabilities.

The impact of system reliability on service recoverySimons (2004, p. 14) also voiced concern that there has almost no multi-stage modelingof service recovery to facilitate system improvement yet reliability has been shown tobe a key component of service quality (Simons, 2004; Cook et al., 2002). Simonsresearch considered the success probabilities in the steps of the service recoveryprocess. Using reliability theory he demonstrated that when the individualrecovery steps are highly reliable, overall system reliability can be higher that thatof any individual step and that the relationship between the reliability of individualsteps and overall system reliability is nonlinear. However, his method does not tell amanager why a step has failed or how to x it.

An operational framework for service recoveryMiller et al. (2000, p. 387) provided a framework for managers to understand servicerecovery from an operations perceptive as well as a starting point for researchers

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in operations management to identify issues for further study. Their three-stageframework covers pre-recovery, immediate recovery and follow-up recovery. However,it only takes limited cognisance of the operational issues and focuses predominantly onthe impact on the customer. The researchers also recognised that the timing, sequence(placement), and benets of the service recovery steps within the broader context of theservice delivery system are still not well understood.

Process improvement (process recovery)From an operations perspective, and the focus of this paper, a key purpose of servicerecovery, in addition to satisfying the customer, is to use the information gleaned from thefailure and its consequences to drive improvements through an organisation by focusingmanagerial attention on specic problem areas. Learning from failures moves servicerecovery awayfroma transactional activity, interested onlyin recoveringandsatisfyinganindividual customer, toward management activity that improves systems and processes toensure future customers are satised and costs are reduced. Indeed, learning from failuresmay be more important than simply recovering individual customers, because processimprovements that inuence customer satisfactionrepresent the most signicant means of creating bottom-line impacts through recovery (Hart et al., 1990; Johnston and Clark, 2005;Reichheld and Sasser, 1990; Schlesinger and Heskett, 1991; Stauss, 1993).

The importance and impact of process improvement is an area raised in severalbooks and papers (Barlow and Mller, 1996; Hart et al., 1990, Johnston, 2000; Johnstonand Clark, 2005, Michel, 2001; Simons and Kraus, 2005; Spreng et al., 1995; Tax et al.,1998; Tax and Brown, 1998; Van Ossel and Stremersch, 1998). But the topic is littledeveloped. Simons and Kraus (2005, p. 279) stated, for example:

The literature appears to contain no prior research of a prescriptive nature that offersmanagers guidance about the extent to which service recovery can benet their systems andmerit incorporation into the design of the service delivery system.

They go on to develop a theoretical model linking improvement to investments inservice recovery. Tax and Brown (1998) recognise the importance of improving theservice system as part of service recovery, which is one section within one part of theirfour stage model. This task includes classifying service failures, capturing the issuesinternally to facilitate organisational learning, generating service performance data,disseminating the data and investing in quality improvements.

Johnston and Clark (2005) suggested that process improvement involved four keystages:

(1) Data collection. The collection of information about both complaints andoperational recovery procedures so that data about problem areas are madeavailable to managers.

(2) Data analysis. The analysis of the data to identify problems and establishpriorities.

(3) Costing. Assessing the cost and other implications of rectifying or improvingthe processes.

(4) Improvement. Improving, where appropriate, operational and organisationalprocesses and assessing the impact after implementation.

There is some literature covering the rst two of these; data collection and analysis.


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Collecting failure dataThere appear to be three key methods used to detect service failures and collectinformation about them; the adoption of a total quality management (TQM) approach,mystery shopping and the use of the critical incident technique.

While most manufacturing companies adopt some tools and concepts associatedwith TQM (Powell, 1995), so too have many service companies (Lovelock and Wirtz,2007). These may involve programmes and approaches such as ISO 9000 certication(Corbett, 2006), national quality award schemes (Lee et al., 2006), and application of sixsigma methodologies (George, 2003). Although these programmes differ in their scopeand method, all require organisations to collect data about failures.

Mystery shopping offers another way to detect problems (Finn, 2001), because itinvolves eld researchers making test purchases, challenging service centres with testproblems, and ling test complaints. Although the data may not be representative,they help in identifying error-prone processes and can also be useful for staff trainingand for establishing service benchmarks.

The third approach to gathering service failure data makes use of customer surveysthat explicitly ask about critical incidents (Bitner et al., 1990; Johnston, 1995).Application of the critical incident technique and other critical incident studies combinethe advantages of qualitative studies, because respondents describe what happened intheir own words, with those of quantitative studies, because they can categoriseincidents systematically. Althoughcritical incident studiesare welldeveloped (Gremler,2004), only a few companies use this approach for service recovery management.

Analysing and interpreting failure dataThere are several techniques for analysing and interpreting failure data includingFrequency-Relevancy Analysis of Complaints (FRAC), shbone diagrams and QualityFunction Deployment (QFD).

The FRAC approach helps managers prioritise their process recovery efforts bycategorising issues in terms of their frequency of occurrence and their relevancy orpotential impact (Stauss and Seidel, 2005). In contrast, the shbone diagram (Ishikawa,1985) qualitatively links internal problems (causes) with service failures (effects) toidentify the main causes of the problem (Stauss and Seidel, 2005). Alternatively, usingcritical incident information, QFD tools can be applied to transform probleminformation into problem solutions and problem prevention activities (Stauss, 1993).

Despite the many traditional OM tools and techniques for failure data collection andanalysis and the more recent work on identifying and categorising service failures andunderstanding their impact, few organisations appear to learn from their mistakesand problems (Armistead and Clark, 1994; Johnston and Clark, 2005; Johnston andMehra, 2002; Tax and Brown, 1998). Tax and Brown, for example, reported that many

customers are less than satised that improvements have been made to the system toprevent future problems. The research cited earlier (MORI, 1997) which reported thatabout 50 per cent of people complain in order that the organisation might improve itsservices also found that only one in ten felt that the service had improved as a result.

Employee recoveryA critical component in service recovery procedures is the front-line employee who hasto deal with complaining and aggrieved, and sometimes highly emotional, customers.

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They often nd themselves sandwiched between understandable customer grievancesand intransigent management or unchangeable organisational policies and procedures,giving rise to high levels of stress in employees. Much of the employee literatureassociated with recovery has concerned the role of the employee, such as their ability toadapt (Boshoff and Leong, 1998), their need to be proactive (Iacobucci, 1998) and therole of self managing teams (de Jong and de Ruyter, 2004).

Bowen and Johnston (1999) take a different approach and introduce the notion of employee recovery. They found that while the organisations in their study were wellaware of the concept of customer recovery they were poor at, or had a limited notion of,the need to recover employees, i.e. supporting their employees in their difcult role of dealing with complaining customers. (Bowen and Johnston referred to this as internalservice recovery.)

Johnston and Clark (2005, p. 398) further suggested that:. . .some organisations just let their staff soak up the pressure resulting from their inadequateservice systems leading not only to dissatised and disillusioned customers but also stressed

and negatively disposed staff who feel powerless to help or sort out the problems.This helpless feeling (known as learned helplessness see for example Martinko andGardner, 1982) encourages or rather induces employees to display passive, maladaptivebehaviours, such as being unhelpful, withdrawing or acting uncreatively. The employeealienation associated with this helplessness will be compounded when employees feel thatmanagementdoes notmakeefforts to recover them, theemployees,fromthishelplessstate.

This alienation impacts directly on customers, especially complaining or aggrievedcustomers. In a recent critical incident study of 2,520 service failures and recoveries in aSwiss Bank, Michel (2003) reported that incorrect actions and inappropriate behaviourby employees were not the cause of the majority of the failures. A content analysis of allthe incidents revealed that 25 customers reported impoliteness, 33 lack of empathy,13 lack of effort, 11 missing explanations, 35 dishonesty, and ve an unfavourableattitude. These cases represented less than 5 per cent of the total reported servicefailures. However, employee behaviour was a more important factor in the recoveryprocess. A frequency analysis indicated that customers described 1,380 differentrecovery activities following the 2,520 service failures. Of those, 336 (24.3 per cent) wereemployee related, whereby 171 incidents (50.8 per cent) were perceived as negative anddissatisfactory, and 165 incidents (49.2 per cent) were perceived as positive andsatisfactory. Interestingly, some of the customers empathised with the employees whoappeared stressed and did not have enough time to serve them well.

Service recovery managementOur review of the service recovery literature indicates that the focus tends to be oncustomer recovery (i.e. the marketing perspective) the majority, or employeerecovery (i.e. the management/HR perspective) or process recovery (i.e. the OMperspective). Recent evidence suggests that managers need to integrate these threeapproaches rather than to prioritise one perspective over the others. For example,although most managers might agree that learning from customer feedback is animportant, efcient, and effective tool for process improvement, one of the biggesthurdles to doing so stems from the lack of information that ows between the part of the business that collects and deals with customer problems (for example, the customer


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service department) and the rest of the organisation. Research suggests that the morenegative feedback the customer service department collects, the more isolated thisdepartment becomes (Fornell and Westbrook, 1984). Furthermore, Tax and Brown(1998, p. 83) noted that employees showed little interest in hearing the customerdescribe the details of the problem. They treated the complaint as an isolated incidentneeding resolution but not requiring a report to management. This approach has beenlabelled as See no evil, hear no evil, speak no evil (Homburg and Fu rst, 2005a), whicharises out of a defensive organisational behaviour approach to complaint handling.Actual or potential threats to employees self-esteem, reputation, autonomy, resources,and job security lead to the suppression of information. Consequently, a lack of employee recovery leads to both poor customer recovery and poor process recovery.

Conversely, combining state-of-the-art employee recovery with process recovery canlead to superior customer recovery.A cross-industry study that exploredthe effectivenessof an organic (employee-driven) versus a mechanistic (process-driven) approach tocomplaint handling in terms of justice, satisfaction, and loyalty showed that the effect of the mechanistic approach, which pertains mainly to distributive andprocedural justice, isstronger overall, but the approaches complement each other. In other words, an overreliance on an organic approach,which considers mainly culture andis more applicable tointernational justice, may be shortsighted because it requires empowerment. An organicapproach maybe more successful forcustomised, complex offerings(HomburgandFu rst,2005b).

Developing the research modelThe purpose of this paper was rstly to highlight these multiple outcomes of servicerecovery and secondly to investigate the impact of service recovery procedures(i.e. the way service recovery is managed and executed) on the three outcomes of servicerecovery recovery of the customer, recovery (i.e. improvement) of the processes, andrecovery of the employees. These three are outcomes(results) of the recovery proceduresemployed by an organisation when a failure or error has occurred. The procedures mayinvolve, for example, the speed and manner in which the customer is dealt with, thedegree of discretion available to staff in dealing with the customer, and the proceduresfor collecting and analysing failure information. These procedures will result in:

(1) customer recovery (for example, satised customers which in turn may lead tohigher levels of customer retention and more word-of-mouth recommendations);

(2) process recovery (for example, improved processes with higher levels of efciency, or less complexity resulting in fewer errors); and

(3) employee recovery (for example, a less stressed workforce with a more positiveattitude towards the job and customers, which in turn may result in lessabsenteeism and reduced staff turnover).

One acid test of the impact of these three outcomes is their relative impact on thenancial performance of the organisation, such as contribution to prots or revenuestreams or reduction in costs. This might be achieved by increased customer retentionor spending (from customer recovery), or reduction in costs (from processimprovement) or from reduced absenteeism or staff turnover (from employeerecovery). Thus, the model shown in Figure 2 links recovery procedures through thethree outcomes of recovery to nancial performance (Johnston, 2001).

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(10) service problems and failures;(11) discretion and empowerment;(12) service recovery; and(13) complaint follow-up.

There were three questions on customer satisfaction, covering (Cronbach a 0.727):(1) satisfaction trends;(2) satisfaction with service or product; and

(3) satisfaction with complaint management process.There were ve questions covering customer retention (Cronbach a 0.731):

(1) user/customer loyalty;(2) user/customer turnover (churn);(3) user/customer referral;(4) user/customer portfolio; and(5) market share.

Process improvement was captured in seven questions (Cronbach a 0.808):(1) employee involvement in complaint management process improvement;(2) process improvement;(3) complaint management process improvement ideas;(4) process change initiatives;(5) process driven changes;(6) communication of improvement ideas; and(7) use of complaint data.

Figure 3.The constructs in the

mod

Employee recovery

Process recoveryFinancial

performance

Customersatisfaction

Customer recovery

Processimprovement

Employeeretention

Employeeattitude

Customerretention

Recoveryprocedures


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Process recovery. The second largest impact of recovery procedures was on processrecovery. It would appear that the organisations with the better recovery proceduresled to improvements in process which in turn had a high, indeed the highest, impact onnancial performance.

Furthermore, few organisations in the sample scored highly on both pairs of constructs. For example, Figure 5 shows the relationships between one pair of constructs, recovery procedures and customer satisfaction for the 60 respondents.

The scatter diagram in Figure 5 shows that only four out of the 60 organisations(7 per cent) scored above four on both constructs (the top right box in the chart). Indeed,the scatter diagrams for all the pairs of relationships reveal that very few organisationsscored above four (out of ve) on both dimensions (Table II).

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Few organisations (despite the potential positive biases from self reporting) appear tohave good (above 4) recovery procedures and good (above 4) outcomes. Despite theimportance of service recovery and its impact on customers, process improvement andemployees, and indeed the bottom line, it would appear (as suggested by Tax andBrown, 1998; Bowen and Johnston, 1999) that many customers are dissatised with theway organisations handle their complaints and, worse still, few organisations learnfrom their mistakes and problems and leave the employee feeling stressed. Goodservice recovery procedures seem to elude many organisations.

While many organisations, and the literature, are concerned with service recoveryfew seem to be good at it, whether customer recovery or process recovery or employeerecovery.

ConclusionsService recovery procedures appear to have a greater impact on employees and processimprovement than on customers. We would suggest that many organisations andacademic researchers have taken a limited view of service recovery by concentratingon the less potent area of customer recovery and largely ignoring the potentially higherimpact outcomes of process and employee recovery. This work supports the emergingview that service recovery is not simply about recovering the customer. From apractitioner perspective it challenges the way some organisations have focused theirrecovery procedures on satisfying or indeed delighting customers and suggests that byso doing they are missing out on substantial benets. It also suggests that manyorganisations have a long way to go to develop the management and execution of service recovery.

This paper seeks to challenge practitioners to assess whether their recoveryprocedures are seen simply as a sunk cost of the business or as an important nancialgenerator. As a sunk cost, recovery tends to be focused on providing short-term relief to customers who have experienced a failure. Having procedures in place which focusmanagerial attention on driving process improvement and helping staff cope withstressful failure situations appears to have a signicant impact on an organisationsnancial performance.

From an academic point of view it highlights the limited research into process andemployee recovery and seeks to encourage academics to bring other perspectives, inparticular OM and human resource management, to bear on the topic of servicerecovery. The two outcomes of process recovery and employee recovery appear to be

Pairs of constructs Percentage

Recovery procedures Customer satisfaction 7Recovery procedures Process improvement 10Recovery procedures Employee attitude 3Customer satisfaction Customer retention 3Customer retention Financial performance 7Process improvement Financial performance 7Employee attitude Employee retention 5Employee retention Financial performance 7

Table II.Percentage of organisations scoringgreater than 4 on bothconstructs

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under-researched when compared to the material on customer recovery and its impacton customer retention.

Limitations and further workThis study is not without its limitations. The small sample size and missing itemsprecluded the use of techniques such as conrmatory factor analysis or structuralequation modelling. In addition common method bias could not be controlled for.

Furthermore, the sample was limited to organisations which volunteered to takepart in a benchmarking exercise. In addition, the questionnaire was self administeredby the senior managers in the organisation, which opens up the question of over-reporting.

Further, work is required to test the ndings; indeed it would be helpful to take datafrom specic service sectors. While this work looks at the some of the consequences, oroutcomes, or service recovery, it would be helpful to consider the antecedents, thedrivers, of good recovery procedures, such as performance measurement systems,communication systems, and organisational culture. It may be possible to identifywhich of these have the larger or smaller impacts on, not only the quality of recoveryprocesses, but also the outcomes of customer, process and employee recovery, andimportantly, a rms nancial performance.

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Corresponding authorRobert Johnston can be contacted at: [email protected]


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