Cutting Corners and Working Overtime:
Quality Erosion in the Service Industry
Rogelio Oliva
Mays Business School, 325M Wehner - 4217 TAMU, College Station, TX 77843
Phone (979) 862-3744; Fax (979) 845-5653
roliva@tamu.edu
John D. Sterman
MIT, Sloan School of Management, 30 Wadsworth St, E53-351, Cambridge, MA 02142
Phone (617) 253-1951; Fax (617) 258-7579
jsterman@mit.edu
Oliva R, Sterman JD. 2001.
Cutting Corners and Working Overtime: Quality Erosion in the Service Industry.
Management Science 47(7):894-914.
Support for this research has been provided by the
Inventing the Organizations of the 21st Century Initiative at the MIT Sloan School
of Management and the Division of Research at the Harvard Business School.
Abstract
The erosion of service quality throughout the economy
is a frequent concern in the popular press. The American Customer Satisfaction
Index for services fell in 1997 to 67.7, down nine percentage points from
its 1994 value. We hypothesize that the characteristics of services -- inseparability,
intangibility, and labor intensity -- interact with management practices
to bias service providers to reduce the level of service they deliver,
often locking entire industries into a vicious cycle of eroding service
standards. To explore this proposition we developed a formal model that
integrates the structural elements of service delivery. We used econometric
estimation, interviews, observations, and archival data to calibrate the
model for a consumer lending service center in a major UK bank. We find
that temporary increases in service demand interact with decision rules
for capacity management, overtime, service delivery processes, and quality
aspirations to yield permanent erosion of the service standards and loss
of revenue. We explore policies to improve performance and implications
for organizational desing in the service sector.
Download
Download the technical documentation for the model
|
HTML |
Download the model
|
for Vensim® Model Reader |
for Vensim® |
Model requires |
historical data |
to replicate past performance (save in same folder as model). Use Vensim option to import data under Simulation Control.
Download the Vensim® Model Reader
Version history:
Oct 02, 2004. Created page for TAMU servers.
Mar 24, 2022. Updated data file to new Vensim format *.vdfx. Updated link to Vensim Reader.