M. Kachniewska Tourism Quality Management by Magdalena Kachniewska

Magdalena Kachniewska

TOURISM QUALITY MANAGEMENT

Magdalena Kachniewska

TOURISM QUALITY MANAGEMENT

Magdalena Kachniewska

TOURISM QUALITY MANAGEMENT

Wydawnictwa Uczelniane Wyższej Szkoły Handlu i Finansów Międzynarodowych im. Fryderyka Skarbka

Warszawa 2006

Redakcja: Korekta:

ISBN

Wyższa Szkoła Handlu i Finansów Międzynarodowych ul. Nowogrodzka 56, 00-695 Warszawa Tel 0-22- 622 0109, 621 4387, 629 2651 Fax 0-22- 629 4413 e-mail: biurorektora@poczta.wshifm.edu.pl http//: www.wshifm.edu.pl

Opracowanie komputerowe, druk i oprawa: Dom Wydawniczy ELIPSA ul. Inflancka 15/198, 00-189 Warszawa tel./fax 0-22 635 03 01, 0-22 635 17 85, e-mail: elipsa@elipsa.pl, www.elipsa.pl

Contents FIGURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PART ONE: RATIONALE FOR QUALITY MANAGEMENT IN THE TOURISM INDUSTRY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. The Concept of Tourism Product . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1. What is Tourism? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2. Specificity of the Tourism Product . . . . . . . . . . . . . . . . . . . . . . . . . 1.3. Challenges Facing Modern Tourism . . . . . . . . . . . . . . . . . . . . . . . . 2. Services as the Integral Part of a Tourism Product . . . . . . . . . . . . 2.1. Services versus Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2. Service Attributes and Obstacles to Attaining Quality Enhancement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Definitions of Quality Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. The Significance of Quality in Modern Tourism Development . . 4.1. Competition in the Tourism Market . . . . . . . . . . . . . . . . . . . . . . . 4.2. How quality improves business . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3. Social Aspects of Quality Management in Tourism . . . . . . . . . . . 4.4. The Power of Loyalty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Tourism Product Quality – a Complex Matter . . . . . . . . . . . . . . . PART TWO: TOURISM ENTERPRISE – A CUSTOMER DRIVEN ORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. Customer Focus – What’s New about It? . . . . . . . . . . . . . . . . . . . 7. Customer as Co-Producer of Value . . . . . . . . . . . . . . . . . . . . . . . . 7.1. Customer Defined Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2. Customer Effects on Service Quality . . . . . . . . . . . . . . . . . . . . . . . 7.3. Complaint Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. The Employee as Internal Customer . . . . . . . . . . . . . . . . . . . . . . . 8.1. Internal Clients Need Internal Marketing . . . . . . . . . . . . . . . . . . . 8.2. Tourism Employees as Determinants of Quality Service . . . . . . . 8.3. Barriers to Quality Enhancement in Tourism Service Encounters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9. Quality Culture in a Tourism Enterprise . . . . . . . . . . . . . . . . . . . . 9.1. Understanding What Corporate Culture is . . . . . . . . . . . . . . . . . . 9.2. Leadership for Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.3. Establishing a Quality Culture . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.4. The Power of Empowerment . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART THREE: QUALITY MANAGEMENT SYSTEMS . . . . . . . . . 10. Introduction to TQM Philosophy . . . . . . . . . . . . . . . . . . . . . . . . . . 10.1. Evolution of Quality Management . . . . . . . . . . . . . . . . . . . . . . . . . 10.2. The Total Quality Approach to Quality Management . . . . . . . . . 10.3. Basic Principles of TQM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.4. TQM Implementation Process – benefits and pitfalls . . . . . . . . . 10.5. Is TQM a miracle to happen? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.6. TQM Concept in a Tourism Destination Area . . . . . . . . . . . . . . . 11. ISO Management System Standards . . . . . . . . . . . . . . . . . . . . . . . 11.1. International Organization for Standarization (ISO) . . . . . . . . . 11.2. Management System Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.3. ISO 9000 as a Route to Implementing TQM . . . . . . . . . . . . . . . . 12. Registration to ISO 9001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.1. International Standardization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2. Rules and Motivation for Registration to ISO 9001 . . . . . . . . . . . 12.3. ISO 9001 in Tourism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13. Standards as a Communication Tool . . . . . . . . . . . . . . . . . . . . . . .

PART FOUR: CONTINUOUS IMPROVEMENT . . . . . . . . . . . . . . . 14. Is It Possible to Measure Service Quality? . . . . . . . . . . . . . . . . . . 15. Cost of Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.1. The Money in Mistakes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.2. Cost of Quality (COQ) Models. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.3. Approaches to Quality Cost Measurement . . . . . . . . . . . . . . . . . . 15.4. “Cost-tracing” Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16. Tools for Cost Tracing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.1. ABC of Cost Tracing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.2. “Vital Few and Trivial Many” Principle . . . . . . . . . . . . . . . . . . . . . 16.3. Pareto Chart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17. Tools for Quality Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.1. Quality Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.2. Self-audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.3. Self-assessment and Quality Awards . . . . . . . . . . . . . . . . . . . . . . . 18. “Hard” and “Soft” Tools for Quality . . . . . . . . . . . . . . . . . . . . . . . 18.1. Fishbone Diagram . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.2. Quality Function Deployment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.3. Critical Incident Technique . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19. Competitive Benchmarking as a Service Improvement Tool . . . . 20. Do Loyalty Programmes Serve Tourism Product Quality? . . . . . Concluding remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . List of abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Figures Figure I: International Tourist Arrivals, 1950â&#x20AC;&#x201C;2004 . . . . . . . . . Figure II: Economic Growth and International Tourist Arrivals Figure III: Tourist Purchase-Consumption Process . . . . . . . . . . . Figure IV: Impact of demand fluctuation while capacity remains inflexible . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Figure V: A tourism sector model . . . . . . . . . . . . . . . . . . . . . . . . Figure VI: The cycle of competitiveness . . . . . . . . . . . . . . . . . . . . Figure VII: Interaction and customization . . . . . . . . . . . . . . . . . . . Figure VIII: Where value is added . . . . . . . . . . . . . . . . . . . . . . . . . . Figure IX: Economic and Social Aspects of Quality . . . . . . . . . . Figure X: Loyalty-based business system . . . . . . . . . . . . . . . . . . Figure XI: The Customer Loyalty Ladder . . . . . . . . . . . . . . . . . . Figure XII: The services marketing triangle . . . . . . . . . . . . . . . . . Figure XIII: Quality dimensions in tourism . . . . . . . . . . . . . . . . . . . Figure XIV: The Quality Chain . . . . . . . . . . . . . . . . . . . . . . . . . . . . Figure XV: The servuction system model . . . . . . . . . . . . . . . . . . . Figure XVI: Model for Quality Implementation . . . . . . . . . . . . . . Figure XVII: Benefits of Empowered Employees . . . . . . . . . . . . . . Figure XVIII: How Management Can Empower Employees . . . . . . Figure XIX: The four levels in the evolution of quality manage ment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Figure XX: The Total Quality System Model . . . . . . . . . . . . . . . . . Figure XXI: The quality development wheel . . . . . . . . . . . . . . . . . Figure XXII: The concept of Total Quality Tourism Consortium . . Figure XXIII: ISO 9000 and tourism: the vicious circle effect . . . . . Figure XXIV: Quality Gap Analysis Model . . . . . . . . . . . . . . . . . . . . Figure XXV: Changes in customer-dissatisfaction costs . . . . . . . . . Figure XXVI: Reduction and shares of different COQ items . . . . . Figure XXVII: Cost of Quality (from typical costs to optimum) . . . . Figure XXVIII: Juranâ&#x20AC;&#x2122;s COQ model . . . . . . . . . . . . . . . . . . . . . . . . . . . Figure XXIX: Quality economics . . . . . . . . . . . . . . . . . . . . . . . . . . . . Figure XXX: Activity-Based Costing Model . . . . . . . . . . . . . . . . . . . Figure XXXI: General principles of self-auditing . . . . . . . . . . . . . . . Figure XXXII: The European Quality Award Framework (Business Excellence Model) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Figure XXXIII: Baldrige Award criteria Framework . . . . . . . . . . . . . . Figure XXXIV: Example Fishbone Diagram . . . . . . . . . . . . . . . . . . . . Figure XXXV: House of Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Figure XXXVI: The benchmarking process model . . . . . . . . . . . . . . .

Tables

Table I: Specific examples of services, differentiated by various parameters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Table II: Quality characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Table III: Intangibility across service types . . . . . . . . . . . . . . . . . . . . . Table IV: Grouping of Similar Services . . . . . . . . . . . . . . . . . . . . . . . . Table V: Definitions of quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Table VI: Important factors when choosing a hotel for business . . . Table VII: Levels of customer participation across different services Table VIII: Definitions of TQM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Table IX: NON-TQM organisation and TQM organization . . . . . . . Table X: Internal and external profits of TQM implementation . . . Table XI: ISO 9000 family and complementary standards . . . . . . . . Table XII: Examples of International Standards . . . . . . . . . . . . . . . . . Table XIII: Types of perceived risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Table XIV: Quality in different areas of society . . . . . . . . . . . . . . . . . . Table XV: SERVQUAL Dimensions . . . . . . . . . . . . . . . . . . . . . . . . . . Table XVI: Loyalty programmes in tourism . . . . . . . . . . . . . . . . . . . . .

Foreword

Tourism today is a global business in which the competition and the customers span international boundaries. Managers competing in the fierce international marketplace are increasingly concerned with a strategic view of quality. Such strategy provides goods and services that completely satisfy both internal and external customers by meeting their explicit and implicit demands. Through its strategic definition of “meeting the needs of customers”, quality influences or defines every generally accepted source of advantage (cost leadership, technology, distribution channels etc.). Quality can be achieved in each and every tourism company or establishment irrespective of its grade or category, sophistication or level of luxury. Even a very modest or low-priced accommodation, catering or another tourism establishment is capable of providing quality. On the contrary, an expensive establishment or service does not automatically carry the quality result and perception. Tourism Quality Management handbook contains some basic issues connected with the problem of quality management both in the tourism enterprise and tourism destination area (TDA). Quality in tourism is measured by the quality of tourism experience. In other words, it is nothing else but the quality of life during the person’s temporary stay outside his/her permanent residence. What is also true is that tourism, especially leisure or holiday tourism, carries the expectation of a higher quality of life than experienced at home. It seems to be the most important reason for quality management in tourism organizations and TDA. The rationale for tourism quality management has been presented in detail in the first part of the book. It covers four main issues: • it defines the phenomena of tourism (Chapter 1), • it introduces the concept of services in a marketing concept and enumerates obstacles in quality enhancing typical of service companies (Chapter 2), • it defines the basic definitions of quality terms (Chapter 3), • it presents the interrelationship between quality and competitiveness of tourism enterprise and tourism region (Chapter 4) • it identifies basic problems in tourism product management (Chapter 5). The world's tourism industry has survived to see the rise of the service society and the global economy. A number of factors have led to

the present situation in which constant environmental flux is accepted as the norm. These include a shifting and expansion of the tourism market, changes in the composition and values of the workforce, and rising expectations on the part of the customer, all accompanied by intensified competition. According to the modern relationship marketing approach “customers” are to be understood as clients (guests) as well as internal customers (employees). Customer loyalty has three second-order effects: (1) revenue grows as a result of repeat purchases and referrals, (2) costs decline as a result of lower acquisition expenses and from the efficiencies of serving experienced customers, and (3) employee retention increases because job pride and satisfaction increase, in turn creating a loop that reinforces customer loyalty and further reducing costs as hiring and training costs shrink and productivity rises. Thus the main stress of the second part (Customer driven organization) is put on the problems of customer-oriented organization (Chapter 6, 7 and 8). According to the rules of modern marketing (including the internal marketing matters) the part covers not only serving guests and visitors but also the relations with/between the employees of a tourism enterprise (Chapter 8). Interaction between people, being the basis of service encounter quality, cannot occur in a vacuum – all the interactions are influenced by the situation in which they take place. Thus a huge part of the text is devoted to the subject of corporate culture, especially leadership and empowerment, constituting the cornerstones of quality culture (Chapter 9). One of the most important parts of the book (Quality Management Systems) contains introduction to total quality philosophy (Chapter 10) as the most powerful and well known “quality school”. Since in my opinion there is no quality unless it is total, I am fully convinced that TQM constitutes the only way to quality enhancement in tourism. Also the title of the book refers to the abbreviation of Total Quality Management (TQM).) One of the most controversial point in this part of the book is the usability of ISO 9000 standards in tourism enterprise and their helpfulness on the route to TQM (Chapter 11). Despite many negative opinions, the revision of ISO 9000 family in 2000 made the standards be very useful tool especially for young and small organizations, with no advanced quality systems and no experience in this field. That point of view has been presented in Chapter 12 covering the rules and motivation for registration to ISO 9001. Chapter 13 covers the idea of using standards (not only those proposed by ISO) as a communication tool. Last but not least the fourth part of the book presents the way towards continuous improvement in a tourism enterprise. First of all

I tried to collect some most popular ways of “measuring quality of services” (Chapter 14). They usually present the customers’ point of view. However hotels and other tourism companies need to know the cost of providing a quality service and the impact on their bottom line so they are looking for ways of “measuring quality”. A lot of managers still treats quality cost as the main reason for neglecting any quality activities in their organizations. Chapter 15 contains the review of quality cost models and cost tracing methods. Its main aim is to put stress on the problem of quality cost management which should start from the “bad quality cost cuts”. Chapters 17 and 18 contain the review of some other quality tools which might also be used in tourism enterprises. They cover the tools for quality assessment (audits and self-assessment) as well as so called “hard” and “soft” tools for quality. Evaluation of quality system might help to recognize the major non-compliances but can not be solely treated as a quality improvement techniques. Quality tools include many techniques usually linked up to manufacturing. Some of them are treated as “hard” tools and quite rarely used in service companies, however such techniques like Ishikawa diagram or Pareto analysis give the unique possibility to improve management systems in any organization and can be very useful in service (tourism) enterprise. The review of so called “soft” management tools contains critical incidents technique (CIT) and quality function deployment (QFD). Last but not least the ideas of competitive benchmarking (Chapter 19) and loyalty programmes (Chapter 20) as service improvement tools have been revised. Tourism Quality Management handbook gives the very basic know‑ledge of quality definitions, models and enhancement tools. It is addressed to students and those looking for the first steps on the quality improvement route. The book can not be treated as the guide for quality managers however it is a good starting point for those studying quality issues for the first time. It might also be useful for students and/or managers who have already had some practice in quality management field within manufacturing but need to broaden their knowledge on service (tourism) industry specificity.

PART ONE: RATIONALE FOR QUALITY MANAGEMENT IN THE TOURISM INDUSTRY 1. The Concept of Tourism Product 1.1. What is Tourism? Historically the concept of tourism was first developed in the period between the two world wars. Tourism was defined as a sum of relations and phenomena resulting from the travel and stay of non-residents, in so far as travel does not lead to permanent residence and is not connected with any permanent or temporary earning activity (Hunziker and Krapf in Burkart and Medlik, 1981). Since 1942 the concept of tourism has been broadened by including various forms of business and pleasure travel. Tourismcomprises more than travelling to visit friends for a weekend or to go on holiday. The so-called “business and congress tourism”, including travelling for improving professional qualifications, is a demand of great importance for the tourism sector and is estimated to amount to about 20% of arrivals (Leidner, 2004). World Tourism Organization defines tourism as “the activities of definition of persons travelling to and staying in places outside their usual tourism environment for not more than one complete year for leisure, business and other purposes”. This multi-faced field touches many lives and many economic activities. It is made up of many sectors or subindustries such as transportation, accommodation, attractions, amenities, catering, enter tainment, shops, activity facilities (leisure and recreation), and many others. The provision of different product and services for visitors (individuals, groups of people) depends on the linkages between various sectors and their mutual interactions. The concept of tourism can be applied to different forms of tourism. Depending upon whether a person is travelling to, from or within a certain country the following forms can be distinguished: – inbound tourism – involving the non-residents received by a destina forms of tourism tion country from the point of view of that destination; – outbound tourism – involving residents travelling to another country from the point of view of the country of origin; – domestic tourism – involving residents of a given country travelling within that country.

visitors

tourists and same-day visitors

tourism industry since 1950s

Different forms of tourism can be distinguished, based upon: – the purpose of the visit (e.g. leisure and recreation including holidays and visiting friends and relatives, business and professional including conferences and meetings), – the duration of the stay (a weekend, a business trip as well as traditional longer holidays), – the nature of the trip (domestic or cross-border destination), – the type of destination (rural, urban, coastal, mountain), – the distance travelled (long haul and short haul), – the nature of tourists themselves (e.g. youngsters, families, ..). All types of travellers engaged in tourism are described as visitors. Visitors can be distinguished as same-day visitors or tourists (overnight visitors). According to international definitions (Eurostat): • visitor is any person travelling to a place other than that of his/her usual environment for less than 12 consecutive months and whose main purpose of travel is other than the exercise of an activity remunerated from within the place visited, • same day visitor is a visitor who does not spend the night in a collective or private accommodation in the place visited, • tourist is a visitor who stay at least one night in collective or private accommodation in the place/country visited, Four groups of participants are involved and are influenced by tourism: 1) tourists, 2) businesses providing goods and services that the tourist market demands, 3) the government of the host community and 4) the host community itself. These groups cooperate to accomplish a set of goals at the micro and macro levels within constantly changing legal, political, economic, social and technological environments (McIntosh, Goeldner, Ritchie, 1995). Within the last 50 years the tourism industry has become a sector of major economic importance. Even if the development of the number of international arrivals is only a week indicator regarding the economic importance of tourism, their astronomical increase since 1950 gives an impression of the dynamism in the tourism sector: the number of international arrivals shows an evolution from a mere 25 million international arrivals in 1950 to an estimated 763 million in 2004, corresponding to an average annual growth rate of 6.5 per cent. Tourism is now one of the world’s major industries and is, for the large part, responsible for much economic growth, balance of payments, employment and regional balances in individual countries and across regions. The substantial growth of the tourism activity clearly marks tourism as one of the most remarkable economic and social phenomena of the past century.

Figure I: International Tourist Arrivals, 1950–2004 800

600

Middle East Africa Asia and Pacific

500

Americas

(million)

700

400

Europe

300 200 100 0 1950

1960

1970

1980

1990

2000

Source: WTO, 2006.

Despite crisis-induced slumps the long term growth trend in tourism growth trend in appears to be stable. Development was particularly strong in Asia and tourism the Pacific (13 per cent on average a year) and in the Middle East (10%) while the Americas (5%) and Europe (6%), grew at a slower pace and slightly below the world’s average growth. New destinations are steadily increasing their market share while more mature regions such as Europe and the Americas tend to have less dynamic growth.

(% change over previous year)

Figure II: Economic Growth and International Tourist Arrivals 12

Real GDP Tourist Arrivals Average 1975–2000 Average 1975–2000

10 8 6 4 2 0 -2 1975

1980

1985

1990

1995

2000

2005

Source: WTO, 2006.

Tourism demand depends above all strongly on the economic tourism demand conditions in major generating markets. When economies grow, levels characteristics of disposable income will usually also rise. A relatively large part of discretionary income will typically be spent on tourism, in particular in

the case of emerging economies. A tightening of the economic situation on the other hand, will often result in a decrease or trading down of tourism spending. In general, the growth of international tourism arrivals significantly outpaces growth of economic output as measured in Gross Domestic Product (GDP). In years when world economic growth exceeds 4 per cent, the growth of tourism volume tends to be higher. When GDP growth falls below 2 per cent, tourism growth tends to be even lower. In the period 1975–2000 tourism increased at an average rate of 4.6 per cent a year. Tourism has become an integral component of lifestyle and, thus, a global industry, with producers and consumers spread throughout the world. The future trends for tourism seem to suggest that travellers will be especially concerned with not just being “there”, but with participating, learning and experiencing the place they visit. What is especially important from the point of view of this book – tourists’ requirements are also tied to the level of their income. Today’s hospitality consumers are increasingly becoming more sophisticated in the standards which they expect and more vocal about products and services which do not meet their requirements in terms of choice and quality.

1.2. Specificity of the Tourism Product tourism product According to the theory of marketing product is everything, what can definition become an object of exchange. A product can be also defined as an offer given to a salesman, which is verified by the market. A tourism product can be defined in two ways. It is everything that tourists buy or do in the place of destination (Altkorn, 2004). “Tourism is the sum of the phenomena and relationships arising from the interaction among tourists, business suppliers, host governments, host communities, origin governments, universities, community colleges and non-governmental organizations, in the process of attracting, transporting, hosting and managing these tourists and other visitors” (Reid, 2003). Unlike other products offered by manufacturing or service compa heterogenity of nies, tourism products are heterogeneous – they are complex and consist tourism of many complementary components provided by suppliers from various public and private sectors (Figure III). The purchase and consumption of the tourism product is spread over time and distance. Thus, the tourism consumer buys expectations at the tourism generating area (TGA) which should meet with the reality during the transit and

A region where tourist demand originates.

consumption of the tourism product at the tourism destination area (TDA) . Figure III: Tourist Purchase-Consumption Process STAGE 4: CONSUMPTION of primary travel-back-homecomponents; PURCHASE and CONSUMPTION of secondary travel-back-home components

STAGE 5: FEEDBACK (impact on purchase of primary vacation and travel components)

TOURISM GENERATING AREA SECTOR public/private/voluntary

SECTOR public/private/voluntary • modes of transport, • road, • transit facilities, • exchange office, • other

• information centres, • travel agents, • transport companies, • transport tereminals, • travel associations, • travel insurance companies, • passport/visa services, • exchange office, banks, • other

STAGE 1: PURCHASE of primary vacation and Travel components

TRANSIT

STAGE 2: CONSUMPTION of primary travel-to-destination components; PURCHASE of secondary travel-to-destination components

TOURISM DESTINATION AREA SECTOR public/private/voluntary • accommodation, • catering, • attractions, • entertaiment, • recreational facilities, • infrastructure, • urban transport, • streets/roads, • information centres, • hospitable behaviour, • other

STAGE 3: CONSUMPTION of primary vacation components; PURCHASE and CONSUMPTION of secondary vacation components

Source: Augustyn (1998).

Each tourism organization provides only one or several components of the total tourism product that is consumed during the course of the complete tourism experience. Therefore, in order to enhance customer satisfaction, tourism companies have to establish effective relationships with their stakeholders, and especially with their suppliers, defined as those companies operating within the external environment that are responsible for the provision of other components of the total tourism product. However, it is hardly possible for any tourism company to achieve this goal due to the existence of the tourism quality control gap (Augustyn, 1998). How to explain this gap? Tourists tend to base their judgments on the quality of and tourism value satisfaction with a vacation experience on all components of a complex chain tourism system. These components are captured by the “tourism value chain” underlying both the production and consumption of “holiday

A coherent tourism – receiving region that has some common tourism features and the potential for tourism development, e.g. a city, a county or a region beyond the administrative boundaries of a city, county, etc.

tourism quality control gap

tourism product characteristics

or vacation experiences” (Bieger, 1997). Since all relevant services contributing to the holiday or vacation experience take place in the context of a tourist destination, tourism researchers accept tourist destinations as the relevant unit for competition and/or benchmarking analyses. This also applies to the tourism value chain which constitutes the total customer (tourist) value associated with the holiday experience at a destination. It is irrelevant whether tourism services comprising the tourism value chain are produced and distributed by a multitude of different tourism enterprises, or whether they are produced and sold by a single firm such as a tour operator. The consumer (tourist) judges the total holiday experience, even though tourists do experience a multitude of individual service encounters and can also evaluate their inherent qualities (Weiermair and Fuchs, 1998). Thus the tourism quality control gap (Augustyn, 1998), relates to the discrepancy between the need for quality control at every stage of the total tourism product delivery and the feasibility of the individual tourism company of exerting actual control over this process. The existence of this gap accounts for an inability of individual tourism companies to offer the total quality tourism product that the customer expects at the beginning of the tourist purchase – consumption process. The tourism quality control gap is also responsible for the increasing number of tourists dissatisfied with their total tourism experience. Tourists consume other elements of the total tourism product during their overall tourism experience, mainly at the destination area – an individual tour operating company is not in a position to control the quality of all the elements of the total tourism product offered by the providers operating at the host area. Moreover, the human aspect of the product is of utmost importance for total tourist satisfaction, which can be confronted only at the time of tourism consumption. Tourism, typically a service offering, cannot be stored for future consumption, this constitutes one of the unique features of services, referred to as perishability (see chapter 2). “In addition to the inability to store tourism services, managers are also faced with seasonality, which e.g. results in: a fluctuation in demand at a ski resort between winter and summer; a fluctuation in occupancy in a city centre hotel during weekdays and weekends, a fluctuation in demand at a restaurant during breakfast, lunch and dinner hours to the rest of the day, the fluctuation of demand for travel facilities during certain times of the day” (Kandampully, 2000). While the consumption of tangible goods may be delayed for future consumption and/or inspection of quality, services are generally produced and consumed almost simultaneously. These differences render the delivery system and quality control systems

utilized in the product industry, inappropriate in tourism services. Tourism managers are thus required to consider alternative strategies to facilitate the efficient management of both demand and capacity (supply) of services as, unlike the goods manufacturing industry, service organizations are unable to increase the supply in accordance with the increase in demand (Figure IV). When the demand for tourism service is higher than the firm’s demand capacity, the firm effectively loses its chance to serve those customers. fluctuations vs Similarly, when the demand is less than capacity, the firm loses revenue fixed capacity owing to unused resources. Given that capacity is a fixed component, the only viable option for the service manager is to seek strategies that assist them to influence demand, strategies which can induce customers to voluntarily alter their demand. Additionally, excess capacity or low demand will not only impair the firm’s profit, but will also affect the quality of service experienced by tourists. A near empty cruiseliner not only loses money, but will also fail to provide its passengers with an important service element of travel experience, namely, the social ambience that is created in the presence of fellow passengers (Kandampully, 2000). Figure IV: Impact of demand fluctuation while capacity remains inflexible Excess demand (lost business) Maximum capacity Capacity

Decrease in quality Optimum capacity Wasted resources (lost opportunity) Time

Source: Kandampully (2000).

On the other hand, if the firm were to adopt a strategy to utilize excess demand by continually operating at above optimum or near full capacity, it would expose the organization to long-term risks of deterioration in the quality of service. The challenges faced by service managers due to fixed capacity, may be deemed equally applicable to a service firm’s quality. Based on customer expectation a firm’s quality of service is required to be

consistent within a specific time frame and target market to gain customer confidence, maintain image and subsequent effect on customer loyalty. Hence, it is imperative that tourism managers design strategies which will assist them to manage both demand and quality simulta neously. For example, a special price menu for families with small children may entice the family to use the restaurant facility before the peak period. Thus enabling the firm to extend the restaurant’s capacity to the slack period, serve different customer groups while maintaining or enhancing the quality of experience of each group. It can be argued that from a tourist’s perspective, tourism packages constitute the offering of a variety of service products commensurate with their needs (Kandampully, 2000).

1.3. Challenges Facing Modern Tourism vertical and The tourism sector can be viewed as comprising a variety of producers, horizontal distributors and facilitators. Whereas in the past the boundaries between integration the different players in the market were clear, vertical and horizontal integration in the tourism sector has resulted in a blurring of these boundaries. dual structure The field of tourism has developed a dual economic structure over of the tourism the years. In the light of recent studies on the phenomena of con market centration and restructuring, two categories of companies seem to coexist: • the traditional small and medium sized enterprises (SMEs), which seek a second breath, in order to become international and try to adapt their services to the new requirements of domestic and international demand, by the introduction of innovations (constitu tion of purchase networks and regionalization of supply); • the corporate companies which specialize in large-scale tourism, according to strategies of cost rationalization. They entered into heavy restructuring operations, directing them towards increased integration of subsectors. Whereas in the target countries or destinations SMEs continue to offer such tourism services as accommodation, catering and leisure time activities, an international travel and tourism industry has gradually emerged in the source countries as part of the globalization process. SMEs in tourism, notable micro and small enterprises play a key role in terms of number of enterprises, number of employees and profit, and on average they are continuing to increase. Tourism is today one of the most internationalized sectors of the tourism market globalization world economy. The world tourism market has been substantially 20

Figure V: A tourism sector model Producers

Vertical integration

Transport

Distributors

Facilitators

Consumers

Travel organisers and intermediaries Transport

Transport

Attractions Accommodation Other, e.g. catering Horizontal integration and consolidation

Source: PriewaterhouseCoopers, 2001.

extended, adding considerably to the potential for further growth and at the same time bringing about greater competition between tourism countries. Globalization affects the supply and demand side in tourism in many ways (Smeral, 1998). The most important supply factors are: • Worldwide acting suppliers, as well as the impact of computerized information and reservation systems. Global-acting airlines, hotel chains and tour operators already have branches throughout the world and cover major parts of international tourism demand with their global distribution systems (GDS). Strategic alliances, cooperations and/or mergers are additional driving forces of the globalization process (Sheldon, 1993). • Decreasing costs of air travel and the possibilities of having access to destinations with relatively low price and income levels, as well as relatively low social standards (Krugman and Venables, 1995). • The development of new destinations, supported by hardware investments of multinational enterprises and infrastructure invest ments. Important demand factors for globalization are: • Increasing income and wealth, emerging new motives and changing lifestyles. • Rising level of education – tourists are more experienced and knowledgeable (languages, use of information technology, booking, use of transportation etc.)

the meaning of Tourism is a beneficiary of the irreversible process of globalization globalization and indeed is an accelerating factor for this process. According to dr Minho Cho (2005) globalization has become an umbrella word for a number of political, sociological, environmental and economic trends which present challenges on a worldwide scale. In a purely economic sense, the term “globalization” stands for the increasing interdependence of markets and production in different countries through trade of goods and services, cross-border flows of capital, international strategic alliances, cooperation, mergers and exchanges of technology. Globali zation also means an increase in the international fragmentation of production, as well as the political trend towards a more liberal world economic order. The trend to a division of labour on a worldwide basis has been particularly favourable to tourism, resulting in increased productivity and prosperity in a great many countries. The process of globalization is also perceived as having a standardizing impact in those products, services and institutions which originally offered only domestically are being supplied on a worldwide scale. The consequences of globalization have very strongly impacted on consequences of globalization in the typical SMEs. The international travel and tourism industry is tourism composed mainly of large companies that organize tourism to various destinations on an industrial basis. They offer standardized products, and develop global strategies that enable them to make the best use of the local potential worldwide. Although the number of large companies is relatively small in the tourism industry, they account for more than a half of total turnover in the sector and for a significant proportion of employment. The SMEs in traditional tourism areas are not yet ready to cooperate with global players in world tourism industry on a wide scale large companies and to form internationally competitive destinations. Large companies, versus SMEs which benefit from standardisation and economies of scale, are in a position to offer their clients more attractive services at very competitive prices. They are able to develop new tourism markets and offer new products, what helps them to increase the “customer value” and to reduce their production costs. The consequences for SMEs are dramatic losses in market share and growing financial pressures as opportunities for attracting new customers by taking advantage of the globalization trends and/or the shift to “post-modern” consumption structures are not realized (Alcouffe and Coulomb, 1993). There is however a unique chance for SMEs thanks to a changing patterns of tourism demand. Many visitors do not want standardised products – they prefer to tailor their holiday experience to their own specific needs and tastes, insisting on personalised services. Thanks to a multi optional supply of products and services which SMEs are able to offer, 22

destinations are in a position to adapt relatively quickly to the everchanging requirements of the individual tourism. Even though there are only a few larger enterprises, it is to be noticed that their economic importance in terms of turnover is high and varies widely between the respective subsectors. The sector of tour operators and travel agencies in Europe, for example, in the mid-1990s consisted of about 44000 enterprises. At the time this market was the process of already concentrated to a relatively high degree as five largest EU travel concentration in organizers of 1997 represented a market share of 35%. In the second tourism half of the 1990s rapid structural change took place resulting in an even higher market concentration of 70% of the turnover yielded by the five largest enterprises in 2002. The speed of this concentration process has slowed down, but competition pressure will continue, especially if it becomes true that the annual growth rate of the turnover of tour operators will be halved in the coming years. The hotel subsector recorded a concentration process as well, but it was much slower than in the travel organisersâ&#x20AC;&#x2122; sector and did not lead to a similar degree of market concentration. The size of an average European hotel increased slightly from 45.3 to 48 rooms per hotel in the period from 1995 to 2001, but large hotel chains and brands only represent between 10 and 20 % of the total room capacity in Europe. It is an evidence that in an accommodation sector structural change is taking place much more smoothly and has not yet increased the market concentration to an extent similar to that for the travel organisersâ&#x20AC;&#x2122; market. Figure VI: The cycle of competitiveness

increased competition

marketing alliances

new technologies price reduction customer expectation

Source: PricewaterhouseCoopers research, 2001.

innovations and Another challenge for tourism enterprises is the rising role of information information technology in tourism. Generally tourism industry is based technology on many innovations. In civil aviation charter flights were invented as a way of dealing with seasonal peaks in demand. Hotel chains that sprouted from family firms, including the Hilton and Marriott empires, grew out of a desire to satisfy the needs of business travellers, initially those travelling from the USA. The rent-a car sector, which is today a giant industry, allows visitors to have the same mobility abroad as they do at home. Credit cards have made international money transfers much easier while at the same time reducing the risks involved in foreign innovations and exchange operations (CFE/TOU (2005)4). New technologies have an competition important place in the cycle of competitiveness (Figure VI). Technological innovations are having a significant effect on the governance/management of the value chains and are encouraging the development of new tourism business models in GVCs (global value chain), notably for distribution chain . The major players have been the main beneficiaries of technological innovation whereas the smaller actors, due to lack of capital, IT literacy, techno phobia and above all the lack of clear strategic plans are not always taking real advantage of technological innovation. It is worth to mention that usually only large enterprises carry out market research on their own and define positioning strategies, with respect to targeted customers, and develop the use of innovative tools in order to strengthen their competitiveness. It should be recognized that their economic importance for the longterm development and the competitiveness of the sector is much higher than their relatively small number suggests. Besides the technological challenges induces by the spread of new information and communication technologies (ITCs), the evolvement of nature-based sustainable tourism seems to be one of the most important changes affecting the competition process among tourism enterprises. There are also some demand structures affecting the activity of tourism enterprises in a global tourism market. A steadily growing number of tourists, does not mean that there are not considerable changes in the types of tourism – besides pure leisure activities such as swimming, skiing or sunbathing other types have gained importance, for example cultural and nature-based tourism. the enterprises have to react to such changes and to adapt their products. The demographic changes

Despite explosive growth in terms of turnover (from 1998 to 2001 turnover from online travel doubled its share in the travel market), so far its share remains rather small (3,6% in 2002). However, the growth forecast by 2006 would result in an increase of turnover of about 120% (Leidner 2004).

reinforce these trends as the growing share of people over 50 as well as disabled persons increases the demand for these more specific tourist products. Health, spa and “keep fit” tourism are likely to be among the segments to benefit particularly from the increasing economic importance of elderly tourists. Today’s secularly increased travel exposure and experience of international tourists can be cited as the reason for such “globally” universal or converging behaviour. The increase in travel exposure and experience leads to converging quality demands, particularly with respect to technical (as opposed to functional) quality dimensions. Referring to the travel experience of international tourists, we may well speak of a global travel culture which is shared among a large class of frequent, experienced and quality conscientious vacationers. Lets take the example of transportation services both to and from the destination. Their embedded service qualities will be perceived, evaluated and judged by tourists in terms of both globally shared values and standards. This is particularly true for such dimensions as convenience of travel, punctuality of travel schedules and customer orientation of service personnel. On the other hand, culturally influenced perception and evaluation criteria will be applied to other dimensions such as waiting times and queuing, added service components and the choice of transportation mode (Becker and Murmann, 1999). Tourists are critical and demand high service quality with respect to the quality dimensions of reliability, responsiveness and assurance (Mok and Armstrong, 1998), suggesting that delivering services accurately and dependably is equally important within and to all cultural settings.

2. Services as the Integral Part of a Tourism Product 2.1. Services versus Goods The word “service” has a great richness and diversity of meaning. This leads to considerable ambiguity when the concept is used in the management literature, where, in its most basic sense, it can mean an industry, an output or offering, or a process. Within the service process, “service” may further indicate core service delivery, interpersonal interaction, performance in a wider sense of drama or skill, or the customer’s experience of service. Different service industries are so variable in nature that authors are advised to lay down parameters for each specific situation, and to give actual examples wherever possible. Table I provides some parameters of

quality demands convergence

global travel culture

three views on services and goods

services-goods continuum

service process

unique attributes of services

this kind and shows how they can be used to characterize specific situations. The issue of the differences between goods and services can be seen from three viewpoints. The first view is widely held, and typified by Kotler who said that marketing of goods and services should conform to the same fundamental rules (Kotler 1980). The second is that there is a need for a different approach to marketing services because of the differences which can be recognized in goods and services themselves (Lovelock, 1984, Grönroos, 1984). A third view is apparent in what actually happens in service businesses. There are few pure goods or pure services. Products are actually combinations of service and goods elements, with one dominat ing and presenting the prime characteristics. E. Gummesson clarifies the position as follows: “Customers do not buy goods or services in the traditional sense. They buy an offering and the value [may] consist of many components, some of them being activities (service) and some being things (goods). As a consequence, the traditional division between goods and services is long outdated.” (Gummesson, 1994). Although processes may appear different when the end product is a service rather than goods, they are in fact identical, in that both involve the use of facilities to act on inputs to satisfy the needs of the customer. The idea that services are activities (performances) rather than things (objects) leads to a notion of services as processes. This notion introduces a new aspect of service processes, because “performance” goes beyond simple execution, connoting drama, face-to-face contact, or eye-catching skill. Service operations depend on the customer to provide the information that is somehow the raw material to be transformed into the service output. Thus “service” as a process not only is the delivery of a core service, but also has a style or manner of its own, imbued with artistic, dramatic or craftsmanlike possibilities (Johns, 1999). The major differences between service and manufacturing sectors have an impact on the approach and substance of quality management. Certain inherent characteristics of the service sector increase the complexity of “quality control” and “improvement efforts”. Service quality is an abstract and elusive construct because of some features unique to services: – intangibility, – perishability, – simultaneity, – heterogeneity

low low low high low high high high low low low high low

Service industry

airline courtroom lawyer healthcare service supermarket high street bank hairdresser hotel restaurant travel agent tourist attraction electricity company car repair school

Source: Johns (1999).

Tangibility/ visibility of output execution performance execution performance execution execution execution performance execution performance execution execution performance

(Provider) execution or performance high low high low low high high high high low low low high

Interpersonal attentiveness no yes yes (?) no yes (?) yes no no yes no no yes yes

Service staff are core providers

Table I: Specific examples of services, differentiated by various parameters

transaction transaction transaction transaction transaction transaction experience (?) experience transaction experience transaction transaction experience

(Customer) experience or transaction low low low high high high low high high low low low low

Level of customer control/choice no no no yes no no yes yes no yes no no yes (?)

Service environment is a key component?

intangibility • Intangibility of service Intangibility raises issues for both the consumer and the provider of services. Customers cannot assess the intangible aspect of service prior to purchase and consumption and hence they often must use the reputation of a service firm and its representatives to judge quality. That is why customers judge quality by comparing their perceptions of what they receive with their expectations of what they should receive. The lack of tangible attributes means that it is difficult for the producer to describe the service and for the consumer to ascertain its likely virtues. The consumer cannot see, feel, hear, smell, or touch the product before it is purchased. Therefore, the consumer often looks for signs of quality: for example: word of mouth; reputation; accessibility; communication; physical tangibles; etc. This places greater responsibility on service orga nizations to deliver what they promise, right, the first time (HaywoodFarmer, 1988). Moreover, in service organizations frontline staff and physical facilities fulfil the dual functions of production and marketing. They are viewed by the potential customer as signs of quality. Services cannot be evaluated in advance of use because, unlike quality characteristics goods, they do not have many of “search properties”. The consumer must rely on experience of the service itself (“experience properties”), or if because of lack of specialist knowledge they are not capable of making objective judgment during, or even after, the delivery process, only “credence properties” can be used (Table II). Table II: Quality characteristics

Quality Search

Definition Can be evaluated prior to purchase

Examples Consumer services Business services shoes jeans refrigerators lawn mowers

raw materials component parts office supplies tools

Experience Can be evaluated only food after purchase catering service entertainment cosmetic surgery

janitorial services lawn services delivery services repair services

Credence

consulting financial advice advertising insurance

Difficult to evaluate CPA services even after the service funeral services education veterinarian

Source: Kurtz and Clow (1998).

Intangibility also requires that service producers take account of consumer psychology, and make plans to cope with the difficulties of demonstrating their offerings, while designing a new or revised service package. They also have to acknowledge the probability of imitation of successful services, since patents cannot be applied to the intangible aspects of a service (Sasser et al., 1978). • Perishability perishability Services cannot be stored in one time period for consumption at a later date. This means that, unlike manufactured goods, it is not possible to have a final quality check. The service provider needs to get the service right first time, every time. In manufacturing, finished good stocks are used to decouple production from variable demand, and component and raw material stocks are used to simplify planning and control, but it is impossible to hold stocks of the explicit service element of the service package, and this raises some particular issues for service management. Clearly the facilitating goods element of the service package can be stocked in readiness for use, but a medical consultation, haircut, or train journey cannot be produced in advance of requirement. This forces services to deal with demand and capacity more directly, than is usually the case in manufacturing situations, by: – chasing demand by increasing and decreasing resources; – influencing demand, for example by adjusting price or controlling access; or – retaining excess capacity to be able to cope with fluctuations in demand. Perishability also requires that service production and service delivery often must exist simultaneously.

inseparability • Simultaneity (inseparability of production and consumption) The high visibility of the service process means that it is not possible (simultaneity) to hide mistakes or quality shortfalls. Moreover, the involvement of the consumer in the delivery process introduces an additional process factor, the consumer, over which the management has little or no direct control. Moreover, the behaviour of one group of customers does influence other customers’ perception of service. Simultaneity occurs because the consumer usually has to be present before a service takes place. In consequence services tend to form in small and dispersed units, and it is difficult to take advantage of economies of scale. There is evidence that the emergence of computer and communications technologies is changing this in some service 29

sectors (e.g. computer reservations in tourism), but personal contact continues to be necessary for the majority. A significant consequence of customer participation in the delivery of services is that perceptions of quality are influenced by observation of the environment, and the systems used. Service facilities, procedures and systems should be designed with the customer in mind, as well as the “product” and the workforce. “The employee providing a service must first diagnose individual customer expectations, and then customize the service on the basis of the diagnosis. The employee must also assess the quality of his or her performance, as it takes place, against their assessment of the customer’s expectations, while remaining ready to detect and respond to any adverse customer reactions which may occur.” (Morris and Johnston, 1987). This also means that the functions of marketing and production (operations) cannot be separated in services.

heterogeneity • Heterogeneity of services Heterogeneity of services occurs in consequence of explicit and implicit service elements relying on individual preferences and perceptions. Differences exist in the outputs of firms producing the same service, and within the same firm, and even the same employee on different occasions. Although unnecessary variation may occur which needs to be controlled, the variety attributed to estimating, and then matching, the consumer’s requirement is essential to customer satisfaction. This inherent variability makes it difficult to set precise quantifiable standards for all of the elements of service. A number of factors can affect the extent of the heterogeneity of service provisions. First, delivery of service often involves some form of contact between the consumer and service provider. The behaviour of the service provider influences the consumer’s perception of quality. It is difficult to assure consistency and uniformity of behaviour. Moreover, it is not easy to standardize and control this facet of service delivery. In effect what the firm intends to deliver may be entirely different from what the consumer receives. Second, service operations depend on consumers to articulate their needs or provide information. The accuracy of the information and the ability of the service provider to interpret this information correctly has a significant influence on the consumer’s perception of service quality. Third, the priority and expectations of the consumer may vary each time he or she use the service. Moreover, priority and expectations may change during the delivery of the service. The variability of service from one period to another and from consumer to consumer makes quality assurance and control difficult. Service providers have to rely heavily on the 30

competence and ability of their staff to understand the requirements of customers and react in an appropriate manner.

2.2. Service Attributes and Obstacles to Attaining Quality Enhancement There are several service attributes which have particular significance service attributes for management and control of service operations (adapted from affecting quality Schmenner, 1986): a. Labour intensity – the ratio of labour costs incurred, to the value of plant and equipment used. Some researchers make a distinction between people- and equipment-based services. b. Interaction – defined as the extent to which the consumer actively intervenes in the service process to change the content of the service. Here, intervention is interpreted as also including customer participation to provide information, from which needs can be assessed, and also customer feedback, from which satisfaction can be inferred (Figure VII). Figure VII: Interaction and customization Interaction and customisation Low

High

Low

service factory

service shop

High

mass service

professional service

Labour intensity

Source: Schmenner (1986).

c. The direct recipient of service – can be either people or things. Some researchers call this attribute “the nature of the service act”, as service result can be either tangible or intangible (Table III). d. Contact – defined as the proportion of the total time required to provide the service for which the consumer is present in the system. This approach provided some insights into the nature of service operations. It classifies services along a continuum from high to low contact. Contact was defined in terms of the time that the consumer is present in the service providing system. e. Customization – defined in two main parts: choice – defined as meeting customers’ needs by supplying one or more selections from

a fixed range of options (low customization means that “choice” is limited to a single option) and adaptation – defined as the interaction process in which the customer’s requirement is decided upon, designed, and delivered to match the individual’s needs. Table III: Intangibility across service types What is the nature of the service act?

Tangible actions

Who or what is the direct recipient of the service? People

Possessions

Services directed at people’s bodies (people processing)

Services directed at physical possessions (possessions processing)

passenger transportation health care lodging beauty salons physical therapy fitness centres restaurants/bars haircutting funeral services Services directed at people’s minds (mental stimulus processing)

Intangible actions

advertising/PR arts and entertainment broadcasting/cable management consulting education information services music concerts psychotherapy religion voice telephone

freight transportation repair and maintenance warehousing/storage janitorial services retail distribution laundry and dry cleaning refuelling landscaping/lawn care disposal/recycling Services directed at intangible assets (information processing) accounting banking data processing data transmission insurance legal services programming research securities investment software consulting

Source: Lovelock (1984).

f. The place where value is added – enables grouping all the services into four groups (Maister, 1983): service factory, mass service, job shop and professional service (Figure VIII below).

Figure VIII: Where value is added

Programmed Non-programmed

Where value is added Back room Front office service factory mass service job shop

professional service

Source: Maister (1983).

As a result Dotchin and Oakland proposed the below classification of services (Table IV): Table IV: Grouping of Similar Services Driving school Beautician Hairdresser Clinic Leisure centre Accountant Finance consultancy Veterinary Hotel College Coach service Take-away Courier firm Cleaning firm Repair firm

Personal services

Service shop Professional services

Mass services

Service factory

Sports coaching Dental practice Optician Cafeteria Service station Architect Solicitors Restaurant Bus service Rail service Nursery Postal service Equipment hire Bank

Source: Dotchin and Oakland (1994b).

We can also enumerate some obstacles to attaining service quality improvements. The main of them is lack of visibility. Service quality problems are not always visible to the provider. At any given time 25 per cent of customers are sufficiently dissatisfied with a service to stop repurchasing, yet only 4 per cent complain to the organization. This places greater responsibility on the service provider to be proactive in the identification of quality problems. The second problem are difficulties in assigning specific accountability. The consumerâ&#x20AC;&#x2122;s overall perception of service quality is influenced by

obstacles to attaining service quality

lack of accountability

time

delivery

service quality requirements

experience at different stages of service delivery. However, it is hard to attribute quality problems to a particular stage of service delivery. Next obstacle is time required to improve service quality. Service quality problems often require major effort over a long period of time to resolve. This is because service quality is more dependent on people than systems and procedures. Attitudes and beliefs take longer to change than procedures. It is difficult for managers to keep their attention focused on the problem and remove the root causes of the quality shortcomings. Last but not least delivery uncertainties. Control of service delivery and quality is complicated by the individual and unpredictable nature of people. The people element encompasses both customers and staff of the service organization. To sum up we shall notice that the attainment of “service quality” requires: Market and customer focus. “Service quality” problems are more likely to arise in organizations that are not focused on identifying and acting on the customer’s needs and expectations. A quality organization should put itself in the “customer’s shoes” and build its policies from the customer’s vantage point (Foster and Whittle, 1989). Empowerment of frontline staff. Service quality can be enhanced by giving frontline staff the latitude to make important decisions regarding the customer’s needs. It is recognized that devolvement of those decisions which affect customer care to the frontline staff pays dividends (see more in chapter 9.4). Well-trained and motivated staff. Frontline staff who are not adequately trained for their job will find it difficult to perform their tasks effectively. This will be noted by the client and is likely to cause adverse quality perceptions. It is important to ensure that frontline staff are effectively supported and motivated. A clear “service quality” vision. In the absence of a clear vision and definition employees are likely to have their own interpretation of “service quality”. Lack of common vision will inevitably increase the variability experienced by the customer within each stage of the service delivery. Inconsistency and variability of treatment is likely to have an adverse impact on the perception of “quality”.

3. Definitions of Quality Terms To take a closer look at the quality management, an explanation of some facts, terminology and regulations concerning quality seems to be

necessary. What needs to be revealed first of all, is what quality and quality management actually mean, what the dimensions of quality are, and what the differences between services quality management and product quality management are. Quality means different things to different people – there exists no definition of uniformly accepted definition of service quality . There are various well- quality known definitions of quality: “conformance to requirement” (Crosby, 1979), “fitness for use” (Juran and Gryna, 1988), “the degree of conformance to a standard”, “user satisfaction” (Wayne, 1983). It is interesting to note that satisfying the customers’ needs and expectations is the main factor in all these definitions. However it happens that a supply of a service or product may be of the highest standard, but the customer may have unreasonable expectations, which cannot be met by any means at all. Official definitions of quality terminology were first standardized in 1978 by the American National Standards Institute (ANSI) and the American Society for Quality Control (ASQC). Quality was defined as “the totality of features and characteristics of a product or service that bears on its ability to satisfy given needs” (ANSI/ASQC 1978). Since 1987 according to the standard ISO 9000 quality is defined as “a degree to which a set of inherent (existing) characteristics fulfil the requirements” (ISO 9000:2000). The above mentioned definition indicates the specific set of adjectives the word quality should be described with (e.g. low, good, perfect etc). It also implies that we must be able to identify the features and characteristics of products and services that relate to quality, and form the basis for measurement and control. Fulfilling the requirements reflects the value of the product as well as the service to the customer, including not only economic value but also other factors such as safety, reliability or maintainability. Below see some more definitions of quality. Each definition has its own group of supporters, and various schools of quality have grown up around particular versions. This has led to fragmentation and confusion in the field of quality. As the given example shows, the quality can and needs to be viewed from several different perspectives. The main problem is how to create the basis of quality in

Quality responds rather to the question “how” than “what”, although without “what” quality cannot be delivered. In some Slav languages this is well reflected although those who speak these languages may not aware of this connotation. For example, in Polish “jakość” (quality) follows on “jak” (how), similarly in Russian “Í‡˜ÂÒÚ‚Ó”(quality) follows on “Í‡Í” (how). (Handszuh, 2004).

companies, how it depends on work environment and how it looks like in particular sectors (industry, services etc.). Table V: Definitions of quality 1. “Quality is the degree of excellence at an acceptable price and the control of variability at an acceptable cost.” (Broh, 1982). 2. “Quality consists of the capacity to satisfy wants.”(Edwards, 1968). 3. “Quality [means] conformance to requirements.” (Crosby, 1980). 4. Quality is (1) product performance which results in customer satisfaction (2) freedom from product deficiencies, which avoids customer dissatisfaction. (Juran, 1985, p. 5). 5. Quality...is the extent to which the customer or users believe the product or service surpasses their needs and expectations (Gitlow et al., 1989). 6. Good quality...means a predictable degree of uniformity and dependability at a low cost with a quality suited to the market (Deming, 1986, p. 176). 7. (Quality is) the total composite product and service characteristics of marketing, engineering, manufacture and maintenance through which the product in use will meet the expectations of the customer (Feigenbaum, 1986). 8. Quality is anything which can be improved (Imai, 1986). 9. Quality is the loss a product causes to society after being shipped (Taguchi, 1986, p.1). 10. Definition of quality (...) a thing is said to have the positive attribute of conformance to specified standards (Shewhart, 1931).

Most of the service quality definitions fall within the “customer-led” category. Many researchers define quality as “consistently meeting or exceeding customer’s expectations” (Moore, 1987, Creedon, 1988). To describe the various viewpoints of quality that are commonly used Garvin (1984), discusses five different approaches to defining quality. A product-based definition describes quality as a precise and product-based approach measurable variable and indicates that differences in quality reflect differences in quantity of some product attribute. Here “quality” is defined as the units of goodness packed into a product or service. Thus, a “quality” service will contain more units of goodness than a lower “quality” service. This definition relies on the quantification of the service’s units of goodness or tangible attributes. In practice, however, it is not easy to clearly identify services’ attributes, let alone quantify them. In addition, “goodness” is not absolute but relative to a particular circumstance. For example, customers may judge a theme park’s production to be of higher quality than a Covent Garden production. This situation arises despite the fact that a Covent Garden production will invariably possess more units of “goodness”. The question is why some people will rate the quality of a theme park’s production higher?

The higher “service quality” perceived in the theme park is attained by closely meeting customers’ demands and expectations. Interestingly, many people perceive that “quality” is somehow synonymous with “attributes”. A process-based definition (supply-led definition) describes quality as an outcome of engineering and manufacturing practice, or “conformance to specification”. Specifications are targets and tolerances determined by designers of products and services, and targets are the ideal values for which production should strive; tolerances are specified though, because designers realize that it is not possible to meet the targets all the time. For example, in services, “on-time arrival” for an airplane might be specified as within 15 minutes of a scheduled arrival time; the target is the scheduled time, and the tolerance is specified to be 15 minutes. These definitions lay emphasis on the importance of the management and control of supply-side quality. The focus is internal rather than external. Such a definition might be useful in organizations producing either standard products or services, or where the output is tangible. Organizations offering a “standard service” involving “low or short customer contact”, such as “refuse collection”, “postal service”, “home deliveries”, “public transport”, “financial services” and “fast food chains”, may find this definition useful. This is partly because of the important role of process in determining the quality of the outcome. A user-based definition is based on the presumption that quality is determined by what a customer wants and what he is willing to pay for. Here the focus is external. “Quality” is defined as “satisfying customer’s requirements” or “fitness for purpose”. This approach relies on the ability of the organization to determine customers’ requirements and then meet these requirements. The “customer-led” definition is probably most appropriate for organizations offering “high-contact”, “skill‑knowledge-based”, or “labour-intensive” services such as, health care, law, accountancy, hairdressing, education, consultancy, leisure, and hotels. Individuals have different needs and hence different quality standards, therefore quality depends on how well the product or service performs its intended function . Finally, the value-based definition states out that quality is defined in terms of costs and prices – a quality product is the one that provides performance at an acceptable price or conformance at an acceptable level. “Quality”, here, is defined either as the “cost to the producer This definition, as it is driven by customer satisfaction, has become the principal definition of quality for managers, and by the end of the 1980s on its basis a related, though fundamentally different, definition emerged: Quality is meeting or exceeding customer expectations.

process-based approach

user-based approach

value-based approach

and price to the customer” or as “meeting the customer’s requirements in terms of quality, price, and availability”. The focus again is external. The transcendent definition of quality is characterized by an image of excellence as perceived by the competency of employees, the availability of additional services, or the availability of advanced technology (on-line booking, business centre, professional conference rooms). These judgments are made by guests and third-party organizations (tour-operators, business partners). Auditing of employees efficiency and resource consumption views quality along the product‑based dimension. The guests’ perception of services and equipment is focused on the user-based definition, which influences business hotels and forces them to provide services to meet these expectations. It is not constant and may change according to changes in fashion, education level, experience, technology development etc. As the demand for flawless service increases, the hotel staff and complementary services must turn their attention to quality to a manufacturing-based definition (standardization, licensing require ments etc.). Lastly, because of the rise in business hotel prices, the value-based definition has received a great attention in recent years, and all parties (guests, local people and the hotel sector) are involved in this controversy. Although the rendering of services may involve some physical service encounter goods, it is commonly people who render services to the customer. Indeed, the critical time for service quality to be clearly understood is during the one-to-one interactions that occur between the consumer and the provider, the so-called “service encounter”. Customers commonly interact intimately with the service production process. This inside knowledge presents them with the opportunity to assess services critically, in particular the quality of service. To illustrate how these different views can apply to a single service, let’s consider the service provided in a business hotel (for examples see table VI). According to Lewis and Booms (1982), service quality is a measure service quality of how well the service delivered matches customers’ expectations. definition Parasuraman define “the quality perceived in a service to be a function of the gap between consumers’ expectations of the service and their perception of the actual service delivered by the organization” (Parasuraman et al., 1985). We do already know what service and service quality is. How to understand then “quality management”?

Table VI: Important factors when choosing a hotel for business Today

FACTORS

Quiet room

Spotlessly clean/hygienic

Control over temperature

High safety standards

Safe location

Highly efficient messaging services

Availability of no smoking rooms

Location near the city centre

Inclusive hotel package

Rapid turnaround cleaning

In the future 1

High-tech business/communication facilities

Safe location

Availability of no smoking rooms

High safety standards

Highly efficient messaging services

Spotlessly clean/hygienic

Quiet room

Ability to earn airline mileage

Control over temperature

Environmentally friendly room

Source: Inter-Continental Hotels and Resorts 1998

Quality management is usually defined as a “set of coordinated activities to direct and control an organization with regard to quality” (ISO 9000:2000). It could be of reactive or proactive character. Reactive approach means in fact complaints management and reflects the desire to avoid problems with customers instead of recognising and dealing with their requirements. Quality is not considered as a major source of service differentiation or competitive advantage. The principal emphasis of reactive approach is minimization of customer annoyance, rather than realization of customer satisfaction. The efforts of quality planning and control are focused on “hygiene factors”. These are the factors that are taken for granted by the customer: for example, time of departure of a plane or clean tables and utensils at a restaurant. To ensure customer

the concept of quality management reactive approach

proactive approach

strategic quality management

satisfaction, it is not sufficient solely to comply with the hygiene factors. Meeting these requirements does not ensure customer satisfaction; however it helps to avid their dissatisfaction. On the opposite the proactive quality management is always of strategic character. Quality is used to differentiate the organization’s service offering and lies at the heart of the organization’s strategy to gain competitive advantage. Here, usually, quality is one of the primary drivers of the business. Corporate image is built around the quality of the offering; for example, British Airways’ emphasis on customer care. The accent, here, is on gaining customer satisfaction. The “quality” phenomenon is the source for strengthening and differentiating the offering and the organization from what is offered by the competitors. Generally strategic quality management (SQM) is a systematic approach for setting and meeting quality goals throughout the company (Juran and Gryna, 1988). It can be defined as a comprehensive and strategic framework linking profitability, business objectives, and compe titiveness to quality improvement efforts with the aim of harnessing the human, material and information resources organization-wide in continuously improving products or services that will allow the delivery of customer satisfaction (Tummala and Tang, 1996). The launch of a SQM programme requires a clear understanding of the service quality vantage point (definition and vision), customers’ expectations, perceived quality, measures of quality, and generic determinants of quality.

4. T he Significance of Quality in Modern Tourism Development 4.1. Competition in the Tourism Market We are all aware that quality has become one of the most, if not the most, important factors in international competition for business success and that continuous improvement in quality makes good business sense. This is especially true of the broad tourism sector, where an everincreasing array of “new” tourism destinations has forced destination marketers and operations managers to invest in the delivery of higher levels of service quality as a competitive strategy aimed at differentiating their product offering (WTO, 2004). Growing competition, lack of willingness to provide a service, growing loss of individuality by standardization of products, adverse price performance ration etc. are good reasons for systematic quality management in tourism are widely documented: growing competition.

Given the increasingly competitive nature of this sector, industry professionals must now concern themselves with not only increasing market share, but also satisfying and maintaining the existing customer base. Guests require products where they are sure of getting top-quality, value-for-money services. Consequently, “a large proportion of organi zational effort is now being directed at both getting and keeping customers” (Christopher et al., 1991). However not all the enterprises and tourism areas are aware of the importance of quality factor in today’s tourism market. “It seems that service inefficiency and poor standards are rife within the international tourism sector. What is unfortunate for the majority of tourism related organizations today, however, is that the modern day customer has tasted quality and now demands it as his or her right. No longer is the old axiom of location good enough to ensure instant profit and business success – tourism’s future it seems rests with quality, quality, quality.” (O’Neil, 1996) Companies with perceived high quality “goods” and “services” typically had higher market share, higher return on investment and asset turnover than companies with perceived low quality. In the long term, the most important factor affecting business performance is the quality of “goods” and “services” offered by the organization, relative to its competitors. Service quality is considered a critical determinant of competi tiveness. Attention to service quality can help an organization to differentiate itself from other organizations and through it gain a lasting competitive advantage. In some manufacturing industries service quality is considered a more important order winner than product quality. Superior service quality is a key to improved profitability, and not the cost of doing business. Service quality affects the repurchase intentions of both existing and potential customers. The poor service will reduce the potential customer base. Tourism operators have to serve an increasingly discerning public, who are now more eager than ever to complain and transfer their allegiances to perceived providers of quality services. This, coupled with the increasingly hostile nature of the present business environment, has forced many within the tourism sector to invest in the delivery of higher levels of service quality as a means of achieving competitive differen tiation (O’Neil et al., 2000). The growing competition in tourism industry, transfer of new technologies, specific and constantly changing customers’ preferences are the main factors of the growing interest in quality management programs. Price competition seems to be no longer a successful diversification tool. In long term it could even bring losses and destruct

quality as a determinant of competitiveness

price-versus quality competition

quality as a hygiene factor main aspects of quality management

the company. The concept of quality not only sounds intuitively desirable but also has been empirically linked to advantages such as customer satisfaction and repeat purchases, brand loyalty and larger market shares. Unless customers perceive that they are receiving a quality service that meets their expectations, they will consider taking their custom elsewhere. Quality now manifests itself as a “hygiene” factor for service organizations. Hygiene is essential for health, but cannot of itself guarantee health (Cowling and Newman, 1995). Improving the quality of services has many aspects: • strategic – the company must focus on quality itself as the tool for competitiveness. The product’s relative advantage (i.e. perceived as being superior) is recognized to be one of the key factors that differentiates between success and failure. This is in terms of being able to offer unique or superior benefits to the customer, providing some benefits not previously available, satisfying clearly identified customer needs, solving customer problems with existing products or being first to the market so that there is no direct competition; • marketing – products should comply with customers requirements. Companies try to achieve their own constant clients because the tough competition may lead to push them out of the market. Strong position, trust and quality are the determinants of gaining stable market share. A lack of understanding of customers and also competitors has been linked to product failure. Companies should concentrate on the up-front activities (i.e. market research) for success; • economic – the company must bring profits which is possible by offering the products strictly meeting customers’ requirements. (Notice however that the process is effective only when the competitiveness of the company is higher than others, when clients respect and appreciate high quality and they are eager to pay more for getting it.); • technological – quick development of technologies implements better adjustment to the market; • social – clients dement high quality which in long term implements work of employees; social environment insist on environmentally clean products and services processes being in accordance with sustainable development approach, moreover, since the company uses local resources local people want to participate in its profits – either directly or through the company’s participation in any local development activities; • law – products must comply to appropriate standards and regulations specific to different sectors of economy,

• nformation – spreading so fast that companies are to take care of their image through the constant improvement of their products quality. The quality efforts of many firms were motivated by real success stories of companies like Xerox, Motorola, Ford and General Motors where the adoption of quality practices had significant positive influence on the global performance of these companies. In this context quality is considered the only way to maintain a competitive advantage and a strategic weapon. Many studies investigate the relationships between quality efforts and financial performance measures such as profit margin, return on equity and net profit after tax.

4.2. How quality improves business The literature indicates also that the setting and maintenance of quality standards is an increasingly important activity for hospitality firms and tourism areas. More and more often, guests and customers are opting for those products and services that allow them to be certain of receiving high quality and value for money. Below find the main arguments for quality improvement in a business organization: arguments • Improving quality generates higher profits. Better services are directly reflected in the business success, compen for quality sation costs are reduced and guest loyalty is promoted. If buyers can improvement detect higher quality of products and services encounters, they will “reward” such sellers with greater volume. If reimbursement is above marginal cost, this higher volume turns directly into higher profits. Higher quality, in a sense, generates its own reward. • Quality management decreases costs. The introduction of a quality management system does not come free. But it is much more expensive to go on making the same mistakes, having the same loses, manage all the same complaints, dealing with some misunderstanding between employees suffering from the badly organized workplace etc. Despite cutting costs by preventing mistakes and lower costs of control, high quality means lower costs thanks to more effective work, less stuff needed because the work is efficient, consequently cheaper services. Still it is worth understanding: quality efforts and investments are by their nature long-term investments. • High quality service brings competitive advantages. The quality programme promotes the creativity of services, making them more difficult to copy, thus improving the market chances. In tourism guests look for an aid to orientation in the wide variety of tourist offers and quality assurance is one of points of orientation for

the customers enabling them to make right decisions. High quality is the way to better and stronger trade mark which generates higher profit. • Quality management leads to increased employees’ morale and job satisfaction and therefore less fluctuation. If employees are involved in the preparation and implementation of the quality programme and they see the system to be more profitable for themselves as well, they are more motivated, satisfied and loyal. This can be gained through better communication between management and employees. Proper quality management reduces employee turnover and therefore also reduces costs. • As a result quality management encourages hospitality. All employees pull together in the same direction – guest satisfaction – and the guests notice that. That’s why it is crucial to employ staff truly devoted to their job and responsibilities. • Quality management enhances company image. Customers prefer companies with some kind of a Quality Label as it generally means better customer service and ensures reliability. Quality in fact is the only way to create the market brand. • Proper customer service is more effective than expensive advertising. Improving customer service is essential for tourism industry. It is sometimes easier and cheaper to rely on customer’s recommendations by satisfying their needs rather than putting a lot of money in marketing, advertising and sales promotions. It has been proven, that 9 out of 10 guests spend their holidays on the recommendation of friends and relatives. • Quality management improves financing possibilities. The creditors tend to require financial schemes which are tied with quality management plans. This also proves, that introducing quality management systems leads to increasing companies’ value, creditability and reliability. Receiving financial help such as loans or leasing becomes easier and sometimes less expensive. • Quality management improves dealing with critical incidents. Each guest has his specific expectations, needs and opinions. No matter how tactful staff may be, the odd mistake or misunderstanding is unavoidable. Such occurrences are described as “critical incidents” (see chapter 18.3); these are defects of varying degrees in a service chain which result in failure to satisfy guest expectations and hence trigger dissatisfaction. Guests tend to remember critical incidents and do not hesitate to talk about them. One of the most important developments in the tourism industry is the growing attention for service quality from the customer’s perspective. This is the consequence of the growing customer dominance in the

service process. Nowadays, customers are much better informed about travelling and are increasingly experienced travellers, which makes them less dependent on the proficiency of the service provider, e.g. the travel agent. As the customer’s dominance increases, he becomes more and more demanding. One of the ways to improve quality is by introducing radical changes, meaning that the existing system is replaced with another, better one. It means going beyond the usual service and developing new designs, procedures, methods, service concepts and service delivery systems. In other words – innovation. For example, instead of presenting more choice in package tours, a travel agent shall use a mass customisation strategy (creating modular components that can be configured into a variety of individualised packages). Customers do not want more choice of package tours; they just want exactly what they need. Quality management in tourism is becoming popular especially within the accommodation industry. Breiter et al. (1995) remark that total quality management in hotels is becoming commonplace and recount the case in the USA of Bergstrom Hotels who have been practicing quality principles since 1989. Bergstrom’s “quality commitment” has evolved into continuous improvement based on systematic decision-making, teamwork and human resource support systems. Also in the USA, Ritz-Carlton Hotel company have produced “Gold Standards” which include a credo, motto and 20 “Ritz-Carlton Basics” in the quality management programme. Their initiative has led them to be the first hotel group to win the Malcolm Baldrige National Quality Award (Partlow, 1993). In the UK, the Sutcliffe Group of contract caterers seeks to define quality as a means of sustaining growth, improving client retention and focusing employees on providing a quality service (Page, 1994). Callan (1992) reports the case of the Avant Hotel in Oldham, which was the first UK hotel recipient of the British Standard BS 5750 . Quality looked for by the customers in tourism means much more then just service quality of tourism enterprise – it is also the problem of the destination area where quality management is much more complicated due to the fact that it does not depend just on the resources of a single company. As the tourism product is not only produced by several private suppliers (accommodation, catering, travel organisers, attractions, leisure activities) but also public or semi-public institutions (roads, municipal services, theatres, museums) a close private-public partnership is needed to raise the competitiveness not only of individual

BS 5750 is a set of documented operational quality standards that is accepted by the British Standards Institution (BSI) and regularly monitored by them.

quality management in tourism – some examples

business versus social aspects in TDA

enterprise but of the destination as the conglomerate of all the product components needed to make a holiday. It means that quality of the tourism area (tourism destination) cannot be developed only in the very strict business aspect. The tourism industry should constantly review its market standing in relation to the global competition. There is an ever increasing number of tourist destinations competing for the customer’s business, and customers do not tend to be loyal to one particular service or product, but look for innovative ideas which present real value. If visitor’s “expectations of quality and value for money are not met they will simply not return and their verdict...will influence their friends’ choice of holiday destination.” (O’Neill et al., 1994). In fact, one of the most important characteristics of the tourism sector is that all the decisions taken by consumers or enterprises are determined not only by economic factors such as price relations and the development of wages and interest rates, but also by changes in the perception of a destination (Leidner 2004).

4.3. Social Aspects of Quality Management in Tourism Service is becoming the differentiator and the source of achieving a competitive edge. At its heart must be the realization that service is about people and the manner in which they are managed. Total quality management is one such approach because “it is a strategy, which is concerned with changing the fundamental beliefs, values and culture of a company, harnessing the enthusiasm and participation of everyone (...) towards an overall ideal of right first time” (Atkinson and Naden, 1989). Fundamental to this strategy is the human element of the service production and delivery process. Longenecker and Scazzero (2000) present the following description: quality of life “Restaurants make customers wait too long for food that may be cold or poorly prepared. Airliners have long waiting and departure lines for checkin and baggage pick-up. Hotel rooms are not always properly cleaned or maintained according to specified company standards. Long cycle times often exist for hospital emergency room patients in need of urgent care. Government agencies are frequently accused of being unresponsive and sluggish in providing critical human services. And, as the popularity of online shopping grows, orders can contain the wrong items or the items are damaged in transit.” Life seems to be horrible in such circumstances. On the contrary: Better quality of life means better people commitment, better quality of work, better results (products, services) and as a result – better quality

of life! Quality of services is a visible sign of the everyday life quality in aÂ given society. One of the measures of quality is job satisfaction. Obviously, when quality influence the employees are highly motivated and content due to the job they do, on the job they work more efficiently and pay more attention to the tasks they are satisfaction responsible for. That is why quality strategies are connected not only with external clients that means producing goods or services of quality but also internal ones, that is creating high quality products by involved and qualified stuff (Hjalager, 2001). Work environment conditions affect work satisfaction and thus customer perceived service quality. Services are usually more or less abstract or immaterial, which makes them difficult to get inspected and assessed before buying. Services do not have a lifetime, they only exist under a short period and they cannot be stored. They are produced, delivered, consumed and marketed simultaneously. That is why services quality must be built in as the service is developed. Quality is not engineered-in at the manufacturing plant, then delivered intact to the customer. In labour-intensive services quality occurs during service delivery (Parasuraman et al., 1985). There is no customer satisfaction without satisfied employees. That is a very basic social aspect of quality management. Figure IX: Economic and Social Aspects of Quality START

Employees commitment

Higher profits

Quality enhancement

Lower price Higher quality

Preventing mistakes

Efficiency anhancement

Higher sales Higher volume market share

Lower costs

Employment increase

Success oriented activities SUCCESS

Source: Kachniewska (2005).

4.4. The Power of Loyalty

stoping the leakages

loyalty based management principles

the service-profit chain

Marketing – acting alone – cannot create sustainable loyalty. Customers remain loyal, not because of promotions and marketing programmes, but because of the value they receive. Value is driven by a full array of features, such as product quality, service, sales support and availability. The sales force controls customer acquisition, manufacturing is respon sible for quality, the service department manages direct interactions with the customer, and so forth. Marketing’s job is to ensure that the efforts of each department are coordinated into effective delivery of a unique value proposition, which will provide superior value and, thus, earn customer loyalty. Marketing conceptualizes the value proposition and envisions how to present it in terms that the customer will understand, but bringing it to life requires the efforts of all the other company functions. F. Reichheld (1996) points out: “You can’t grow when customers are defecting out the back door faster than the salesforce can pull new ones in the front door. You can’t increase productivity (or real wages) when employees are jumping ship while they are still being trained. You can’t manage a long-term strategy when half the owners on January 1 will be replaced by new owners by November 30. Believe it or not, the average company today loses half its customers in five years, half its employees in four years, and half its investors in less than one year. Isn’t it easier to fill a bucket when it isn’t leaking?” Main principles of loyalty-based management are: • Qualifying and acquiring guests who value and appreciate your product builds repeat visits, sales and referrals. Concentrating investment on selected customers improves loyalty and further stimulates sustainable growth. • Sustainable growth enables the enterprise to attract and retain better employees. The opportunity to design and deliver superior value to a chosen group of customers increases staff satisfaction. • As staff learn about the enterprise’s operations and align financial with other constants, they can reduce cost and improve quality. • Loyal donors behave like partners. They can fund investments, lower the cost of capital and ensure cash flow. Leaders who want to build loyalty and generate the loyalty effect must exercise extreme discipline to protect their partners’ interests. They know that the key to winning is not to make sure their competitors lose, but to make sure their partners win. The service-profit chain (Figure X) establishes relationships between profitability, customer loyalty, employee satisfaction and productivity.

The better economics mean the company can pay workers better, which sets off a whole chain of events. Increased pay boosts employee morale and commitment; as employees stay longer, their productivity rises and training costs fall; employees’ overall job satisfaction, combined with their knowledge and experience, leads to better service to customers; customers are more inclined to stay loyal to the company. The best customers and employees become part of the loyalty-based system (Heskett et al., 1994). Figure X: Loyalty-based business system MARKET SHARE

VALUE

CUSTOMER RETENTION

COST

PROFIT

EMPLOYEE RETENTION

Source: Reichheld (1994).

Improving customer acquisition, hiring and motivating and retaining customer employees, building better investment and governance structures are all retention part of an integrated approach resulting in and from loyalty-based management. There is a high correlation between customer retention and company profitability according to the US strategy consulting firm Bain & Company. Its research showed that a 5% increase in customer retention leads to a considerable rise in net present value profits, from 50 to 125%. Nobody is pretending that a 5% increase in customer retention will be easy to obtain, but even a 1% increase could yield considerable improvement in profitability (Payne, 1994). This calculation is based on the expected cash flow over a customer’s lifetime – the longer they stay the more profits they bring the company. What is more, customers typically generate increasingly more profit each year they stay with the company. Retaining customers allows the company to develop

value-added versus cost-cutting approach

retention profitability

how to keep customers

a deeper relationship with them and encourages repeated and increasingly frequent buying activity. That is why rather than concentrating on applying cost-cutting measures to increase the benefits of quality management, management needs to instil a value-added approach among the staff to challenge them to review their own operations and evaluate the benefits they individually provide to internal and external customers. This concept is based on focusing attention on adding value rather cutting costs. The value-added approach to quality cost and quality improvement maintains the focus on the customer and ensures that the end user rather than the provider defines quality. A formalized system for monitoring customers’ opinions and complaints should therefore be in place. Retention should be treated as the central gauge that integrates all the dimensions of an organization, and its measurement can predict how well an enterprise creates value for its clients, donors, and even community. If a company can �� communicate�� this value in financial terms to its employees they will give more thought to ensuring that customer satisfaction is achieved. There are a few �� reasons�� why retaining customers are so profitable (Reichheld, 1994): • sales and marketing and set-up costs are amortized over a longer customer lifetime; • customer expenditure increases over time; • repeat customers often cost less to service; • satisfied customers provide referrals; • satisfied customers may be prepared to pay a price premium. Customer retention also helps to predict the profitability of the company and is therefore an excellent management tool for considering the success of quality and customer service programs. There is also another important reason to remember: a customer lost through dissatisfaction with the service provider will be one gained by a competitor. Keeping customers is therefore a key strategic issue for service companies to address. Key features of such an approach include (Howe et al., 1992): • The “voice” of the customer is incorporated into product/service decisions. • Customer commitment is earned in a “social” contract. • There is open exchange of ideas for mutual gain. • Employees develop a greater identification with the corporation (just as the supplying corporation must become more customer‑oriented).

• Customers are involved in product design, production and service. • There is close partnership between suppliers and customers. • Customers are viewed as individual people and so are “value” providers. • There is continuous interaction and dialogue between suppliers and customers. • There is a focus on discovering, creating, arousing and responding to customer needs. • Relationships are viewed as enterprise assets. Integral elements of the relationship marketing approach that help to reach customers are promise concept and trust. The responsibilities of marketing include giving promises and thus persuading customers in order to attract new customers and initially build relationships, as well as fulfilling these promises (Calonius, 1988). Otherwise, if promises are not kept, the evolving relationship cannot be maintained and enhanced, and the seller fails at achieving retention of the consumer base and long‑term profitability. On the other hand, trust was defined as a willing ness to rely on an exchange partner in whom one has confidence (Moorman et al., 1993). Establishing a relationship can be divided into two parts: attracting new customers and building relationships with them in order to achieve all economic goals resulting from that relationship. Along the way, there are two marketing strategies (Fornell, 1992), both of them deals with different element of these two elements of the relationship-building. Offensive marketing strategy would focus on obtaining new custo mers and increase customers’ purchase frequency. It strives to attract dissatisfied competitors’ customers and makes potential customers to take the next step. This strategy can be divided into three main areas. First, team activities; second, string tactics includes such things as newsletters, civic activities and general publicity, and third, “clutching at straws” tactics is mainly publicity, including brochures, large-scale seminars and most direct mails (Fergusson, 1996). Defensive marketing strategy is concerned with minimizing customer turnover and geared to managing the dissatisfaction among a firm’s own customers. It consists of two components: customer satisfaction and

WOM is the key type of communication used in relationship marketing. Positive WOM, informal communications directed at other consumers about the ownership, usage or characteristics of particular services and their sellers is a valuable vehicle for promoting products and services. Given its non-commercial nature, WOM is viewed with less skepticism than firm-initiated promotion, it is very influential in any purchase decisions, especially in services, where a single recommendation is often sufficient to convince a person to try a particular service provider.

relationship marketing

offensive marketing strategy

defensive marketing strategy

switching barriers customer loyalty ladder

switching barriers (barriers that make it costly for a customer to switch to another supplier). Different types of costs (search costs, learning costs, emotional costs); cognitive effort and risk factors (financial, psychological, social) constitute switching barriers from the customerâ&#x20AC;&#x2122;s point of view (Storbacka, 1994). The basic argument for this strategy is that the cost of obtaining a new customer exceeds the cost of retaining an existing customer. Organizations frequently acknowledge that existÂ ing customers are easier to sell to and are more profitable than new customers. Customer loyalty can be viewed as a ladder showing the progression of relationships customers can have with an organization. Figure XI: The Customer Loyalty Ladder

Partner

Advocate

Supporter Client

Customer Prospect

Partner: someone who has the relationship of a partner with you Advocate: someone who actively recommends you to others, who does your marketing for you Supporter someone who likes your organization, but only supports you passively Client: someone who has done business with you on a repeat basis but may be negative, or at best neutral, towards your organization Customer:someone who has done business just once with your organization Prospect: someone whom you believe may be persuaded to do business with you

Source: Payne, 1994.

The first marketing task is to convert the prospect into a customer. The next task is to generate repeat business with customer to make him/ her the firmâ&#x20AC;&#x2122;s client and then a supporter. The fifth level of the presented ladder is an advocate being pleased with the services or products he receives and eager to recommend them to others. The final step on the ladder is a partner. This represents a situation where a very close and long-term relationship is developed between a supplier and customer, based on satisfaction of mutual needs.

One of the practices increasingly applied in consumer marketing is the maintenance of customer databases . The deployment of the software by employees may really help them readily recall customer characteristics and use this information in relationship building. But the view of relationship marketing as database management is, however, one-sided. The establishment and maintenance of databases does not constitute an effort to forge true relationships. Databases can be used to target customers, with the customer having little or no knowledge of the company in question or the existence of the database. In addition, databases are limited in the extent to which they can help manage genuine relationships. Managing the customer base means that the firm has at least some kind of direct knowledge of how satisfied its customers are (Grönroos, 1981). This requires means of gathering the various types of data about customer feedback that are constantly obtained by a large number of employees in large number of customer contacts. In combination with market share statistics, such an intelligence system focusing on customer satisfaction and customer needs and desires forms a valuable source of information for decision making. Consequently, the firm can build up an on-line, real-time information system. Companies should target the “right” customers – not necessarily the easiest to attract or the most profitable in the short term but those who are likely to do business with the company over time. The challenge is to avoid as many of these people as possible in favour of customers whose loyalty can be developed. The right customers are those to whom the best value can be delivered by the firm over a sustained period of time. According to statistical research people who buy because of a perso nal referral tend to be more loyal than those who buy because of an advertisement. Those who buy at the standard price are more loyal than those who buy on price promotion. Home owners, middle-aged people, and rural populations also tend to be loyal, while highly mobile populations are inherently disloyal because they interrupt their business relations each time they move. Special promotions and other kinds of pricing strategies aimed at acquiring new customers often backfire. Even attempts to recover customers who threaten to leave are often a waste of resources. Investments in service-quality improvements may be

Customer segmentation is a tool used to create a type of “intimacy” in order to serve clients better. This is possible thanks to the use of information technology. Databases, which should include both qualitative and quantitative information about the customers, are supposed to be the “technical” basis for relationship marketing. Marketers can direct highly customized marketing to selected customers.

customer databases

choosing the „right” customers

buying behaviourS

counterproductive when they are focused on customers the business actually should get rid of the business of keeping them. The external marketing (Figure XII) can not exist without the staff loyalty internal marketing as customer loyalty can’t be had without staff loyalty. Internal marketing is needed to ensure the support of traditional non-marketing people who have to be committed, prepared and informed, and motivated to perform as part-time marketers (Carlzon, 1987). Figure XII: The services marketing triangle

Company (management) Internal marketing

External marketing

Enabling the promise

Employees

Setting the promise

Interactive marketing

Customers

Delivering the promise Source: Zaithaml and Bitner (1996).

The interaction marketing helps to arrange the proper service encounters and deal with the uncertainty of the service process. While external marketing is about setting the promise to customers, interactive marketing is about delivering the promise, which is possible only through the proper internal marketing. Today’s jobs are increasingly complex and require sophisticated knowledge of customers, internal processes and technology. Thus, company investments in hiring, training, and development, will only pay off in superior productivity if employees stay and apply their knowledge at the company. “Some managers “question the wisdom of increasing pay by, say, 25% in order to decrease employee turnover by 5%. Yet the fact is that employee retention is key to customer retention, and customer retention can quickly offset higher salaries and other incentives designed to keep employees from leaving. The loyal employee learns, over time, how to serve the customer, and the loyal customer learns how to access the

business system in a way that makes it easier to be well-served. The loyal stockholder learns how to anticipate ups and downs in the business and doesn’t induce behaviours that destroy long-term value in order to ensure short-term accounting profits. A successful business is really a partnership that includes customer, employee, and investor. […] When any one participant overreaches, the system will collapse.” (Reichheld, 1994). Here we come to the next group – the company’s partners and investors. In fact some researchers treat the relationship marketing very widely including here not only relations with individual and institutio nal external clients and internal company’s relations, but also relations with suppliers and even relations with local governments or local communities. It is worth to notice that such an attitude to the relation ship marketing concept could be especially useful when analysing the complexity of tourism product (TDA’s offer). However as far as the external client constitutes the main source of company’s income let’s concentrate on the relations with clients. In a tourism sector the success of many tour-operators depends on the well developed net of agents. Agent retention and customer retention reinforce one another. The agent who is committed to a long‑term relationship with the company, and indeed, to his or her own business, is more likely to build lasting relationships with customers. In addition, loyal customers make life easier for the agents, who spend more time working with people they know and like and far less time chasing new customers. It then initiates a series of second-order effects that cascade through a business system as follows (Reichheld, 2003): • Revenues and market share grow as the best customers are swept into the company’s book of business, building repeat sales and referrals. The best customers are those who have the highest inherent loyalty because they understand and buy into the company’s value proposition. They are the company’s best assets because of how long they stay and how profitable they will become. • Costs shrink as the expense associated with acquiring and esta blishing relationships with new customers and replacing old ones declines. The long-term customers are much easier to serve because they know the system and how to use it and have built up good working relationships with loyal employees. • Employee retention increases because job pride and job satisfaction increase, in turn creating a loop that reinforces customer retention through better service. Increased productivity results from longer employee tenure because of continued learning by the employees as they gather experience in creating value for customers.

partners’ loyalty

second-order effects of loyalty management

zone of tolerance

customers’ price sensitivity

social bonds

commitment to the relationship

Many researches point out that satisfaction and loyalty are affected differently by the components of the supplier’s marketing mix – the satisfaction seems to be affected mainly by the sales force of the supplier through interpersonal relations, communication, cooperativeness and promotional activities in the outlets (Biong, 1993). While satisfaction is one determinant of loyalty, loyalty also is affected by determinants signalling dependency, sources of power and stakes in the relationships, e.g. quality products, strong brands, a unique product line, product profitability, and a professional sales force. Customers seem to have a zone of tolerance, which can be defined as the difference between an adequate and a desired level of service (Zeithaml et al., 1993). Customers are prepared to absorb some unfavourable evaluations before expressing them in terms of net dissatisfaction (Kennedy and Thirkell, 1988). It means that customers may be dissatisfied with a service episode and still be satisfied with the relationship. One of the crucial effects of this strategy is that relationship marketing makes customers less price sensitive. It is possible due to the creation of more value for customers than that which is provided by the core product alone. Firms pursuing this system develop over time more and tighter ties with their customers. If they are well handled they provide customers with added value, something that is not provided by the core product itself. The aspects which enhance the relationship strength are, first of all, the existence of bonds between the customer and the provider, which function as switching barriers. Six different types of bonds have been suggested: social bonds, technological bonds, knowledge bonds, planning bonds, and legal/economic bonds. In addition to these bonds, consumers may also have geographical, cultural, ideological and psychological bonds to service providers (Liljander and Strandvik, 1995). The conse quence of bonds is that the customer might accept lower levels of service quality, compared with other service companies, without breaking the relationship. One way to facilitate the development of social (interpersonal) bonds is to design the environment where the service takes place – the servicescape, in such a way that opportunities for interactions (both formal and informal) between employees and customers are plentiful. In addition to the environment, services marketers might consider how to design the service delivery process to encourage employee-customer interactions. This could include “assigning” an employee to a specific customer to create an ongoing series of interactions. The second dimension relates to the customer’s and the provider’s commitment to the relationship. This commitment might be based on

customers’ intentions and plans for the future. The commitment refers to adaptation processes which are the result of the parties’ intentions to act and positive attitudes towards each other. There is a difference between loyalty and commitment, as loyalty is regarded only as repeat purchase behaviour within relationship (Liljander and Strandvik, 1995) and commitment is defined as parties’ intentions to interact with each other. This also means that customer loyalty is not always based on positive attitude, and long-term relationships do not necessarily require positive commitment from the customers. Another important aspect is that the importance of the relationship for customers varies significantly. Some customers may be very committed to the relationship and for these customers the perceived satisfaction with the relationship is very important. Others may find the relationship basically unimportant and for those the satisfaction component is not as important.

5. Tourism Product Quality – a Complex Matter Why quality in tourism seems to be such complex phenomenon? Quality in tourism has many dimensions. As it was stated earlier all products are accompanied by some aspect of service, and most services are associated with some physical items, either the service itself or the provision of the service. “(...) neither goods nor services are marketed; what is marketed is a bundle of benefits, often including both tangible and intangible aspects” (Enis and Roering, 1981). A tourism package is the total sum of goods, services and interactions which a tourist receives at different points in time, and maintains as perceived memories of his/ her tourism experience. It can be the holiday experience – comprising both tangible and intangible services – that constitutes the core component of the tourism product. Tourist satisfaction can be achieved only if a tourism firm’s core offering is able to meet the expectations of the customer; peripheral offerings thus essentially assist the firm in providing added attractions to the core service. This differentiation of a core and peripheral within a range of services is critical for the effective management of tourism firms and customer satisfaction. As a result, the concept of service packaging proffers various applications in the effectual management of tourism services. When we talk about quality in tourism we should decide whether we discuss the problem of service quality offered by the tourism enterprise or quality of the destination area – which is much more complex.

tourism quality dimensions

tourism enterprises versus tourism area

Let’s start with a single company. It is necessary then to concentrate on four main parts: • service contact (employees, infrastructure), • the project of service (defining the needs of guests in comparison to goals of company), • productivity of services (taking care of constant or improving quality in conditions of rising demand), • organization and culture of service. Services are performed when the producer and consumer come into tourism service contact. This inseparability lends a further complication in that it encounter inhibits mass production of the service. This situation is exacerbated due to the perishability of services, for example a seat in a restaurant or a bed in a hotel that is not used in one time period cannot be accumulated for use at a future time. Aspects of these features of services present specific problems for managers who must accurately forecast demand to ensure effective capacity utilization. The evaluation of quality systems of individual tourism enterprises indicates that the lack of proper inputs combined with the unfavoura ble features of the external environment in which these systems operate obstruct the benefits that these systems could otherwise produce (quality tourism products). The resources used by big tourism companies for the development of advanced quality systems are therefore lost. In the short term, the existing quality systems of individual tourism companies may increase their competitiveness. However, in the long term, lack of the ability to satisfy the needs of their customers may result in a gradual decrease in the sales of tourism products offered by these companies. Increasing competition in the tourism market impels individual tourism enterprises to focus on quality improvement as a source of competitive advantage. Small tourism enterprises typically lack adequate inputs and ability to manage effectively internal and external relation ships in order to develop comprehensive quality systems. A majority of big tourism enterprises have, however, developed modern quality systems based on the concept of TQM (see chapter 10). Despite the fact that their quality management processes are in most cases advanced, comprehensive and consistent, they also face difficulties with achieving total satisfaction of tourists. These problems result from inadequate inputs and inability to secure quality relationships with the environment in which the systems operate, which is associated with the nature of the tourism product. Defining the quality and its determinants in tourism industry seems to be even more complicated then in any other services area. The tourism industry is composed of networks of independent

but inter-related service providers, such as airlines, hotels and tour operators, functioning within a range of service industries. From a services management perspective, these tourism networks can be described as packages of experiences consisting of both tangible and intangible elements. Thus, the pre-sale tourists' expectations relate mainly to the quality of the destination area rather than the quality of services provied by tour operators and travel agents that operate within a TGA. Locating the tourism quality system within the TDA enables more accurate identification of the benefits that the host area is in a position to offer to various market segments. Required quality improvement areas in terms of satisfying total customer expectations can also be better recognized owing to the fact that the majority of components of the total tourism product are consumed at a TDA. It is therefore easier to close the tourism quality perception gap. Figure XIII: Quality dimensions in tourism Quality in tourism Hardware

Environment

Software

Facilities

Landscape

Service

Functions

Adverse effects / pollution

Information

Aesthetical aspects

Consumption of resources

Hospitality

Source: Romeiss-Stracke, 1995.

Augustyn (1998) defines the “tourism quality perception gap” which relates to the discrepancy between the views of the tourists and those of the tourism organizations in respect to the quality of the tourism product. While tourists perceive quality as satisfaction with the complete tourism experience from the time they leave home to the time they return (Medlik and Middleton, 1979), the popular tourism organization’s approach to quality in tourism limits tourists’ satisfaction to those components of the tourism product that are provided by the organi zation (Handszuh, 1996). For example, a tour operating company offers a quality package composed of a seat in an airplane, a hotel room and meals in a restaurant, and is interested only in the quality of those components, as well as the quality of their own services. It should, however, be noted that other factors, such as the quality of destination

tourism product characteristics

enhance customer satisfaction

facilities, infrastructure, public transport, hospitality also influence tourist satisfaction. In most cases, however, these factors are not taken into consideration by individual tourism companies while searching for information related to customers’ expectations and levels of satisfaction. Therefore, even if the packages offered by the tour operators are of top quality, the other factors may spoil the tourist’s overall experience. A number of quality dimensions such as accessibility of services, service orientation, freedom of choice, security and aesthetics, as well as specific tourist activities such as shopping activities or the use of public transportation seem to be perceived and evaluated very critically (Weiermair and Fuchs, 1998). The defining characteristics of the tourism product are such that they present specific issues for practicing managers (adapted from Augustyn, 1996): Supply-related: • the multisectoral and complex nature of the product which represents a mixture of various elements (for example, the destination with its facilities, attractions and accessibility); • the rigidity of the main elements of the offer that limit speedy responses to changing consumer tastes; • the highly fragmented supply – many businesses may contribute to the overall experience; • the intangibility, inseparability and perishability of certain aspects of the offer; and • staff issues – tourism as “people industry”. Demand-related: • high elasticity; • seasonality; • changing needs, attitudes and preferences of customers; • little brand loyalty; and • heterogeneous customer groupings. In order to enhance customer satisfaction, an individual tourism organization should adopt the same understanding of quality as its customers. Consequently, the information needed for identification of quality improvement areas should relate to all components of the total tourism product and not only to those offered by the tourism company. A majority of the companies do not have, however, sufficient resources to develop and monitor complex information systems. Since the information about customer expectations constitutes an important part of the inputs to a quality system, shortcomings within this area give rise to failures of quality systems developed by individual tourism organizations.

Tourists’ expectations of specific levels of service quality in tourism partly stem from their own culture and prior socialisation, which can predispose them to interpret factors influencing tourism destination choice and destination experience from a distinctive perspective (Pikkemaat and Weiermair 1999). Different segments of tourists may have both different expectations and attitudes regarding tourism services and service quality. In addition, they may also perceive tourism experiences and associated service quality differently, thus requiring specific attention with respect to the differential development and management of tourism products/services. Managers want to have control over the factors that influence customers’ expectations, but some of those factors are uncontrollable. That is, e.g. the case for the factor “perceived service alternatives from competitors”. The factors that influence customers’ expectations of service are often influenced by social trends. For example the new service alternatives (i.e. the Internet) influence the service expected from the traditional travel agent. The necessary changes in this service must go far beyond the usual job of the travel agent. Managers in a tourism organisation are in a position to react to these trends in an appropriate manner, depending on how they are viewed – as a threat or as an opportunity. If a manager objectively examines trends, then, he/ she is better prepared as a professional to take a leadership role in the tourism sector, instead of being caught in a reactive or defensive position. Most tourism services are heavily dependent on word-of-mouth recommendation. Publicity by WOM can have – both positive and negative – serious consequences at the macro level of the industry. Indeed, the design of the tour package will not only influence customers’ tourism experience, but will also affect the image of the destination and, ultimately, the tourism industry as a whole. Consequently, tour operators who manage mass tourism assume an important role in maintaining the image and well being of the destination they serve (Kandampully, 2000). Quality is a global, but not easily definable, concept that applies to tourist destinations, regions or nations, as well as individual private enterprises. Most approaches have focused on individual providers of tourism services, with the aim of helping them understand better the needs of modern tourists, and to develop economically feasible products and processes (Maylor, 2000). But a destination area’s reputation for hospitality, or “(...) the manner in which visitors are received, and the quality of service provided, forms a major component of a destination’s tourist image” (Murphy, 1985). In order to attract and retain the

importance of tourists’ expectations

factors influencing tourists’ expectations

WOM recommendation

customer, the tourism business must concern itself with attaining and maintaining a constant level of service quality in terms of service production and delivery. It is, however, important to bear in mind that quality relates to customersâ&#x20AC;&#x2122; perceptions, not the perceptions of those who provide the service. WTOâ&#x20AC;&#x2122;s definition The most complex definition of the tourism product quality should of tourism quality include these observings. Such definition was formed by World Tourism Organization (WTO, 2004): uality in tourism implies to satisfy all the legitimate service Q requirements and expectations of the client at an acceptable price whereby always conforming to the underlying quality determinants such as safety and security, hygiene, accessibility, and harmony with the human and natural environment. WTO therefore defines quality as the central objective of tourism development and identifies it with the quality of tourism experience for both who visit and buy tourism service and those who receive visitors and provide such services. Quality thus provides a basis for sustainable tourism. It is again worth to notice that tourism quality in such a context cannot be enhanced by an individual enterprise â&#x20AC;&#x201C; it needs the involvement of tourism organizations or consortiums and should be developed at national and local levels.

PART TWO: TOURISM ENTERPRISE – A CUSTOMER DRIVEN ORGANIZATION 6. Customer Focus – What’s New about It? Allied to the notion of quality is the notion of customer orientation. The argument is that it reflects the business climate of the 1990s, which demands a customer orientation in order to meet and exceed customers’ requirements. The literature tends to focus on the extent to which the tourism industry is customer oriented and the types of strategies they must adopt in order to become so (Gilbert and Soni, 1991). A long ago customers stopped buying anything what is offered. They want to buy products and services which they really need. The growing level of education make nowadays customers much more sophisticated and innovative. It can be easily observed in the tourism market where customers look for new products, enabling them to show their individuality. In order to keep and attract new customers it is necessary to establish their needs and expectations. The marketing strategy has to be customer-driven (Mohanty, 1995). The ever-spreading idea of quality management may be viewed as a process by which a company concentrates its total resources on the task of satisfying customer requirements in terms of value for money, reliability and fitness for purpose at a minimum cost. The idea of quality management influenced the marketing activities. Typical features of the modern marketing management are not only an interest in the customer but also in the customer’s interaction with the provider’s personnel in delivering the service creating value. QM is a managing system based on never-ending improvement in order to satisfy customer’s demands. This satisfaction should be treated as an investment as profits are not supposed to appear immediately (Mohanty, 1995). Of course, it does not mean resigning from budgeting principles and thinking in profitability categories. QM is not aimed at the higher volume of sale. Quality-oriented managers keep it in mind to lower the costs. In service companies (especially in the tourism sector) one of the most burdening positions of costs constitutes the workforce. Traditionally this cost used to be cut very simply – the layoffs. Managers tend to forget that the longer employees stay with the company, the more familiar they become with the business, the more they learn, and

customer orientation

customer - driver marketing

employees’ effect on customer loyalty

the more valuable they can be. Employees who deal directly with customers day after day have a powerful effect on customer loyalty. A customer’s contact with a company is through employees, not the top executives. It is with employees that the customer builds a bond of trust and expectations, and when those people leave, the bond is broken. The idea is to gain customers loyalty through the best service. This can be done only when employees are eager to serve clients in a perfect way. This leads us to the conclusion that quality management does not start the concept at the level of company-customer interaction. Its roots reach deeper – to of internal the level of human resource management (HRM). The customer in marketing this concept is not only the external user of the product or service, but is also the next person to use the work of any company employee (Mohanty, 1995). Figure XIV: The Quality Chain outside organisation final customer

supplier/ customer supplier/ customer supplier/ customer supplier/ customer supplier/ customer external supplier outside organisation

Source: Ho (1994).

There is a series of supplier-customer relationships (Figure XIV), quality chain which serve as an important interface in the quality chain. Failure to meet requirements in any part of a quality chain will affect the other parts (Oakland, 1993), what means that the quality chains may be broken at any point by one person or process not meeting the customer’s (internal or external) requirements. The ability to meet the customers’ requirements is vital, not just between the company and external

customers, but within the organization’s internal customer/supplier relationships – it helps to avoid breaking the quality chain. The notion of improving service quality by attention, primarily, to the customer care social and behavioural elements of customer service encounters, is the initiatives basis of a number of so-called “customer care” initiatives. Five types of care can be distinguished (Horovitz and Cuddennec-Poons, 1990): quality care, customer care, flip care, communications care, lead care. By quality care they mean establishing, in the organization, a shared definition of the meaning of service quality. Customer care places the prime focus of quality improvement on the interaction which takes place with the customer. Front-line people care, abbreviated to “flip care”, is about helping and equipping the employees who are exposed to the public to provide the service. Communications care requires attention to avoiding misrepresentation of service quality in any way which might lead to false expectations. And finally they mention lead care, which they suggest is about management providing and showing leadership and commitment. The focus on customers and employees can not stay an empty slogan tailored to an annual management meeting. In the new economics of service, frontline workers and customers need to be the centre of management concern. Successful service managers pay attention to the factors that drive profitability in this new service paradigm: investment in people, technology that supports frontline workers, revamped recru iting and training practices, and compensation linked to performance for employees at every level.

7. Customer as Co-Producer of Value 7.1. Customer Defined Quality. One field largely ignored by traditional quality control and assurance activities is the marketing discipline. Quality management opened the way to involve the marketing discipline in quality issues. IBM has stressed its corporate vision development in seeking to satisfy customers through market-driven quality (MDQ) as it was summarized that customers buy on value; they do not simply buy products. It is value that attracts customers to particular firms, and delivers competitive advantage to that firm. The process of value creation needs to be service quality understood, if it is to be managed and enhanced. Customer satisfaction is important for success as consumers make as customer’s extensive use of personal sources of information when buying services. experience

actual versus expected performance

anticipating customers’ needs

customer’s feedback value

Additional elements of service augmentation, for example accessibility and convenience, must also be managed to provide a complete offering. Quality is incapable of measurement, for quality as a characteristic exists as it is perceived by the consumer (Callan, 1989). Service quality then is basically perceived as the customer’s subjective interpretation of their experience. The production of services requires a higher degree of customization than that of manufactured goods – a service must be provided to an individual customer. Customer needs and performance standards are very difficult to identify. The customer and the service employee need to interact for delivery of the service to be complete. At the time of purchase, the customer decides if expectations have been met by comparing the perceived performance with the expected performance. This usually forms the basis of a decision to purchase, and determines purchase satisfaction. After the purchase of the supplies, the customer becomes aware of the actual performance; and user satisfaction is the result of comparing the actual performance with expected performance. Evidence suggests that successful organizations are able to diagnose their customer expectations fully and satisfy them completely, during each and every service encounter (Zemke and Schaaf, 1990). In an attempt to delight customers tour operators, accommodation, restaurants must attempt to get as close to them as possible so that they are better able to anticipate and thereby meet their needs. The idea is to stay ahead of the customer, to anticipate his/her needs “so that when he/she articulates the needs service suppliers have already planned for it and are ready (ahead of the competition) to meet it” (Bank, 1992). Service staff must be supported by an appropriate service infrastruc ture that enables them to succeed. This requires that an organization have effective systems and procedures in place to ensure that the services it provides constantly focus on meeting the customer’s needs. It is clear that the customer has a major role to play in the creation of a quality product; unless the customer has an accurate requirement, and reasonable expectations, the transaction will be ineffective in some form. The customer feedbacks is a main source of information about tourists’ requirements. Managers should therefore seek to understand their customers and appreciate the extent to which different quality dimensions are prioritised. High contact customers will have more interrelationships

Accessibility has been found to be particularly important in choosing a tourist agency. This is defined in terms of convenience of location, hours of operation and number of branches. However it should be noted that not all services require the presence of the customer (making reservations via Net).

with employees who, as a consequence, will need to be suitably trained in “people skills”. In contrast low contact customers may have greater affinity with the tangible components of the servicescape. Many service organizations such as airlines, banks and hotels have well developed quality assurance systems. Regretfully, most of them are generally based on industrial system analogies and tend to be more product oriented than service oriented. For instance a typical hotel’s quality assurance system is focused on technical standards such as properly made up rooms. However, service organizations have special requirements that manufacturing systems cannot fulfil, therefore they must go beyond product orientation and include customer service transaction as well as employee performance and behaviour. There are several points that service organizations should consider when it comes to instituting quality assurance systems (King, 1984). The quality characteristics that should be controlled may not be the obvious ones. Customer perceptions are critical and it may be difficult to define what the customer wants. For example, speed of service is an important quality characteristic, yet perceptions of speed may differ significantly among different service organizations, such as restaurants. Behaviour is a quality characteristic. The quality of human inter action is a vital factor in every service transaction that involves human contact. For example, travel agencies have found that the friendliness of tellers is a factor in retaining clients. Another quality characteristic is company’s image – a major factor in shaping customer expectations of a service and in setting standards by which customers evaluate that service. A breakdown in image can be as harmful as a breakdown in delivery of the service itself. Expectations represent the level of service consumers believe they will receive in a given service encounter. Expectations are influenced by a wide variety of information sources (advertising, physical cues, etc.). They are also specific to individual firms as consumers “will” expect varying levels of service from various firms within a given industry (e.g. consumers expect a better product in Marriott then in any – even 5-star local hotel). What are the antecedents of expectations then? First of all consumers’ expectations result from the perception of various pieces of information that are relevant to a service industry or service firm. This information originates from: 1) individual-specific sources, 2) pre-encounter sources, and 3) intra-encounter sources (Liu et.al., 2000). 1) Individual-specific information sources vary across individuals and may lead different individuals to expect different levels of service in similar situations. They include such variables as an individual’s

the critical value od customer’s perceptions

behaviour as quality characteristics company’s image as quality expectations factor how expectations rise

individual specific information sources

pre-encounter information sources

intra-encounter information sources

personal service philosophy (i.e. individuals beliefs about how services should be performed and how service employees should conduct themselves), transitory service intensifiers (i.e. personal emergencies that lead individuals to need and expect a higher level of service), personal needs (i.e. physical, social, or psychological needs), perceived service alternatives (i.e. an individual’s perception of the number of providers that can perform a given service), and self-perceived service role (i.e. an individual’s perception of how much their own actions affect the delivery of the service). 2) Pre-encounter information sources are biased and unbiased informative stimuli that are received by consumers before a given service encounter that lead consumers to expect various levels of service performance. Biased, pre-encounter stimuli are those pieces of information that firms disseminate to solicit business (e.g. advertisements, brochures, Web sites, etc.). These biased sources of information have been shown to be particularly important to the formation of expectations when consumers lack other sources of information (Hoch and Ha, 1986). Unbiased, pre-encounter stimuli are sources of information that do not originate from the service firm, and are likely to be seen as more credible sources of information. Unbiased, pre-encounter informa tion sources include previous experience with the service firm or service category, personal word-of-mouth (i.e. from friends and/or acquaintances), and third-party information (i.e. consumer reports, news broadcasts, etc.). While consumers rely heavily on word-of‑mouth communications to form expectations, this source of infor mation has been shown to be particularly useful when the source of information is closely related to the recipient (Oliver, 1987). 3) The list of intra-encounter factors is a little longer: As consumers interact with representatives of the service firm, the physical environment of the service encounter and other consumers, they are the targets of a great many information sources, influencing their expectations. The sources include the delivery of the core service, company communications10, implicit service promises, situational factors11, price and brand name. 10

Company communications consist of any information explicitly communicated to the consumer during the service encounter. Examples are service claims made by salespeople, signs that provide information about some aspect of the service, etc. This information is similar to biased, pre-encounter antecedents because it originates from the company and consumers may question its credibility. 11 Situational factors are random events that are perceived by consumers to be beyond the control of the firm, and that temporarily affect the firm’s ability to deliver the service. Situational factors include random over-demand for the service, natural

Another important aspect influencing the customer’s experience is the environment in which a service transaction takes place, also termed the servicescape (Bitner, 1992) and including ambient and spatial servicescape conditions as well as the signifying nature of artefacts. The term servicescape connotes a more or less contrived scenario, echoing the fact that some front-line service encounters are “scripted” and that services actually impress upon their employees the existence of a “front” and “back stage”. Servicescape is not always controllable (e.g. North American wilderness). Sometimes the environment is chosen, rather than “designed”. It is not controllable in the same sense as a hotel reception area or a store interior.

7.2. Customer Effects on Service Quality Customers have a role as “a co-producer of value and a partner” (Gummesson, 1997, p. 269) within service encounter. Tourism areas, hotels and means of transportation have the potential to attract large numbers of diverse groups of customers and, while this does not necessarily lead to incompatibility, managers should be aware of the criteria which delineate segment membership and whether certain segment mixes are incongruous. Because tourists are invariably in close proximity to each other and often share time, space and service utensils, there is potential for both positive and negative interactions. Inter relationships between customers will therefore impact service quality evaluations, as will interactions with staff and the physical elements of the offer (servicescape). Service experiences are the outcomes of interactions between organi zations, related systems/processes, service employees and customers. In many services customers themselves have vital roles to play in creating service outcomes and ultimately enhancing or detracting from their own satisfaction and the value received. Customers themselves participate in creating the service and ensuring their own satisfaction (Bitner et al., 1997). The heterogeneous nature of tourists has the potential to contribute to the quality gap through the impact which particular groups of customers may have on one another. So called inter-customer conflict may result from the fact that tourists differ in terms of language, food catastrophes, bad weather, etc. (Zaithaml et al., 1993). Situational factors are likely to reduce the level of service consumers believe they will receive. For example, consu mers in a crowded restaurant will not expect to be served very quickly. However, as normative expectations represent the level of service consumers expect under more ideal circumstances, they are unlikely to be affected by situational factors.

customer as co-producer

inter-customer conflicts

example areas of potential conflicts

levels of customer participation

requirements, values and behavioural norms, as well as specific service needs. Customers are in close physical proximity to each other (all activities take place in a relatively small area of land or the same building – hotel or restaurant), customers are engaged in numerous and varied activities (many sport options are available together with bars, restaurants, shops, hairdressing, car hire, etc.), they must occasionally wait for service (there is potential for delays to occur in relation to any of the above facilities); tourists are expected to share time, space or service utensils with each other (e.g. the sport facilities such as pools, courts, etc.); and the service environment has the potential to attract a heterogeneous customer mix. Management seeks to address these potential difficulties. They could be partly limited by a process of first attracting homogeneous consumers to the service environment. E.g. families with young children will require different types of support services, and place differing emphasis on the need for physical, inter active and corporate quality (Thwaites, 1999). One of the example areas of potential conflicts in tourism resorts is a “quiet” period between midnight and 07.00, usually intended to reduce noise levels. This requirement appears to be ignored by many guests who return to their apartments from the bars and discothèques early in the morning or who sit talking on their balconies until the early hours. It is necessary to recognize the difficulty and position security staff to minimise the noise situation and manage the delicate balance between heavy “policing” and allowing some customers the freedom (Thwaites, 1999). Similar potential areas of conflicts among customers is for example, the relationship between smokers and non-smokers, time share owners and one-off visitors or different cultural attitudes to dress codes such as “topless” sun-bathing. The level of customer participation in a service experience varies across services as shown in Table VII. In some cases, all that is required is the customer’s physical presence (low level of participation), with the employees of the firm doing all of the service production work, as in the case of a symphony concert. In other cases, consumer inputs are required to aid the service organization in creating the service (moderate level of participation). Inputs can include information, effort or physical possessions. When choosing a holiday offer in a travel agency or staying at SPA – tourist has to be very active and provide the service enterprise with quite a detailed information about his/her requirements. In some situations, customers can actually be involved in co-creating the service (high level of participation). For such services, customers have essential production roles that, if not fulfilled, will affect the nature of the service outcome. All forms of education, training and health maintenance fit

this profile. Unless the customer does something (e.g. studies, exercises, eats the right foods), the service provider cannot effectively deliver the service outcome. Within the sector of incentive travels, similarly, an organization seeking training services for its employees will need to help define the nature of the training, identify the right employees for the training, provide incentives for them to learn and facilitate their use of the training on the job. If the organization does not do this, the employees involved will not receive the full benefits of the service. Table VII: Levels of customer participation across different services Low: Customer presence required during service delivery Products are standardized Service is provided regardless of any individual purchase Payment may be the only required customer input Examples: End consumer: Airline travel Motel stay Fast-food restaurant

Moderate: Customer inputs required for service creation

High: Customer co-creates the service product

Client inputs customize a standard service.

Active client participation guides the customized service. Provision of service requires Service cannot be customer purchase created apart from the customer’s purchase active participation Customer inputs (information, materials) are necessary for an adequate outcome, but the service firm provides the service Hair cut Annual physical exam Full service restaurant

Business-to-business customer: Uniform cleaning service Pest control

Marriage counselling Personal training Weight-reduction programme

Agency-created advertising campaign Payroll service

Interior greenery Maintenance service

Independent freight transportation

Management consulting Executive management seminar Install wide area network (WAN)

Source: Bitner et al. (1997).

Within the levels of participation just discussed, customers can play a variety of roles (Bitner et al., 1997): • the customer as productive resource; • the customer as contributor to quality, satisfaction and value; and • the customer as competitor to the service organization.

Customers as productive resources customers as For over a decade, researchers have advocated that organizations productive view service customers as “partial” employees (Bowen, 1986, Mills and resources Morris, 1986, Mills et al., 1983). It recognizes that customers contribute inputs, much like employees, which impact the organization’s producti vity both via the quantity and quality of those inputs and the resulting quality of output generated. For example, in contributing information about their requirements and the level of satisfaction hotel guests are part of the service production process. Passengers of the sea cruise constitute a part of the product influencing their co-passengers, creating the atmosphere of the cruise being more or less eager to take part on recreations offered aboard the ship etc. Gaining the customers’ co-operation is also necessary for success in gaining service operations in a more practical way. There is a lot of tasks which customers’ can be transferred from the service provider’s role to the customer co-operation (Lovelock, Young, 1979). Providing drinks-making facilities in place of room service in hotels is a well accepted example of customers performing functions for themselves, so that the company can reduce costs and overcome staff shortages. It is important for customers’ expectations to be suitably conditioned before changes are made and that the procedures are made simple and relevant. In order to increase customer participation successfully, employees need to become effective in demonstrating new procedures and technology (e.g. sauna service). It is also necessary to ensure that customers do not feel that the tasks they undertake are unequally distributed, and hence they should be based on a good understanding of consumer needs and characteristics.

customers as contributors to quality

“partial employees”

Customers as contributors to quality Customers can influence both the quality and quantity of production. Some experts even believe that the delivery system should be isolated as much as possible from customer inputs in order to reduce the uncertainty customers can bring into the production process. This view reasons that the less direct contact there is between the customer and the service production system, the greater the potential for the system to operate at peak efficiency. The introduction of ATM machines and automated customer service telephone lines in the banking industry, on‑line booking in hotels, are both examples of ways to reduce direct customer contact in that industry, resulting in greater efficiencies and reduced costs. Other experts believe that services can be delivered most efficiently if customers truly are viewed as partial employees and their participative roles are designed to maximize their contributions to the service

creation process. The logic in this case is that organizational productivity can be increased if customers learn to perform service-related activities more effectively. The extreme case would be full self-service where the customer produces the service for him or herself with very little intervention or support from the organization’s employees. Hotel restaurant quite successfully use this approach when offering the buffet breakfast, “American” lunches or salad-bars. Some customers simply enjoy participating in service delivery. They enjoy using the computer to obtain airline tickets, or they may like to arrange their holidays personally through the Internet. In some cases, there is a price discount advantage for self-service, but other times, customers may be motivated by convenience, a sense of greater control over the service outcome, timing of delivery, or simple enjoyment of the task (Dabholkar, 1996). Tourism, as a service offering, entails tourists’ intimate participation with the organization, its employees and other fellow tourists at various stages of the production and consumption process. Hence, from an operational management perspective, it is important that managers of tourism services understand the importance of tourists’ involvement in the various activities. This understanding will assist managers to streamline their operations to enable them to enhance the quality of the tourists’ experience by incorporating the activities that they enjoy most (Kandampully, 2000). Customers as competitors A final role played by service customers is that of potential competitor. In many situations, customers (whether individuals or customers as companies) have the choice of purchasing services in the marketplace or competitors producing the service themselves, either fully or in part. Customers in a sense are competitors of the companies that supply the service (Lusch et al., 1992). For example, a car owner who needs maintenance on his car can choose to do all his own maintenance (assuming he has the skills), to have someone else do all the maintenance tasks, or to do some tasks himself (e.g. changing oil). Parallel examples can be imagined for child care, landscaping, home maintenance, and of course for the tourism industry. Individual customers planning the trip around the world may prefer to arrange it themselves or look for a ready product of any tour-operator. A company intending to arrange an incentive for its employees may not wish to outsource the product in a professional incentive travel agency. The organization should ask what types of information and education it may need to share with its customers, and how it might develop

approaches for training and rewarding its customers for effective participation. Approaches for monitoring the quality of customer contriÂ butions, providing feedback to guide improvement or offer encourÂ agement, and rewarding customers for effective participation can be implemented. The servuction system model (Figure XV) highlights that the service the servunction system model organization comprises two parts (Bateson, 1995). The invisible aspects of the business are inextricably linked to the visible aspects that are represented by the inanimate physical environment in which the service encounter takes place and the contact staff who actually deliver the service. Recreation clubs, hotels and resorts are examples of services where customers spend lengthy periods of time in the physical surroundÂ ings of the service provider (servicescape). Accordingly the perceived quality of the servicescape will influence the desire to stay in the facility for an extended period which in turn may affect spending patterns. There are some perspectives in relation to the planning of service facilities, viz. operational, locational, atmospheric/image, consumer use and contact personnel. A key requirement for the delivery of service quality is the integration of these perspectives to ensure compatibility (Thwaites, 1999). Figure XV: The servuction system model

Inanimate Environment Invisible Organization and System

Invisible

Customer A

Contact Personnel or Service Provider

Customer B

Visible

Bundle of Service Benefits Received by Customer A

Source: Bateson (1995).

The servuction system model presents also the interrelationship between customers and the impact that this can have on service quality. The customer’s experience, therefore, is created through a variety of sources, some of which are outside the control of the organization. As to sum up – the customer roles are as follows: • Provision of explicit services can be recognized in three forms: selfservices, which require roles such as drinks making in hotels, and self-service in restaurants and supermarkets: services to other consumers, for example participation in a seminar or syndicate group; and services provided for the organization, like returning supermarket trolleys or library books. • Creation of the environment; in restaurants and bars the atmosphere is partly due to other customers. • Training other customers. Johnston considered that one customer's conduct was adopted by others and thus was a form of training. • Provision of information. Customers need to specify their require ments and provide feedback about their level of satisfaction, and even to show when the service has been completed. Service firms need to manage these customer roles using a similar approach to the management of employees (Johnston, 1989). This will probably include deciding what sort of customer is wanted and how to go about customer selection. It will also be necessary to provide the customer with mechanisms, both equipment and procedures, to help them to select the correct course of action. Service firms will need to have ways of dealing with customers who do not "fit". This might require either removing them, or changing their expectations, or, in the long term, changing the service provided. Training of customers by explicit action of service employees, or through the example of more expe rienced customers, is another necessary function, as is motivating and rewarding customers.

7.3. Complaint Management In the previous chapter we discussed a few ways of customers partici pation in company’s efforts toward creating high quality services. There is one more way of customers participation in quality enhancement – making complaints. Failures usually teach us more than successes. Failure is a problem the value of only if the root causes are not analyzed and used for organizational failures learning. Airlines, operating in an extremely complex and dangerous environment, exceed the highest standards of quality control by spending millions retrieving and analyzing the flight recorder (“black

WOM communication

management of complaints as extended service encounter

box”) carried on every airplane to determine what caused a crash (Reichheld, 1996). Looking at our failures is painful, personally and organizationally. But failure shows us which link in the chain has been broken. A defect stands out as a clear, understandable message, telling an organization exactly where improvements are needed. Various studies indicate that upset customers may tell, on average, 10–20 people about their experience. With the increasing use of the Internet in the new millennium, communication among customers will soar. This reality of word-of-mouth and the expectation of “spreading on Net” has led many service practitioners to place renewed focus on customer complaint behaviour and customer complaint management (Liu et al., 2000). WOM communication is generally recognized as one of the most effective marketing tools in services. Effective complaint management can lead to significant improve ments in the number of customers retained (through its effect on behavioural intentions) and on the number of new customers recruited (through its effect on WOM). Consumers use information perceived during service encounters to update their expectations, and these expectations are the drivers of consumers’ service evaluations. The expectation updating process has significant implications for the consumers’ quality perception and behavioural intentions toward the present service encounter, future service encounters and WOM communications. The management of complaints is sometimes part of this extended service encounter as, for example, when a restaurant decides to provide a client with a replacement meal for one that has proved to be un satisfactory, or when a hotel decides to change the room for a guest who is not satisfied with his or her original allocation. The way in which complaints are managed should not only cover up or fix problems, but should also help to reinforce, in the customer’s mind, the strengths of the company. With services such as amusement parks, hotel stays and restaurant meals, where the “service encounter” takes place over an extended period of time, customer expectations of quality can change while the service itself is being delivered. This provides companies with the opportunity to re-emphasize their strengths while they are delivering a service. By measuring complaints systematically and designing procedures and measures that communicate the seriousness of complaints to all employees, the organization sends a strong message to employees and customers that it wants to know what problems are created, will followup on those problems, and wants customers to know that the problems will be solved and the factors that created the problems will be fixed.

These characteristics of ‘good’ complaint management all contribute to a culture of concern over fixing problems and addressing complaints that distinguishes successful organizations from unsuccessful ones. Some research show that managing complaints well and recovering customers, i.e., dealing with them after a service failure and (usually) a complaint, influence not only customer satisfaction but also repurchase intentions, customer trust and commitment, and long-term relationships. Good recovery and complaint management have a positive impact on staff attitude and staff retention, process improvement and, arguably more importantly, on profit (Johnston, 2001). Johnston and Mehra (2002) enumerated the best-practice complaint management principles: 1. It is well accepted that speed of response is vital. No matter who responds to complaints, response should be rapid. During the reso lution process, the complainant should be kept informed of progress toward resolving the complaint. The case-study organizations provide a speedy response to complaints, usually they acknowledge within 24 hours and, within five working days after an investigation, provide a full reply with an explanation of the causes and details of actions to be taken. 2. Take complaints seriously. Complaint procedures should be easily understood (for the complainant and the staff) and easily accessed. Complainants should clearly understand what they should do to register a complaint, and staff should clearly understand what they should do to respond. Accessibility means that for the customer, a single point of contact should be sufficient to register the complaint and get the procedure for resolving the complaint underway. If possible, staff should be empowered to resolve the complaint. Customers do not want to hear, “I’ll have to ask my manager and get back to you.” 3. Complaints are the tip of the iceberg. Managers at each organization were convinced that for each complaint there were many more unhappy customers that they did not know about. The respondents were uniformly of the opinion that they needed to encourage customers to complain and to make it as easy as possible for them to do so, because this alone gave them the opportunity to convert unhappy customers into loyal ones. 4. It is critical that organizations not only encourage complaints but also choose appropriate methods of doing so. Systems are to be put in place to make complaining as easy as possible. Some of the organizations rely on leaflets and posters informing customers that comments of any sort are welcome. Sometimes customers are

recovering customers

best-practice complaint management

reluctant to complain because of fears about the implications for their further treatment, especially in case of the long-term contact with an organization (stay in a hotel, aboard the cruise ship, in a sea resort etc.). To combat this reluctance, the organization should devise a separate system whereby tourists could register their comments without being recorded as complainants. Encouraging customer complaints and making it easy for customers to register their dissatisfaction also has the benefit of letting the organizations know quickly when something is going wrong. This enables them to react immediately – before other customers notice the same problem. Immediate reaction is also positively marked by the complainants and may result in their overall satisfaction. This is one of the points of successful quality management – be able to reverse the negative observations into the positive ones. Rewarding staff to encourage or collect complaints is not necessary but requires a ‘no-blame’ culture that accepts mistakes and makes complaints a normal but positive part of organizational life. One common feature of the organizations was an acceptance that not only were mistakes inevitable but that they were also acceptable, except where repeated mistakes were being made. This encouraged staff to take initiatives to satisfy complaining customers and to look for solutions without first thinking about whether they might be punished for going outside their job descriptions (although there were limits as to what staff were allowed to suggest). Organizations should have follow-up procedures to check with customers to see if the resolution was satisfactory. While many organizations recognize the value of follow-ups, closure is a different matter. Closure is concerned with the process and its outcomes for both the customer and the organization. Closure is the opportunity to ensure that the customer is, in fact, happy with the outcome and also that the organization has made changes, where appropriate, to its systems or procedures to ensure that the problem does not recur. The need for top-level support of complaint management is not a surprising finding, but top-level proactive involvement in a variety of aspects of complaint management presents a challenge to many senior managers. Complaints are not always concerned with operational issues. Many of them expose cross-functional and strategic issues that can be dealt with only at a senior organizational level. Information from complaints needs to be incorporated into strategic planning systems. Measurements of procedural effectiveness should assess whether the

causes of complaints have been reduced, rather than simply whether the volume of complaints has been reduced 10. Excellent complaints management requires both a centralized and decentralized approach, though the allocation of tasks may vary. At the minimum, decentralized units should be used to collect infor mation and deal with customers where they can, and centralized departments should be responsible for analysis of trends with overall responsibility for policies. 11. Reports of complaint issues and learning points need to be widely circulated throughout an organization. Real improvement needs a common understanding of the issues and problems. 12. Customer complaints should not be the only source of information to help drive improvements. Employees should be used as a major source of ideas. 13. The acid test that should be applied to all complaint-management systems is whether or not they result in action and lead to improve ments for the financial benefit of the organization (for example, through the reduction of costs and time spent dealing with problems) and for the benefit of customers (for example, by preventing dissatisfaction from recurring). Knowledge of these benefits provi des the motivation for staff to deal with complaints in a positive manner. 14. Motivation for senior management should be provided by infor mation about the financial costs and benefits of complaints, so it is important that organizations are able to develop means of assessing the financial impact of complaints and the value of improvements that should result from them. The opportunity to convert a dissatisfied customer into a loyal advocate, and therefore reap the rewards of retention and referral, was quoted by all the organizations as one of the basic reasons for managing complaints well.

8. The Employee as Internal Customer. 8.1. Internal Clients Need Internal Marketing Various models have been proposed that revolve around the concept customers within of customers existing within the boundaries of the organization. This the organization basic principle of internal customer service posits that every person/ department in an organization exists to serve someone, whether that be the external customer or another department (Farner et al., 2001). “If

unhappy employees = unhappy customers

quality of people as a success factor

internal marketing strategy

you’re not serving the customer, your job is to serve somebody who is.” (Albrecht, 1992). Individual units or departments need to view them selves as both customers and suppliers. They receive inputs from another department (their supplier), add value, and send the output of their work to another department (their customer). Processes can be improved, and thus quality improved, if each department treats the people who receive the outputs from their work as “customers”. The basic assumption is that if everybody strives to provide their “internal customer” with better service, then the end customer will receive higher quality service. The quality of service rendered to external customers is very often a reflection of the quality of service rendered internally to partners, colleagues and/or associates, according to the assumption that unhappy employees cannot create happy customers.12 For many this has led to a direct inversion of the traditional organi zational hierarchy where the internal customer is now regarded as the most important organizational resource in the pursuit of service excellence. Naturally this requires action on a number of fronts, namely: recruitment, selection, training and development, empowerment, staff motivation and reward, the principal objectives being customer satisfaction and retention through the removal of barriers to improved employee performance. More than any other factor it is the quality of people, both front and back of house, which will determine success as defined at this moment. It is people, aided by techniques, methods and systems, that deliver the right level of customer service. This implies that they must want to do so, be empowered to do so and gain satisfaction from giving and improving good customer service. As a result, many service organizations are now investing heavily in the development of an internal service culture where employees are now viewed as customers in their own right. The first classical documented example of an internal marketing strategy was implemented by Scandinavian Airline Systems (Carlzon, 1987). John Carlzon, president of SAS, believed in empowering his front-line people to take the necessary action to satisfy external customers at the organisation-customer interface. He implemented a decentralised decision-making system that flattened the organisational structure, thereby facilitating quick and direct response to customer needs (Carlzon, 1987). 12

To be able to do a good job, the service personnel who are in customer contact need not only to be well trained, but also to be happy about their work. These considerations encouraged Marriot to pay attention to managers’ individual development, fair treatment procedures for handling disputes, and career progression programmes.

Internal marketing should “create an internal environment which supports customer-consciousness among the personnel” (Grönroos, 1981, p. 327). This can only be achieved if front-line people are treated the same way as customers. The term “internal customer” evolved in part from both the process and continuous improvement perspectives. A broadened concept of internal marketing includes: • the retention of skilled people in the organization, by counteracting declining management standards and providing clear corporate and personal direction; • relationships with the management team who share the objectives, experience and skills to build, release, and mobilise individual motivation for economic recovery; • the proper understanding and need for quality for competitive service delivery in a changing economic, social, political, and technological environment; • building a corporate brand which appeals to both customers and organization members; • communication management with a clear strategy based on research and evaluation, and personal skills development and responsibility; and • productivity through participation requiring leadership, processes and commitment from all. (Varey and Lewis, 1999). The concept of “internal marketing” regards providing jobs that satisfy the needs and wants of employees as the internal equivalent of products (Thompson et al., 1978). The equivalent of market research, market segmentation, and advertising should be used within the organization. These can: • provide information about supervisor effectiveness as well as employee preferences; • help to pay attention to individual needs; • shape expectations and provide a motivational stimulus. (Dotchin and Oakland, 1994). Not all the researchers are sure about the sense of internal customer concept. In commenting on Albrecht's phrase (1992) “if you're not serving the customer, your job is to serve someone who is”, Harari (1991) proposes changing it to “if you’re not serving a customer, maybe you’d better start”. He gives three specific reasons why focusing on internal customers will actually hurt the organization. The first is that it diverts attention away from the real customer who pays the bills. The second reason is that the basic principles associated with the internal customer concept can foster a climate of “turfism”, meaning that departments are again not focused on the customer who actually

proper internal environment

internal marketing elements

providing jobs that satisfy the needs

produces the revenues. Those employees or departments that have no contact with the paying customers can easily slip into the mentality that as long as they can document service to an internal customer, their service must be legitimate and necessary. Finally the concept of department B taking inputs or resources from department A, then passing them on to department C has negative consequences associated with waiting, reworking, fingerpointing, and backstabbing. That is why Harari (1993) claims: “Don’t call them [employees] customers. Real customers purchase goods and services.” Even though all three constituencies (clients, employees and investors) must be well‑served, it is the external customer who must be considered “first among the mobility equals” because all cash flow originates in the customer’s wallet. Of the of external three groups, the external customers’ loyalty is the most mobile; they customers’ loyalty generally have the least emotional and financial capital invested in the company and usually can go somewhere else with minimal effort. However the idea of internal marketing, creating loyal, effective and competent employees, can not be neglected. The external customer votes with money choosing this enterprise or another. The internal client cannot vote this way, actually there is no way for him to protest whenever he feels overworked, observes wrong stuff decisions, suffers from the lack of empowerment etc. Those factors if occur may cause the decrease of quality. If internal marketing is neglected, external marketing suffers.

8.2. Tourism Employees as Determinants of Quality Service

customer’s experience as the basis for quality perception

The quality movement was quite slow to recognize the importance of human factors in the successful implementation of quality systems. Early emphasis was on production methods, measurement, and conformance to specification (Wilkinson, 1992). Human factors are now accorded greater attention, following the realization that teamwork, co-operation, and motivation cannot be taken for granted. Japanese manufacturing companies have always placed strong emphasis on human factors, and have continuously emphasized that all employees have a responsibility for quality (Ishikawa, 1976). Western authorities now follow suit: “TQM is concerned with moving the focus of control from outside the individual to within: the objective being to make everyone accountable for their own performance, and to get them committed to attaining quality in a highly motivated fashion” (Oakland, 1986). Tourism services come about in the interaction between the service provider and the customer. The customer’s experience or perception of the service encounter is the basis for quality perception. Research into

the factors leading to customer satisfaction and dissatisfaction show the key role of the employees and their competence and service orientation. Every time when a customer gets in touch with an element of the service process, he or she judges the service producer. This means that service providers must develop not only the precise form of the service, but also the appropriate nature of interaction with customers. Most often, this makes a new service far more complex, conceptually, than the develop ment of a new tangible product. Tourism may be classed as both a people-driven and people-served economic activity. Given the fact that it is almost always the front-line service employee who carries the service encounter to its logical conclusion (either customer satisfaction or customer dissatisfaction) it is paramount that tourism organizations of all types and sizes invest wisely in terms of the recruitment, training and retention of such service personnel. Existing as they do at the front line of the customer/supplier interface, it is essential that all employees be at least equipped to do the job in hand, thereby enabling them to meet visitor expectations during each and every service encounter (O’Neill, 1996). The intangibility of a service product makes it difficult for customers to imagine, understand and evaluate the offer. Consequently the beha viour of front line staff takes on additional importance as a surrogate for more traditional evaluation criteria. Frontline employees who play a boundary role represent the firm in interaction with outside parties and, in addition, influence the cognitions, attitudes and evaluations formed by customers. These characteristics indicate the significant interactive qualities of services in service encounters, which means that services are most often produced, distributed, and consumed in the interaction between the service provider and the service receiver (Grönroos, 2000). The importance of service quality can be explained by the fact that it may be seen as a phenomenon which contributes to the strength of interperso nal, intra-organisational and inter-organisational service encounters. Employees who make the discretionary effort – who are friendly and responsive, who ask the extra question or suggest the extra service, who take the time to listen – provide the competitive edge! (Donnelly et al., 1985). The question is, however, what can service firms do to ensure that when moment of truth comes, frontline employees will engage in creative discretionary behaviour? Some argue that a service firm can motivate frontline employees to behave in a desired manner (Grönroos, 1985) that is, engage in creative discretionary behaviour through internal marketing. In other words, internal marketing efforts can enhance service quality delivery.

tourism: people-driven and people-served

employees’ behaviour as an evaluation criterion

interactive qualities of services

employees’ discretionary effort

“service trinity”

moment of truth

front-line employees as a “visit-card” of an enterprise

“indirect” control

social behaviour as a quality factor

Service employees are said to function as a “service trinity” (Crosby and Stephens, 1987): they run the service operation, market the service (“part-time marketers”), and are equated by customers with the service. In tourism the guest’s first impression is generally considered to be of the utmost importance. The impact that the receptionist has on customer service can best be explained in terms of behaviours. Carlzon (1987) uses the term “moment of truth” to describe every point of contact between the customer and front-office staff in a service organization. He estimated that many thousands of moments of truth occur each day and while they may be small in scale they are make-orbreak occasions when the organization has the opportunity to disappoint the customer by failing to meet their expectations. He argues that the key objective must be constantly to meet customer expectations and to minimize occasions when customers are disappointed. People involved in the provision of service need to be open to new and innovative ideas if service delivery is to improve. This suggests that every company should seek to create an organizational environment which both supports quality and enhances communication between employees and customers. The most important group are front-line employees who serve as a kind of company’s “visit-card”. In fact, “service” personnel are often incidental to the core service. For instance it is the pilot who delivers an airline’s core service, not the air hostess, and the chef, not the waiter, is responsible for the quality of the meal. The second of these assumptions is variously justified by the fact that service delivery is “simultaneous” with consumption (Lewis and Mitchell, 1990), incurs a great deal of interpersonal contact (Shostack, 1977). In service situations managers do not have direct control over employees during the service encounter. “Indirect” control is then established by creating a climate conducive to optimal performance and in which employees will behave in an appropriate manner. It seems to be the preferred status; the reality, however, is much more akin to a military battlefield with service excellence reported more as the exception than the rule it should be. Whether it be a short tempered coach driver, a grumpy air hostess, an under-slept hotel receptionist or an over-stressed restaurant waiter, the multiplying effects of the resultant bad word of mouth will continue to have negative spiralling effects on both market share and bottom-line performance. The process of interpersonal interaction is likely to be affected by forces within the individuals involved in the interaction. People can behave socially in quite different ways depending on the situation they find themselves in; in one situation a person may be dominant and

outgoing, but in another they may be shy and retiring. There are, however, certain fundamental attributes which seem to persist from one interaction to the other; these include a person’s need for dominance or dependence, their need for aggression or warmth in relationships, their extroversion or introversion, stability or neuroticism, their perceptual style, their social and cultural background and their self-image or self‑esteem. Three specific factors are worthy of mention (Garavan, 1997): 1. Perception of people. The selection of appropriate response from an individual’s range of behaviour is affected by the way they perceive the other person in terms of their personality, age, status, gender, etc. 2. Social competence. Just as some people are more skilled at manipula tive motor skills, different levels of social skills can also be identified. Likewise social skills can be improved through training and work experience. The interaction between two socially competent people will vary significantly from that between two socially less competent people. 3. Motivations. An individual may be looking for support, protection or guidance as in, for example, a tired guest at reception; any new situation will tend to stimulate this dependent approach. Alter natively, a person may be looking for warmth or friendship in the relationship and may behave in such a way as to encourage a friendly response. Another motivating force in social situations may be a need for power or the desire to control other people’s behaviour; super visors may have high needs in this respect. Another alternative need may be a desire for approval, confirming what people think about themselves in a favourable way, bolstering their self-image and selfesteem. There is the positive impact that social skills training can have on improving the quality of customer service within a tourism company. Especially the social-skills training of front-line employees may lead to improved quality of service, in the short term at least. Training and development can be used to reinforce certain behaviours and attitudes which contribute to effective service while stressing the need for improvement in behaviours which do not facilitate the attainment of desired quality goals.

8.3. Barriers to Quality Enhancement in Tourism Service Encounters A “people focus”, within tourism and hospitality, is by no means new and successful organizations such as Disney, British Airways, Singapore Airlines, Marriott and Ritz Carlton have developed strong reputations

initial point of quality improvement

negative employment image

for their recognition of the role which their staff play in meeting customer expectations within their sector (Baum et al., 1997). Best practice, in the area, appears to recognize that quality service delivery is not the outcome of an isolated service enhancement training pro gramme, but has to do with change in organizational culture from top down and is a complex process which impacts on all areas of the organization and its systems (Mahesh, 1994). The initial point of quality enhancement of service encounter is the recruitment of proper employees. The goal is not only to fill desks but also to find and hold onto workers who will continue to learn, to become more productive, and to create trusting relationships with customers. There are two main barriers to the recruitment and retention of quality and well educated employees in tourism sector (even in most developed countries): – the negative employment image of the sector employees – the rewards and benefits structure of the tourism and hospitality industries. The first barrier – poor image – is the result of a cocktail of historic and contemporary factors – “the origin of hospitality work within domestic service and its consequent associations with servility; links, in some countries, between hospitality employment and colonial legacy; widespread use of expatriate labour in many developing countries, creating the perception that the sector is one offering only limited opportunity for promotion and progression; widespread exposure to work in the sector as a first working experience, resulting in generalized assessment based on limited exposure; and the reality of anti-social working conditions and casualized remuneration” (Baum et al., 1997). Both industry employees and wider society view hotel and catering labour as relatively low status, mainly because of the personal service nature of the work involved (Wood, 1995). In some respects, the negatively-held perceptions are not wholly justified by the reality of work for major airlines, international hotel groups, theme parks or within heritage organizations. In other regards, the perceptions are a mirror of the reality of work within an industrial sector dominated by small and medium-sized enterprises (SMEs) and the impact of irregular demand. The effect of these perceptions is to impose a barrier to employment and employment choice among school and college leavers, parents and career guidance teachers which has been very difficult to counter. However, the situation, in some developing countries, is rather different in that international tourism offers a high status and secure employment environment when compared to alternatives in both the primary and manufacturing sectors.

The second problem – perceptions regarding working conditions, hours and pay extend across the tourism-related service sector (Choy, 1995). There is a clear and unavoidable reality, within tourism and hospitality, that the demand cycle is anti-social and falls out with “normal” nine-to-five working parameters. Aircraft fly at night, hotel guests expect services at weekends and theme parks reach peak demand during public holidays. In terms of remuneration, the sector faces challenges in common with other labour-intensive service areas and in many countries has seen pressures for increased productivity along side deskilling in many areas of work. At a policy level, the sector is influenced greatly by legislative intervention, for example European initiatives with respect to minimum wage levels, duration of the working week and unsociable working times. Staff turnover, therefore, can be very high, especially in tight and competitive labour markets, and is a major inhibitor for organizations and destinations seeking to achieve overall enhancement of service and product quality. The combined impact of technology and product substitution in the workplace; centralization of key management functions (finance, information analysis, marketing); standardization of product and service delivery; and delayering of management structures in many developed tourism economies means that opportunities for meaningful and developmental careers in skilled craft or managerial areas have been reduced. Reduced opportunity, in turn, impacts on perceptions of the sector and the likelihood of young people, in particular, opting for tourism/hospitality as their career choice. The already dismal lot of front-line service staff (low pay and long working hours) was worsened by employers’ attitudes towards the training function. In the absence of any worthwhile level of international demand and/or five star benchmark competition, the prevailing attitude was one of reluctance to invest in people who, when trained, would only take their newly acquired skills elsewhere. Employers, it seems, were more concerned with the bottom line (at any cost) and extremely short‑sighted with respect to developing a well trained and competitive quality human resource pool (O’Neill, 1996). Central here was the lack of professionalism in management and the lack of training and development for new and existing employees. As a result tourism suffers from the specific skills shortages in key technical and some managerial areas. In part, this is an extension of the concerns addressed above – image, conditions, remuneration – but is also linked to a reluctance, within some industry sectors and businesses, to invest in the skills development of their key personnel. In addition many small businesses

working conditions in tourism

staff turnover

reluctance to invest in people

“soft” competencies

technical abilities

managing the moments of truth

service encounters

(dominating in tourism sector) do not have the resources or skills to focus on their human capital. It results in some deficiencies related to “soft competences” (Baum, 1990) and technical abilities within the tourism sector. Soft competencies include communication (with customers, colleagues and in various languages other than the mother tongue), information (technology‑derived, but also analysis and interpretation) and service (marketing‑related, understanding customer needs). All those attributes are generic to the sector and, indeed, to services in general. Technical ability deficiencies seem to be less significant as they can readily be met within the workplace by larger employers, provided soft competences are in place. However, the skills requirements of SMEs remains an issue of rather less clear-cut endorsement. Tourism industry is also problematic in terms of managing the moments of truth (MOT) because of the fragmentation of the expe riences of many customers/guests even within one enterprise (Baum, 1993). Guests come into contact with a wide range of staff attached to different departments. Therefore customers may frequently encounter rude, inefficient behaviour, in which case they may have a negative MOT. MOT in effect became the inputs into perceived quality service. Therefore to obtain a positive MOT the key issue is the management of front-office staff behaviour. Hence, more training of employees (especially some form of social skills training) and “self-management” are necessary. Consumer experience of “human value added” through service is varied within and between the hospitality sectors of most countries. In part, this is a reflection of the eclectic nature of customer expectations which may demand very different things from the same service delivery situation (Baum et al., 1997). It is also a factor of the number of human interactions which most customers experience within any one hospitality purchase – these may or may not be within the one organization and thus the ability to “control” the customer’s experience may not lie within the organization, which suffers through lost business. In many respects, a customer’s assessment of hospitality will be based on the total destination experience. The consumption of a tourism product consists of plenty of service encounters, performed not only by the employees of several different tourism enterprises (hotels, resorts, restaurants etc.) but also by local people and workers of different service units not necessarily belonging to the tourism sector. It is important to strive to ensure that the visitor’s experience is positive throughout the full range of contact with the providers of goods and services

All the encounters involve feelings of anxiety and uncertainty about service outcomes, as customers (tourists) feel they have no or little control. Tourists may sense this lack of control due to the varied nature of service employees’ motivation and non-controllable service settings, as well as due to varying embedded social support systems/groups. The latter aspect plays a crucial role in the perception and judgement of TDA’s quality by customers. Human resource management is more than a strategic and operatio nal concern for companies competing within the tourism and hospitality marketplace. It considers human resource management as a strategic dimension within the wider enhancement of quality and market posi tioning of tourism at the level of organizations, specific destinations, regions within countries or whole nations. The main thesis advanced is that the tourism and hospitality industry, from the perspective of all its stakeholders (public sector, private sector, visitors and host community), benefits from the close integration of human resource, labour market and education policies, with those policies relating to, and impacting on, the tourism and hospitality sector (Baum et al., 1997).

uncertainty about service outcomes

human resource management as a strategic dimension

9. Quality Culture in a Tourism Enterprise 9.1. Understanding What Corporate Culture is No two organisations or businesses are the same – each has its own culture that is as individual as a fingerprint! The organizational culture usually includes values and beliefs that support the organisational goals. It can be felt in the implicit rules and expectations of behaviour in an organisation where, even though the rules which are not formally written down, employees know what is expected of them. It is usually set by management whose decisions on policy usually set up the culture of the organisation. Things in an organisation which contribute to the culture or climate include: • the organisational structure of reporting and relationships, • company policy, • personnel practices, • work flow and work loads, • job design, • management and supervisory styles. Corporate culture is then a set of unwritten decrees, rituals, and a pattern of shared values and norms which permeate an organization (Desphande and Webster, 1989). It provides the central theme under

corporate culture contributors

definition of corporate culture

main aspects of an organizational culture

strong and weak corporate culture

cultural web

lying the growth of a firm (Smircich, 1983) and defines the way that business is conducted (Barney, 1986). More importantly, cultural values exert tremendous influence on the behaviour of employees and the productivity of the organization (Pascale, 1983; Schneider 1980). Corporate culture could affect a firm’s ability and approach, including both technical and administrative procedures, to coping with the exter nal environment and quality management activities (Webster, 1990). Culture in organizational terms is broadly the social/behavioural manifestation and experiencing of multiple issues such as: • the way work is organized and experienced, • how authority exercised and distributed, • how people are and feel rewarded, organized and controlled, • the values and work orientation of staff, • the degree of formalization, standardization and control through systems there is/should be, • the value placed on planning, analysis, logic, fairness etc., • how much initiative, risk-taking, scope for individuality and expres sion is given, • rules and expectations about such things as informality in inter personal relations, dress, personal eccentricity etc., • differential status, • emphasis given to rules, procedures, specifications of performance and results, team or individual working. Strong Culture is said to exist where staff respond to stimulus because of their alignment to organizational values. Conversely, there is Weak Culture where there is little alignment with organizational values and control must be exercised through extensive procedures and bureau cracy. The danger of bureaucratic organizations consists in missed opportunities for innovation, through reliance on established proce dures. On the contrary, innovative organizations need individuals who are prepared to challenge the status quo – be it groupthink or bureaucracy, and also need procedures to implement new ideas effectively. Johnson (1988) described a cultural web, identifying a number of elements that can be used to describe organizational culture: • The Paradigm: What the organization is about; what it does; its mission; its values. • Control Systems: The processes in place to monitor what is going on. Role cultures would have vast rulebooks. There would be more reliance on individualism in a power culture. • Organizational Structures: Reporting lines, hierarchies, and the way that work flows through the business.

• Power Structures: Who makes the decisions, how widely spread is power, and on what is power based? • Symbols: These include the logos and designs, but would extend to symbols of power, such as car parking spaces and executive wash rooms! • Rituals and Routines: Management meetings, board reports and so on may become more habitual than necessary. • Stories and Myths: build up about people and events, and convey a message about what is valued within the organization. These elements may overlap. Power structures may depend on control systems, which may exploit the very rituals that generate stories. A vibrant and positive organizational work culture displays seven attributes attributes (Ruin, 2001): of a positive corporate culture I. Transparent and sincere communication. The essence of changing people’s attitude to quality is gaining acceptance for the need for change. This can be achieved through good communication. Its job is to ensure that each group (employees, custo mers, business partners) sees TQM beneficial to them. Communication communication is needed to clarify the future state in terms that are relevant and concrete for organization participants at all levels (Abraham and Fisher, 1997). The creation of vision itself demands communication, some times two-way communication throughout the whole organization, with significant numbers of employees at all levels being involved in providing feedback and input on early drafts of the vision. Transparent or clear communication promotes peaceful and amicable working environment, breeds creativity and expands productivity, develops a learning company and its people are prepared to speak, willing to listen and assimilate instructions, express frank opinions or speak without fear or fervour, and every one is prepared to give chances to each other’s opinions or ideas. Credible organizational work culture ensures that policy in the company propagates honest, integral and transparent communication both internally (among employees and management) and externally (with customers, outsiders and the public). II. Customer focus. It is vital then that employees working in an organization focus on customer focus activities and jobs that satisfy, attract and retain good clientele base. Good organizational work culture is customer-centred.

III. Cohesion. clear common Positive organizational work-culture thrives if the company’s mission vision statement, corporate vision, business goals and operational objecti ves are understood, shared, and supported by all employees. An all encompassing and clear vision make easier comprehension by all employees. Leadership provided by top management plays a paramount role. It could, for example, explain clearly the company’s mission and vision. One of the fundamental elements for creating a positive organizational work culture is employees’ understanding of what are to be achieved, and the concerted effort of every one to achieve them. IV. Teamwork. Teamwork is an essential element for successful organizational work collective effort culture. In teams we realise that “together, everyone accomplishes more”. Teams form an essential component of organisations that could greatly influence the total level of accomplishment. Teams or groups could also fulfil the social desires of their members. It is fair then to say that collective efforts in teams generate the potential to satisfy the needs of individual employees, customers and organisation as a whole. V. “Can do” mindset. positive Employees with “can do” and positive disposition are an organisa disposotion of tion’s powerful tool and invaluable asset. An employee’s positive employees mindset entails positive perception towards self, his employer/company, superiors and bosses, peers and colleagues and subordinates. Non‑negative attitudes create positive working atmosphere. VI Adaptable to changes “change” ever A company must “run” today if it wants to “walk” tomorrow along constant side its competitors. This fast-paced corporate life is compounded by the ever looming threat of change; so much so that the only constant these days in managing business is “change”, that all else are variables. An organisational work culture is superior and effective if it allows for flexibility to changes and managing adequately the risks that changes brings.

employability

VII. Employability, not employment, for life One of the conditions for today’s corporate success is the fast changing business environment, where employees learn the new rules of work. The old rules were not always explicit, but employees knew that if they performed a fairly decent job and avoided having problems, they could have employment for life. The old rules were based on the

assumption that a company would been around forever. Nowadays employees need to prove their worth to their organisation’s pay. According to the rules, each employee is to be a contributor and contribute more than what s/he costs. It is not good for the employee or for his company if he stays around for his entire career and contribute nothing. A superior organisational work culture is one that allows employees to realise that these days there is no employment, but employability, for life. Lifetime jobs are disappearing from the corporate culture in the global markets. Even the much admired Japanese corporate work culture of “lifetime employment” is a bygone thing these days. More and more often companies see the only way to enhance their competitiveness in changing corporate culture. People-related skills of style and shared values plus strategy, structure and systems are very powerful. It is not just management or just hourly operatives. It must be everyone in the organization, across all disciplines and functions. It is by harnessing the knowledge, experience and enthusiasm of everyone in the organization that the most effective progress can be made.

9.2. Leadership for Quality Management commitment is the single most important ingredient in any management customer-based service strategy. Indeed, it could be said that the commitment strength of any companies underlying service culture is only as strong as its management commitment to that culture. However, great commit ment of the chief executive is not enough. Leaders should understand the service-profit �� chain, be able to�� develop and maintain a corporate culture centred �� around service to customers�� and fellow employees. They influence the quality of internal marketing through a willingness and ability to listen, through they care about employees and deal of time they spend on selecting, tracking, and recognizing the best employees (Heskett et al., 1994). The two keys to success in today’s environment of increasing compe tition and rapid change are an absolute passion for, and dedication to, excellence in customer service and the effective and enlightened management. The latter breeds commitment which leads to achieving the desired standards in customer service. In the absence of good management, employees will simply treat their work as a job – a 8.00 to 16.00 – routine without any burning desire to accomplish any more than is necessary to remain employed. Employee behaviour on the job is influenced directly – positively or negatively – by managers. Positive influences are essential to strengt

internal quality as hening employee commitment. What we call the internal quality of a contributor to a working environment contributes most to corporate culture and corporate culture employee satisfaction. Internal quality is measured by the feelings that employees have toward their jobs, colleagues, and companies. Internal quality is also characterized by the attitudes that people have toward one another, the way people serve each other inside the organization and the their corporate commitment (Heskett et. al., 1994). The majority of quality awards includes leadership as the main criterion when assessing “organization capability”. Ulrich and Lake (1991) state: “First, capable organizations have a shared mindset both inside and outside the organization. Second, they use management practices to build a shared mindset. Third, they create a capacity for change through understanding influence and managing organizational systems. Finally, they empower all employees in an organization to think and act as leaders”. Ways that managers can create and maintain the desired climate comprise: creating desired • being a “role model” or example for the staff by actually behaving in the way that s/he wants them to behave, culture • rewarding appropriate behaviour in some way. Management’s recognition of employees’ commitment to meet and exceed custo mers’ needs, is demonstrated by regular incentives and rewards. This congenial and mutually supportive working environment also enables the company to enjoy a lower staff turnover (Kandampully and Duddy, 1997), • employee empowerment (This enables employees not only to recognize their individuality and unique contribution to the corporate goal, but also allows them the flexibility and control to act and to deliver a service tailored to their customers' specific needs.), • communicating to staff what behaviour is desired in as many ways as possible, • providing training in order to highlight the activities that support the sort of climate that the manager is trying to encourage. Quality-oriented organizations require a modern view of leader ship. The traditional view of leaders as special people who set the direction, make key decisions and energize the troops as deriving from a deeply individualistic and non-systemic worldview, is based on assumptions of people’s powerlessness, their lack of personal vision and inability to master the forces of change. The modern view is that managers are facilitators, motivators and leaders. But getting the leader position does not seem to be easy. A climate of fear will not do so. Leaders require followers and to be a follower requires certain beliefs 94

and attributes. Employees’ attitudes are not within the full control of management. In a quality-based management, leaders are responsible for building organizations were people continually expand their capabilities to under stand complexity, clarify vision, and improve shared mental models. They are designers, stewards and teachers: Leader as designer. The organization’s policies, strategies and ‘systems’ are key area of design, but leadership goes beyond this. The leaders’ task is integrating all the processes and designing the learning processes whereby people throughout the organization can deal productively with the critical issues. Leader as steward. The notion of leader as steward is associated with P.Block (1993). His starting point was that leader develops a unique relationship to his or her own personal vision. He or she becomes a steward of the vision. One of the important things to grasp here is that stewardship involves a commitment to, and responsibility for the vision, but it does not mean that the leader owns it. Leaders have to learn to listen to other people’s vision and to change their own where necessary. Leader as teacher. “Leader as teacher” is not about “teaching” people how to achieve their vision.”Much of the leverage leaders can actually exert lies in helping people achieve more accurate, more insightful and more empowering views of reality” (Senge, 1990, p. 353). Leader can influence people’s view of reality at four levels: events, patterns of behaviour, systemic structures and the ‘purpose story’. Most managers and leaders tend to focus on the first two of these levels but are unable to develop systemic understanding. A good manager focuses on teaching and learning instead of authority and command. More and more often managers try to act as mentors instead of supervisors. Traditionally, mentoring might have been described as the activities conducted by a person (the mentor) for another person (the mentee) in order to help that other person to do a job more effectively and/or to progress in their career. The mentor was probably someone who had “been there, done that” before. A mentor might use a variety of approaches, e.g., coaching, training, discussion, counselling, etc. The mentor communicates his/her own vision and then gets people to see their own behaviour. Protégés observe, question, and explore. Mentors demonstrate, explain and model. The following assumptions form the foundation for a solid mentoring programme: • Deliberate learning is the cornerstone. The mentor’s job is to promote intentional learning, which includes capacity building through methods such as instructing, coaching, providing experiences, modelling and advising.

managers’ roles

the concept of mentoring

mentoring programme

• Both failure and success are powerful teachers. Mentors, as leaders of a learning experience, certainly need to share their “how to do it so it comes out right” stories. They also need to share their experiences of failure, i.e., “how I did it wrong”. Both types of stories are powerful lessons that provide valuable opportunities for analyzing individual and organizational realities. • Leader need to tell their stories. Personal scenarios, anecdotes and case examples, because they offer valuable, often unforgettable insight, must be shared. Mentors who can talk about themselves and their experiences establish a rapport that makes them “learning leaders.” • Development matures over time. Mentoring taps into continuous learning that is not an event, or even a string of discrete events. Rather, it is the synthesis of ongoing event, experiences, observation, studies, and thoughtful analyses. • Mentoring is a joint venture. Successful mentoring means sharing responsibility for learning. It begins with setting a contract for learning around which the mentor, the protégé, and their respective line managers are aligned. employees as boss “People are boss watchers. Everyone consciously or unconsciously watchers watches his or her immediate supervisor and senior manager. If everyone at all levels in an organization visibly displays involvement and commitment to policies, procedures and programmes then others change their behaviour to support or mimic the values demonstrated by their supervisor. If management begins meetings late, with no prepared agenda then the rest of the organisation is likely to do the same” (Miller, 1999). It is a passion for continuous improvement fired by well-thoughtout training and development plans that leaders ought to demonstrate, not just talk about.

9.3. Establishing a Quality Culture Achieving sustainable organisational change is extremely difficult and many organisations fail to reach their goals at the operational level. This failure usually occurs at the implementation stage because employees and managers are too busy getting the job done, and dealing with dayto-day problems. Effective implementation needs to change the way work is done through the organisation’s operations, systems and procedures; and this is linked to the organisation’s culture. quality culture QM emphasizes the need to meet customer needs precisely, the characteristics importance of doing things right from the start, and the importance of recognizing that quality improvement will truly be achieved only when it

is a goal of all company employees and becomes part of the fabric and culture of the entire organization. It means that quality awareness and practices extend to all aspects of an organization’s activities and are not restricted (like quality control) to identifying and rejecting unacceptable products or services. Quality improvement process typically includes (Longenecker and Scazzero, 2000): • defining quality; • developing quality standards; • measuring quality; • developing effective corrective-action procedures; • making changes to eliminate quality problems; • integrating all factors that affect quality. All the systems and procedures are designed to meet not only the needs of the organization, but also the needs of its customers, both internal and external: • they must be customer-focused and customer driven, designed for the convenience of the customer and staff alike throughout the service chain; • they must be flexible enough to attend to individual customer needs and permit swift and effective recovery from service failure; • they must constantly monitor external performance and be flexible enough to take account of changing customer requirements; • they must support front-line staff in their role as customer-service providers and not hinder their efforts through bureaucratic proce dure; • they must constantly monitor internal performance and be flexible enough to take account of additional recruitment, training and development needs. In a high-contact service business such as tourism service, marketers must understand that commitment to quality service and service mentality are integral elements in the firm's culture and that a positive attitude towards interpersonal relationships must be held by service employees (Luk, 1997). Tourism organisations must understand that their most important resource is people. The culture of the organisation, if it is positive and helpful can help to motivate staff or at least prevent them from becoming dissatisfied. If the climate does not satisfy the needs of staff, then it will probably become a demotivator – that is that it would cause dissatisfaction and so people would become less inclined to want to work towards the organisational goals. The best approach to improving the quality of service interactions is to develop service-minded employees who firmly believe that they “should do everything possible

quality improvement process

model for quality implementation

service- minded employees

to keep the customer satisfied” so that delivering high quality service to customers becomes a natural way of life (Grönroos, 1990). Such a belief is one of the manifestations of marketing culture. Figure XVI: Model for Quality Implementation

Teams

Culture

Commitment Process Customer/ Supplier Tools

Systems Communication

Source: Letza and Gadd (1994).

operational Webster (1990, 1993) provides an operational definition of marketing definition of culture in terms of six dimensions: service quality, organization, inter marketing culture personal relationship, interpersonal communications, innovativeness, and selling task. This operational definition allows the measurement of a firm’s marketing culture, to discover its nature, and to identify linkages with service performance. tangible Only one of the above mentioned dimensions can be interpreted as dimensions in the tangible dimension. In tourism it is composed of service facilities, tourism hotel accommodation, good meals, information brochures and leaflets describing the services available during the tour and places of visits, as well as helpful, polite and friendly tour escorts. The other ones are intangible dimensions (responsiveness, assurance, reliability, empathy). The examples of such intangible dimensions in tourism sector may intangible dimensions in include the ability of tour escorts to deliver the service promptly, tourism providing the service at the time as promised, willing to respond to tour members’ requests, willingness to explain clearly the service benefits and features, experience and competence of employees, ability to communicate, ability to organize and control all activities to meet the 98

schedule, and ability to foster a friendly, harmonious relationship among tour members or guests. Reliability in tourism should be understood as the ability of tour escort to instil confidence in the tour members’ choice of joining the tour, no sudden increase in tour cost, and a friendly tour characterized by good relationships among tour members. Empathy refers to personal attention to individual tourist and employees’ ability to understand the specific needs of each customer. The “interpersonal relationship” dimension includes attention to employees’ feelings, recognition of employees as invaluable assets to the firm, adoption of an “open-door policy” within the organization, frequent interactions between management and front-line employees, and encouragement to express opinions to higher management. They also nurture close work relations between subordinates and supervisors which may be mirrored in employees’ relationships with their customers (Luk, 1997). Everyone in the organization must be equipped to cope with the demands of quality and excellence. In order to make this commitment employees must be aware of the concepts of total quality: – approach: management-led. – scope: company-wide, customer-driven. – philosophy: prevention rather than cure. – standard: right-the-first-time. – measure: short-term cost, long-term gain. – scale: total quality or no quality. – time: continuous improvement. The key lesson is that management can only offer environments which are conducive to employees wanting to alter their values, beliefs and behaviours towards providing a quality service. They need, there fore, to believe and “buy in” to cultural change programmes. Mana gement, of course, merely has to find out how to create the environment in which its proposals and changes are seen as fitting in with the values, beliefs and behaviours of the workforce. Among many tools of mana gement influencing corporate culture and the quality of service en counter there are 4 deserving special attention: • training, • motivating, • employees participation (partnering for competitiveness), • empowerment. Institutions such as banks, tourism agencies, hotels, airlines or hospitals do not produce tangible goods and the interaction between workers and customers is much more critical in organizations of this kind. As a result, the skills, attitudes, and training of service personnel

“interpersonal relationship” dimension

total quality dimensions

how to create a quality environment

training

essentially affect the quality of services delivered. Even if the quality of the design is correct in a company, the result in practice may be different from what is intended. Service is difficult to standardise, since it is often dependent on the personal interaction between the front-line employer and the customer. Different actions are needed, e.g. training the employee who is responsible for the implementation of the service concept. In tourism the importance of the development of service employees’ interpersonal skills as well as effective problem solvingconflict resolution skills, is evident. This will prevent the employee from entering the cyclical process of poor customer relationships and subsequent poor leader relationships. It is critical to understand the determinants of a successful relationship between an employee and a customer in order to develop appropriate training programs which emphasize the skills needed to insure personal and firm’s success. The company has incorporated some techniques into initial and ongoing training to improve employee/customer relationships. These techniques allow the service employee to develop successful behavioural scripts and identify matching situations. Effective training methods and techniques are difficult to develop effective training methods (Charles, 1997, Cooper and Shepherd, 1997, Periic, 1996). Most training programs are organizational socialization programs geared toward a particular corporate culture and management style. Such organizations are only interested in the employees being able to use the methods and techniques developed by the corporation to approach their business objectives. The focus is “my way or no way”. This type of organizational approach does not use a research base to train employees. Training in the case of organizational socialization is familiarizing the employee with the corporate procedures and culture. Employees in this type of organization are only pawns and the management does the “thinking”. It is important to recognize that when approaches like TQM are used (see Chapter 10), the burden and the innovation shift from upper management to the employees. The employees are empowered to find solutions to problems and improve the ways of “doing business”. The responsibility is not upon management. It is management’s role to facilitate the employees to become actively involved with their jobs to be part of the “solution” and not the “problem”. Employees are to be taught to think systematically, to be able to identify problems and actively design solutions that are in the best interest of the individual and organization. It is the focus of this particular type of training program that is being advocated to teach critical thinking skills and make the employees partners in the strategic planning process (Anderson et al., 2001).

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Training employees should cover both: service standards and problem solving as service encounters frequently contain elements that cannot be standardised. Employees can be then given more autonomy in decision making and in undertaking actions in service encounters. The biggest cost of quality is the money spent chasing new prescrip tions, usually provided by expensive consultants. If we all keep learning, and, for instance, allow all our employees time for e-learning, reading journals and business magazines as part of their daily routine, we should not need massive training schemes. For those who are reluctant to read, there are plenty of lively, informative videos. But the idea of self‑learning, coaching, mentoring and sharing the knowledge within the organization does not come just from the attempt to lower the costs of training. It has been developed into the much wider concept of learning organizations and needs some special approach called knowledge management. The necessity of knowledge management comes from P. Senge (1990, p. 139) observation: “Organizations learn only through individuals who learn. Individual learning does not guarantee organiza tional learning. But without it no organizational learning occurs”. Aspects of management such as motivation are critical in service sector. Motivating for quality may take different forms of direct moti vation (of material and immaterial character) and the incentives which are very popular especially within tourism sector (e.g. bonus trips). What is worth mentioning is that people can be motivated through: 1 identifying and surfacing dissatisfaction with the current state; 2 building in participation in the change; 3 building in rewards for the behaviour that is desired both during the transition state and in the future state; 4 providing people with the time and opportunity to disengage from the present state. Motivated staff require the provision of: an appropriate and clear career ladder and opportunities; remuneration and recognition system; a measurement system; and appraisal procedures. As it was already mentioned successful large-scale change requires visible and active leadership. But leadership is not enough principle. Even the “magic leader” cannot by itself, sustain large-scale change. Success depends on building a broader base of support with other individuals who first act as followers then as helpers and finally as co‑owners of the change. The way to achieve this is through inviting participation and involvement in order to develop leadership through out the organization (Nadler, 1989). Employees should to be involved in preventing and correcting problems. They must be allowed to use and release their energy in support of the business objectives.

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knowledge management

motivation

co-owners of the change

the idea of Partnering can be seen also in a wider sense as company’s partnership partnering with customers and suppliers (similarly like the idea of loyalty-based management). The customers (internal and external) as well as suppliers must be listened to and be part of the improvement cycle. People must play a critical role in any performance improvement initiative. The idea of partnering is well practiced in manufacture industry through so called quality circles and team work. But the experiences of teamwork seems to be more difficult, to apply to the tourism and especially hospitality context. Part of the problem may be the traditio nal nature of hospitality management and its attendant functional departmental structure which can contribute to inertia, conflict and lacklustre performance. Another difficulty arises in matching a generic team strategy to hospitality units of diverse sizes, cultures and product offering, many of whom are struggling with the challenge of brand identity. One hospitality firm who has consistently tried to reconcile the opposing tensions of standardization and empowerment is the Accor Group of France. From earlier experiments with quality circles, their Novotel chain of three-star hotels has developed a new approach to developing staff and ensuring standard brand quality. Flexible working patterns have broken down the staff demarcation normal within hotels and has enabled the creation of an “open space” approach to organizational learning Segal-Horn, 1995). Firmly at the helm of this initiative is the unit general manager, whose role has been redefined much closer to the social role of a ship’s captain. As a result, greater collaboration between levels is observed and an increased autonomy which has added value for staff and customers alike (Ingram, 1997). internally directed High performance service companies are using internal marketing ideas service vision to develop an internally directed service vision. The health of the enterprise is dependent on the degree in which employees share common values, and how well employees are served by the company’s activities. Last but not least comes the point of employees empowerment. The idea seems multidimensional and especially important within the practice of service organization – that is why it is presented in a separate chapter.

9.4. The Power of Empowerment The presence of the customer in the service process, and the difficulty of establishing precise specifications, account for uncertainty and variability variation and in high contact services. This appears, at first sight, to be contrary to variability a fundamental quality improvement objective – control of variation.

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Careful distinction between variety and variability, however, explains the apparent contradiction. Variety can be defined as the extent of the range of service provided. This will be large in most services because they have to be adapted to match individual customer’s needs. This is not the same as variability which is more generally used to describe differences occurring in successive performances of services intended to be the same. Clearly, variety is the inevitable consequence of the multiplicity of inputs and outputs associated with high contact and high interaction services, and is desirable for customer satisfaction. Variability, on the other hand, is not desirable, and may not be inevitable. The difficulty in reducing variability in services increases with the difficulty of making valid specifications, and are exacerbated by the problems of measure ment and control of an apparently infinite variety of services. Attempting to achieve consistent service quality by relying on more supervision has proved ineffective. Excessive regulation of service employees and elaborate chains of command bring inertia and de humanization of services. A more successful approach is to restructure incentives, to emphasize quality, to redesign jobs fostering teamwork, and to instil a sense of pride (Heskett, 1986). The quality of service delivery rests to a large degree on the way in which the provider – consumer interaction (i.e. service encounter) proceeds and, consequently, it is unpredictable a priori (Singh, 1991). Consumers utilise the quality of the provider-consumer interaction itself as the basis for evaluating the service received. That is why “service design must differ from goods design in one essential aspect: it must include a certain amount of discretion and it must empower employees to use their best judgement in interaction with customers” (Gummesson, 1995). Here comes empowerment – a fashionable research area in the field of services marketing. Empowerment refers to a process whereby an individual’s belief in his or her self-efficacy is enhanced. To empower means “either to strengthen this belief or to weaken one’s belief in personal powerlessness” (Conger and Kanungo, 1998). Employee empowerment is also the process of decentralizing decision making in an organization, whereby managers give more discretion and autonomy to the front-line employees (Johnson, 1994). Staff empowerment means transferring power and responsibility to employees so that, within specified limits, they will be better able to provide the best possible service at their own discretion (Kinlaw, 1993). The purpose of shifting decision making to the employees is not to remove managers totally from making decisions, or to turn the operation

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the difficulty in reducing variability

ineffectiveness of supervision

definition of empowerment

interior and exterior people

personal responsibility for failures and successes

into a democracy. Indeed, it is management’s “new role” to guide, assist and support the employees in achieving success through this self‑directed leadership strategy (Brymer, 1991). Managers are interior people. They see life well within their control. They realize the relation ship between behaviour and performance and therefore take personal responsibility for their department’s and organization’s performance (Johnson, 1994). Exterior people, on the other hand, are employees who see life as outside their personal control. Because exteriors do not recognize a cause-and-effect relationship between behaviour and success, they are not easily motivated to change the way they behave. Exteriors learn little from their mistakes because they believe they had little personally to do with the mistakes; they just happened. Their excuses run from, “Nobody told me”, to “It’s not my fault”, to finally, “You didn’t tell me to do that” (Conrath, 1988). Two of the principal causes of poor service quality are placing the wrong people in the service role and giving employees too little control over the service. Managers empower their employees by insisting they take personal responsibility for their successes, as well as their mistakes. In addition, assigning tasks for which employees are qualified creates an environment which fosters success. Managers also need to help disempowered employees understand that success is a combination of chance, choice, and achievement; this is brought about by emphasizing behaviour over attitude. Finally, treating employees as adults by creating a truly co‑operative relationship is part of a dynamic employment relationship (Atchison, 1991). This is also the problem of company’s security – employees are to be able to work and act even in the absence of managers. Figure XVII: Benefits of Empowered Employees Benefis of having self-directed and empowered employees

Less risk aversive Source: Johnson (1994).

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More flexible, innovative, creative

Better rapport with employees

Managers have more time for other tasks

There are many benefits to having self-directed and empowered employees. First, empowered employees are less risk aversive and are more willing to suggest bolder solutions. Second, when empowered employees are given more authority, autonomy and flexibility, they will be encouraged to be more innovative and creative. Third, under an empowerment programme, managers and employees work together as a team, more in an adult-to-adult relationship and less in an adult-to‑child relationship. And finally, as employees take on greater respon sibility, managers will have more time to handle other tasks they are responsible for (Johnson, 1994). In particular, empowerment is regarded as a strategic advantage in situations of service failures: empowered contact employees can provide the complaining customers with adequate and fast service recovery than non-empowered counterparts. Customers who, in a critical situation, meet an empowered employee will normally regard this as a part of excellent service. Empowered employees can, on their own initiative, raise the level of quality. Thus, in service organisations, staff empower ment can be regarded as a crucial ingredient in quality improvements. Discretionary behaviour (behaviours not specified formally but viewed positively by the firm such as “travelling the extra mile” for the custo mer) will determine how frontline employees behave as part-time marketers and can have a significant impact on customer satisfaction and favourable service quality perceptions. Sparrow and Wood (1994) advance the proposition that experienced food servers have a far richer picture of customers than do training manuals and that their perceptual “maps” can assist in providing quality service. Further, such techniques produce enhanced feelings of trust and self-worth in employees as well as reducing absenteeism and waste (Ingram, 1997). An additional argument for empowerment in tourism sector is the fact that contact employees have to deal with a great variety of customers coming from various cultural horizons. Contact employees have to adapt their behaviour to a number of different cultures and have to undergo tremendous pressure to adapt their behaviour to specific individual customers. An empowered environment allows people to move out of their role stereotypes so that all people can take initiative, assume power, act tenderly and compassionately, and use intuition to balance their rationality. It makes them feel better and improves perceived quality of their working environment. On the contrary disempowered employees are usually passive and have retreated deep within themselves, focusing on long-lost dreams and missed oppor tunities. People become unmotivated by the thoughtless, irritating, unconcerned way they are treated. And, of course, unmotivated people

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benefits of empowerment

dicretion as quality factor

diadvantages of disempowered employees

are unlikely to produce quality results (Hoernschmeyer, 1989). Disem powered employees recognize that they have limited power and influence, and that the little they have is always in danger of being taken away if they are not careful. In addition, disempowered employees may resist empowerment. They feel safer in the old culture where they had lower levels of responsibility and accountability (Fleming, 1991). Figure XVIII: How Management Can Empower Employees

Motivation Support

Allow risk taking

Stress innovation

Feedback

How to empower

Encourage decision making

Spend time

Relinquish control

Source: Johnson (1994).

elements of Empowerment means giving people the power to do the job empowerment demanded by their positions. People and positions are empowered by three ingredients: information, support, and resources. At the same time they become responsible for their use. Another ingredient to empower ment and self-directed leadership is having your heart invested in the organization. This is called “psychological ownership.” Psychological ownership is when everyone inside a business feels a sense of res ponsibility for what is being done and holds himself or herself duly accountable for delivering on an organization’s pledges. To build psychological ownership, an employee must find meaning in his/her daily tasks, feel a sense of security, and possess an attitude that work can be fun (Brown, 1989). 106

barriers to Main barriers to empowerment are (Kahnweiler, 1991): • resistance from supervisors who are reluctant to allow their staff empowerment more autonomy (in empowering employees they experience a loss of power), • resistance from employees (it is easier and safer to follow instruc tions). If managers make all the decisions, employees are not to blame when things go wrong; • more active participation can mean bigger work loads. Additionally, managers are often confused about how to mobilize and motivate this newly empowered staff. Managers will be forced to delegate more responsibility to lower levels; this delegation is yet another blow to hierarchical authority. Finally, when employees are given greater responsibility, they become bolder about speaking up, they challenge authority, and they begin to create their own destiny (Kanter, 1989). Thus empowerment needs well educated and experienced managers.

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PART THREE: QUALITY MANAGEMENT SYSTEMS 10. Introduction to TQM Philosophy 10.1. Evolution of Quality Management quality Quality management. This is a generic term which describes a distingui management shable tool or method used for quality improvement. Various quality evolution management concepts started to develop in the previous century with the first era of inspection (Figure XIX). Over the years, quality manage ment theory has evolved into the concept of quality control, then quality assurance to reach the highest level of total quality management (TQM). Various tools and techniques are associated with each of these four levels. The authors emphasise that the highest level in the evolution of quality management – the level of TQM – comprises the achievements of all previous stages in the development of quality management theory. This signifies, that the philosophy of TQM utilises the tools and techniques developed by preceding authors of quality management theories. Figure XIX: The four levels in the evolution of quality management

Source: Kachniewska (2005).

TQM philosophy

The philosophy of TQM was introduced by Feigenbaum as early as 1951 by the name total quality control (TQC). The definition of quality

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given by Feigenbaum (1991) is the total composite product and service characteristics of marketing, engineering, manufacture, and maintenance through which the product and service in use will meet the expectations of the customer. Juran brought the idea of TQC to Japan in the early 1950s. The principles of TQC were quickly adopted in Japan, where it was further developed and called company wide quality control (CWQC). The developments in the management of quality during the 1980s led increasingly to the international adoption of the principle of business improvement through TQM. With the maturing of the approaches to TQM in the 1990s, organizations have sought to refine their TQM methodologies and in particular to identify those quality activities which most directly affect business performance (Ollila and Malmipuro, 1999). Before we start analyzing the tools of TQM lets start with an explanation of the previous quality approaches. Inspection included just salvage sorting, grading, corrective actions, inspection identification of sources of non-conformance. Quality control refers to those processes of verification and will quality control include systematic monitoring, including statistical and other manage ment information, recurring and one-off audits and inspection activity designed to establish whether standards are being achieved (HMSO, 1991). Quality control is one aspect of quality assurance. It should provide objective feedback to line managers who have continuing responsibility for quality, about what is actually being achieved. The major tools in that approach include basic quality planning, manual process performance, data self-inspection, product testing, use of basic statistics and paperwork control. Quality assurance is the implementation of processes which aim to quality assurance ensure that concern for quality is designed and built into product/ services. It implies commitment by the organization to a systematic approach to the pursuit of quality, demonstrated by an explicit state ment of policy, setting out expectations and standards. Systematic and comprehensive arrangements to ensure that the required standards are achieved will be evident throughout organizational procedures and will include processes for verification and feedback.

10.2. The Total Quality Approach to Quality Management All the approaches mentioned in chapter 10.1, seem to be very “static”. The organization which believes that the traditional quality control techniques, and the way they have always been used, will resolve their

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quality problems is wrong. Employing more inspectors, tightening up standards, developing correction, repair and rework teams do not promote quality. Traditionally, quality has been regarded as the respon sibility of the Quality Control department, and still it has not yet been recognized in some organizations that many quality problems originate in the service or administrative areas. On the contrary the concept of TQM is very dynamic and goes one total quality step further then previous methods. This approach was intended to approach move away from the traditional role of chasing failure, towards an attitude of prevention and for every individual to be responsible for producing good quality products and services. It goes towards conti nuous improvement and assumes that it is not sufficient to inspect, control or assure quality in order to achieve customer satisfaction. TQM requires the application of quality management principles to all operations, every branch and at every level of the organization. Every one should be committed to continuous improvement in their part of the operation. Through this participation and commitment, with the use of various tools and techniques that the TQM concept has adopted or developed, quality can be managed effectively. Table VIII contains some of multiple definitions of TQM. Table VIII: Definitions of TQM TQM mans that the organization’s culture is defined by and supports the constant attainment of customer satisfaction through an integrated system of tools, techniques and training. This involves the continuous improvement of organizational processes, resulting in high quality products and techniques (Sashkin and Kiser, 1993, p. 39). TQM – management approach of an organisation, centred on quality, based on the participation of all its members and aiming at long-term success through customer satisfaction, as well benefits for all members of the organisation and for society (Zink, 1998, p. 38). TQM is the integration of all functions and processes within an organization in order to achieve continuous improvement of the quality of goods. The goal is customer satisfaction (Ross, 1999, p. 1). TQM is a systems approach to management that aims to continuously increase value to customers by designing and continuously improving organizational processes and systems (Stahl, 1995, p.4). Source: adapted from Lakhe and Mohanty (1995).

TQM describes an approach to quality assurance which stresses the importance of creating a culture in which concern for quality is an integral part of product/service delivery. TQM is not just a management technique. This is a kind of philosophy which stresses systematic,

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integrated, consistent, organization-wide perspective involving everyone and everything. The key elements of the philosophy are the prevention of defects and an emphasis on quality in design. TQM is an organized system of strategies, methods, tools and behaviours that enable organizational leaders to: identify and prioritize customers’ needs and expectations; design and improve business proces ses that meet these needs; and to achieve “breakthrough” improvements that create “exciting” quality for customers and stakeholders. The three letters of the acronym stand for (Witcher, 1990): Total: Every person in the firm is involved (also its customers and suppliers). Quality: Consistent gearing of all activities to the quality requirements of internal and external customers/guests: principle of guest-led action Management: Senior executives are fully committed: principle of management responsibility. TQM is concerned with moving the focus of control from outside the individual to within; the objectives being to make everyone accountable for their own performance, and to get them committed to attaining quality in a highly motivated fashion. The assumption a director or manager must make in order to move in this direction are simply that people do not need to be coerced to perform well, and that people want to achieve, accomplish, influence activity, and challenge their abilities. Real commitment generates a vision which is meaningful and achievable. The vision and mission for the organization must be translated into effective plans for implementation. This means identifying the critical success factors and key processes. TQM is an integrative management concept for continuously improving the quality of goods and services delivered through the participation of all levels and functions of the organization. Growing out of human resource management (HRM) are structures for employee involvement and team approaches to decision making, quality improv ement, and problem solving. The total quality system is the interrelated set of plans, policies, processes, procedures, people and technology required to meet the objectives. It is composed of two related systems – the management system and the technical system (Figure XX). There are a number of instances of TQM being applied in the service sector, and to the service functions of manufacturing concerns. Many of these applications concentrate on tangible functions within service operations, and particularly on back office activities. There is persuasive argument in the literature, however, for the less tangible elements of

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definition of TQM

the acronym of TQM

quality as everyone’s responsibility

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Source: Evans and Lindsay (1993).

EMPLOEE INVOLVEMENT AND/OR TEAM STRUCTURE

TOTAL QUALITY SYSTEM

QUALITY IMPROVEMENT AND PROBLEM SOLVING STRUCTURE

EMPLOEE INVOLVEMENT AND/OR TEAM STRUCTURE

PRODUCT AND PROCESS DESIGN STRUCTURE

SAMPLING TECHNIQUES

QUALITY OF CONFORMANCE PROCESS

STATISTICAL PROCESS CONTROL TECHNIQUES

TECHNICAL SYSTEM

INSPECTION AND MEASUREMENT STRUCTURE

QUALITY OF DESIGN AND PERFORMANCE PROCESS

ECOOMIC CONCIDERATIONS

CONTROLLING PROCESS

HUMAN RESOURCES MANAGEMENT PROCESS

PLANNING PROCESS

MANAGEMENT SYSTEM

Figure XX: The Total Quality System Model

service and employee-customer interaction being particularly important determinants of service quality. Attempts to improve quality of service, therefore, often concentrate on educating, training and motivating staff. Quality improvement by means of customer care initiatives have also been applied in service. Such approaches avoid some of the more difficult issues associated with measurement and control of inherently variable service delivery. A undamental tenet of TQM is that action should be centred on making the processes capable of producing the required output, that is attention to the process not just to the product. Clearly this should apply to services just as much as it does to goods which are produced.

10.3. Basic Principles of TQM Successful implementation of strategic quality management is not an easy task. As Deming stated, “Everyone doing his best is not the answer. It is necessary that people know what to do. Drastic changes are required. The responsibility for changes rests on management” (Deming, 1982). In fact, the major emphasis of Deming’s philosophy on quality management is that top management must orient themselves to innovate and commit resources constantly to support innovation and continuous improvement (Deming, 1986). Building quality into products and services, breaking down department and worker-supervisor barriers, developing long-term partnerships with suppliers, restoring pride of workmanship, ceasing dependence on mass inspection, and removing numerical quotas and targets and concentrating instead on improving processes are the leadership issues that management must pursue in developing strategies for managing quality. Evans and Lindsay (1993) formed several key concepts for successful TQM implementation of TQM: implementation 1. Long-term perspective. Improvements do not happen overnight. The process planning and organizing of improvement activities take time and require major commitments from everybody in the organization. While time is necessary, it can work against the organization. First, the longer an organization takes to implement TQM, the further ahead its competitors will be. Second, unless steps are taken to ensure that TQM remains a priority, the organization risks losing the commitment of its employees. 2. Customer focus. Customer service is becoming an important differen tiator in an increasingly competitive business An essential attribute of TQM is the understanding that the customer is the final arbiter of quality. TQM is based on the premise that quality is driven by and

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4. 5.

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defined by the customer. Product and service attributes that create a perception of quality will increase customer satisfaction and demand. Various means, such as customer opinion surveys and focus groups, are used to understand customer requirements and values. New techniques must be adopted to obtain customer feedback. A firm must also recognize that internal customers – the next person or department in manufacturing process or the order-picker who receives instructions from an order entry clerk – are as important in assuring quality as are external customers who purchase the product. Employees must view themselves as both customers of and suppliers to other employees. The process can help to identify and eliminate many useless activities. Top management focus. If commitment to quality is not a priority, any initiative is doomed to failure. The management should set quality policy and review performance goals within the company. Quality should be a major factor in strategic planning. Many of the management principles and practices that are required in a TQM environment may be contrary to a company’s long-standing prac tices. However, it is not enough that management simply throw money at quality, it also needs to ensure that the “processes” of quality are working in an everyday sense and at the sharp end of the business where customers are affected (Knights and McCabe, 1996). Total involvement. All functions at all levels of an organization must focus on continuous improvement to achieve corporate goals. Systems thinking and error prevention. Traditionally, organizations are integrated vertically by linking all the levels of management in a hierarchical fashion. TQM requires horizontal coordination between organizational units. A process focus, by which inputs are transformed into outputs, provides better insights into how the organization actually operates. Training and education. Continuous learning, training, and educa tion is the responsibility of everyone in the organization. Every employee requires training in TQM philosophies and techniques. This is evident in the above-mentioned philosophies of Deming, Juran and Crosby. Training is necessary to reach a common under standing of goals and objectives and the means to attain them. Training usually begins with awareness in quality management principles and is followed by particular skills in the quality improve ment. Training must be viewed as a continuous effort, not a one-time project. This requires the commitment of significant resources but many firms are still reluctant to make this move.

7. Continuous improvement. Statistical reasoning with factual data is the basis for problem solving an continuous improvement. The very purpose of this principle is to improve continuously to attain excellence. 8. Participation and teamwork. Problem solving and process improvement are best performed by multifunctional work teams. Everyone must participate in the improvement efforts. The person in any organization that best understands their job and how it can be improved is the one performing it. Employees must be empowered to make decisions that affect quality and develop and implement new, better systems. This often represents a profound shift in the philosophy of senior management, because the traditional philosophy is that the work force should be managed to conform to existing business systems. Participation can be encouraged by recognizing team and individual accomplishments, sharing success stories throughout the organization, encouraging risk-taking by removing the fear of failure, encouraging the formation of employee involvement teams, implementing suggestion systems that act rapidly, provide feedback and reward implemented suggestions and providing financial and technical support to employees, to develop their ideas. 9. Measurement and reporting systems. Measures based on facts must be established to assess quality improvement. Reporting of information must be timely and accurate and a systematic process to measure and evaluate quality continuously is necessary. Traditional information systems focus on cost and financial accounting, sales, marketing, purchasing and scheduling. Quality measures must become part of the reports that are regularly provided to middle and upper management. Line workers and supervisors also require quality reports so that problems can be identified, analyzed and solved. 10. Communication and strong leadership. TQM requires improved communications to support improvement. Traditional lines of communication are slow and sometimes inaccurate. People need to communicate across organizational levels, functions, product lines, and locations to solve problems and implement changes. Top managers must become the organization’s TQM leaders. They must be the focal point that provides broad perspectives and vision, encouragement and recognition. The leader must be determined to establish TQM initiatives and committed to sustaining its activities through daily actions. This is necessary to overcome the inevitable resistance to change.

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Figure XXI: The quality development wheel

Quality standard Quality development Correction Planning

Review

Implementation

Quality assurance Time Source: Koch (2004).

TQM also involves the principle of process orientation, thus principles emphasizing that each product or service is the result of a process, with of process orientation each step being linked to the one before and after it. The quality of the individual processes makes for the quality of the whole, and in time, quality standards are raised by means of the permanent cycle of planning – implementation – reviewing – correction.

10.4. TQM Implementation Process – benefits and pitfalls TQM versus Table IX contains the comparison between two organizations: in the non-TQM first one, TQM has not been implemented so far, whereas the second organizations organization has been using it successfully. TQM may provide a fundamental way of conducting business, making the organization more competitive and viable, with TQM driving change and improvement. In TQM-organizations such benefits as enhan ced profitability, reduced costs, creating an innovative approach, accountability and a more enjoyable working environment are bound to appear. There is also a better organizational synergy, removal of nonproductive activities, better competitor understanding through bench marking and a more reliable communication system. Every enterprise should find its own way to TQM. Many organiza tions have found it difficult to implement an effective TQM policy. One of the prime reasons for this is that organizations fail to identify what 116

they are attempting to change and achieve by implementing TQM. If these factors are not addressed then the necessary resources and commitment required to develop an effective tailored approach may be lacking. In view of its complexity, the TQM process has to be well planned and professionally designed. In many cases, there is a need for employing a consultant to guide the whole process in order to avoid the development of impractical or over-elaborated processes. It is worth pointing out, however, that the concept of TQM should not be treated as a ready-made set of principles and tools to be used technically as a fast solution to gaining competitive advantage. TQM requires several years of sustained effort to change the culture of the system (Castle, 1996). Table IX: NON-TQM organisation and TQM organization NON-TQM organization

TQM organization

Company structure strong vertically but Company structure strong both verti weak horizontally – poor communica cally and horizontally. tions between departments. Emphasis on inspecting quality into Emphasis on designing quality into products and services. products and services. Quality is the business of the Production Quality is everyone’s business. and Quality departments High Quality = High Cost.

High Quality = Low Cost.

Goalpost mentality – all products within Nominal value is best, more consistent specification limits are equally good, products which increases piece to piece variability and reduces consistency. Lack of methods for the routine optimi Well used methods, leading to more sation of products and processes. robust and reliable processes and products. Technology fixes – tighter tolerances, Invest last, not first – only if optimi better materials, higher skills etc to sation of product and process fails to improve quality – but at a higher cost. give required quality. Voice of the manager is dominant.

Voice of the customer is dominant.

Source: http://www.kbe.cov.ac.uk/emdata/48tqm.html

Organizations should undertake a thorough analysis of the most common factors affecting the successful implementation of TQM. The information from such an analysis should assist in determining which implementation approach to use and how quickly it should be implemented.

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TQM internal and TQM implicates the increase of efficiency which results in short external profits terms of achieving goals, shorter time involved, lower involvement of materials, energy and materials. It brings in particular internal and external profits (table X). Table X: Internal and external profits of TQM implementation Internal profits of TQM implementation • better involvement of workers • efficient management and planning • better flow of information • a guarantee of quality • lower number of complains • clear responsibilities • lower costs • less mistakes • more efficient processes • better use of assets • high level of satisfaction among workers • trust to own actions

External profits of TQM implementation • higher market share • presence on national and international markets • higher profits • higher quality of product • better service • better control of processes • trust to company • higher sensitivity for clients and market • a tool in marketing • trust and limited control of service • easier contacts with banks • better contacts with insurance companies • constant relationships with clients • limited loss of clients • high level of client loyalty • easier gaining new partners • increase in reliability (certificates) • identification of strong and weak points in a company and eliminating mistakes • better trade mark, recognizable • limited additional cost, finance management • proud workers of being employed in such company

Source: Mohanty (1995).

Within tourism sector hospitality industry was probably the first one to recognize the importance of the guests’ satisfaction. However, many hotels are still struggling to reach a real understanding of what is meant

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by TQM. Breiter et al. (1995) give the example of quality management implementation process in a Bergstrom Hotels case study. They identify main problems of the practical implementation of TQM principles. Bergstrom Hotels’ experiences are important because they prove that quality can be achieved with standard staffing levels and reasonable investment. Bergstrom has designed a culture that is quality oriented. A shared quality – oriented vision is achieved, largely through communications, relationships, culture measurement and training. Customer satisfaction is understood through the use of surveys and interviews and continuous improvement of processes is the job of all Bergstrom employees. Open lines of communication are essential to the success of quality management because they help to develop and improve relationships between inter nal customers. Management saw the need to design a more effective system for allowing employees to contribute ideas and suggestions and processes for building awareness of the company’s quality initiatives were needed. Managers believed they could improve communication with employees, so as to share information on quality progress, either individually or on a team basis. Employees and managers needed to share information openly about the hotels’ performances and what the teams were doing. However despite many improvements made some difficulties occurred. Because the number of employees involved in teams was relatively small, true representation of all employees did not exist. This led to a lack of universal commitment. Also, barriers between the quality teams and other employees arose. An élitist structure emerged where team members were in and everybody else was out. An example of this occurred when a server asked to be on the restaurant’s quality team but was told all the positions were filled. The server responded that she wanted to get involved and had some ideas to contribute but was being told she could not participate. Employees who were not on teams thought that their contributions were not welcome (Breiter et al., 1995). Another apparent problem was that employees were not sure what management wanted and felt they were not given enough direction. That is why all employees had to be trained in quality concepts and tools. An analysis of experiences of 21 companies (Mann and Kehoe, 1995) enabled a guideline to be developed showing how each company characteristic affects an implementation of TQM. By identifying their most critical factors, methods can then be developed to minimize the difficulty:

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factors effecting the success of TQM implementation process

1. Process factors. An organization’s method of manufacture or serving their custo mers can hinder the application of quality activities. Traditional service and production methods may encourage job specialization. In these circumstances it may be difficult for employees to become actively involved in the improvement of work processes. However, it is impor tant that they are involved in the TQM effort, to prevent any feelings of alienation. Many organizations are surprised how employees, given the correct support (particularly resources) and encouragement, can make an active contribution to the organization and their working environment.

2. Type of employees. The diversity of employees can present problems when imple menting TQM. It is recommended that representatives of each “type of employee”13 are involved in the development of the TQM imple mentation plan. This will ensure that training and TQM activities take into account their particular needs. If the needs of employees, as listed below, are considered, TQM can be effectively implemented: education, skills • Skill level. Highly skilled employees are likely to accept TQM more quickly than lower skilled employees. They are less likely to feel and lenght of threatened by proposed changes and are more likely to understand employment its need. Organizations wishing to increase the autonomy of their workforce may need to improve the skill level of their employees. • Level of education. Employees with a high level of education are likely to accept TQM more quickly. Individuals with a high level of education are more likely to judge TQM by its results rather than through its publicity. Whatever the level of education, it is important to note that publicity and posters may be viewed cynically and can create high expectations which are difficult to meet. • Length of employment. Employees who have worked in an organi zation for a long time can be the hardest to convert to TQM. They are likely to have witnessed many new management approaches and initiatives. If these approaches were not as successful as expected, then these employees are likely to be sceptical towards the imple mentation of TQM. The most effective method of converting these employees to TQM is through their involvement in quality activi ties which produce improvements. With regard to job ownership, employees who have worked in a certain position for a number of 13

It can be easily illustrated through the example of hotels, where organizational structure reflects the diversification of employees (reception desk, restaurant, clean and laundry etc).

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years often do not want any increased responsibility. New responsibi lities for some employees may cause distress. It is therefore important to consider each individual's needs before implementing changes which affect them. • Age distribution of employees. An "old" workforce may not accept age, maturity and change as quickly as a "young" workforce. An old workforce may external contacts feel threatened at having to learn new responsibilities and use new work methods. It is therefore important to have a comprehen sive education and training programme tailored to their needs. A gradual approach to TQM which gains their confidence, may be appropriate. • Employees’ level of external customer contact. Employees in close contact with the customers are more likely to accept TQM. This is because quality activities are typically associated with final results. For this reason it is important in the planning of TQM to discuss how TQM will be implemented in low customer contact areas. A solution would be to develop specific training programmes for these areas providing practical applications of relevant quality activities. Quality activities concentrating on improving the service (product) between internal suppliers and customers may be appropriate. 3. Shared values. • Employee's attitude towards change. A positive attitude by employees towards change assists in the implementation of TQM. A negative attitude can be changed through education and training and the involvement of employees in quality activities which result in improvements. After the implementation of an education and training programme, it is important that involvement shortly follows, otherwise employees may become disillusioned. The setting up of a communication structure between management should aim to install a culture whereby employees recognize problems and solve them automatically (as part of their responsibility). • Business performance. The relationship between business perfor mance and TQM acceptance is complex. Organizations with an excellent business performance may accept the need to change as a necessary prerequisite for success, or alternatively, employees may react against TQM as they fail to understand the need to change a successful system. Similarly, organizations in a "survival situation" may act positively to change as "it's their last chance", or negatively owing to previous poor experiences. The attitude of the employees, due to the organization's business performance, should be considered when deciding the rate of implementation.

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attitudes towards change and business performance

organization’s • Organization’s age. TQM is likely to be more quickly accepted in a “new organization” or a “young organization” rather than in an maturity and work established one. A new or young organization can introduce TQM as environment a natural element of its organization. • Work methods. Employees used to traditional working methods such as “we do our job and someone else it to check it” are likely to find it difficult to accept the TQM concepts. These employees have proba bly been educated and trained in the values of job specialization, delegation, inspection and control, and are likely to react adversely to the same management advocating new values and methods. In contrast, employees using new technology are more likely to have experienced changing working methods. The experience of new working methods should encourage a more open attitude to concepts such as TQM. quality • Understanding of quality improvement needs. Employees who under stand the need for quality improvement are more likely to accept improvement TQM. For this reason, acceptance is likely to be high for organi needs zations with a high level of quality development which have witnessed the benefits of quality activities. motivating/ • Salary. Employees with poor salaries are less likely to be enthusiastic for TQM. These employees are likely to feel undervalued by top dismotivating management and will be suspicious of any new approaches. Organi factors zations using a performance appraisal system will probably need to change the appraisal system to support the aims of TQM. • Working conditions. Employees working in poor working conditions are less likely to be enthusiastic for TQM. Similar to employees with low salaries, these employees are likely to feel undervalued by top management and will be suspicious of any new approaches.

different levels management attitude towards change

4. Management style. • Top management's attitude towards change. It is essential that, prior to TQM implementation, all members of the board support the proposed approach. If the managing director or board do not demonstrate their total commitment and total involvement in TQM then it is at risk. The top managers/directors need to be "champions of quality". • Middle management's attitude towards change. Middle management can be difficult to convert to TQM. Many managers may have been with the organization for a number of years and are used to a certain style of management. It may be difficult for them to give greater responsibilities to employees and change to a more participative style of management. In addition, they themselves may be controlled more

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•

by the incoming TQM structure. To gain the middle management's commitment and confidence in and a support structure needs to be developed to assist them through the change period. Without the total commitment of middle management, team building and employee involvement will be affected. Junior managements’ attitude towards change. Junior managers can have the same problems as middle managers in accepting change. Those used to fire-fighting and delegating to employees may have difficulty in changing to a more participative style of management. As they are often the direct link between employees and manage ment, it is important that they fully understand TQM. As the manage ment style of junior managers is typically not as developed as middle managers, they are likely to accept TQM more quickly. Leadership style. TQM aims to encourage a participative style of management throughout the organization. An organization with this style of management is likely to be more enthusiastic towards TQM and will have less need to change its systems and communication structure. Organizations with an authoritative style of management, whereby employees/ managers are promoted who are aggressive, career minded and not team workers, are likely to find it more difficult. To achieve a participative management style, it may, at first, be necessary to use an authoritative leadership style to implement TQM. This may consist of delegating and monitoring the perfor mance of quality activities. Through the implementation of quality activities, such as teams, and top management leading by example, a more participative style of management can develop. Management planning. Organizations driven by short-term planning may find it difficult to change to TQM where the emphasis is on long‑term planning. Rewards, such as promotion for quick results invol ving fire-fighting, need to be redirected to rewards for prevention and participation activities. Long-term planning can begin by imple menting a comprehensive education and training programme. Departmental interaction. Organizations which are function oriented and/or encourage specialization may have difficulty in converting to TQM. Barriers to departmental interaction (e.g. rivalry), need to be removed in order for TQM to operate successfully. Teams which concentrate on improving cross-functional integration can help to achieve this.

5. Organizational structure. • Organizational structure description (number of sites). TQM is generally easier to implement within one site than in a number of

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leadership style and management planning

co-operation and interaction between departments

sites. The larger the number of sites, the greater the difficulty of controlling its implementation and developing an integrated approach to TQM (if required).14 The greater the number of sites, the more likely they will differ with regard to quality development. • Stability of organizational structure. If the organizational structure is stable then TQM will be easier to implement. An unstable organi zational structure can threaten the implementation of TQM. For example, the merging of two sites could adversely affect the structural elements of TQM already in place, like delegated teams. Also, the departure of committed TQM personnel, particularly members of the site board, can threaten the impetus and drive for TQM. • Geographically integrated. Organizations implementing TQM into sites geographically distanced from each other may find it more difficult to implement an integrated TQM approach. The physical distance between sites may hinder the transfer of information and weaken the effect the corporate board's leadership style and approach has on each site. In addition, sites geographically distanced are likely to have different characteristic owing to the effect of the local environment (local culture) on the organization's employees. 6. Number of employees. Generally, the smaller the number of employees, the easier it is to implement TQM. At smaller sites, the steerers of TQM (usually the management board) are more visible and have less employees to manage and involve in TQM. This may mean a less detailed and sophisticated implementation structure is required to ensure employee participation and to improve business performance. 7. Quality development. Organizations with a high level of quality development are likely to be enthusiastic towards TQM. These organizations will understand the need for quality improvement and are therefore less likely to require as much training and education. They will be able to implement TQM more quickly.

If you think of a travel agency having its sites in many cities or even countries it seems quite difficult to keep the same level of quality commitment in every site. However we can find the perfect example of success in this field in hotel industry – international hotel chains.

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10.5. Is TQM a miracle to happen? TQM may not contribute significantly to improvement if poorly implemented. Two pitfalls concern a change in the behaviour, processes and attitudes of employees and heightened expectations since they wait for some sort of miracle to happen. There may also be an empowerment causing some loss of control. Some researchers warn about over delegation by top management, placing the burden for change on the employees and then blaming them for any failure. Senior management should tackle the important issues of TQM, demonstrating leadership and commitment. It may be also possible that some companies choose the wrong strategy, the wrong tool or select merely one tool. Sometimes the implementation of TQM is not successful due to the absence of strategic planning and the lack of a system orientation. When each department is trying to improve performance independently of others, this can also lead to failure. Major TQM implementation problems may also concern the lack of management commitment, poor communication between departments and the perception of TQM as a fad or campaign rather than a real, working system. Another study identified barriers such as management compensation not being linked to achieving quality goals, best practices of competitors not being benchmarked, insufficient training in problem identification and problem solving techniques and employee resistance to change (Curry and Kadasah, 2002). The organizational emphasis of tomorrow will probably be shifting towards four main areas of the improvement of quality. These focus areas are: customer focus, process focus, innovation and environment (adapted from Mehra et al., 2001): • Customer focus. This approach has already been widely described. However in the future development of quality ideas should cover also “customer partnership”. It will require that the business get closer to the customer, not just physically but in many other facets. This closeness should take the form of an enterprise wide sharing of ideas, actions, and other planning aspects. Both parties, buyers and sellers, are to assume ownership of all actions that occur in the supply chain. Information, specifically the flow of information, will become a crucial element for future success. Trading partners will have to facilitate synchronized flow of information in order to achieve a high degree of responsiveness to the ultimate customer. It is expected that businesses will have to achieve a high degree of integration of processes between suppliers and customers. This will call for a new management thinking, i.e. a focus on global thinking perspective. The

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possibile pitfalls in the implementation process

areas of quality improvement

future supplier-customer partnership will yield a “seamless entity” that will feel no pain in responding to changes because it will be a “seamless” change. Managing quality will be replaced by managing change with quality. • Process focus. Quality organizations of tomorrow will face a shift in the management of process. This shift will require a true understand ing of the process dynamics. Quality management efforts will heavily emphasize self assessment of three major capabilities, i.e. human resource capabilities, technical capabilities and financial capabilities. This self analysis will be crucial before forming any strategic alliance with customers to arrive at the seamless enterprise. Credible and convincing self assessment will become necessary to forge long-term relations with all trading partners having similar critical success factor niches. • Innovation/improvement/knowledge focus. Without fast paced responsiveness to changing customer demands will definitely cause the demise of a business in the coming years of the new millennia. Efficient consumer response, successfully practised by the food and grocery industry, now comes to the door steps of manufacturers. The service component of their business takes on a different meaning, with after-sale service just a fading word. To provide for customer satisfaction, businesses will have to plan perpetual growth processes based upon innovation, improvements, and knowledge creation. These efforts will require technological leadership in management ranks of all trading partners. These partners will become knowledgecreating organizations having synchronized knowledge workers moving in the same direction. Hence, the flow of information and timing of managerial actions will become critical in the quality decisions. • Environmental focus. The last missing puzzle in quest for total quality organization of tomorrow revealed another focal point of attention, i.e. environmental focus. This is a three-dimensional focus comprising government regulations, social/ethical issues, and market dynamics. Government regulations will stay a mystery in years to come due to the changing patterns of public opinions. The same will be true of social and ethical issues. However, such uncertainties will have to be dealt with through early partnerships between governmental organization and businesses. Such cooperative alliances will provide timely and correct information to all trading partners, and hence, affect the market dynamics through competition. It is in this respect that the continuous improvement process component of TQM will take on

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a new role. This role will be innovation-based, attempting to discover new knowledge (e.g. new technology to produce user friendly products of higher quality). Creating knowledge on a routine basis will replace the current mode of working that focuses on just doing the job.

10.6. TQM Concept in a Tourism Destination Area Tourists’ needs are met not just by one product or service but by three elements of the area’s attraction (3As): accessibility, attractions, amanities (Holloway, 1996). Quality management of TDA includes the recognition of all the factors, products, services which create the image of quality destination in the eyes of tourists. The problem seems to be quite complicated as the geographical area is not the business unit in a sense we get used to when analyzing the activities of business enterprises. At the same time from the point of view of tourism industry development the level of TDA’s quality management is of the upper importance as this is a place of: • concentration of all the tourism enterprises activities, • creation of the tourism image, • branding of tourism product, • cooperation of the public and private sectors, • last but not least – meeting (or dis…) tourists’ requirements. Consumers in tourism typically purchase and consume a whole range of services, which together make up the "holiday or vacation experience". An inability of individual tourism companies to offer the total quality tourism product that the customer expects at the beginning of the tourist purchase – consumption process leads to the idea of the implementation of TQM within the whole tourism destination area (Kachniewska 2004). According to such an approach all the area should be treated as a system of public organizations, private enterprises, local people (social environment), natural environ ment and other tourist attractions as well as all the relations between them. On the grounds of systems theory, synergy is essential for the success of a system. Synergy is defined as a situation in which separate subsystems (providers of various components of the tourism product within the TDA) co-operate and interact with the result of becoming more productive than they would be if they operated in isolation (Stoner and Freeman, 1992). However co-operation between the providers of tourism services within a TDA should be based on formally established links in order to bring about the benefits of synergy.

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the 3 As of TDA attraction

reasons for implementing TQM in a tourism destination

synergy effect in TDA

TQM consortium Co-operative links may take various forms, such as a syndicate, for TDA a cartel, a pool or a consortium15. In the case of quality systems created within tourism destination areas, the form of consortium proves to be most desirable. There are some arguments for establishing a consor tium (Augustyn, 1998): unlike a cartel, it is a formal association; unlike a syndicate, it facilitates co-operation of all the parties within the TDA; unlike a pool, it does not attempt to control price, to share the business and to divide profits. M. Augustyn’s idea of a Total Quality Tourism Consortium (TQTC) the concept of TQTC can be established within a tourism destination area in order to ensure synergy. The concept of TQTC (Figure XXII) assumes that represen tatives (top managers) of various public, private and voluntary tourism organizations, operating within a tourism destination area and willing to co-operate, enter a special agreement aimed at tourism quality enhancement while sharing the cost of the task. The quality of tourism product contains tourist’s expectations, which are formulated long before travel. It means that quality management of TDA should include the problem of information – namely influencing tourists’ expectations through a proper promotion of the area’s tourism product. The reliability of such information is quite often discrepant from the advertising efforts of local government or enterprises, but still taken into account by the tourists when taking the decision about visiting the area. Figure XXII: The concept of Total Quality Tourism Consortium TOURISM DESTINATION AREA SECTOR public/private/voluntary · · · · · · · · · · ·

accommodation, catering, attractions, entertainment, recreational facilities, infrastructure, urban transport, streets/roads, Information centres, hospitable behaviour, other

TOTAL involvement in continuous improvement commitment

enhance

QUALITY TOURISM Tourists’ expressed and implied requirements are met fully

agreement CONSORTIUM Development of an advanced quality system

Source: Augustyn (1998).

A consortium is a group of companies and/or public sector organizations that co‑operate for a specific purpose (Gilpin, 1973).

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It is essential that quality is understood properly by all subsystems in order to enable the achievement of the objectives set by the system (quality tourism products and increased customer satisfaction). This may require launching a quality awareness programme within the system. Adopting the view of the customers in respect to the quality of the tourism product constitutes a pre-requisite for identifying quality improvement areas within the TQTC. With such understanding of quality, benchmarking techniques and the model of service quality can be applied as a means of gaining information about the competitors and customers. TQM has been widely adopted in many manufacturing and service TQM concept in organizations but still remains treated as the management system for TDA a single company. Its adoption to the reality of TDA requires a new look on the area as a kind of very complex organization, where the group of employees seems to be much wider then just the workers of all the local enterprises. All the people living and working within TDA should be treated as “employees” of this complex system, as customers’ (tourists’) impressions are influenced by all the local citizens, not only the employees of tourism enterprises. Prior to employing the TQM princi ples, it is essential to make sure that all members of the subsystems focus on the customer as a purpose of whatever they do. Continuous research and measurement of customer satisfaction are essential for the purpose of designing and re-designing the quality tourism product. A dynamic approach to product development is required in order to delight customers. This approach focuses on a continuous variation by means of special events, such as surprise events or gifts not itemised in an offer. A development of a consistent marketing strategy for the whole system, based on the research results, constitutes an integral part of the TQM process. A smooth running of the TQM process demands creating teams, securing proper communication, devising tools, building commitment and quality culture within the system. Communication between indivi duals and subsystems (internal) as well as between the system and the suppliers and customers (external) enables the flow of information, which is indispensable for making decisions within the system. Internal communication with the emphasis on the progress in achieving the goals of the system is needed in order to avoid discouragement. Devising tools for delivering, sustaining and measuring quality is vital for ensuring high and consistent levels of tourism quality within the entire system. Setting quality standards, comparing performance against them and feedback are extremely important for identifying opportunities for improvement. It should be pointed out, however, that quality has to be built into the system rather than inspected.

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local people commitment as a success factor

environmental issues in the concept of TQTC

the necessity of public-private partnership

Generating enthusiasm among the executives and employees through recognition and rewards is of utmost importance for the success of the TQM process. Quality culture determines the ability of the system to accept change within its morale and internal working relationships as well as relations with the environment. Partnership relationships in which everyone learns from each other constitute an important pre‑requisite for the success of the new tourism quality systems. Building a quality climate is based on the principle of encouraging people to look beyond preventing problems and seek opportunities for continuous improvement. The attitude of local people towards tourism development is quite often very unfriendly, even in the areas which find the only way of their economic activity in the development of tourism. Not all the inhabitants participate indirectly in tourism prosperity and local government should find the way to demonstrate the benefits connected with tourism development of the area (higher profits, possible investments beneficial not only to tourists but also to local people, development and increased attractiveness of the area, improvement of the area’s beauty and the quality of natural environment etc.). Local government should keep it in mind that without the inhabitants’ approval the TDA’s product will never be of really high quality. Its task is also the necessity to create tourism consciousness of local people (tourism knowledge, the aware ness of tourism economics) and to deal with myths and emotions connected with tourism development which seems to be very difficult to fight. It is also necessary to prepare funds to cover the costs of clearing social dysfunctions in order to create friendly atmosphere around the tourism function of the area. It is very difficult in case of local people who feel much stronger the negative then positive effects of tourism development. Quality management of the natural environment seems to be another difficulty as the development of tourism industry could occur one of the most devastating factors (at least causing the permanent landscape modifications) lowering tourism attraction of the area. Rich service offer of TDA can become the source of its competitive advantage and at the same time enables the relief of natural environment. Social and environmental strategies of TDA can not be properly developed without the public-private partnership. The public sector usually suffers from the lack of funds and inability to take risk while the private sector does not poses the possibilities to form the complex and complete quality offer of the area. Augustyn (1998) gives three reasons of the limited influence of enterprises on the quality offer of the TDA:

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• There is a lot of antagonism between what is profitable for different companies, the society and the area as a whole. • The activity of enterprises concentrates on some chosen areas, neglecting the other ones. • The abilities to absorb additional tourists may be limited by the quantity of local tourism resources (especially natural ones). The cooperation of public and private sectors may help to overcome those gaps and ensure the sustainable tourism development. The mana gement of a total quality tourism consortium is therefore responsible for making the employees of participating organizations aware of this in order to maintain enthusiasm and interest. Through the commitment of the executives and involvement of all members of the system in continuous improvement, the TQTC is in a position to assure compre hensiveness and consistency of the quality management process. The particular choice of the TQM tools depends, however, on the nature of the internal and external environments in which a tourism quality system operates.

11. ISO Management System Standards 11.1. International Organization for Standarization (ISO) In 1946 in London, delegates from 25 countries decided to create a new international organization, intended “to facilitate the international the origin of ISO coordination and unification of industrial standards”. The new organi zation, ISO16, officially began operations on 23 February 1947.17 ISO is an international, non-governmental network of the national ISO members standards institutes of 148 countries, on the basis of one member per country, with a Central Secretariat in Geneva, Switzerland. It occupies a special position between the public and private sectors. This is because, on the one hand, many of its member institutes are part of the governmental structure of their countries, or are mandated by their government. On the other hand, other members have their roots uniquely in the private sector, having been set up by national 16 As “International Organization for Standardization” would have different abbreviations in different languages (“IOS” in English, “OIN” in French for Organisation Internationale de Normalisation), it was decided at the outset to use a word derived from the Greek isos, meaning “equal”. Therefore, whatever the country, whatever the language, the short form of the organization’s name is always ISO (www.iso.org). 17 To find more about historical perspective of ISO go to “ISO’s First Fifty Years” (www.iso.org/iso/en/aboutiso/introduction/fifty).

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partnerships of industry associations. Therefore, ISO makes an attempt to act as a bridging organization in which a consensus should be reached on solutions that meet both the requirements of business and the broader needs of society, such as the needs of stakeholder groups like consumers and users. National member from every country takes the responsibility for: • informing potentially interested parties in their country of relevant international standardization opportunities and initiatives; • ensuring that a concerted view of the country’s interest is presented during international negotiations leading to standard agreements; • providing their country’s share of financial support for the central operations of ISO, through payment of membership dues. ISO standards ISO has been developing voluntary technical standards over almost portfolio all sectors of business, industry and technology for over 55 years. One of the best-known standards in the ISO portfolio is ISO 9001:2000, Quality management systems – Requirements but the great majority of ISO standards do not relate to management system requirements. On the contrary – the vast majority of ISO standards are highly specific. They include terminology, sampling, test and analytical methods, as well as specifications and performance requirements for industrial and agricultural products, equipment, processes and, to a growing extent, services. ISO standards18 were, before ISO 9000 and ISO 14000, princi pally of concern to engineers and other technical specialists concerned by the precise scope addressed in the standard. The Organization has more than 3000 technical bodies (committees, working groups) respon sible for over 4000 active standards projects (ww.iso.org). ISO standards are voluntary19 and developed according to the princi ples of consensus among relevant stakeholders (e.g. service providers, consumer groups, governments, research organizations). The process is market-oriented, needs-driven and based on voluntary contribution and 18

ISO is the world’s largest developer of voluntary international standards. Every year, ISO publishes approximately 1000 new or revised standards in fields ranging from health care to industrial machinery; from screw threads to financial planning; and from materials and testing to quality and environmental management. As of the end of 2004, there were 14251 published standards and related publications in ISO’s collection. 19 As a non-governmental organization, ISO has no legal authority to enforce their implementation. A certain percentage of ISO standards – mainly those concerned with health, safety or the environment – has been adopted in some countries as part of their regulatory framework, or is referred to in legislation for which it serves as the technical basis. Such adoptions are sovereign decisions by the regulatory authorities or governments of the countries concerned. However, although ISO standards are voluntary, they may become a market requirement.

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involvement of relevant interests. Participation in the process is accomplished through national delegations and their appointed experts. In addition, ISO maintains liaison with over 500 international and broadly based regional organizations that participate in its technical work (www.iso.org). Most standards require periodic revision. Several factors combine to ISO standards render a standard out of date: technological evolution, new methods revision and materials, new quality and safety requirements. That why ISO has established a general rule that all ISO standards should be reviewed at intervals of not more than 5 years. On occasion, it is necessary to revise a standard earlier. ISO’s work programme ranges from standards for traditional activities, such as agriculture and construction, through mechanical engineering, to medical devices, to the newest information technology developments, such as the digital coding of audio-visual signals for multimedia applications.

11.2. Management System Standards. The vast majority of ISO standards are highly specific to a particular product, material, or process. Despite the fact that for 50 years ISO published mainly technical standards the organization gained the real popularity thanks to management system standards – to be more precise families of standards – namely ISO 9000 and ISO 14000. ISO 9000 is primarily concerned with “quality management”, while ISO 14000 is concerned with “environmental management” – both of great interest to the tourism industry. Both families consist of standards and guidelines relating to management systems, and related supporting standards on terminology and specific tools, such as auditing (the process of checking that the management system conforms to the standard). Notice that neither ISO 9000 nor ISO 14000 are product standards. The management system standards in these families state requirements for what the organization must do to manage processes influencing quality (ISO 9000) or the processes influencing the impact of the organization’s activities on the environment (ISO 14000). This is a very important fact as a lot of ISO 9000 opponents (especially in tourism sector) stress that implementation of such standards in tourism industry would mean the standardization of tourism offer and hence would cause a negative effect, as tourists look for unique products, enabling them to express their individuality and satisfy their educational and emotional needs. The same opponents indicate the example of international hotel chains where high level of standardization has completely disturbed national individuality of local

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ISO quality and environment management standards

are ISO management standards for tourism enterprise?

standardisation versus customisation in tourism

hotels. Standarization of hotel product was aimed most of all at the quality assurance and enhancement but in fact well educated and demanding tourists perceive it as a sign of quality decline. Once again this is the evidence of a quality gap: hotel managers perceive quality in an absolutely different way then hotel guests. To avoid such misunderstanding there is a necessity to stress again that quality management system (QMS) principles presented in ISO 9001 standard are not aimed at standardization of any product (whether service or manufacturing). The standard is to assist managers when implementing or restructuring the quality-based system of management. All the principles of ISO 9001 construct the framework, and within that framework every organization builds up its own, unique system. QMS standard does not describe the characteristics of the final product but includes a set of principles pointing what the organisation is to do to ensure that its products conform to the customer’s and applicable regulatory requirements and to improve continually its performance in this regard. ISO quality management system is also expected to address the needs of the service industries as it will focus on customer satisfac tion, management leadership, process management and continuous improvement through teamwork. Both ISO 9000 and ISO 14000 concern the way an organization goes about its work, and not directly the result of this work. In other words, they both concern processes, and not products – at least, not directly. Nevertheless, the way in which the organization manages its processes is obviously going to affect its final product. In the case of ISO 9000, the efficient and effective management of processes is, for example, going to affect whether or not everything has been done to ensure that the product satisfies the customer’s quality requirements. In the case of ISO 14000, the efficient and effective management of processes is going to affect whether or not everything has been done to ensure a product will have the least harmful impact on the environment, at any stage in its life cycle, either by pollution, or by depleting natural resources. This means what the organization does to minimize harmful effects on the environment caused by its activities. In both cases, the philosophy is that management system require ISO 9001 as a generic standard ments are generic – they can be applied: • to any organization, large or small, whatever its product, • including whether its "product" is actually a service, • in any sector of activity, and • whether it is a business enterprise, a public administration, or a government department.

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No matter what the organization's scope of activity, if it wants to establish a quality management system or an environmental manage ment system, then such a system has a number of essential features for which the relevant standards of the ISO 9000 or ISO 14000 families provide the requirements.20 Although ISO has no plans to merge the ISO 9000 and ISO 14000 families, the Organization is nevertheless sensitive to the needs of users who wish to implement both quality and environmental manage ment systems. Therefore, the ISO technical committees ISO/TC 176 (responsible for ISO 9000) and ISO/TC 207 (responsible for ISO 14000) have an ongoing collaboration to achieve a high degree of compatibility between the two families of standards to facilitate their implementation by user, either as side-by-side systems, or as integrated management systems (www.iso.org). This collaboration addresses such issues as common terminology and structure of the standards but its biggest achievement so far is the development of a joint auditing standard for quality management systems (QMS) and environmental management systems (EMS). Both the ISO 9000 and ISO 14000 families of standards emphasize the importance of audits as a management tool for monitoring and verifying the effective implementation of quality and/or environmental management. ISO 19011 provides a uniform approach for the auditing of environmental and quality management systems. As many organi zations implement both EMS and QMS – either as separate systems, or as an integrated management system – they want to harmonize and, where possible, combine the auditing of these systems. The use of uniform auditing standard will give organizations a more integrated and balanced view of their operations, making it a tool for continuous improvement. It is also aimed to help organizations optimize their management systems, facilitate the integration of quality and environ mental management, save money and decrease disruption of work units being audited. Table XI contains the list of quality management standards (standards irrelevant for tourism enterprise were skipped21). Only one of those standards is intended for certification – namely ISO 9001:2000. What are the other standards for? 20

Where any requirement(s) of ISO 9001:2000 standard cannot be applied due to the nature of an organization, this can be considered for exclusion however such exclusions may not affect the organization’s ability to provide product that meets customer and applicable regulatory requirements. 21 ISO/TR 13352:1997 (Guidelines for interpretation of ISO 9000 series for appli cation within the iron ore industry) or ISO 13485:1996 (QS – Medical devices).

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the idea of integrated management

standard audit procedures

Table XI: ISO 9000 family and complementary standards ISO 9000 family – basic standards ISO 9000:2000

Quality management systems – Fundamentals and vocabulary

ISO 9001:2000

Quality management systems – Requirements

ISO 9004:2000

Quality management systems – Guidelines for performance improvements ISO 9000 family – complementary standards

ISO 10002:2004

Quality management – Customer satisfaction – Guidelines for complaints handling in organizations

ISO 10005:2005

Quality management systems – Guidelines for quality plans

ISO 10006:2003

Quality management systems – Guidelines for quality management in projects

ISO 10007:2003

Quality management systems – Guidelines for configuration management

ISO 10012:2003

Measurement management systems – Requirements for measurement processes and measuring equipment

ISO/TR 10013:2001

Guidelines for quality management system documentation

ISO/TR 10014:1998

Guidelines for managing the economics of quality

ISO 10015:1999

Quality management – Guidelines for training

ISO/TR 10017:2003

Guidance on statistical techniques for ISO 9001:2000

ISO 10019:2005

Guidelines for the selection of quality management system consultants and use of their services

ISO 19011:2002

Guidelines for quality and/or environmental management systems auditing

Source: adapted from http://www.iso.org/iso/en/CatalogueListPage

ISO 9000:2000 standard describes fundamentals of quality manage ISO 9000:2000 standard’s ment systems, which form the subject of the ISO 9000 family, and contents defines related terms. This International Standard is applicable to the following: • organizations seeking advantage through the implementation of a quality management system; • organizations seeking confidence from their suppliers that their product requirements will be satisfied; • users of the products; • those concerned with a mutual understanding of the terminology used in quality management (e.g. suppliers, customers, regulators);

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• those internal or external to the organization who assess the quality management system or audit it for conformity with the requirements of ISO 9001 (e.g. auditors, regulators, certification/registration bodies); • those internal or external to the organization who give advice or training on the quality management system appropriate to that organization; • developers of related standards. ISO 9001:2000 (intended for certification) specifies requirements for a quality management system where an organization: • needs to demonstrate its ability to consistently provide product that meets customer and applicable regulatory requirements, and • aims to enhance customer satisfaction through the effective applica tion of the system, including processes for continual improvement of the system and the assurance of conformity to customer and applicable regulatory requirements. ISO 9004:2000 provides guidelines beyond the requirements given in ISO 9001 in order to consider both the effectiveness and efficiency of a quality management system, and consequently the potential for improvement of the performance of an organization. When compared to ISO 9001, the objectives of customer satisfaction and product quality are extended to include the satisfaction of interested parties and the performance of the organization. The focus of this International Standard is the achievement of ongoing improvement. This International Standard consists of guidan ce and recommendations and is not intended for certification, regula tory or contractual use, nor as a guide to the implementation of ISO 9001. One of the most interesting of complementary standards – however rarely mentioned in literature – is ISO 10002:2004 which provides guidance on the process of complaints handling related to products within an organization, including planning, design, operation, main tenance and improvement. The complaints-handling process described is suitable for use as one of the processes of an overall quality manage ment system. Annex A provides guidance specifically for small busi nesses. ISO 10002:2004 addresses the following aspects of complaints handling: • enhancing customer satisfaction by creating a customer-focused environment that is open to feedback (including complaints), resolving any complaints received, and enhancing the organization's ability to improve its product and customer service;

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ISO 9001:2000 requirements

ISO 9004:2000 as a way to continuous improvement

ISO complementary standards

• top management involvement and commitment through adequate acquisition and deployment of resources, including personnel training; • recognizing and addressing the needs and expectations of complai nants; • providing complainants with an open, effective and easy-to-use complaints process; • analysing and evaluating complaints in order to improve the product and customer service quality; • auditing of the complaints-handling process; • reviewing the effectiveness and efficiency of the complaints-handling process. ISO 10002:2004 is not intended for certification but constitutes a kind of assistance for those managers who look for some sophistica ted solutions.

11.3. ISO 9000 as a Route to Implementing TQM Up to the present total quality management (TQM) seems to be the most advances system which can finally guarantee real quality improve ment to the companies. The main disadvantage of TQM is the lack of any clear requirements and directions, which could be used by managers for audits, which would enable external conformance assessment etc. It was intended that ISO 9000 series is to overcome the above mentioned shortcomings. The development and application of a QMS conforming to ISO 9001 should help companies to better organize and synchronize their operations by: • documenting their processes, • clearing out ambiguities, • and clearly defining duties and responsibilities among employees and departments, thus enabling them to construct the clear and effective customer oriented system. ISO 9001 The principles of ISO 9000 family (see below) are as close as possible principles close to to the philosophy of TQM. The greatest and most important advantage TQM philosophy of ISO standards lies in the fact that they introduce a preventive way of managing quality, focusing mainly on the prevention of errors, rather than their later detection and correction, which was the focus of the traditional "quality control". It emphasises also the significance of interpersonal relationship in the service process and human influence on the service quality. Despite the intentions there is a general confusion and uncertainty regarding the effectiveness of ISO management system standards and

lack of requirements as TQM’s disadvantage

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their long-term contribution to the companies. Quite a lot of managers and researchers doubt whether ISO 9001 can really serve as the path to professional quality management systems, especially TQM. This dilemma regards the degree to which the development and certification of a quality assurance system, according to the ISO 9000 series of standards, can finally guarantee real quality improvement to the companies that apply it. The pessimistic view (Corrigan, 1994, Henkoff, 1993, Johannsen, 1995, Stephens, 1994) is based on the fact that companies focus mainly on quick and easy certification, without real commitment to quality. This may result in the development of a static system, which increases bureaucracy and reduces flexibility and innovation, without guaranteeing real and continuous improvement of products and processes and improved satisfaction of the customer, who is finally the only judge of quality. Also, the standards can not guarantee efficiency22, since the processes are not necessarily evaluated for their efficiency before they get documented, while they also do not include any operational or other business results in their requirements. “Even more, it is claimed that in cases of bad implementation, the company is more likely to move one step backwards instead of forwards, because of the general disappoint ment and resentment caused to the employees by the excessive bureau cracy and workload.” (Gotzamani and Tsiostras, 2001). The optimistic view is mainly based on the fact that the standards offer a well-structured tool to “start with quality”, making much easier top management’s commitment to it. In strictly operational sense QMS conforming ISO 9001: • decrease the gap between the current quality management environ ment and TQM for the majority of the companies, • offer a shift in focus from the final products (services) to the processes that produce these products (services), • improve internal organization and operation, • ensure a more effective and uniform communication throughout the company, • increase employees' awareness in quality issues, • lower quality variations and quality related costs, • increase customers' satisfaction and trust to the company • encourage continuous improvement through regular and imperative quality audits. 22

In fact ISO 9004 standard includes the efficiency requirement. Regretfully the majority of enterprises concentrate only on ISO 9001 requirements as it is the only standard in ISO 9000 family intended for certification.

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shortages of ISO 9001 standard

ISO 9001 standard’s advantages

determinants for standard success

8 quality management principles according to ISO 9000 family

It is also claimed that although the shortages of ISO 9001 standard compared to TQM are far too many, the conscientious and consistent implementation of their fixed and clear requirements can offer a good first step towards TQM, for which no formal requirements exist. Even more, the quality assurance system, when properly implemented by the companies, represents a sub-system of TQM, while its final certification increases responsibility and commitment to quality. The key determinant for standards success is the depth to which a company desires to proceed in satisfying their requirements. Those companies limiting their efforts to the satisfaction of the minimum necessary requirements for certification, will not be able to realize the full potential of the standards and are likely to fail. “On the contrary, companies can really benefit from the process if they see the standards as an opportunity to organize and improve their internal operations and quality, by creating a dynamic and ever-improving quality system that may evolve in a TQM system. The real benefits can be realized only when the companies that apply them truly understand both their capabilities and their limits.” (Henkoff, 1993). The basic arguments of both the views are mainly based on personal assertions and isolated experiences of certified companies – there is the lack of formal empirical research on this issue. What can be of interest to the tourism sector (dominated by micro-enterprises), the standard's contribution was found to be higher for SMEs. However the companies' efforts after certification should focus more on the "soft" elements of TQM, like HRM, leadership, suppliers' relations and customer focus, as they proved to be the ones with the lowest performance improvement from certification. This notice can be explained by the fact that the majority of companies covered by the studies were certified according to the requirements of the old ISO 9000 family. Only few of them had a possibility to conform to the new ISO 9000 series23, which addresses these “soft” quality issues. The quality management system standards of the revised quality management series are based on the eight quality management princi ples (ISO 9000:2000): 1. Customer focus. 2. Leadership. 3. Involvement of people. 4. Process approach. 5. System approach to management. 6. Continuous improvement. 23

The revision took place in 2000.

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7. Factual approach to decision making. 8. Mutually beneficial supplier relationships. These principles can be used by senior management as a framework to guide their organisations towards improved performance. They are all defined in two ISO’s standards: ISO 9000:2000, Quality management systems – Fundamentals and vocabulary and in ISO 9004:2000, Quality management systems – Guidelines for performance improvements. Principle 1 – Customer focus comes from the simple and obvious notice that organisations depend on their customers and therefore should meet customer requirements and strive to exceed their expectations. Customer focus stresses also the need to measure customer satisfaction and to act on the results as well as to communicate customer needs and expectations throughout the organisation. Customer focus should however ensure a balanced approach between satisfying customers and other interested parties (owners, employees, suppliers, financiers, local communities and society as a whole). Principle 2 – Leadership – establish unity of purpose and direction of the organisation. Top management is required to generate a condu cive environment to enhance the development of the system. Good quality service does not happen by accident it occurs as a result of planned and intelligent effort. The key benefit of the principle is better understanding of the organisation’s goals by the employees as well as better possibility of motivating people towards these goals. Principle 3 – Involvement of people – stresses that people at all levels are the essence of an organisation and their full involvement enables their abilities to be used for the organisation’s benefit. Applying this principle will ensure motivated, committed and involved people within the organisation as well as innovation and creativity in furthering the organisation’s objectives. Total commitment is essential – there must be an uncompromising commitment to maintain or improve the quality level, starting with the most senior management and floor downwards”. Involvement of people makes them: • understand the importance of their contribution and role in the organisation, • identify constraints to their performance, • accept ownership of problems and their responsibility for solving them, • evaluate their performance against their personal goals and objectives, • actively seek opportunities to enhance their competence, knowledge and experience, • freely share knowledge and experience, • openly discuss problems and issues.

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customer focus

leadership

involvement of people

Principle 4 – Process approach enables an organization to lower the costs and to short cycle times through effective use of resources, improve, consistent and predictable results and focus improvement opportunities. A process in an organization refers to “a group of logically related tasks (decisions and activities) that, when performed, utilize the resources of the business to produce definitive results” (Kane, 1986). Any process must yield a product/service; any product/service is the outcome of a process (Zarafian, 1987). Here are some common place criteria to distinguish between processes and activities (adapted from Briffaut, Saccone, 2002): • a process can aggregate several activities controlled by different departments (matrix organisation); • a process can be viewed as a chain reaction of interrelated activities triggered by an external event (complaints office); • a process can be considered as chained activities organised to reach a goal (market- or product-oriented organisation, retailing channels); • a process can be defined in relation to suppliers and customers. system approach Principle 5 – System approach to management – means improvement of the organization’s effectiveness in achieving its objectives through identifying, understanding and managing interrelated processes as a system. Management system should be structured in such a way that it enables the achievement of the organization’s objectives in the most effective and efficient way. It involves understanding of the inter dependencies between the processes of the system as well as roles and responsibilities necessary for achieving common objectives and thereby reducing cross-functional barriers. Principle 6 – Continuous improvement. Continual improvement of continuous improvement the organization’s overall performance should be a permanent objective of the organization. Applying the principle of continual improvement typically leads to (www.iso.org): • employing a consistent organization-wide approach to continual improvement of the organization's performance, • providing people with training in the methods and tools of continual improvement, • making continual improvement of products, processes and systems an objective for every individual in the organization, • establishing goals to guide, and measures to track, continual improvement, • recognizing and acknowledging improvements.

process approach

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Principle 7 – Factual approach to decision making means that effective decisions should always be based on the analysis of data and information. Applying this approach the organization gets an increased ability to demonstrate the effectiveness of past decisions through reference to factual records as well as to review, challenge and change opinions and decisions. In order to apply the principle an organization should ensure that data and information are sufficiently accurate and reliable, accessible to those who need it (www.iso.org). Principle 8 – Mutually beneficial supplier relationships. According to the principle an organization and its suppliers are interdependent and a mutually beneficial relationship enhances the ability of both to create value. Applying principle 8 an organization gets an increased ability to create value for both parties as well as flexibility and speed of joint responses to changing market or customer needs and expecta tions (optimization of costs and resources). This can be done through establishing relationships that balance short-term gains with long-term considerations, pooling of expertise and resources with partners, identi fying and selecting key suppliers, clear and open communication, sharing information and future plans, inspiring, encouraging and recognizing improvements and achievements by suppliers. The new ISO 9000:2000 standards for quality management systems reflect some of these advancements and higher demands. For example, instead of the sole emphasis being on the customer needs and expec tations, all stakeholders are now concerned, including customers, suppliers, managers, employees, local community and society, in general (Karapetrovic, Willborn, 2002). Such developments continue to challenge quality practitioners to “master additional, modern, total quality management approaches and integrate them into management methods” (Andersen, 2000). Only those professionals “who understand that quality is derived from effectively managing systems will (be able to) provide leadership in the new millennium” (Chong, 2000).

factual approach to decision making

mutually beneficial supplier relationships

12. Registration to ISO 9001 12.1. International Standardization Standards make an enormous contribution to most aspects of our lives – although quite often their contribution is invisible. People usually realize the importance and the necessity of standards when there is ISO standards’ a lack of them. That is why usually we are unaware of the role played contribution to by standards in raising levels of safety, reliability, efficiency and everyday life

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interchangeability – as well as in providing such benefits at an econo mical cost (www.iso.org). International Standards provide a reference framework, or a common technological language, between suppliers and their customers – which facilitates trade and the transfer of technology. Table XII contains some examples of international standards that have been widely adopted, giving clear benefits to industry, trade and consumers. The widespread adoption of International Standards means that suppliers can base the development of their products and services on specifications that have wide acceptance in their sectors. This, in turn, means that businesses using International Standards are increasingly free to compete on many more markets around the world. Table XII: Examples of International Standards • film speed code, • standardization of the format of telephone and banking cards, • the internationally standardized freight container, which enables all components of the transport system (air and seaport facilities, railways, highways, packages) to interface efficiently, • m, kg, s, A, K, mol, cd – are the symbols representing seven base units for the universal system of measurement known as SI (it is covered by a series of 4 International Standards), • paper sizes (A4, B5 etc.), • symbols of automobile controls, • international codes for country names, currencies and languages, which help to eliminate duplication and incompatibilities in the collection, processing and dissemination of information. Source: www.iso.org.

main advantages The worldwide compatibility of technology which is achieved when of international products and services are based on International Standards brings an standardisation increasingly wide choice of offers. Customers benefit from the effects of competition among suppliers. For governments, International Standards provide the technological and scientific bases underpinning health, safety and environmental legislation. There are also important benefits for developing countries. By defining the characteristics that products and services will be expected to meet on export markets, International Standards give developing countries a basis for making the right decisions when investing their scarce resources and thus avoid squandering them. Conformity of products and services to International Standards provides assurance about their quality, safety and reliability. Internatio nal Standards on air, water and soil quality, and on emissions of gases 144

and radiation, can contribute to efforts to preserve the environment. Extraordinary example of International Standard that contributes to sustainable development, and is applicable to all fields of activity (including tourism) and related services, is the ISO 14000 series of environmental management standards.24 The importance of International Standards is growing and is fuelled by such trends as increased globalization, the convergence of techno logies, and societal demand for quality, safety, consumer confidence, environmental protection and sustainable development.

12.2. Rules and Motivation for Registration to ISO 9001 The service sector and in particular, the tourism industry is beginn ing to appreciate the added value that the application of standards can bring to the business. In this respect, the ISO 9000 series of standards for QMS offer a powerful tool to raise quality and to improve mana gement of all types and sizes of organizations in this sector. There are numerous reasons why many companies are now developing their quality systems. However do they have to implement �� a system based on ISO 900�� 1 standard? Some managers take up such decision because of incorrect reasons. They need a nice certificate hanging on the wall, they want to make reference to the standard on company headed paper. Quite often they need to get the kitemark symbol on the company’s product, desperately try to retain existing customers; or just hope to enforce discipline on employees (making use of some fear of external audits). They naively believe that after a short and rough certification procedure their enterprise will get a certificate which can be used as panacea for all the problems. Small firm registration is often something they feel compelled to do in order to stay on preferred supplier lists. Additional reason might be some pressure from large customers. It is not a good reason as it does not come from the company’s own conviction that system needs to be restructured. However, large customers pressure sometimes may occur to be a good starting point for the revision of company’s inside procedures and final results. In fact implementation of any quality system makes sense only in case the system is companywide and QMS principles are taken seriously. 24

In particular, the ISO 14001 and ISO 14004 standards provide a model describing how organizations should establish environmental policies, objectives, target, and programs. It details how an organization should analyze its business processes, products and services that may impact on the environment and specifies the implementation of processes to control and improve operational activities that are critical to environmental performance.

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standard implementation or registration

reasons for registration

ISO standards versus our own way

ISO 9001 standard as a model to follow

With such an attitude, the companies are less likely to understand the standard and commit to continuous improvement. Getting a certifi cate quickly becomes an ultimate goal but misunderstanding of the requirements of the standard as well as ignorance of the real potential costs and benefits involved in the ISO 9000 system development and implementation prior to certification inflates expectations of many firms which cannot be met by the reality. Failure to implement the standard for the right reasons may prevent companies from gaining potential benefits from the system. Consequently, these businesses are unhappy with their performance. In order to overcome all the above mentioned reasons for poor performance, companies are to look for the efficient management system. Why do they choose ISO 9001 standard then? Why don’t they look for their own way? The first reason for choosing ISO standards instead of building up company’s own management concept is convenience. The ISO 9000 standards are based on the concept that certain minimum characte ristics of a quality management system could be usefully standardized, giving mutual benefit to suppliers and customers alike. The major purpose of these standards is to provide an effective quality system reflecting a company’s practices of producing goods and services that conform to specified requirements in order to enhance and facilitate trade. Instead of building, testing and correcting its own quality system, an enterprise can use a ready “prescription”, modifying it according to its own needs. In a very small organization, there is probably no “system”, as such, just “our way of doing things”, and “our way” is probably not written down, but all in the head of the manager or owner head. The larger the organization, and the more people involved, the more the likelihood that there are some written procedures, instructions, forms or records. These help ensure that everyone is not just “doing his or her own thing”, and that the organization goes about its business in an orderly and structured way, so that time, money and other resources are utilized efficiently. Large organizations, or ones with complicated processes, could not function well without management systems. To be really efficient and effective, the organization can manage its way of doing things by systemizing it. This ensures that nothing important is left out and that everyone is clear about who is responsible for doing what. Management system standards provide the organization with a model to follow in setting up and operating the management system. This model incorporates the features on which experts in the 146

field have reached a consensus as representing the international state of the art. A management system which follows the model – or “conforms to the standard” – is built on a firm foundation of state-ofthe-art practices. The ISO 9000 family now makes these successful practices available for all organizations when it comes to meeting their objectives concerning quality and the environment. Management system based on ISO 9001 provides the same benefits as any other own-made quality system. However there are some additional reasons for implementing the ISO standard and getting the certificate. They are: • advantages accruing from the result of having a quality system that has been independently assessed (customers are much less likely to act on their own special assessments thus saving everyone’s time and money, the need for customer-supplier demonstrations of quality assurance is reduced due to a third-party quality assurance certificate), • reduced need for auditing of the quality system by customers, • an open way to foreign markets by ensuring that ISO 9000 is compatible with EEC and US quality procedures, • a good marketing tool – the certification marks and symbols can be used on publicity, packaging and company literature, • confidence coming from knowing that QMS system is under independent surveillance, • in some countries the company's name appears in the national register of quality assessed companies, • better document control leads to improved communication with customers, suppliers and internally in the factory. Before a company registers to ISO 9001 (before it is certified) its QMS has to be assessed for conformity against ISO 9001 standard. “Conformity assessment” means checking that products, materials, services, systems or people measure up to the specifications of a relevant standard. Certification against ISO standards is not compulsory and a company can implement ISO 9001 without external auditing and certification. Like all ISO standards management system standards are voluntary. Deciding to have an independent audit of QMS to confirm that it conforms to ISO 9001:2000 is a decision to be taken on business grounds, for example – if it is a contractual or regulatory requirement, – if it is a market requirement or to meet customer preferences, – if it falls within the context of a risk management programme, – if it will motivate employees by setting a clear goal for the develop ment of QMS. 147

value added of registration against ISO standards

conformity assessment

internal benefits

certification process

certification body

accreditation and accreditation body

Organizations can implement QMS solely for the internal benefits they bring in increased effectiveness and efficiency of operations, without incurring the investment required in a certification programme. However you should keep it in mind that without a certificate even the most tremendous and effective system will not be able to communicate in short and simple way that it measures up to the specifications of ISO 9001 standard. It does not influence the effectiveness of QMS itself but means the loss of a very powerful marketing tool. ISO itself does not carry out conformity assessment nor issues certificates of conformity, however it worked out special standards aimed at unification of auditing and consultancy processes (ISO 10019:2005). According to those standards conformity assessment (which is the basis for certification) can be carried out by so called certification (registra tion) bodies. What is then a certification process and who can become a certifica tion body? Both the ISO 9000 and ISO 14000 families contain a single “certification” standard. In case of QMS it is so often mentioned ISO 9001 standard. Certification refers to the issuing of written assurance (the certificate) by an independent, external body that has audited an organization’s management system and verified that it conforms to the requirements specified in the standard. The auditing body then records the certification in its client register and the procedure is called registration. For practical purposes, in the ISO 9001:2000 contexts, the difference between the two terms is not significant and both are acceptable for general use.25 Likewise, the bodies that issue ISO 9000 certificates are referred to in some countries as “certification bodies” and in others as “registration bodies” or “registrars”. The certification/registration body is independent from the customer and supplier and thus called the “third party” as it represents neither your company nor the customers. In some countries in order to become authorized to certify other companies, a certification body needs to be accredited. In most countries, accreditation is a choice, not an obligation and a certification body operating nationally in a highly specific sector might enjoy such a good reputation that it does not feel there is any advantage for it to go to the expense of being accredited. However many certification bodies choose to seek accreditation, even when it is not compulsory, in order to be able to demonstrate an independent confir mation of their competence. 25

One term is preferred over the other depending on the country. “Certification” seems to be the term most widely used worldwide, although registration is often preferred in North America.

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In the ISO 9001:2000 or ISO 14001:2004 context, accreditation refers to the formal recognition by a specialized body – an accreditation body – that a certification body is competent to carry out ISO 9001:2000 or ISO 14001:2004 certification in specified business sectors. Certificates issued by accredited certification bodies – and known as “accredited certificates” – may be perceived on the market as having increased credibility. More than 360 000 organizations worldwide have been certified to an ISO 9000 and/or ISO 14000 standard. ISO 9000 and ISO 14000 certification is carried out independently of ISO by more than 720 “certification” or “registration” bodies active nationally or internatio nally. The ISO 9001:2000 and ISO 14001:2004 certificates issued by certification bodies are issued under their own responsibility and not under ISO’s name. That is the reason to be very careful when choosing the certification body. It is worth to evaluate several certification bodies and bear in mind that the cheapest might prove to be the most costly if its auditing is below standard, or if its certificate is not recognized by customers. It is also necessary to establish whether the certification body has auditors with experience in your business sector and to follow the publication of the ISO 9000:2000 series in order to establish whether the certification body has integrated the evolution in the focus of the standards from conformity to performance. Another point to clarify is whether or not the certification body has been accredited and, if so, by whom. Of course the fact that a certifica tion body is not accredited does not, by itself, mean that it is not a reputable organization. “ISO Directory of ISO 9001:2000 or ISO 14001:2004 accreditation and certification bodies” might be useful as it contains the list of certification bodies in the majority of countries as well as information about the geographical extent of their operation. There is a lot of certification bodies operating multinationally26, across accreditation national boundaries regardless of the country where their headquarters bodies operating are located, or of their accreditation status at home or abroad. 27 multinationally Certification process in such a body might be costly but such certificate represents much stronger marketing tool as the name and logo of the

For example: British Standards Institution (BSI), Bureau Veritas Quality International (BVQI) Headquartered in Manchester, UNITED KINGDOM), KEMA, Lloyd’s Register Quality Assurance Ltd (LRQA), TÜV Cert. 27 Even if your company’s system has been certified by such a body you must remember that there is no ISO mechanism governing the mutual recognition of registration certificates delivered by third-party bodies to companies who’s QMS or EMS has been assessed.

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certification body is widely known and recognizable. It is especially important when your company intends to operate on foreign markets. the logo of ISO Upon certification, many organizations turn to ISO to request use of “the ISO 9000 logo”. No such ISO logo exists. There is only the ISO logo itself, which is a registered trademark. Unless authorized by ISO, use of its logo is prohibited. ISO will not allow its logo to be used in connection with the certification of management systems, even when these certifications attest conformity to ISO 9001:2000 or ISO 14001:2004. Another misleading practice is giving the false impression that ISO no ISO labelling 9001:2000 is a product quality label, or that ISO 14001:2004 is a label signifying a “green” or “environmentally friendly” product. This is not so. They are not product standards. Every hotel can work out its own equipment or service standards (which cannot be certified according to any ISO standard as ISO has no standards for hotel services) and at the same time conform to ISO quality system standard and apply for the conformance assessment and the certificate of conformance. Such certificate is not a guarantee of hotel services quality. The only thing it signifies is the conformance to quality management requirements of ISO 9001. The objective of the certificate is to give the organization’s management and its customers confidence that the organization is in control of the way it does things.

12.3. ISO 9001 in Tourism

reasons for reluctance towards ISO 9001 in tourism

Despite the growing popularity and increasing numbers of ISO 9000 certified companies across many public and private sectors in the global economy (Ho, 1999, Holland, 1996), the standard has not found many advocates within the tourism sector (Handszuh, 1996). Indeed there is some reluctance and sometimes resistance on the part of public and private tourism organisations towards ISO 9000. Many of them generally reject ISO 9001 as a standard irrelevant for this sector, being sure that the ISO 9000 standards were written with the manufacturing sector in mind. In fact the latest revision of ISO 9000 family (in the year 2000) among others was undertaken in order to enable implemen tation of the standard in service companies. This negative image of ISO 9000 prevailing within the tourism sector seems to be justified in view of two facts (Augustyn and Pheby, 2000).�� First, �� the knowledge of the standard is superficial and existing research findings encourage the sector to reject the standard on the grounds of its irrelevance to the tourism sector. As a result, ISO 9000 is not promoted as a tool for business excellence and there is a lack of 150

awareness of the standard and its potential benefits within tourism. Consequently, there are very few tourism companies ISO 9000 registered, which in turn discourages undertaking research within this area. Figure XXIII: ISO 9000 and tourism: the vicious circle effect Irrelevavant: reject Not promoted

Superficial knowledge

ISO 9000: TOURISM Lack of awareness reject

Limited research

Few companies registered Source: Augustyn and Pheby (2000).

Second, there is a general polarisation of views as to the impact of ISO 9000 on business performance, which makes it difficult for those within the tourism industry who want to learn more about the standard and its potential benefits. There is also one more reason for rejecting ISO 9001 as the branding tool â&#x20AC;&#x201C; lack of understanding of the standard by the general public (individual customers). This can probably explain why tourism industry searches for a new, internationally recognized quality standard that would be more applicable for the sector and improve its performance (WTO, 2004). Since the beginning of 2004, three separate ISO members from different points of the globe have contacted the ISO Secretary-General expressing interest in developing International Standards for tourism services. The areas for work that each has proposed under a new Technical Committee structure are Eco-tourism, Exhibition terminology and audit procedures, and Tourism as a whole. (Handszuh, 2004). It is worth noting that the World Tourism Organization already acts in a formal liaison organization to ISO/TC 145/SC 1 â&#x20AC;&#x201C; Public information symbols and TC 154 Processes, data elements and documents in commerce, industry and administration. In addition, other related standards may be of interest to the World Tourism Organization; one example is ISO/IEC

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polarisation of views as to the impact of ISO 9000 on business performance

the role of WTO in promoting ISO standards in tourism

7501 Identification cards – Machine readable travel documents. ISO has a number of Technical Committees with work programmes impacting on tourism (ISO/TC 42 Photography, TC 68 Financial services, ISO/TC 204 Intelligent transport systems, TC 177 Caravans, TC 83 Sports and recreational equipment, TC 188 Small craft). tourism standards In 2001 ISO/COPOLCO28 resolved to develop generic guidelines for on the COPOLCO standardization of services, and to identify consumer priorities in the forum standardization of two specific areas: financial services and tourism. Particularly in the area of tourism, preliminary investigations revealed a strong interest in standardization of tourism services and an abun dance of existing national standards. COPOLCO agreed that input from industry operators was necessary in developing feasible proposals for standardization of tourism services. Further research by COPOLCO specialists led them to contact representatives from other tourism‑related organizations (e.g. Rainforest Alliance, Swiss Tourism Associa tion, World Tourism Organization, International Hotel and Restaurant Association). Exchange of information between ISO/COPOLCO consumer representatives and representatives from the hospitality industry has been fruitful. Input from representatives of the hospitality industry, notably by a representative of the International Hotel and Restaurant Association (IH&RA), has helped COPOLCO focus on priority areas of tourism standardization. In September 2003, COPOLCO identified the following subjects as both important for consumers and conducive to standardization: hygiene, sustainable tourism, safety (particularly concerning child and fire safety) and accessibility (including “design for all” concepts). More specific to tourism is the proposal for the creation of a technical committee that will shortly be circulated to ISO members for vote. The proposed new field of activity covers terminology and specifications for 28 �� COPOLCO is the Committee on Consumer Policy of ISO, established in 1978.

It provides a forum for the exchange of information and experience on standards and conformity assessment issues of interest to consumers, identifies standardization areas of priority interest to consumers and works to promote and coordinate consumer representation in those areas. It influences ISO’s programme of work by proposing new areas for standardization where there is a perceived need for enhanced consumer protection. In response to COPOLCO proposals, ISO has undertaken standards projects on: customer satisfaction, including guidance for organizations on how to develop codes of conduct, complaints handling mechanisms, and external customer dispute resolution systems, environmental management systems, social responsibility, tourism and related services, generic guidelines to address the trading of second hand goods, especially safety, health, environmental protection and product information aspects.

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tourism related services. The aim is to establish criteria that may assist users and consumers in making informed purchasing decisions in this important sector and assist providers in implementing good practices as well as in communicating the services they offer. The work is proposed to cover a broad range of tourism related areas including: terminology, accommodations, convention organization, tourist information offices or sustainable tourism services. Some sub-sectors have already been identified as being key for this technical committee, such as sustainable tourism and horizontal aspects already identified by the ISO Committee on consumer policy as priorities for the users of tourism services. A related, yet narrower field of proposed new work concerns “Exhibition Terminology”. This proposed work is currently out for vote by the ISO membership. The work is intended to develop standardized terminology that can facilitate objective dialogue with and assessment of exhibition management services and activities. The ISO 9000 and ISO 14000 series of standards have been success fully used in a variety of different service areas, including financial and tourism services, to improve the overall quality of service delivery. Actual case examples of hospitality industry providers benefiting from ISO 9000 and ISO 14000 certification include German tour operators and fair organizers, hotel and catering associations and hotels in France, hotels in Singapore and Malaysia, and an airline catering service in Singapore. The Italian ISO member has published handbooks providing guidance on implementation of ISO 9000, and later ISO 14000, in the hotel and tourism sector. Other examples include parks in Italy and Ecuador, and the administration of island tourist destinations in Italy and South Korea29. Of the 561 747 organizations certified to ISO 9000 worldwide at the end of 2002, 123 128 were providers of services. Hotels and restaurants accounted for 1840 of these certifications30. Beyond the World Tourism Organization, ISO’s collaboration with the United Nations System also extends to many other agencies and bodies such as the World Trade Organization (observer status); UNIDO; the International Trade Centre; UNCTAD; ILO; WHO; UN/ECE as well as other key non-governmental international agencies and organi zations (e.g. ICC, WBCSD, WEF). As a worldwide and impartial body, the World Tourism Organization WTO consensus is currently contemplating to come up with WTO consensus standards standards for the for the tourism sector. Several intervention areas such social sustain tourism sector ability and cultural resources, safety and security, or the environment are being taken into account, to be applied to tourist destinations or 29 30

ISO Management Systems, ISO 9000 & ISO 14000 News, 1998–2003. The ISO Survey of ISO 900 and ISO 14001 certificates.

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companies. Eventually, WTO might become an accreditation body for third parties willing to go by its standards at the request of interested suppliers (second parties). The same way as it applies to certifying other international standards, the system would be entirely voluntary.

13. Standards as a Communication Tool

the need to communicate quality

tourists’ need for advice and reliable information

Striving for quality in tourism has an intrinsic value. It provides economic benefits even if it is not automatically accompanied by tourism growth in numerical terms, it ennobles the tourism environment, including the social one. It brings better quality of life for all: those who visit and buy tourism services, those who constitute the tourism environ ment, and those who are employed by tourism companies and tourismsupporting infrastructure. So it is worthwhile to invest in quality even if it does not reap immediate commercial benefits. However, it is also necessary to be able to communicate quality in the competitive and rapidly changing world of today in order to win the competition edge and achieve returns from investment in quality. Quality has to be communicated to potential consumers to reward the effort. The annual holiday or even the weekend break is increasingly associated with enormous financial and emotional risk. In western society time has become a scarce commodity, particularly for double income families. Therefore, for many consumers their holiday repre sents a major emotional investment that cannot easily be replaced if something goes wrong. Travellers at present can acquire information from a wide variety of sources. Traditionally touristsexpect this infor mation, among others, from travel agents. But the Internet – the World Wide Web and browser technology – has brought a major change both on the quantity of information to which tourists have access and in the sophistication with which this information can be manipulated. The information technology also facilitates the integration of tourism information from multiple sources, both local and remote, into perso nalised packages and itineraries. Regretfully the information on the Internet is badly organised and unstructured. There is an information overload. And it is time-consuming for a customer to access and assess the required information and assemble it into a personalised holiday. Nevertheless research has shown that electronic commerce and the Internet are rapidly devaluing the traditional roles of travel agents – information delivery and transaction processing. At the same time, the explosion in available travel information on the Internet has increased

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the tourist’s need for advice and critical assessment of product and destination information, as well as assistance in making a suitable choice based on a clear understanding of their preferences. As a consequence the service expected from the travel agent of the future will move more into assessing the reliability, quality and appropriateness of the retrieved information, obtained from the Internet and other physical sources and conveying it, together with appropriate advice, to the customer in a clearly understandable form. There are also some other factors that influence expectations (past experiences, other customers opinion, the promises with booking, the image and the principle of equity etc.). The process by which customers evaluate a service varies from the corresponding process used to evaluate goods. As stated before services are generally seen to be high in experience and credence qualities whereas goods are high in search qualities. Because of the complexity of tourism services outlined earlier, experience qualities and to a lesser degree, credence qualities are particularly relevant features of the tourism product (or TDA). This feature has implications for the form of communication which should be adopted by tourism areas and its agents. The literature suggests that potential customers will be more influenced by WOM communication and expert comment rather than, for example, mainstream media advertising (Zeithaml et al., 1993). One potentially negative feature of this form of communication is the fact that positive WOM communication can elevate the levels of desired and predicted service. In turn this may contribute to the development of gaps where expectations become unrealistic. While management has control over mainstream advertising, publicity and word of mouth are blunter instruments. Customers who have enjoyed their visit to a chosen TDA may be prone to exaggerate aspects of the resort when talking to friends, thereby increasing the expectations of these groups in the event that they visit the area. Consumers face risk when making a purchase decision, due to the uncertainty attached to the outcome of the decision. The dimensions of perceived risk usually considered are: financial; performance; physical; social; time; and psychological (Jackoby, Kaplan, 1972). Garner (1986) applies these risks to services (Table XIII). To minimize these risks, consumers seek to reduce the uncertainty surrounding the purchase decision (Mangan and Collins, 2002). Different forms of information can be used by enterprises as risk reducing strategy. They include the use of brands, symbols, quality levels etc. According to Handszuh (2004) assuring, symbolizing and identifying quality include the following possibilities: Classification (category, class, grade, rating) – which relates basically to physical attributes of the establishment. Attributing an

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risk perceived by tourists

possibilities of symbolizing quality

establishment or service to a certain class does need to automatically carry the characteristics of quality, although it may give rise to the expectations of such especially when it comes to a higher class establishment (e.g. a 5-star hotel). Table XIII: Types of perceived risk Risk Financial Performance Physical Time Social Psychological Political (in tourism)

The risk that the service purchased will not achieve the best possible monetary gain for the consumer The risk that the service purchased will not be completed in the manner which will result in customer satisfaction. The risk that the performance of the service will result in a health hazard to the consumer. The risk that the consumer will waste time, lose convenience or waste effort in getting a service redone. The risk that the selection of the service provider will negatively affect the perception of other individuals about purchaser. The risk that the selection or performance of the producer will have a negative effect on the consumer’s peace of mind or selfperceptions. The risk that some political disturbances will result in a life hazard to the customer. The type of risk became especially important after Sept. 11th.

Source: adapted from Garner (1986) and Leidner (2004).

It however appears that classification, whether official or private, is not sufficient to ensure and communicate quality. The complementary approach, currently developed and applied in Spain in the hotel sector for example, is to assign specific quality standards to hotel categories. Brands (trademarks) – can replace classification whereby each brand may stand for a specific class and include a series of quality attributes. Accordingly, a brand may be representative of a certain service idiom and level of quality. Commercial brands are protected by intellectual property rights. Nevertheless, even branded companies and facilities are eager to consolidate their quality idiom by recurring to additional means such as certification. The case of a well-known Spanish hotel chain, Sol Meliá, can be quoted as an example of this approach. quality labels in Quality labels – A tourism establishment or service may obtain tourism a quality label or distinction by meeting the standards established by its own professional or trade organization, or the organization it joins for this purpose, or an external organization conceding such distinction on its own right. Many such quality-related labels have been in place for 156

many years already, and some enjoy good reputation worldwide. In addition to suggest quality, they may also stimulate the sector to promote quality. The national quality labels are just starting in various places (Spain, Switzerland). Their effectiveness will be checked over time. Because of the national scale they imply both hopes for large sector improvements but they also carry great risks in their acceptance and interpretation. Certification. Subjecting tourism establishments to certification can be considered as a new force driving the tourism sector into a higher level of excellence and competitiveness. Some tourism establishments, especially hotels, begin to display certification insignia thus alluding to guarantee quality. This gives rise to questions in both industry and the public with respect to the actual value of certification for management and quality assurance. Four types of certification are in place: system certification, service certification, product certification, and personnel certification. System certification in tourism may include ISO 9000, ISO 14000, SA 8000, HACCP, Green Globe, which end result is “quality of the organization against specific criteria”. It appears therefore that undergoing this type of certification does not necessarily promise all quality of service or the product, but can be useful to correct a number of usual deficiencies and thus indirectly ensure better quality plus important economic savings. Some tourism establishments, especially hotels, have begun to display certification insignia (especially according to ISO 9000/2000 and 14000 family standards) thus alluding to guarantee quality. ISO standards, so far, refer to management certification to support quality. Certification does not intervene in the quality level. This is established by the company itself. It does not even provide for management excellence. Certification is therefore a starting point of a whole process aiming at streamlining a company’s operations. The issue is again communication. The user may not know what certification is up to, but it may be important to make it known because other commercial partners may so request (e.g. tour operators may ask for hotel certification) or the company may try to dissipate uncertainty about its quality status and reputation, or the company believes that it will enhance its image and competitive advantage vis-à-vis both users and other companies. In any case, going by quality parameters and standards and subjecting tourism establishments to certification can be considered a new force driving the tourism sector into a higher level of excellence (Handszuh, 2004).

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certification in tourism

types of certification in tourism

PART FOUR: CONTINUOUS IMPROVEMENT 14. Is It Possible to Measure Service Quality?

expected versus perceived performance

factors influencing customer’s “a priori image”

Different criteria are used by different customer groups to evaluate service, and these criteria will vary depending on the situation and the circumstances. The customer determines specifications, rather than engineering or others inside the firm. He or she specifies quality, and his or her satisfaction is the basis for measuring quality performance. It is the transaction which brings a product with certain characteristics and capabilities to a customer with certain needs and expectations. There are five “key states” which appear in a completed transaction (Hardie and Walsh, 1994): 1 The actual need of the customer. 2 The perceived requirement to meet the need. 3 The expected performance by the customer. 4 The actual performance of the supplies. 5 The perceived performance of the supplies by the customer. The “perceived requirement” is normally created by the customer as a requirements specification, but it is sometimes the results of market research by the supplier. The “expected performance” (prior customer expectation) is the way in which the customer expects the supplier to meet the requirement. This depends on the knowledge, attitude and sense of the customer. A customer may be unaware of the current capability of the service enterprise, and have very low expectations. Or the customer may have unreasonable ideas of what is possible, far beyond the capacity of the supplier. In this case, the customer will always be dissatisfied. Ideally, the customer’s expectations should be based on a good understanding of the capability of current technology and the service industry. Prior customer expectation is the a priori image of what will be recei ved when the consumer purchases a service. Several factors influence the “a priori image”. These include: personal needs; past experience; word of mouth; market communications; image; and price. The provider of service can be proactive in shaping the “customer’s expectations” through its marketing and external communication efforts. Other factors that influence expectations are past experiences, the customer’s selfperceived competency, the service of other providers from whom the customer can obtain service, what customers hear from other customers, external communications from the service provider which include a wide

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variety of direct and indirect messages converged by service firms to customers, the promises with booking, the image and the principle of equity (Hjalager, 2001). The “actual quality (performance” is the true nature of the supplies – the actual capability of the supplies, and the actual performance of any services. “Actual quality” is the real level of “service quality” provided. This is determined and controlled by the “service provider”. It is possible to quantify and set standards for some, if not all, of the “service quality” characteristics. It is, however, imperative to note that the “quality” of a service is determined by the “customer’s perception” and not by the perceptions of the providers of the service (Boothe, 1990, Grönroos, 1978). The “perceived quality” is the understanding which the customer develops of how the supplies will perform. “Perceived quality” (PQ) is the customer’s feel for the “quality” of the service. The three key possible “quality” outcomes are: 1. satisfactory quality, where customer’s expectations (CE) are exactly met: that is to say, CE = PQ; 2. ideal quality, where perceived quality is higher than customer’s expectations: that is to say, PQ > CE; 3. unacceptable quality, where perceived quality is lower than customer’s expectations: that is to say, PQ < CE. The provider of the service should ensure that either condition (1) or condition (2) is attained each time the service is delivered. It is not practical to focus on the points that may lie in between these three landmarks on the quality continuum. The service providers are more likely to reach conditions (1) and (2) if they have a clear understanding of the customer’s expected quality. Moreover, to be competitive it is necessary to set marginally higher levels of “satisfactory” and “ideal” quality than those of competitors. This will require an understanding of the generic determinants of service quality. The “perceived quality” lies along a continuum. “Unacceptable quality” lies at one end of this continuum, while “ideal quality” lies at the other end. The points in between represent different gradations of quality (Ghobadian et al., 1994). The perceived quality can be represented as follows: Prior Customer Expectations + Actual Process Quality + Actual Outcome Quality = Perceived Quality PCE

APQ

AOQ

This paradigm implies that “prior expectations” are compared with the actual “service delivery process” and the “service outcome” and that it is through this comparison that the “perceived quality” is fashioned.

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the real level of service quality

possible quality outcomes

perceived quality paradigm

physical quality

interactive quality

corporate quality

process quality

Service quality is usually discussed in terms of different dimensions of the service production process. Grönroos (1978) argued that “service quality” comprises of three dimensions. These are: the technical (physi cal) quality of outcome, the functional (interactive) quality of the service encounter, the corporate image. Physical quality represents the quality derived from the physical elements of the service. In tourism this will include both the physical product, for example, food and drinks in the restaurants and bars and the framework of physical support that facilitates production of the service. The latter can be subdivided into environmental factors such as buildings, swimming pools, tennis courts, promenades, beaches etc., and equipment (in the hotel, restaurant etc.). The aesthetic appeal of the facility architecture may be the basis of a customer’s first impression of the quality of the service provider. The physical elements lay the foundation for the second dimension, interactive quality. This element of “quality” is concerned with the interaction between the provider and recipient of a service and is often perceived in a subjective manner. These elements may be human or mechanical, as in the case of an ATM or drinks dispenser. Interactions between different groups of customers would also be an important feature of interactive quality. The third dimension, corporate quality, is concerned with consumers’ perceptions of the service organization (price; external communications; physical location; appearance of the site; and the competence and behaviour of service firms’ employees). Moreover, in services, customer interaction, along with word-of-mouth communication, influence perceptions of corporate image more than the traditional marketing elements. Corpo rate quality is symbolic in nature and involves customer perceptions of the corporate entity. Grönroos states that “technical quality” refers to the result of the service and/or the question: “What has been provided?”. “Functional quality” refers to the way the service has been delivered and relates to the question: “How has the service been provided?”. Technical solutions are easily copied. Functional quality, in contrast, can be used to create a competitive edge by focusing on staff-customer relations. This refers to the more personal side of service and how personnel interact with customers. Technical quality is a necessary but not sufficient condition for high quality service. Functional quality, on the other hand, is likely to be more important than technical quality if the latter is at least of a sufficient standard. An alternative, yet complementary, approach to quality merely utili ses two dimensions, process quality and output quality of service produc tion (Lethinen and Lethinen, 1992). Process quality is the customer’s

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subjective judgment and draws upon their view of the production process and from feelings of how well they fit into it. Customers participate in the production process to varying degrees, although in the tourism context there are many cases of heavy participation. Output quality represents the customer’s evaluation of the service output quality production process. This can include both tangible and intangible elements, although the output of tourism is often intangible, as represen ted by personal feelings and experiences. The use of physical evidence cues during and on completion of the process may mitigate some of the problems that this causes, for example, a certificate at the end of a coaching course to indicate a particular level of achievement. It should be noted that the output of the service may well be influenced by elements of the process and that these two dimensions are not mutually exclusive. Communicating service quality begins with an understanding of the aspects of service quality that are most important to customers (Zeithaml et al., 1990). Accordingly, it seems necessary to list service attributes essential in assessing the service quality. Quality in different service areas is considered in different ways – see the example in Table XIV. Table XIV: Quality in different areas of society Area

Examples

Airlines Health Care Food Services Postal Services Academia Consumer Products Insurance Military Automotive Communications

On-time, comfortable, low-cost service Correct diagnosis, minimum wait time, lower cost, security Good product, fast delivery, good environment Fast delivery, correct delivery, cost containment Proper preparation for future, on-time knowledge delivery Properly made, defect-free, cost effective Payoff on time, reasonable cost Rapid deployment, decreased wages, no graft Defect-free Clearer, faster, cheaper service

Source: http://home.t-online

Consumers take into account several factors, not just one, when deciding about quality. Four primary factors have been identified as influencing customer perceptions of service: service encounters or “moments of truth”, the evidence of service, image and price. These form the customer’s overall perceptions of quality, satisfaction and value.

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factors influencing customer perceptions of service

1. In service encounters. Verbal and non- verbal behaviour are as impor tant determinants of quality as tangible cues such as the equipment and physical setting. 2. Evidence of service. Due to the intangibility of services and the simultaneity of production and consumption, customers are searching for cues to help them determine the level of service. Three major categories of evidence have been identified: • employees – how they are dressed, their personal appearance and their attitude and behaviour; • process – whether the service is complex, bureaucratic; and • physical evidence – all the tangible aspects of the service such as reports, equipment, statements, and in some cases the physical facility where the service is offered (the branch). 3. Image and reputation. The set of perceptions reflected in the associa tions held in the memory of the consumer. These can be specific (e.g. hours of operation, ease of access), or, of an intangible nature (e.g. trustworthiness, tradition, reliability). A favourable mage can influence positively perceptions of quality, value and satisfaction 4. Price. If the price is high, customers are likely to expect high quality, and their actual perceptions will be influenced accordingly. If the price is too low, customers might have doubts about both the ability of the institution to deliver quality and about the actual level of service received. The most widely reported framework is that proposed by Para SERVQUAL suraman et al. (1988) as the basis of SERVQUAL research, consisting dimensions of the five dimensions of service quality – tangibles, reliability, responsi veness, assurance and empathy. Five quality determinants enumerated by Parasuraman were a consolidation of ten dimensions as shown in Table XV.

Table XV: SERVQUAL Dimensions SERVQUAL Tangibles Reliability Responsiveness Assurance

Empathy

Source: Dotchin and Oakland (1994b).

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Components Tangibles Reliability Responsiveness Competence Courtesy Credibility Security Access Communication Understanding

The full list provides the most complete expression yet available of the issues which influence consumers in their assessment of service quality. Only two of these determinants, tangibles and credibility, can be evaluated by the consumer in advance of the service performance. Two others, competence and security, cannot be evaluated at all, even after the service is consumed. For the remainder, evaluation is possible, but example only during the service process itself. Below see the description of the service quality determinants example service quality determinants: Reliability: the ability to provide the pledged service on time, accurately and dependably. as well as prompt settlement of the claim. Responsiveness: the ability to deal effectively with complaints and promptness of the service. For example, in the case of a package tour operator, it could be dealing quickly and effectively with a patron’s accommodation problems; or in the case of a car hire company, provi ding a similar or higher-grade substitute car, even when the original car suffers from only a minor problem such as a radio malfunction. Customization: the willingness and ability to adjust the service to meet the needs of the customer. This would mean, for example, in the case of a gourmet restaurant, willingness to provide an item that is not on the menu; or in the case of a specialized tour operator, tailoring the holiday package to meet the customer’s specific requirements. Credibility: the extent to which the service is believed and trusted. The service provider’s name and reputation, and the personal traits of front line staff all contribute to credibility. Competence: staff should possess the necessary skill, knowledge and information to perform the service effectively. Access: the ease of approachability and contact. For example, this could involve convenient opening hours, getting through on the tele phone and convenient location. Courtesy: the politeness, respect, consideration and friendliness shown to the customers by the contact personnel. Security: the freedom from danger, risk and doubt. It involves physical safety, financial security and confidentiality. Communication: keeping customers informed about the service in a language that they can understand and listening to the customers. For example, in the case of an airline giving regular updates, this could include detailed and accurate information whenever a delay in service occurs. Tangibles: these include: the state of facilitating goods; physical con dition of the buildings and the environment; appearance of personnel; and condition of equipment. Tangibles are especially important in high‑contact services.

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Understanding/knowing the customer: this involves trying to under stand the customer’s needs and specific requirements; providing individualized attention; and recognizing the regular customer – an important determinant of quality in high-contact customized services. quality gap Parasuraman et al. (1988) propose a model of the determinants of analysis model service quality (Figure XXIV) which identifies five opportunities for quality failure to arise (service gaps).

Figure XXIV: Quality Gap Analysis Model Consumer Word of mouth communication

Personal needs

Past experience

Expected services Gap 5 Perceived services Marketer

Gap Service delivery 4 (including pre- and post-contacts)

External communications to consumers

Gap 3 Translation of perceptions into service quality specifications

Gap 1 Gap 2

Management perception of consumer expectations

Source: Dotchin and Oakland (1994b).

The model was based on information collected from “in-depth inter views” with executives, and “focus group interviews” with consumers in retail banking, credit card, securities brokerage and product repair and maintenance. From this work it was possible to identify a number of differences between the consumers’ requirement, or expectation, of a particular aspect of a stage in the marketing and provision of a service, and their perception of the execution of the same stage. The quality gap model attempts to show the salient activities of the service organization that influence the perception of quality. Moreover, the model shows the interaction between these activities and identifies 164

the linkages between the key activities of the service organization or marketer which are pertinent to the delivery of a satisfactory level of service quality. The gaps are described briefly below. • Consumer expectation – management perception gap (Gap 1): Mana gement may have inaccurate perceptions of what consumers (actually) expect. The reason for this gap is lack of proper market/customer focus. The presence of a marketing department does not automati cally guarantee market focus. It requires the appropriate manage ment processes, market analysis tools and attitude. • Service quality specification gap (Gap 2): There may be an inability on the part of the management to translate customer expectations into service quality specifications. This gap relates to aspects of service design. For example, an airline may find that its customers require a better meals’ service on its short-haul routes. This require ment needs to be translated into food and beverage menus for different times of the day. • Service delivery gap (Gap 3): Guidelines for service delivery do not guarantee high-quality service delivery or performance. There are several reasons for this. These include: lack of sufficient support for the frontline staff, process problems, or frontline/contact staff perfor mance variability. For instance, the airline of the previous example may introduce an exotic and extensive menu that does not leave enough time to serve or consume. This results in a perception of poor quality. The manner of service also influences the perception of quality. If the stewards or stewardesses are not competent or friendly, once again the investment in the meal service will not improve perceptions of quality. • External communication gap (Gap 4): Consumer expectations are fashioned by the external communications of an organization. A realistic expectation will normally promote a more positive percep tion of service quality. A service organization must ensure that its marketing and promotion material accurately describes the service offering and the way it is delivered. This is why in service organiza tions it is counter-productive to separate the operations and the marketing functions. • Expected service – perceived service gap (Gap 5): Perceived quality of service depends on the size and direction of Gap 5, which in turn depends on the nature of the gaps associated with marketing, design and delivery of services. The above model is a diagnostic tool. If used properly, it will enable the management to identify systematically service quality shortfalls. This model is externally focused. It has the potential to assist the 165

quality gaps perception gap

quality specification gap

service delivery gap

external communication gap

expected versus perceived service gap

SERVQUAL as management to identify the pertinent service quality factors from the a diagnostic tool perspective of the customer. SERVQUAL model can be perceived as a process for the design of a service: management develop an under standing of customer expectations, use this to set up relevant quality specifications, ensure that the service is designed and operated to those specifications, and ensure that customers are correctly informed of the service standards. It also provides a framework for analyzing quality failures by identifying the gaps in this process which cause a mismatch between customer expectation and customer experience (perceived service). Since this is a general model of the service process it does not suffer from the problems of defining and measuring service quality and does not require a rigorous definition of service quality to enable it to be used. Accurate perceptions of customer expectations are necessary, but “design quality” not sufficient, for delivering correct quality service. Another prere quisite is the development of a service design or concept and perfor mance standards that reflect those accurate perceptions. It is called “design quality”. Improving design quality sometimes means more than modifying the existing concept or design. Sometimes a fundamental change is needed, involving a creative, innovative approach, leading to a completely new service design or concept that tries to meet particular customer needs that were not fulfilled before in a satisfactory way by any other organisation. developing A powerful method for both strategies is customer surveying (loyal, a strategy of QM repeat, first time and lost customers). This is a very good starting point for developing a strategy of quality management, because it draws the attention of all persons involved to the customer. Client orientation is essential in improving and innovating services. Moreover, the results of a survey confront all employees of a company with facts they did not know before, e.g. differences between the service expectations expressed by the customers and the supposed expectations. A survey of customers can be also a powerful information source for improvement and innovation (Fache, 2000). Conceptual service quality models are useful for a number of reasons. First, they provide an overview of factors that affect the quality of the organization and its offerings. Second, they facilitate under standing. Third, they help to clarify how quality shortfalls develop. Fourth, they can provide a framework for launching quality improve ment programmes. A framework has the advantage of channelling the efforts of the organization in the appropriate direction. It is also important to be aware of the limitation of any model. Models are almost invariably simplified versions of reality. They 166

suggest that there are simple relationships between complex phenome non, and that systems operate by rules of cause and effect. However in any case they prove that human behaviour significantly affects the quality of an organization and its offerings.

15. Cost of Quality 15.1. The Money in Mistakes Quality experts argue that a typical company can save more money by halving poor quality costs than by doubling sales (Harrington 1987). The implementation of a quality program can result in substantial cost savings and higher revenues for an organization. Corporations like Xerox, General Electric, and Motorola have implemented successful quality programs and have reduced their quality costs from 30 percent of sales to 2 percent of sales while improving the quality of their products (Superville and Gupta, 2001). But a survey of mid-size manufac turing firms reveals that only one-third of the respondents calculated quality costs (Morse, 1991). What is even more surprising – only one in four finalists of the prestigious Malcolm Baldrige National Quality Award calculated their quality costs (Baatz, 1992). The activities that people used to deal with problems of quality most of the time include (Witcher, 1990): • correcting errors – e.g. misspelled written material, • finding out where things are – e.g. missing files, • finding why things are late – e.g. stock shortages, • checking things we do not trust – e.g. double checking research results, • rectifying and reworking – e.g. modifying designs which are too difficult to produce, • apologizing to customers – e.g. finding and explaining to them, • clearing up – e.g. scrap, returns, • making good – e.g. warranty claims, service. Companies used to detect defects and errors in their products and the economic services and then congratulate themselves on taking remedial action to sense of errors put them right. They continue fire-fighting and rectifying the same detection problems desperately week after week, month after month, and year after year! (Hakes, 1991). It is obvious that employing more inspectors, tightening up standards, developing correction, repair and rework teams, will not promote quality. Nevertheless, these activities still exist in today's industry (Oakland, 1989).

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poor quality costs Poor quality costs your organization money. Good quality saves your money! organization money. But many organizations today do not measure the cost of poor quality, and if you do not measure it, you cannot control it. In Harrington’s poor quality concept there is an item called indirect poor-quality cost which includes: customer-incurred cost, customerdissatisfaction cost, loss-of-reputation cost, lost-opportunity cost (Harrington, 1999). Customer-incurred cost appears when an output fails to meet the customer-incurred customer’s expectations. Typical customer-incurred PQC are: cost • Loss of productivity while equipment is down. • Travel costs and time spent to return defective merchandise or to make complaint. • Overtime to make up production because equipment is down. • Repair costs after warranty period is over. • Backup equipment needed when regular equipment fails. It is also necessary to apply poor-quality cost systems to the impact that errors have on the customer. Frequently, the cost incurred by the customer when an error occurs can far exceed the cost of repairing the defective item. customer Customer-dissatisfaction cost –- Figure XXV portrays customerdissatisfaction dissatisfaction PQC in terms of lost revenue versus product quality level. cost On the left side of the curve, you will note a sharp decrease in lost revenue for only small improvements in product quality. This curve Figure XXV: Changes in customer-dissatisfaction costs

Lost revenue (dollars)

High

New customer– dissatisfaction quality costs

Low Bad

Source: Harrington (1999).

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Product operating level

Old customer– dissatisfaction quality costs

Product quality level

Best

reflects the binary classification of satisfaction in the customer’s mind. Once a customer’s acceptance level has been reached, the curve becomes almost flat, even though the product quality level continues to improve (Harrington, 1999). Loss-of-reputation cost is even more difficult to measure and predict. Costs incurred due to loss of reputation differ from customerdissatisfaction costs in that they reflect the customer’s attitude toward an organization rather than toward an individual service or product line. The cost must be considered as a total effect for an organization. It is for this very reason that it is considered good business practice to group and distribute products under different trade names based on expected performance. Lost-opportunity cost relates to the money that the organization does not realize, due to poor judgment or poor output that results in the organization not taking advantage of an opportunity. Every customer that turns away from your products represents a lost- opportunity cost. It is very important to understand and consider the losses involved when we lose a customer (Harrington, 1999). Poor-quality cost provides a very useful tool to change the way management and employees think about errors. PQC helps by: • Getting management attention – talking to management in dollars provides them with information that they can relate to. It takes quality out of the abstract. • Changing the way the employee thinks about errors – employees need to understand the cost of errors they make. • Providing a means to measure the true impact of corrective action and changes made to improve the process. • Providing a simple, understandable method of measuring what effect poor quality has on the organization. Measuring and reporting the COQ is the first step in a quality management program. It helps management understand the magnitude of the quality problem, pinpoints opportunities for improvement, and measures the progress being made by the improvement activities. COQ information can be used to indicate major opportunities for corrective action and to provide incentives for quality improvement. In course of detecting and reduction of poor quality costs, the overall cost of quality gets down and the relations between the level of different cost items will significantly change (see figure XXVI). Feigenbaum (1974) claimed that failure costs tend to fall, as appraisal costs rise. An empirical study (Ittner, 1996) indicated that effective prevention investments could reduce both appraisal and failure costs. Figure XXVII presents the optimum shares of particular COQ items.

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loss-of-reputation cost

lost-opportunity cost

the way we think about errors

reporting COQ as a step towards QM

Figure XXVI: Reduction and shares of different COQ items. COST OF QUALITY

COST External Failure

External Failure Internal Failure

Internal Failure

Appraisal

Prevention

Reduction in Cost of Quality = Savings

External Failure Internal Failure Appraisal

Prevention TIME

Source: Miller (1999b).

Figure XXVII: Cost of Quality (from typical costs to optimum) From Appraisal 15.0%

To Prevention 5.0%

Prevention 45.0% Internal Failure 20.0%

External Failure 35.0%

Internal Failure 45.0%

Typical Costs

Appraisal 25.0%

External Failure 10.0%

OptimumÂ

Source: Miller (1999b).

It is worth mentioning that quality levels exist in all departments and functions, not just in activities directly related to the product. Deming is credited for saying that 80 per cent of quality problems is the result of people who never touch the product. For example, the number of times we incorrectly issue or re-issue an invoice, re-design something because the initial design was incorrect, re-write or re-type letters are the result of poor quality and incur a cost of quality.

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15.2. Cost of Quality (COQ) Models Among the most common barriers to implementing a TQM programme managers regard lack of resources, short-term goals, internal environ ment and communication as principal boundaries to TQM programmes. This is evidence of a market-place in which management and staff are under increasing pressure to achieve quick profits and higher volume of sale. In fact some companies are adopting ‘quality initiatives’ towards cutting costs and achieving short-term results rather than being committed to the never-ending improvement culture which quality management programmes should promote. As mentioned earlier the most popular approach to the “cost of quality” is to understand them as cost of poor quality – those associated with avoiding poor quality and those that occur as its result. Although the concept of cost of quality has been in existence since the early 1940s, it was not until the early 1960s that a formal attempt was made to model COQ. Juran (1962) proposed a division of quality costs into four categories: prevention, appraisal, internal failure, and external failure costs. Prevention costs are those that are expanded in order to prevent nonconforming products from occurring and reaching the customer. Prevention reflects the up-front investment of time and effort to prevent a problem from occurring the first time (costs incurred in an effort to prevent defects from occurring). Product design and product reviews, employee training, preventive maintenance and quality improvement programs are examples of prevention costs. Appraisal costs are those expanded on maintaining quality levels through measurement and analysis of data in an effort to detect and correct occurring problems. Appraisal costs are also the costs incurred in identifying which individual products do not conform to specifica tions. Accounts in this category are all about what we do to prevent or minimise the need for appraisal and to minimise or eliminate internal and external failures. Appraisal includes the activities the customer should not be expected to pay for (sampling, testing, checking, inspect ing or auditing). The two kinds of failure costs are a result of nonconformance; unsatisfactory quality can be found either before (internal failure costs) of after (external failure costs) the delivery of a product to the custo mer (Miller, 1999b). Internal failure cost is a result of quality failures within the company. These costs occur prior to delivery or shipment of a product or service and are incurred when a nonconforming product is detected within a factory/organization. Scrap costs, rework costs,

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barriers to TQM implementation

prevention costs

appraisal costs

internal and external failure costs

reactive cost

proactive cost

prices of conformance and non-conformance

Juran’s COQ model

re‑inspection costs, cost of downtime due to defective parts, are exam ples of internal failure costs. They include non-value adding activities, costs associated with opportunities to improve process costs. External failure is cost resulting from products or services not conforming to customer requirements. They are the costs incurred when a nonconforming product is detected after it is shipped to the customer. Costs of recalls, warranties and customer complaints are examples of external failure costs. There are some other costs including industry-specific quality costs (Heldt, 1994), costs of exceeding requirements and lost opportunity costs (Collins, 1995). However some researchers insist that these pro posed costs of quality, upon closer inspection, can be incorporated into hidden internal and/or external failure costs. Another COQ model is developed to include two major cost elements. One is termed reactive cost, which accounts for quality related costs incurred at a given stable level of operation. These include the process monitoring cost; product inspection cost and the loss due to deviation form the part design target and delivery schedule. The second element considers the cost of attaining an improved level of conformance and hence is termed proactive cost. This element accounts for the cost of introducing planned changes to the process as part of continuing efforts to improve its conformance. More specifically the improvement costs can be defined as the total costs incurred through: • identifying new target values to better achieve customer expecta tions; • reduce deviation between the current process average and the specified target; and • reduce variation in the process output. Using incremental economics the two cost functions should be assembled to obtain the net worth of any improvement. To ensure that higher conformance should cost less, an economic criterion is used to restrict the net worth of improvement within positive boundaries. Similarly Crosby (1984) divides quality costs into two categories: 1. the price of conformance (POC), including the explicitly quality‑related costs incurred in making certain that things are done right the first time; and 2. the price of nonconformance (PNOC), including all the costs incurred because quality is not right the first time. Juran’s COQ model suggests that as quality improves, conformance costs (prevention and appraisal costs) increase but nonconformance costs (internal and external failure costs) decrease (Figure XXVIII). Total cost of quality is determined by adding conformance and non

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conformance costs. Juran suggests that the objective of any quality program should be to find the level of quality (defect rate) that minimizes the total cost of quality i.e. the bottom of the U-shaped total quality cost curve.

Figure XXVIII: Juran’s COQ model

Total Qality Cost

Quality Cost Nonconformance Costs

Conformance Costs 0%

Conformance %

100%

Source: Juran (1962).

Juran’s COQ model proposes that the optimal level of quality is achieved at less than 100 percent conformance, i.e. at a level where some defective products are being produced. Initial dollars spent on quality costs pay handsome rewards in terms of increased productivity and improved customer satisfaction. After a certain point, however, additional dollars spent on quality costs do not result in proportionate savings to the organization. Increased voluntary spending on confor mance costs results in a lower defect rate (a higher conformance level) and in turn, lower nonconformance costs. The increasingly steeper conformance cost curve is a reflection of the law of diminishing marginal returns relative to the level of defects (Diallo et al., 1995). Empirical analysis reveals that for every eight cents spent on preven tion costs, an organization can save one dollar in failure costs (Superville and Gupta, 2001). Money spent on corrective action (prevention and appraisal costs) is generally a one-time cost for most organizations aimed at eliminating the root cause of the quality problem. The longer the quality problem remains unresolved, the higher the failure costs. Failure costs that typically arise as a result of inadequate spending on prevention costs are warranty costs, product returns, product liabilities.

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And these are only the tangible costs that are immediately apparent. Organizations may also have intangible costs such as lost contribution margins from lost sales due to poor product quality, loss of customer goodwill, and lost market share (Superville and Gupta, 2001). Appraisal costs, with emphasis on early detection, is the next best emphasis on alternative and should experience the next greatest percentage of quality appraisal costs dollars. The remaining category, failure costs (both internal and exter nal) should ideally constitute only a minor percentage of the total dollars spent on quality.

15.3. Approaches to Quality Cost Measurement the lack of COQ Traditional cost accounting, whose main functions are inventory valua information tion and income determination for external financial reporting, does not yield the COQ information needed. While most COQ measure ment methods are activity/process oriented, traditional cost accounting establishes cost accounts by the categories of expenses, instead of activities. Under traditional cost accounting, many COQ-related costs are lumped into overheads, which are allocated to cost centres (usually departments) and then to products through predetermined overhead rates. For example, among various COQ-related costs, the rework and the unrecovered cost of spoiled goods caused by internal failures are charged to the factory overhead control account which accumulates the actual overhead costs incurred (Hammer, Carter, Usry, 1993). The predetermined overhead rates should be adjusted to incorporate the normal levels of various COQ-related costs, and excess COQ-related costs will be buried in overhead variances (Tsa, 1998). Oakland (1993) remarked that “quality related costs should be preventioncollected and reported separately and not absorbed into a variety of appraisal-failure (PAF) approach overheads”. Prevention-appraisal-failure (PAF) approach and process cost approach are two main approaches to measuring COQ. However, these approaches still cannot provide appropriate methods to include overhead costs in COQ systems. Accordingly, many quality cost elements require estimates. After Feigenbaum (1986) categorized quality costs into prevention‑appraisal-failure (PAF), the PAF scheme has been almost universally accepted for quality costing. In order to calculate total quality cost, the quality cost elements should be identified under the categories of prevention, appraisal, internal failure and external failure costs. disadvantages of Although the PAF) model is universally accepted for quality costing, the PAF model there are a number of criticisms of it (Oakland, 1993, Porter and Rayner, 1992), described as follows: 174

• It is difficult to decide which activities stand for prevention of quality failures since almost everything a well-managed company does has something to do with preventing quality problems. • There are a range of prevention activities in any company which are integral to ensuring quality but may never be included in the report of quality costs. • Practical experience indicates that firms which have achieved notable reductions in quality costs do not always seem to have greatly increa sed their expenditure on prevention. • Original PAF model does not include intangible quality costs such as “loss of customer goodwill” and “loss of sales”, • It is sometimes difficult to uniquely classify costs (e.g. design reviews) into prevention, appraisal, internal failure, or external failure costs. • The PAF) model focuses attention on cost reduction and ignores the positive contribution to price and sales volume by improved quality. • As mentioned above, the classic view of an optimal quality level is not in accordance with the continuous quality improvement philo sophy of TQM. • The key focus of TQM is on process improvement, while the PAF categorization scheme does not consider process costs. Therefore, the PAF model is of limited use in a TQM program. The alternatives to the PAF categorization scheme are divisions of quality costs into conformance and nonconformance, tangible and intan gible, controllable and uncontrollable, discretionary and consequential costs, and so on. In Xerox, quality costs are classified into three categories (Carr, 1992): 1. the cost of conformance (prevention and appraisal); 2. the cost of nonconformance (failure to meet customer requirements before and after delivery); and 3. the cost of lost opportunities. The first two categories are analogous to Crosby’s price of confor mance and price of non-conformance respectively. Xerox measures lost opportunities as the profit impact of lost revenues. It occurs when a customer chooses a competitive product over a Xerox product, when a customer cancels an order because of inadequate service, or when a customer buys Xerox equipment that is inadequate or unnecessary and switches to another brand. It seems that the identification of quality cost elements in the PAF identification approach) is somewhat arbitrary. It may focus on some quality-related of quality cost activities which account for the significant part of total quality cost, not elements on all the interrelated activities in a process. Under the philosophy of

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process improvement in TQM, analysts should place emphasis on the cost of each process rather than an arbitrarily defined cost of quality process cost (Goulden and Rawlins, 1985). In view of this, the process cost approach approach is proposed. It recognizes the importance of process cost measurement and ownership. The process cost is the total of the cost of conformance (COC) and the cost of nonconformance (CONC) for a particular process. The COC is the actual process cost of providing products or services to the required standards, first time and every time, by a given specified process. The CONC is the failure cost associated with a process not being operated to the required standard (Porter and Rayner, 1992). The process cost model can be developed for any process within an organization. It will identify all the activities and parameters within the process to be monitored by flowcharting the process. Then, the flow charted activities are allocated as COC or CONC, and the cost of quality at each stage (i.e. COC + CONC) are calculated or estimated. Finally, key areas for process improvement are identified and improved by investing in prevention activities and process redesign to reduce the CONC and the excessive COC respectively (Oakland, 1993, Porter and Rayner, 1992).

15.4. “Cost-tracing” Management The management of quality from the economic viewpoint, made quality managers aware that they are actually managing the function of produc tivity and “business assurance” as well as that of quality. As many as 80 per cent of organizations implementing TQM are failing to show any tangible benefits. This is generating a backlash against TQM, with many observers not only pronouncing its impending doom, but advocating newer management philosophies. Fundamental to TQM is the conti nuous improvement of business processes. This involves a substantial cost. There is therefore a need for senior management to demonstrate an improvement in business performance to justify the change. And there is a problem here. COQ programmes can be used to identify, prioritize, evaluate, and benefits of COQ select quality investments, monitor improvements over time, and programmes increase sales while reducing costs, capture top management’s attention for quality programs, challenge the necessity for commonly-accepted operating expenses, measure the return on quality investments, and jumpstart other quality improvement efforts. There is however one barrier to COQ implementation – errors in data collection can distort the cost of quality and lead to inappropriate management decisions. In order to overcome this barrier COQ implementation must go smoothly

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with clear communication. First, a general amnesty for initial quality cost measurements, along with assurance that these measurements will not be used to cut the workforce, will encourage honest reporting. Second, a long-term focus on improving business processes with the goal of 100 per cent customer satisfaction will ensure that COQ figures are not used for budgeting purposes, or to indicate short-term financial performance. Third, use of readily available information utilizing diffe rent measures from different organizational levels will enable COQ implementation teams to estimate hidden costs, rather than striving for exact quality related numbers. Finally, communication of COQ to management in terms of quality costs as a percentage of sales, or alternatively as compared to profits, will serve to sustain their interest in quality investment programs (Angel and Chandr, 2001). Quality investment decisions are complex and interrelated, with added uncertainties associated with the many “unknown and unknow able” costs (such as the value of an unhappy customer). The nature of quality costs is different in case of service and manufacturing organiza tions; in manufacturing they are primarily product oriented, whereas for services they are generally labour dependent. Since quality in service organizations strongly depends on interaction between employee and customer, costs that tend to account for a higher percentage of total quality than they do in manufacturing, are appraisal costs. Internal failure costs, however, tend to be much lower for service organizations, since there is little or no opportunity to correct an error before it reaches the customer – and by the time it becomes an external failure. Work measurement and sampling techniques are often used extensi vely to gather quality costs in service organizations. For example, work measurement can be used to determine how much time an employee spends on various quality-related activities. The proportion of time multiplied by the individual’s salary represents an estimate of the quality cost for that activity. Other ways of determining quality costs for services are customer surveys and all different means of customer feedback. All in all, however, the intangible character of the output of services makes quality cost accounting for this sector very difficult. Quality costs analysis can not be taken separately for different groups of costs as it may lead to mistaken conclusions and decisions. E.g. a great proportion of operating costs in activities of service organizations is attributed to people. Therefore, a reduction in total quality costs frequently means a reduction in time worked and hence in personnel. In many labour-intensive services (like tourism or hospitality) such decision might result in a sudden quality decrease and cause the “yoyo effect” through its influence on strong increase in external failure costs and

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relations between the value of quality and COQ quality economics

additional immeasurable loses (weakened company’s image, negative WOM). Again the idea of systems thinking should be accepted here to make the proper decision about the quality costs management. If we measure what we do then we can set priorities, which can be directly related to both internal and external customer satisfaction; priorities that, acted upon, can reduce cost that the customer should not be expected to pay. Without appropriate measures and data we try to address many issues rather than concentrate on the vital few that will have a major impact on how we work and what we deliver to improve customer satisfaction. Undoubtedly, those who have invested in TQM or who are preparing to invest in TQM as a quality model for restruc turing will need to ask themselves two important questions: • What is my return on quality (ROQ)? • How to demonstrate the return on quality investments? The answer lies in measurement. This involves assessing customer need and expectations; producing quality outputs which meet or exceed customer satisfaction, and then documenting these returns by directly linking quality education outputs with the inputs of time, money, and effort (Weller, 1996). Consequently, accountability means demonstrating quality returns on quality investments with products and services provi ded more efficiently and effectively to satisfy customer demands and meet their expectations. The problem of cost measuring and quantifying the quality program mes is of special concern not only to profit-oriented enterprises but any other organizations as well (public schools, hospitals etc.). Without the ability to demonstrate quality returns for quality investments, be it time, money, or technology, public support may wane and the progress gained by the TQM practices may be perceived as too expensive for public support (Weller, 1996). If we manage to put the quality function on equal terms with organizational counterparts (sales, marketing, finance department), the quality economics principle is used. This principle establishes the relationship between the value of quality and the cost of quality, as graphically presented in Figure XXIX. We always strive to increase the level of quality, while at the same time decrease the COQ. The minimum point in the COQ curve is reached when the sum of the costs of prevention, appraisal and non‑conformances is at its minimal/optimal value. The value of quality is defined as an index of consumer taste. The value of quality is the price that the consumer is willing to invest in return for a level of quality that meets his/her expectations. The value of quality curve, has no optimum point, but rather a final maximum value, which is reached asymptotically. The intersection of these two curves is

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the optimum working area for the realization of maximum economic benefits from the quality management. Figure XXIX: Quality economics

COS TO FQ UAL ITY

COST $

VALUE OF QUALITY

ION ENT REV ISAL P F RA TO COS ND APP A

“UNDER QUALITY” ZONE

COST OF FA ILURE OPTIMUM QUALITY ZONE

OVER QUALITY ZONE

QUALITY 100%

Source: Bester (1999).

Since the value of quality reflects the index of the consumer’s attitude to the price, it is evident that we would want it to be as high as possible relative to the COQ. The profit lies in the difference between them. Figure XXIX shows that it will not be possible to sell products whose cost of quality exceeds value of quality. The intersection between the two curves defines the zone where the product has real economic value. Notice that the more we reduce the cost of quality, while at the same time raising the value of quality, the greater the range of economic viability. An essential question is who has the ability to establish the value of quality, and who does not. The answer is, as aforesaid, a result of the test of the interaction between the supplier and the consumer. The business relationship between the two determines the definition of the quality and its value. The consumer generally checks several alternatives for quality, value and cost, and in the end selects that which provides him with a satisfactory result.

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16. Tools for Cost Tracing 16.1. ABC of Cost Tracing Activity Based Costing (ABC) is an accounting technique that allows an organization to determine the actual cost associated with each product and service produced by the organization without regard to the organiÂ zational structure. It is essentially an accounting system that measures the use of resources by activities. In order to demonstrate an early financial effect, efforts should be directed extensively at measuring cost reductions. ABC may provide the tool necessary for quality-based organizations to demonstrate tangible benefits and visible increases in business performance (Letza and Gadd, 1994). function of ABC An important function of ABC is for the organizationâ&#x20AC;&#x2122;s activities to be defined as value added or non-value added. Value added activities are those for which the customers are usually willing to pay (in some way) for the service. Non-value added are activities that create waste, result in delay of some sort, add costs to the product/s, or for which the customer is not willing to pay. Figure XXX: Activity-Based Costing Model Sales revenue

Direct material

Products

Profit

Productrelated costs Direct labour

Activities

Customers Customerrelated costs

All overheads

Inrastructure

Infrastructure -related costs

Source: Letza and Gadd (1994).

Resources are assigned to activities to allow them to be conducted; performing the activity results in a cost that can be priced, which can be

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assigned to the primary output. It is through ABC, that an organization can begin to see actual dollar costs against individual activities, and find opportunities to streamline or reduce the costs, or eliminate the entire activity, especially if there is no value added. “Cost drivers”31 are then used to ascribe the costs of those activities to items generating the activities, e.g. products, customers and company infrastructure. It therefore allows a more accurate costing of overheads according to their actual usage (Letza and Gadd, 1994). ABC offers an accurate management information system, providing cost data at the business process level. Improvements in processes will become visible and tangible benefits will be seen at the crucial 3- to 5‑year period, because ABC: • is geared to the medium term; • measures activities at the process level; • provides accurate cost data; • identifies customer generated costs; • identifies excess capacity; • focuses on continuous improvement; • is flexible and customizable. While not a panacea, ABC would appear to have a great deal to offer the TQM organization. By providing management with better quality information, it allows better quality decision making and brings the finance function firmly into the total quality culture. Steps for perfor ming ABC: • analyze activities, • gather costs, • trace costs to activities, • establish output measures, • analyze costs.

ABC characteristics

steps for performing ABC

Analyze Activities First the scope of the activities to be analyzed must be identified. It is activities analysis suggested that the program include at least a half-dozen organizational units having a common functional orientation, and preferably also a common budget somewhere in the reporting chain. The depth and detail of analysis will be determined by activity decomposition, since 31

A cost driver is a unit measure of a particular overhead that can be assigned to a user of that overhead. Direct material and labour costs will be assigned to the product, as in cost accounting methods. For example, in attempting to allocate administration overheads to products, the cost driver may be the number of invoices generated for that product. Products generating the most invoices would therefore acquire the largest share of administration overhead.

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activity decomposition is complete when one common or homogeneous primary output per activity is reached. A determination then is made if an activity is value or non-value added; also if the activity is primary or secondary, and required or not needed. Value added is determined if the output of the activity is directly related to customer requirements, service or product, as opposed to an administrative or logistical outcome that services the providing organization. For instance, if the output of an activity were an inventory report or update for products (for which there are customers), the output would be non-value added, but necessary to the organization, i. e., “overhead.” A major goal of reengineering is to reduce non-value added activities and eliminate those that are not necessary. Primary activities directly support the organization’s mission while secondary activities support primary activities. Required activities are those that must always be performed while discretionary activities are performed only when allowed by the operating management.

collection of costs

Gather Costs In this step costs are gathered for the activity producing the products or services provided as the outcome. These costs can be salaries, expendi tures for research, machinery, office furniture, etc. These costs are used as the baseline activity costs. When documents for the costs incurred are not available, cost assignment formulas may be used.

Trace Costs to Activities In this step the results of analyzing activities and the gathered costs consumed by activities organizational inputs and costs are brought together, which produces the total input cost for each activity. A simple formula for costs is provided – outputs consume activities that in turn have consumed costs associated with resources. This leads to a simple method to calculate total costs consumed by an activity – multiply the percent of time expen ded by an organizational unit, e.g., branch, division, on each activity by the total input cost for that entity. Here we are not calculating costs, just finding where they come from. Establish Output Measures In this step the actual activity unit cost is calculated. Even though output measures establishment activities may have multiple outputs, only one is identified as the primary output. Activity unit cost is calculated by dividing the total input cost, including assigned costs from secondary activities, by the primary activity output volume; the primary output must be measurable and its volume or quantity obtainable. From this, a bill of activities can then be

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calculated which contains or lists a set of activities and the amount of each activity consumed. The amount of each activity consumed is extended by the activity unit cost and is added up as a total cost for the bill of activity. Analyze Costs In the final step, the calculated activity unit costs and bills of activity costs analysis are used to identify candidates for improving the business processes. Managers can use the information by stratifying, for a Pareto analysis (see chapter 8.3.3), the activity costs and identifying a certain percentage of activities that consume the majority of costs. The thing to keep in mind is that the identification of non-value added activities occurs through this process with a clarity that allows us to eliminate them, and at the same time permits the product or service to be provided to the customer with greater efficiency.

16.2. “Vital Few and Trivial Many” Principle In 1906, Italian economist Vilfredo Pareto created a mathematical formula to describe the unequal distribution of wealth in his country, observing that twenty percent of the people owned eighty percent of the wealth. After Pareto made his observation and created his formula, many others observed similar phenomena in their own areas of experti se. Quality Management pioneer, Dr. Joseph Juran, recognized a univer sal principle he called the “vital few and trivial many” and reduced it to writing in the late 1940s. The 80/20 Rule means that in anything a few (20 percent) are vital and many (80 percent) are trivial. In Pareto’s case it meant 20 percent of Pareto principle the people owned 80 percent of the wealth. In Juran’s initial work he (80/20 Rule) identified 20 percent of the defects causing 80 percent of the problems. Project Managers know that 20 percent of the work (the first 10 percent and the last 10 percent) consume 80 percent of your time and resources. You can apply the 80/20 Rule to almost anything, from the science of management to the physical world. You know 20 percent of you stock takes up 80 percent of your warehouse space and that 80 percent of your stock comes from 20 percent of your suppliers. Also 80 percent of your sales will come from 20 percent of your sales staff. 20 percent of your staff will cause 80 percent of your problems, but another 20 percent of your staff will provide 80 percent of your production. It works both ways. The value of the Pareto Principle for a manager is that it reminds to focus on the 20 percent that matters. Of the things you do during your

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day, only 20 percent really matter. Those 20 percent produce 80 percent of your results. Identify and focus on those things. When the fire drills of the day begin to sap your time, remind yourself of the 20 percent you need to focus on. If something in the schedule has to slip, if something isn’t going to get done, make sure it’s not part of that 20 percent. There is a management theory floating around at the moment that proposes to interpret Pareto’s Principle in such a way as to produce what is called Superstar Management. The theory’s supporters claim that since 20 percent of your people produce 80 percent of your results you should focus your limited time on managing only that 20 percent, the superstars.

16.3. Pareto Chart

the purpose of Pareto chart

Pareto chart construction process

In order to put the 80/20 principle into practice in a more “statistical” (reliable) way managers can construct so called Pareto chart. It is a special form of a bar graph, used to display the relative importance of problems or conditions. A Pareto chart is used for: 1. Focusing on critical issues by ranking them in terms of importance and frequency (example: Which course causes the most difficulty for students?; which problem with Product X is most significant to our customers?) 2. Prioritizing problems or causes to efficiently initiate problem solving (example: Which discipline problems should be tackled first? What is the most frequent complaint by parents regarding the school?; Solution of what production problem will improve quality most?) 3. Analyzing problems or causes by different groupings of data (e.g., by program, by machine, by team) 4. Analyzing the before and after impact of changes made in a process (example: Has the initiation of a quality improvement program reduced the number of defectives?) The left-side vertical axis of the Pareto chart is labelled “frequency” (the number of counts for each category), the right-side vertical axis of the Pareto chart is the “cumulative percentage”, and the horizontal axis of the Pareto chart is labelled with the group names of response variables (identified problems, cost causes, reasons for claims etc.). How to construct the Pareto chart? Below find the steps in con structing the chart with step-by-step example: 1. Determine the categories of problems or causes to be compared. Begin by organizing the problems or causes into a narrowed down list of categories (usually 8 or less).

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2. Select a Standard Unit of Measurement and the Time Period to be studied. It could be a measure of how often something occurs (defects, errors, cost overruns, etc.); frequencies of reasons cited in surveys as the cause of a certain problem; or a specific measurement of volume or size. 3. Collect and Summarize the Data. Create a three-column table with the headings of “error or problem category”, “frequency”, and “percent of total”. In the first column list the categories of problems or causes previously identified. In the “frequency” column write in the totals for each of the categories over the designated period of time. In the “percent of total” column, divide each number in the “frequency” column by the total number of measurements. This will provide the percentage of the total. Error Category

Frequency

Percent of Total

Punctuation Grammar Spelling Typing TOTAL

22 15 10 3 50

44% 30% 20% 6% 100%

100% 80 30

Percentage of Total

Frequency of Occurrence

4. Create the framework for the horizontal and vertical axes of the Pareto Chart. The horizontal axis will be the categories of problems or causes in descending order with the most frequently occurring category on the far left (or at the beginning of the horizontal line). There will be two vertical axes-one on the far left and one on the far right. The vertical axis on the far left point will indicate the frequency for each of the categories. Scale it so the value at the top of the axis is slightly higher than the highest frequency number. The vertical axis on the far right will represent the percentage scale and should be scaled so that the point for the number of occurrences on the left matches with the corresponding percentage on the right.

Error Category

185

100% 80 30

Percentage of Total

Frequency of Occurrence

5. Plot the bars on the Pareto Chart. Using a bar graph format, draw the corresponding bars in decreasing height from left to right using the frequency scale on the left vertical axis. To plot the cumulative percentage line, place a dot above each bar at a height corresponding to the scale on the right vertical axis. Then connect these dots from left to right, ending with the 100% point at the top of the right vertical axis.

Error Category

6 Interpret the Pareto Chart. Use common sense-just because a certain problem occurs most often doesn’t necessarily mean it demands your greatest attention. Investigate all angles to help solve the problems: What makes the biggest difference? What will it cost to correct the problems? What will it cost if we don’t correct this problem? In most cases, two or three categories will tower above the others. These few categories which account for the bulk of the problem will be the high-impact points on which to focus. If in doubt, follow these guidelines: Look for a break point in the cumulative percentage line. This point occurs where the slope of the line begins to flatten out. The factors under the steepest part of the curve are the most important. information The Pareto chart answers the following questions: collected • What are the largest issues facing our team or business? • What 20% of sources are causing 80% of the problems? • Where should we focus our efforts to achieve the greatest improve ments?

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17. Tools for Quality Assessment 17.1. Quality Audits “Improve or perish” is the motto that businesses must adopt in order to remain competitive in the ever changing and expanding global market of today. Because improvement cannot be recognized unless it is measured, all existing models for quality management, ISO 9001 standard and quality awards being the two most prominent groups, contain guidelines for the process of evaluation against them. For instance, a quality audit measures the effectiveness and achieved improvement of an organiza tion’s quality system against the requirements of ISO 9001 model (Karapetrovic and Willborn 2001). Basically, evaluation of one’s work is as old as work itself. By virtue of being a goal-oriented activity, actual work and its achieved results (also called “performance”) are always compared with the planned objectives. A typical evaluation includes the measurement of effecti veness (“extent to which planned activities are realized and planned results achieved” [ISO 9000:2000]) and efficiency (“relationship between the result achieved and the resources used”[ISO 9000:2000]) of the work process, and subsequent comparison of process performance with the expected goals. Quality audit, as a methodology for evaluating system, product and/ or process performance against established requirements, has experien ced substantial growth in worldwide use in recent years. This is largely due to the steady increase in ISO 9001 registrations. Based on the fundamental principles of independence, objectivity and professionalism, the audit is an irreplaceable tool when confirmation of compliance with standards is sought. The underlying and common objective of the audit to evaluate performance against a referenced model is reflected in its definition: “Systematic, independent and documented process for obtaining audit evidence, and evaluating it objectively to determine the extent to which audit criteria are fulfilled” (ISO 9000:2000). In order to achieve the audit objective, we simply need to know two points: 1. Level of performance the reference standard requires; and 2. Whether our actual performance is above or below that level. In an audit, such an evaluation is performed by collecting and comparing “audit evidence” with a reference standard (“audit criteria”). The result of this comparison is called an “audit finding”. The audit criteria, ISO 9001 for example, must be designed in such a way that the finding indicates either compliance or noncompliance with the criteria,

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work evaluation

the use of quality audits

audit definition

audit criteria and audit finding

principle of independence

external and internal audits

representing the two possible and mutually exclusive audit outcomes. ISO 9001 standard contains multiple criteria (requirements for mana gement responsibility and realization processes, among others), thus it is possible an audit reveals that some criteria are met, and some are not. In this case, an audit evaluates “the extent to which audit criteria are fulfilled”, that could be anywhere from 0 percent (no criteria met) to 100 percent (full compliance) (Karapetrovic and Willborn, 2001). In some cases the auditee also has some leeway in determining the applicability of certain requirements to his/her business, which can change the overall number of criteria. For example, parts of section 7, “Product realization” of the ISO 9001 standard may be excluded from a quality system if they are deemed inapplicable. As quality audits are designed for the purpose of the evaluation against reference criteria, the inherent characteristics of the criteria define what kind of methodology will be used to achieve this purpose. The purpose of the ISO 9001 model is to provide assurance, as a result of demonstration, that an organization is able to consistently provide product that meets customer and applicable regulatory requirements and enhance customer satisfaction through the effective application of the (quality) system. The ISO 9001 model provides the minimum requirements for policies, processes and resources that must be in place for an organization to have a quality system and, by virtue of its existence, to assure customer satisfaction. The corresponding evaluation methodology (quality audit) is then limited to “assessing whether the system and underlying procedures are being followed” (van der Wiele et al., 1995). The auditor is only responsible for conforming the conformity and/or identifying the nonconformity, however the results of audits can be used by management to improve performance. Audit methodology has been developed to uphold the principles of independence, objectivity, and a documented search for evidence. An auditor must be free of any conflict of interest and be unbiased when making judgments, which is formally assured by his/her independence of the function being audited. Therefore, technically, it is not possible to audit one’s self. An audit is a special case of the assessment. Depending on whom the evaluation is performed by, audits can be external and internal. External audits may be performed by a customer (“second-party”), or an independent institution (“third-party”32) on behalf of the customer or the organization’s own management. When auditors from one organizational unit are assessing the performance of another unit, an internal audit is under way. 32

Registrars/certification bodies.

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17.2. Self-audit While quality system audit is used to evaluate performance against some set of criteria (ISO 9001 standard) it has its own advantages and shortfalls. For example it is most often externally required, focuses on the quality assurance function within an organization only, and relies on competent quality professionals for judgments on compliance with audit criteria. Traditional quality audit, carried by professional auditors commonly fails in enabling continuous improvement and spanning the differing aspects of business performance beyond conventional “quality assurance”. In order to overcome the deficiencies it is necessary to em power the process owner to conduct periodic self-evaluations of process performance. Such “self-audits” would be less formal than quality audits and aimed at continuous quality improvement. Self-assessments (self-audits) are cross-functional, less formal, and almost always intrinsically motivated. However, the audit is still superior with respect to objectivity of the evaluation process, reliability and consi stency of results, as well as the identification of systematic failures. It has an added benefit of providing a fresh, independent, and unbiased outlook of the audited process. To enhance intrinsic motivation and the depth of the required organizational change, which are the two most important variables for the sustainable success of a management, such an integrative approach must inevitably be based on self-evaluation. Any assessment that is externally-driven or performed by an outside party is likely to induce fear, perceptions of uncertainty and coercion, as well as to produce only a short-lived and ineffective effort. A self-audit would provide immediate or on-line feedback on performance. The process owner, in other words, the person or unit performing the work itself, should conduct periodic self-evaluations of his/her own process performance. This concept, branded as a “self-audit”, is largely based on the internal quality audit and self-assessment methodology. Evaluations may be done using formal, standardized procedures (inter nal audit) or informal guidelines (self-assessment and benchmarking). They can also be conducted on an individual basis, or may involve a whole department or organization. For example, every conscientious worker checks his/her work (“Do I continuously achieve what is expect ed in the proper way? Can I make improvements? What can I learn from the best people doing the same job?”), much like entire organi zations evaluate their business performance against standards, exce llence models and best-in-class companies (Karapetrovic and Willborn, 2002).

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self-audits characteristics

formal and informal procedures of selfaudits

general principles The self-audit can be conducted at different hierarchical levels. At of self-auditing the bottom level, an individual worker compares his/her performance with set standards (e.g. a job description), identified strengths, weak nesses, opportunities and threats (SWOT) and the work of best-in-class people. At the top level, organizations, which use ISO 9000 standards, quality awards and benchmarks for reference, perform self-audits of their business performance. Such audits must be coordinated in both vertical directions, so that individual self-audit results are utilized at the unit level, as well as in organizational audits. Conversely, audit criteria must be communicated throughout the organization and interlinked, so that each person is aware of how his/her individual audit criteria correspond to departmental or company level ones.

Figure XXXI: General principles of self-auditing RESOURCES

PROCESSES

OBJECTIVES

Allocation • Self-audit criteria exist • Self-audit criteria are relevant & unambiguous • Evidence and information exist • Self-audit is based on facts

Planning & Design • Self-audit is planned to achieve the stated objective • Self-audit is a system

Determination • Purpose, objectives and scope of the self-audit are clearly defined • Feasibility to achieve the stated objectives is ensured

Deployment • Process owner is trained and qualified to conduct a self-audit • Adequate & reliable auditing methods are applied

Implementation • Evidence and information are collected and verified • Strengths, weaknesses and improvement opportunities are identified

Follow-Up • Relevant, valid, communicable and verifiable findings are reported • Self-audit results are included in the business planning process

C L I E N T

System-Wide Principles • Objectivity • Assurance of quality, reliability and maintainsbility • Continuous improvement and non-punitive orientation

Source: Karapetrovic and Willborn (2002).

the source of Self-audit’s strength, compared to the conventional audit, lies in self-audit stength a less rigorous evaluation, little external control of compliance with set procedures and official guidelines, and the opportunity for joint identification of improvements in the work place. In a small business, a self-audit may be the only practical process evaluation method available. Here the manager, auditor, auditee and the client are usually functions of the same person. The independence principle of the traditional audit would require at least two internal auditors in the 190

company, regardless of how small it is. A self-audit is also expected to bring a solid foundation in data collection, verification and evaluation, as well as more objectivity to self-assessments. It is also crucial to understand that self-assessment has no end in itself as a separate activity.

17.3. Self-assessment and Quality Awards In recent years, it has become apparent that organizations competing in any kind of market cannot rely solely on ISO 9000 standards to meet the increasing demands for continuous improvement and business excellence. Consequently, the traditional quality auditing methodology designed to test quality assurance systems against the standards falls well short of enabling performance improvement. While there is little doubt that a system audit is an excellent tool for independent, objective and systematic evaluation against the standard’s minimum requirements, based on professional and statistically sound judgments, there is even less doubt that some changes are required. Among the problems that continue to plague the audit are the lack of motivation of participants, narrow focus on quality assurance, non-existing linkages with business planning, and the inability to measure efficiency or at least focus on business results. Meanwhile, self-assessments against quality award models have gained prominence in exactly the areas where quality audits were lacking, most importantly performance improvement. Although they cannot replace quality audits, self-assessments possess one crucial characteristic that can improve their more formal counterpart: self‑evaluation. The ability to improve continuously is a predictor of the future of organizations. In recent years, self-assessment has become an important management technique for continuously improving overall business performance. There are some standardized quality models used by firms in practice as a guide for their implementation, or in order to carry out self-evaluations of their quality practices. The main models are the Malcolm Baldrige National Quality Award (MBNQA) model in the USA, the European Foundation for Quality Management (EFQM) model in Europe and the Deming Application Prize (DAP) model in Japan. Although there are some differences between these models, they have a number of common elements as themes (Ritchie and Dale, 2000). Additionally, there are a number of national quality award models developed out of MBNQA and/or EFQM, e.g. the Swedish SIQ model and the Dutch excellence model. During the past few years, many other countries, including Singapore and the Philippines, have also established

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self-assessment against quality award

world-wide known quality awards

self-assessment against an excellence model

main steps of self-assessment

their own national quality awards. All these excellence models are based on TQM and they are helpful in defining and describing TQM (Van der Wiele et al., 2000). National quality award programs promote quality awareness, reco gnize quality achievements of companies, and provide a platform for sharing successful quality management initiatives. Most national quality awards use a framework of criteria that seeks to assess an organization’s quality related performance. These criteria require organizations to show evidence of innovative approaches, widespread deployment of these approaches, and a continuous improvement philosophy. These require ments are prerequisites for organizations to reinforce and improve quality in work processes, products and services. Recognizing that organizations can pursue different paths on their quality journey, the criteria, however, do not look for specific practices but instead rely on a non-prescriptive perspective during assessment. Quality awards models contain a number of criteria that are divided into sub-criteria and address every aspect of a company. Self-assessment is a comprehensive, systematic and regular review of an organization’s activities and results referenced against an excellence model. The self‑assessment process allows the organization to discern clearly its strengths and areas in which improvements can be made and culminates in planned improvement actions which are then monitored for progress. Apart from illuminating areas for improvement, self-assessment provi des an important cultural benefit because it encourages an ethos of continuous improvement, promotes a holistic perspective, and allows people to gain a broader understanding of the business (Zink, Schmidt, 1998). There is no universal method for self-assessment. An approach to self-assessment must consider the organization’s maturity and culture, and must be correctly positioned as a part of an overall management process. Here are the main steps of self-assessment operation: • plan self-assessment, • choose an approach, • plan the implementation, • gain commitment, • communicate the message, • train people, • handle actions for improvement. When an approach is designed and a plan is established, it is crucial that there is strong commitment among middle and top management. In order to maintain their commitment, people must be informed about targets, execution, and consequences of the self-assessment, and improve

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ents in profitability and overall business performance must be visible. m Training of key management and in-house facilitators should be one of the organization's first priorities when implementing self-assessment. A critical phase of self-assessment is the establishment of an improve ment plan that must be presented to higher management, linked to business planning, and then communicated to the whole organization. Much too often, organizations fail to do this, and consequently, selfassessment activities do not lead to lasting improvements. People should receive training in how to handle improvement actions to develop an understanding of why to improve and where to start Self-assessment provides a great opportunity to make comparisons with other organizations and identify the best efforts and practices within an organization. Combining self-assessment with external benchmarking will counteract inside orientation. Ideas can be borrowed and stretched from areas or disciplines outside an organization’s immediate area of expertise. What is even more important – using a model continuously is better than winning any award. Thus self-assessment should be looked at as a part of a process and not as a separate activity.

improvement plan establishment

advantages of self-assessment

Figure XXXII: The European Quality Award Framework (Business Excellence Model) People management 9%

Leadership 10%

Policy and Strategy 8%

Resources 9% Enablers 50%

People Satisfaction

Processes 14%

Customer Satisfaction 20%

Business Results 15%

Impact on Society 6% Results 50%

Source: EFQM, 1999.

As you can see from figures XXXII and XXXIII, EQA and MBNQ main quality as well as majority of quality awards have similar criteria measuring awards criteria leadership, information analysis, process management, strategic plann ing, human resource management, partnerships, public responsibility, quality results, operations results, and customer satisfaction. In most of

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these awards, companies are assessed on their approaches, the depth of deployment in their approaches, and performance results associated with operations, quality, and customer satisfaction (EFQM, 1999; NIST, 1999). Assessors make a conscious effort to link approaches to results, and examples are in the areas of human resource and customer satisfacÂ tion. In actual award application, a company that mentioned specific approaches to managing or developing human resource should also report on performance results that are derived from these approaches. Thus, different companies in different countries may use different approaches and the performance results that are assessed would mostly be linked to the stated approaches. This will ensure that companies are measured on the merit and effectiveness of their approaches and deployments (Lee and Quazi, 2001).

Figure XXXIII: Baldrige Award criteria Framework Customer and Market Focused Strategy and Action Plans

2 Strategic Planning 8% 1 Leadership 11%

3 Customer and Market Focus 8%

5 Human Resource Development and Management 10%

6 Process Management 10%

7 Business Results 45%

4 Information and Analysis 8%

Source: Lee and Quazi (2001).

quality awards The MBNQA and EQA criteria are farther-reaching and broader versus ISO than the ISO 9001 requirements. Also, the ISO 9001 quality assurance standards standard falls short of strategic quality management in focusing and implementing quality improvement strategies in delivering ever improving value to customers and the improvement of a companyâ&#x20AC;&#x2122;s 194

overall operational performance. This does not mean that ISO 9001 is not desirable; the fact that it is being used for registration all over the world should underscore its definite value. The ISO 9001 registration process involves much less time and effort then application to any award criteria. It also involves much less cost. Thus it is recommended that companies should attempt first getting ISO 9001 registration and then try to develop and implement quality improvement strategies to satisfy the MBNQA or EQA criteria. Tummala and Tang (1996) compare the Malcolm Baldrige and European Quality Awards with the ISO 9001 standard as follows: • The MBNQA and EQA are awards whereas the ISO 9001 is a con tractual quality assurance standard that can be satisfied by registra tion. • Both the MBNQA and EQA and the ISO 9001 standard are results‑based awards/standards. • The major purposes of the MBNQA and the EQA are to promote quality awareness, to increase competitiveness, to understand the requirements of excellence in quality, and to recognize companies for outstanding quality management and achievement. In addition, the MBNQA requires that award-winning companies should share information on their successful strategies with other companies. On the other hand, the major purpose of ISO 9001 is to implement an effective quality system to provide confidence in customers that the intended products and services consistently conform to specified requirements. • Both the MBNQA and EQA emphasize two factors of competitive ness; namely, delivery of ever improving value to customers and improvement of the company's overall operational performance. The EQA also focuses on a company's financial performance. ISO 9001, on the other hand, focuses only on conformance to specified require ments in establishing and maintaining the company's documented quality system. • In addition to inspection and testing, conformance and documenta tion play a vital role in planning and implementing an effective documented quality system that satisfies ISO 9001 requirements. On the other hand, they are not emphasized in the MBNQA and EQA criteria. Companies could regularly use the framework of quality awards to benchmark their current quality performance and identify areas of improvement. As mentioned earlier, to facilitate wider use of the award criteria, a self-assessment tool in the form of a survey-based question naire could be developed for measuring the essential elements in each

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MBNQA versus EQA

quality awards criteria as a benchmark

of the criteria. Such a self-assessment tool could then be administered by the award committee to organizations who are not ready for the actual application of the award but would like to assess their current quality performance level. Administering such a self-assessment survey from a central body also helps in setting up benchmarking information within and outside the industry (Lee, Quazi, 2001).

18. “Hard” and “Soft” Tools for Quality 18.1. Fishbone Diagram

hard and soft quality techniques

cause-and-effect diagram

Evaluation of quality system might help to recognize the major noncompliances but can not be solely treated as a quality improvement tool. Audits enable to put the diagnosis – but the treatment and maintenance depends on some other tools. The range of initiatives and technical tools used towards quality enhancement is very large and diverse. Some include specific human resource management components such as team building, quality circles, just-in-time planning, quality action teams, team building, management workshops, awareness training, customer care training, customer satisfaction surveys, etc., while some are driven by “hard” techniques such as statistical process control (SPC), Pareto charts, fishbone diagrams (Ishikawa diagrams), histograms, check sheets, scatter diagrams, run (trend) charts. Like other tools, you have to use the right one for the job. To describe a process, flowcharts, histograms, run charts, and Pareto charts can be used. To explore or analyze a process, fishbone diagrams and scatter diagrams can be used. To monitor a process, run charts and control charts can be used. Not all of them are known and/or suitable for service and namely tourism enterprises. One of the most popular of the above tools is the Cause-and-Effect diagram, also called the “root cause analysis”, “Ishikawa” or “fishbone” diagram, because it was drawn to resemble the skeleton of a fish, with the main causal categories drawn as “bones” attached to the spine of the fish (see Figure XXXIV). The C&E diagram can be used by individuals or teams; probably most effectively by a group in a brain-storm style session. The most effective method is to select a scribe (the one who documents) and then encourage the rest of the team to contribute. Seeing the ideas on paper often triggers more ideas. The team assists by making sugges tions and, eventually, the entire cause and effect diagram is filled out.

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Causes33 in a C&E diagram are frequently arranged into four major main categories of categories: C&E diagram • 4 M’s: manpower, methods, materials, and machinery (recommended for manufacturing) • 4 P’s: place, policies, procedures, and people (recommended for administration and service). • 4 S’s: Surroundings, Suppliers, Systems, Skills The basic concept in the C&E diagram is that the name of a basic problem of interest is entered at the right of the diagram at the end of the main “bone”. The main possible causes of the problem (the effect) are drawn as bones off of the main backbone. The “Four-M (P or S)” categories are typically used as a starting point. Different names can be chosen to suit the problem at hand, or these general categories can be revised. The key is to have three to six main categories that encompass all possible influences. Brainstorming is typically done to add possible causes to the main “bones” and more specific causes to the “bones” on the main “bones”. This subdivision into ever increasing specificity continues as long as the problem areas can be further subdivided. The practical maximum depth of this tree is usually about four or five levels. Figure XXXIV: Example Fishbone Diagram workers

environment too hot

training unhappy workers

old management

machines

Source: http://quality.enr.state.nc.us/tools/fishbone.htm

Figure XXXIV shows a simple Ishikawa diagram. When the fishbone is complete, one has a rather complete picture of all the possibilities about what could be the root cause for the designated problem. Then team discussion takes place to decide what are the most likely root 33

These guidelines can be helpful but should not be used if they limit the diagram or are inappropriate. The categories you use should suit your needs.

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causes of the problem. These causes are circled to indicate items that should be acted upon, and the use of the tool is complete. The empowerment of employees is a mainstay of quality initiatives in service organizations and a number of companies introduce such tools like quality circles or quality action teams. Service organizations often emphasize the point of contact with external customers and that is probably the reason why “hard” techniques do not seem to be very popular in those companies. Much more often they look for some “soft” techniques like quality function deployment, critical incidents technique, and well known benchmarking techniques. What is more surprising – few service companies attempt to measure the cost savings associated with quality (perhaps this reflects the difficulties companies experience in trying to quantify the benefits and costs of quality initiatives). Neither they try to use any techniques to lower the cost of so called poor quality.

18.2. Quality Function Deployment In order to gain customers loyalty, the organization must first define quality, then listen to the customer’s definition of quality, and then fuse the two together. This process is called quality function deployment (QFD) and was first used in Japan to design new products and service delivery systems. Quality function deployment utilizes the results of customer research at the product design stage while product engineers are conceptualizing the new product. In this way, the needs of the organization and those of the customer can be incorporated into the product before mass marketing takes place. three types of Hauser (1993) relates three types of customer needs which are customer needs necessary to sustain satisfaction and which should be considered when using the QFD technique. Necessary needs are those absolute needs on which customer satisfaction depends but which are often taken for granted – value and dependability for the price paid. Desirable needs are second in importance and are those which are “nice to have” but not essential. These “nice to haves,” however, often attract customers to one product over another, especially if little cost difference exists between the two. Variables such as dependability, ease of operation, and service reputation are highly desirable but are not absolute needs. Last, those factors which surpass necessary and desirable needs, which are offered at a reasonable price, and which are deemed of high value are the key to sustaining customer loyalty and increasing the market share. Because customers often find these variables difficult to describe or identify, the use of the QFD process is of great importance.

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The issue of perceived quality as opposed to objective quality is important to customer satisfaction and loyalty. When customers perceive a lack of quality in a product, for any reason, their degree of satisfaction decreases and they refrain from buying the product. Customer perceptions about product quality can and do change, but that change in perception takes time and requires satisfaction which is substantiated through word of mouth, personal experience, or both. Consequently, objective quality is less important than customer perceptions of quality which result from personal experience and fulfilled expectations. When the product is better than expected, quality is perceived and satisfaction exists; however, when the product fails to perform as expected, there is a perceived lack of quality which results in customer . The main features of QFD are a focus on meeting market needs by using actual customer statements (referred to as the “Voice of the Customer”), its effective application of multidisciplinary teamwork and the use of a comprehensive matrix, called the “House of Quality” (Figure XXXV) for documenting information, perceptions and deci sions. The QFD methodology is based on a systems engineering approach consisting of the following general steps (Crow, 2004): • Derive top-level product requirements or technical characteristics from customer needs (Product Planning Matrix). • Develop product concepts to satisfy these requirements. • Evaluate product concepts to select most optimum (Concept Selection Matrix). • Partition system concept or architecture into subsystems or assemb lies and flow-down higher-level requirements or technical characteri stics to these subsystems or assemblies. • Derive lower-level product requirements (assembly or part characte ristics) and specifications from subsystem/assembly requirements (Assembly/Part Deployment Matrix). • For critical assemblies or parts, flow-down lower-level product requirements (assembly or part characteristics) to process planning. • Determine manufacturing process steps to meet these assembly or part characteristics. • Based in these process steps, determine set-up requirements, process controls and quality controls to assure achievement of these critical assembly or part characteristics. In a buyers’ market, it is not enough in itself to supply the basic needs of consumers. In addition to necessary qualities, attractive qualities must also be developed that will furnish the customer with special value. In a competitive market, it is no longer possible to be satisfied with simply

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House of Quality

QFD methodology

necessary versus attractive qualities

Figure XXXV: House of Quality

Source: www.isixsigma.com/offsite.asp?A=Fr&Url=http://www.shef.ac.uk/ ~ibberson/qfd.html

complying with the required quality to meet consumers' needs. Rather, it is necessary to invest in, and achieve attractive quality that also meets their expectations. Since 1966 QFD has been used world wide in nearly every industry and sector to: 1. Prioritize spoken and unspoken customer wants, and needs; 2. Translate these needs into actions and designs such as technical characteristics and specifications; and

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3. Deliver a quality product by focusing various business functions toward achieving a goal of customer satisfaction. Some of the benefits of adopting QFD have been documented as: QFD benefits • reduced time to market, • reduction in design changes, • decreased cost of design and services rendering, • improved quality, • increased customer satisfaction.

18.3. Critical Incident Technique As mentioned in previous chapters, in service settings, customer satisfaction is often influenced by the quality of the interpersonal interaction between the customer and the contact employee. Thus, one central goal in the pursuit of “zero defects” in service is to work toward 100% flawless performance in service encounters. Here, flawless per formance is not meant to imply rigid standardization, but rather 100% satisfying performance from the customer’s point of view. The cost of not achieving flawless performance is the “cost of quality,” which includes the costs associated with redoing the service or compensating for poor service, lost customers, negative word of mouth, and decreased employee morale. There are few ways to check the quality of service encounter. The mystery guest is a methodology in which a participant is asked to evaluate experiences and identify important factors that influence the nature of the experiences from a guest viewpoint. This technique is quite popular in tourism – especially within a hotel sector. Hotel managers sometimes sustain the fear of the mystery guest among employees in order to guarantee the high level of every service encounter. However every opinion on service quality is very controversial and thus quality assessment of the mystery guest does not have to be the best indicator of the average customer’s viewpoint. There is also another possibility to collect information on customers opinions. Frontline personnel are a critical source of information about customers. There are two basic ways that customer knowledge obtained by contact employees is used to improve service. First such knowledge is used by the contact employees themselves to facilitate their interactions with customers employees often modify their behaviour from moment to moment on the basis of feedback they receive while serving customers. Second is the knowledge used by the firm for making decisions. Frontline personnel have frequent contact with customers, they serve a boundary-spanning role in the firm. As a result, they often have better

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mystery guest

ways to obtain customer’s knowledge

frontline personnel as a source of information

understanding of customer needs and problems than others in the firm. Researchers have theorized and found some evidence that open commu nication between frontline personnel and managers is important for achieving service quality (Parasuraman et al., 1990). Schneider and Bowen (1984) argue that firms should use information gathered from contact personnel in making strategic decisions, especially decisions regarding new service development and service modifications. However the best idea is to confront the employees and customers point of view. One of the most popular tools to obtain employees and/or customers opinions on some incidents or quality of service encounter is so called Critical Incident Technique (CIT) or Critical Point Analysis “incident reports” (CPA). It is a research method developed during World War II by Colonel John C. Flanagan, Director of the Division of Aviation. The method involves collection of brief, written, factual reports of actions in response to explicit situations or problems in defined fields. “Incident reports” may be written by participants who took action (employees, customers, hotel guests, passengers etc.), by qualified observers, or both. Researchers may obtain descriptions of the effective and ineffective behaviours of people who are performing a given job. Persons in a position to observe job performance are asked to report on specific observable incidents that have had either a positive or negative influ ence. Reporters describe the antecedents that lead up to the incident, the behaviour or action that occurred, and the consequences of that behaviour which led the observer to conclude that it was either effective or ineffective. An incident may be defined as “critical” when the action taken critical points definition contributed to an effective outcome (helped to solve a problem or resolve a situation). An incident may also be considered “critical” when the action resulted in an ineffective outcome (it partially resolved a problem, but created new problems or need for further action). A critical incident report should describe a situation, and an action that was important, significant, “critical” in determining whether the out come was effective or ineffective. Flanagan emphasized that “the CIT should be thought of as a flexible set of principles which must be modified and adapted to meet the specific situation a hand.” Proposals must include a clear, concise statement of the purpose or aim of the study; specifications for the types of data to be collected; plans for selection of the population to be used; guidelines for observing, interpreting and classifying critical incidents; plans for analyzing data and for interpreting and reporting results. Because critical incident data can be analyzed both qualitatively and quantitatively, results tend to be more precise, more explicit and more

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usable than opinion poll data in studies issues related to education, business, industry, health care, and professional and working life. The CIT has been used to study “what people do” in a variety of professions, which provided data used to identify factors important in defining criteria for “acceptable performance” in many fields. Analysis of thousands of incident reports from project participants and qualified observers have helped to describe “critical requirements” for perfor mance in fields as diverse as piloting and navigating aircraft, improving the operation of complex devices, designing and manufacturing safer automotive equipment performing orthopaedic surgery, providing safe/ effective nursing care, and improving the quality of service encounter, enhancing working conditions in many other fields of human endeavour. The technique has proven useful in research on ways to help people of diverse cultures, at all ages and stages, to improve the quality of life and living. Frontline employees are good sources of information on customer attitudes. Many studies (Schneider and Bowen, 1985, Schneider, 1980, Schneider et al., 1980) based on CIT confirm that employees of hotels, restaurants, and airlines report all the same categories of customer satisfaction and dissatisfaction reported by customers in the same industries. Moreover many frontline employees do have a true customer orientation and do identify with and understand customer needs in service encounter situations. They have respect for customers and a desire to deliver excellent service. Oftentimes the inability to do so is governed by inadequate or poorly designed systems, poor or nonexistent recovery strategies, or lack of knowledge. When employees have the skills and tools to deliver high-quality service, they are proud of their ability to do so. The CIT has also proved that, on the contrary, customers can be the source of their own dissatisfaction through inappropriate behaviour or being unreasonably demanding. The group of dissatisfactory incidents caused by problem customers surface in any service industry and its existence represents a strategic challenge for the organization as well as an operational, real-time challenge for service employees. In a time when “customer is king” is the stated philosophy of most forward‑thinking organizations, acknowledgment that wrong customers exist, coupled with creative thinking about customer roles and management of customer expectations, may considerably deepen understanding of and ability to cultivate customer relationships. It is insufficient to look only at the encounter with the customer; hotels, other tourism companies and even all the TDA must study the critical incidents in the production process and examine how an

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customers and employees in CPA

customers as source of their dissatisfaction

oversight in one area might affect the customer’s satisfaction with the end result (Edvandersson, 1992). Service industries have always had a customer focus, but it now appears to be better focused than before. It is not sufficient to assume what the customer wants, it is necessary to find out and to provide it.

19. Competitive Benchmarking as a Service Improvement Tool Benchmarking is defined as a process of measuring the performance of a company – in terms of the products and services offered and the processes employed – against its best competitors. It is important to determine how the best competitors achieve their performance levels in order to introduce changes to the practices of the company (Bemowski, 1991). Benchmarking is a continuous quality improvement process by the concept of which an organization can assess its internal strengths and weaknesses, benchmarking evaluate comparative advantages of leading competitors, identify best practices or functional leaders, and incorporate these findings into a strategic action plan geared to gain a position of superiority. Benchmarking is applicable to a wide array of industry including the hotel industry and has two distinctive approaches: competitive and process benchmarking. Competitive benchmarking aims to measure organizational performance against that of competing organizations, whereas process benchmarking aims to measure discrete process performance against organizations that lead in those processes. Since Xerox developed a strong benchmarking foundation through its “leadership through quality” program in 1979, benchmarking management has become a competitive technique taken by many companies such as IBM34, Motorola, AT&T, 3M, DuPont, and Digital hoping to minimize unit production cost and product defects so as to improve productivity and meet the customer needs (Chen, 2002). The CEO of Xerox, David Kearns, defined the benchmarking approach as “to continuously improve the product and service in order to compete with the best one and the leadership in the industry.” The bench marking process has been recognized in USA as the most important 34

Benchmarking was used by IBM to improve its “market management” capability after a cross-industry benchmarking study in the early 1990s. This resulted in a radically new market management process design that IBM believed was superior to those of its competitors.

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tool in improving product quality for the past ten years and has been certified by MBNQA. The steps of competitive benchmarking may consist of: Step 1: Identify and prioritize salient service attributes that influence the overall service quality in hotels. Step 2: Develop service quality standards as benchmarks. Step 3: Conduct competitive gap analysis. Step 4: Develop strategic action plans for continuous service quality improvement. Benchmarking and performance evaluations are components of modern management practices and parts of TQM. However, the bench marking process differs from performance evaluation. Performance evaluation is a tool used for measuring productivity, cost efficiency, and operational advantages, which has traditionally been realized on a histo rical basis. The benchmarking process is usually based on a competitive basis and is the value of some parameters used as a reference point in comparisons. It could be used to compare the performance within one corporation (internal) or among different companies in an indu stry (external). Stonehouse et. al. (2000) argued that successful bench marking process relies on: • commitment from the managers of the organization; • acceptance of the need for improvement; • willingness to accept others' perspectives; • a supportive community; • continuous development of competence; and • a constructive vision, mission and clear objectives. Typically, the benchmarking process comprises four phases, namely, planning, analysis, integration and action (Dodwell and Zhang, 2000). The first two phases fall under the external applications (amongst compa nies) and the last two, internal applications (in each company). Planning lays the foundation and is critical to implementing a successful bench marking project. It involves the complete understanding of the existing internal processes and measurements. In the planning phase, manage ment should reach agreement on such issues as: identifying what is to be benchmarked, identifying competitors, and developing methods for data collection. The analysis phase involves analyzing the benchmarking data to iden tify and understand the practices which best contribute to the subject's strengths. Hence, the company could determine current performance gap. In the analysis phase, the key questions are these: what is the perfor mance of the best competition organization? How to determine current performance, and how to benefit from the “benchmark” organization? 205

the steps of benchmarking process

factors of benchmarking success

phases of benchmarking

analysing benchmark data

integration phase

action phase

market-based organizational learning

learning from competitors

In the integration phase, the company develops goals and integrates them into the benchmarking process to obtain significant performance improvements. The integration phase is to develop goals and integrate them with the benchmarking approach in order to achieve performance improvement. This phase addresses such questions as: has top manage ment accepted this finding? Have the goals been completely communica ted to all parties involved? Finally, the action phase needed to achieve the goal is decided in the integration phase. While this phase follows the third phase, a continuous examination of the goals is crucial. The integration and action phases involve actions that are internal to the benchmarking process, which should be implemented within the organization. The central theme of establishing benchmarking is built upon customer needs, the house of quality technique is considered to be the most useful quantitative tool to translate directly the “voice” of the customer into product development and improvement elements. So‑called “quality function” is an activity of continuing quality improve ment. Therefore, from product design and development to product disposal, product quality function is clearly established in each stage. As such, the QFD technique systematically works to fulfil this purpose. Market-based organizational learning has been identified as an important source of sustainable competitive advantage. Benchmarking has the potential to become a key learning mechanism for identifying, building, and enhancing marketing capabilities to deliver sustainable competitive advantage (Vorhies, 2005). Benchmarking, a structured process by which a firm seeks to identify and replicate “best practices” to enhance its business performance (Camp, 1989, Zairi, 1998), is one of the most popular management tools in the world. It has become a primary instrument in firms’ total quality management, knowledge management, and process improvement efforts. It has also been recommended as a marketing capability improvement tool, with firms having undertaken benchmarking projects in areas such as customer satisfaction monitoring and brand management. Benchmarking is called a market-based learning process as it means learning from competitors and peers. A firm seeks to identify best practices that produce superior results in other firms and to replicate these to enhance its own competitive advantage. Over time, the primary focus of benchmarking has moved from the content of the product or services produced, the strategy pursued, and performance outcomes achieved by top-performing firms to a process focus on the capabili ties believed to have produced the superior performance outcomes observed.

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Figure XXXVI: The benchmarking process model Planning phase

1. Identify what is to be benchmarked 2. Identify the competitors 3. Develop the data collection method

Quality Benchmarking Deployment House of quality

Analysis phase

1. What is the performance of the best practice organization? 2. Determine the current performance 3. How to benefit from the “benchmark”?

Integration phase

Develop the goals Communication

Action phase The action plan needed to achieve the goals

Source: Chen (2002).

Benchmarking also provides an important opportunity for learning learning by by experimentation. The search stage of process benchmarking involves experimentation identifying the capabilities contributing to superior performance that should be isolated for further study. When managers have determined which capability improvements will likely yield the greatest return, they should then communicate and discuss benchmarking findings within the firm to develop a common understanding, use process mapping tools to conduct more detailed investigations of the target capabilities in the benchmark sites, agree on specific capability improvement goals, develop and execute detailed capability improvement action plans, and monitor outcomes using market and cost feedback to enhance initial capability improvements further. In most cases, large tourism companies are in a position to secure adequate physical, financial and human resources needed for the development of a comprehensive and advanced quality system based on

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the concept of TQM. In many cases, they also have satisfactory infor mation about the areas of improvement in relation to their competitors as a result of using the benchmarking technique (Cheshire, 1997). benefits of Benchmarking helps to focus resources on the performance targets that benchmarking relate to the areas of improvement against the company’s best competitors. The use of benchmarking is definitely of great importance in enhancing the performance of an individual tourism company and to gain market leadership. However, it still provides partial information about the customer needs. As a matter of fact, benchmarking establishes only what, in their customers’ opinion, makes the difference between the company and its best competitor (Ho, 1995). The new standards that are set as a result of applying the benchmarking technique are mainly conducive to gaining a competitive advantage by an individual tourism company. In view of the complex nature of the tourism product, this technique does not provide sufficient information about the customers’ needs in relation to their total tourism experience.

20. Do Loyalty Programmes Serve Tourism Product Quality? If the company wants to make its stable customers feel welcome and persuade them that they are better than those who do not use services of the company, it should make them members of its own private and exclusive “club” and offer them benefits to reward their membership and loyalty. A club is one of the most effective forms of relationship marketing, and can help to strengthen relationships with existing customers by focusing activities on them, and their wants and require ments (see the example in table XVI). the idea of “club The basic idea of “club cards” (customer cards) is to function as cards” a tool for customer relationship marketing by offering special advantages (usually by the form of price reductions or bonuses, or some kinds of “happening”) for the card owners. At the same time, the cards serve as the basis for a customer database. The key tasks to establish the “customer clubs” “customer clubs” are to (Slight, 1995): • identify the business benefits of the club; • assess the cost of the program; • appoint a program coordinator; • research customer requirements; • refine the contents of the program; • develop a launch strategy; • introduce the concept of the program internally to build commit ment;

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• implement the practical requirements of the program- the technical hotline, the training programs and the mechanism for distributing product information; • implement any training programs required to deliver quality service to club members; • introduce the program to the sales force; • develop a launch program to ensure high levels of awareness among prospective club members; • operate a launch and sales incentive program to recruit high membership levels; • implement a program to ensure that members continue to receive high levels of benefit; • develop a membership program that will continue to strengthen relationships. Except the “typical” relationship marketing some enterprises practise so called one-to-one marketing. In fact it represents the company’s attempt to treat its customers as individuals and thereby develop a continuing business relationship with them. This approach uses individually addressable and interactive media to permit dialogue with customers, and also can offer mass-customized goods and services. The market-place of the future is undergoing a technology especially more opportunities for electronic interactions with individual customers. E.g. the Marriott Hotel chain, by systematically storing customer information on preference for a non-smoking room, previous visits to Marriott Hotels, etc., can treat guests in a customized mode even at their first visit to a specific hotel location. An example from tourism practice is the Koala Tours agency, practicing mass-customized marketing. A relationship begins when a couple orders a honeymoon package. Then, the following year, six weeks before their anniversary, the travel agency’s computer system sends the couple a reminder postcard together with the latest catalogue of honeymoon packages. The agency is performing an important service: it reminds valued customers of their upcoming wedding anniversary, encourages them to spend their second honeymoon in an exotic country, and makes it easy for customers to book this service at this particular travel agency. The underlying strategy is following. Although it would be less expen sive per person reached to market using one-way media message, it is cheaper per sale completed to communicate individually with a valued customer and solve a problem for him. The agency that has the data required for the success of such a transaction – in this case, customers’ wedding date and their special tastes in travelling – has a measurable 209

one-to-one marketing

some examples from tourism practice

advantage in the competition for this specific customer’s business. In relationship marketing, information in the database is a crucial component of the offering. The more information the agency has about any customer, the deeper the relationship that agency will be able to develop with that particular customer, and the less likely that customer will be to leave the franchise. Companies implementing one-to-one marketing have learned that (Peppers and Rogers, 1995): – an awareness or image-building advertising campaign can not help a brand or service which customers perceive as being poor quality; – initiating a relationship marketing database helps to pinpoint product and service problems and also contributes to continuing improvement in quality. With a high-quality product, a company gets satisfied customers and satisfied customers tend to return. The basic assumption is that customer satisfaction drives profitability (Grönroos, 1990). The assump tion is based on the idea that by improving the quality of the provider’s service, customer’s satisfaction is improved. A satisfied customer creates a strong relationship with the provider and this leads to relation ship longevity (or customer retention-customer loyalty). Retention again generates steady revenues and by adding the revenues over time customer relationship profitability is improved. Thus the firm can utilize potential customer relationship economic opportunities in a favourable way. When a quality breakdown does occur and customers defect, it is important to establish exactly why. A long wait at a travel agency or unwillingness to provide a customer with information that are fitted exactly to his needs may be due to inadequate staffing, lack of training, lack of motivation of staff, complicated form-filling, lack of administra satisfaction and tive organization or a host or other reasons. The result is the same loyalty – a dissatisfied customer who probably perceives the problem to be a lack of staff. The real root cause, however, may be very different and needs to be identified if the right strategies are to be implemented to improve service quality and resulting customer retention. But can we take it for granted that there is a reciprocal influence of quality and satisfaction? As mentioned earlier the customer perceived quality is a function of the customer’s perceptions of two dimensions: technical quality (the impact of the outcome or the technical solution) and functional quality (an additional impact based on the customer’s perception of the various interactions with the firm – how the so-called moments of truth are perceived). In relationship marketing the functional quality

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dimension grows in importance and often becomes the dominating one. However perceived service quality can be seen as an outsider perspective, a judgment of a service. It does not even have to be experienced; it can be based on knowledge about a service provider through word-of-mouth or advertising (Liljander and Strandvik, 1995). The paradox resulting from the definition of consumer satisfaction and perceived quality is visible. Service quality can be judged low but the customer is satisfied. This might be the case when the service fits the customer’s budget or is priced according to the low quality. Low satisfaction and high perceived service quality is also a possible outcome. The customers judge the service to be of high quality but are not satisfied because what was given (price) is not perceived to correspond to the received quality. This clearly has to do with the budget of different customers and their preferences for different attributes and alternative ways of spending their money and time. That is why Dave Illingsworth, the first general manager of Lexus USA, underlines “The only meaningful measure of satisfaction is repeat purchases.” Moreover quality service delivery may not be always required to retain all customers (Young and Denize, 1995). Some customers require only minimal competence aligned with a guarantee of relation continuity or a high quality brand name. Other clients are tied to service providers by their complete dependence on the unique or business-specific service they provide. Fostering of such ties is increasingly recommended as an effective “loyalty marketing” strategy. Frequent flyer programs and other point-for-benefit clubs are exam ple of these. Managers can assess what is required by customers and provide them with that and only that. Such a position would man date that resources invested beyond relationship maintenance are wasted. Moving customers up the loyalty ladder is not simple. Firms need to retaining know in depth what each individual customer wants and how they can customers continue to add value to the customer offer. Marketing directed at retaining customers can be expensive and needs to be closely evaluated against results. Therefore, customers have to be segmented also according to their “value” for a company. Every company must know how much potential business that person is likely to generate. The most successful retention programs segment customers into different levels of existing and potential profitability and focus marketing activities on them. The most profitable customers (the most valuable ones) are the ones that should be concentrated on. 211

Table XVI: Loyalty programmes in tourism The youth agency CKM Travel, a part of a worldwide chain STA Travel that offers individual tourist products for young people, students and teachers, introduced the service CKM Online. The customer becomes a member of CKM club when buying a particular product CKM 2000 Travel or some of international cards (EURO<26, ISTC, ISIC, ITIC). Thanks to CKM Online, the customer gets the access to all products, latest news, current discounts, Internet compe titions, etc. Information sent to the customer can be selected according to preferences that were specified in his/her personal profile. Members receive magazine “Big News” every three to four months which gives them a useful insight into the news and discounts that are available. As a bonus, club members can also get free tickets to concerts and other special events. Some frequent flyer/hotel guest clubs such as the British Airways Executive Club, introduce clubs’ service in order to deter customers who make regular high value purchases, from moving their business to its competitor. In Kosice, the Golden Royal Company that operates as a travel agency, a guest house and a restaurant, focuses on “club membership”, as well as other inter active form of retaining clients. Their web site, incorporating material from their print catalogue but with very rapid updates, went on-line in October 1998 and was targeted at the clients of the travel agency. Golden Royal admittedly sees their Web site as a marketing awareness tool more than anything else. It views the electronic catalogue as a way to transfer some of the selling function (and certainly the data entry tasks) to the customer and suggest that customers receive appropriate incentives such as discounts or membership in an elite group with preferential treatment. Therefore, the company offers a special club card for its regular clients, which makes possible to get discounts in all activities of Golden Royal. To the advantages of the club card belong 10% discount in all activities and 4 % bonus discount in the travel agency for mediated products and 2% discount for airplane tickets. The customer joins the club after first payment over 1000 SKK, when he or she gets temporary club card Golden Royal, which makes possible to get 5% discount in all activities. Temporary club card is registered in its database with individual number constituting an account. After spending 31,000 SKK the client obtains club card Golden Royal. The club card can be used in the restaurant, the pension, the travel agency (own products 10%, mediated products 4% and airplane tickets 2%), transport and the congress hall. Source: Kachniewska (2005).

customer’s The best indication of customer’s potential “profitability” comes past behaviour through analyzing a customer’s past behaviour, preferences and other analysis relevant information. Forecasts of an individual’s future transactions can then be modelled using statistical techniques. Some firms already have established sophisticated databases to track customer’s transac tion histories. They can use their record of an individual’s transactions, plus any other customer-specific variables (demographic or psycho graphic information and data from outside sources) to estimate a person’s life-time spending potential. 212

One-to-one relationships to customers can easily be created in tourist facilities. Staff should be encouraged to learn the names, habits and expectations of customers. In hotel Gloria Palace in Kosice, there is an attempt of very intimate approach to each customer. Frontline staff must address each guest by name, even if she or he stays for two days and may never come back! One of Kartago Tours agency relies on identifying the 50 best “New Year’s Eve” customers by name. Two months in advance, before the end of the year, special trained staff send them mails with special offer for upcoming New Year’s Eve, their own ICQ number and encourage them to contact them via Internet to present their special wishes, set all details; and in turn the staff creates the most suitable offer for them. The one-to-one marketer uses the opportunity to discuss face-to-face (via Internet or by visiting the agency’s placement), he focuses on the dialogue that leads to greater understanding of the customer, and then customizes the offering to get a greater share of business from each of the most valuable travel agency’s customers in the population.

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Concluding remarks

Services, the tertiary sector of economy has vastly gained on importance in recent years, especially when it comes to the economies of developed countries. Since the number of firms assembled in this sector increased rapidly and consumer demands and technologies changed, new and highly competitive markets have been opened up. The rapid growth has also introduced new perspectives for quality management. The most famous formal (ISO 9001) and informal (TQM) quality management systems try to include the specificity of service activity into the range of their tools and techniques. The international demand for tourism products and services no longer happens automatically; it has to be created. Consumers are increasingly becoming more sophisticated in the standards which they expect and more vocal about products and services which do not meet their requirements in terms of choice and quality. This applies to a whole range of products and services including those provided by the hospitality industry. Managements are constantly striving to meet customer requirements and in an effort to fulfil this objective have turned to a wide continuum of theories and practices such as quality circles, etc. Total quality is one of the latest concepts to have found favour in the world of management as a means to maintain, increase and consolidate market share (O’Neill and McKenna, 1994). Tourism enterprises as service organizations are likely to face difficult obstacles in its attempt to improve service quality. This is because of service intangibility; participation of the customer in the service delivery; heterogeneous nature of the process; lack of pre dictability and repeatability of the service process; diverse customer base sharing the same processing facilities, lack of visibility of quality shortfalls; difficulties in identifying sources of quality problems; and the time required to improve service quality. Let the book be a very basic advisory guide on the route towards quality improvement in a hospitality industry.

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List of abbreviations

ABC – activity based costing ANSI – American National Standards Institute ASQ – American Society for Quality ASQC – American Society for Quality Control BSI – British Standards Institution CIT – Critical Incident Technique COC – cost of conformance CONC – cost of nonconformance COQ – cost of quality CPA – critical point analysis CRM – customer relationship management CWQC – company wide quality control DIS – draft international standard EFQM – European Foundation for Quality Management EMS – environmental management systems FDIS – final draft international standard GDS – global distribution system GVC – global value chain HRM – human relations management IEC – International Electrotechnical Commission ICT – information and communication technologies ISO – International Organization for Standarization IT – information technology MBNQA – Malcolm Baldrige National Quality Award MDQ – market-driven quality MOT – moments of truth PAF – prevention-appraisal-failure (costs) PDCA – plan-do-check-act (Deming cycle) PNOC – price of nonconformance POC – price of conformance QFD – quality function deployment QMS – quality management systems ROQ – return on quality SME – small and medium-sized enterprise SPC – statistical process control SQM – strategic quality management TDA – tourism destination area TGA – tourism generating area

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TQC TQM TQTC WOM WTO

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– total quality control – total quality management – total quality tourism consortium – word of mouth – World Tourism Organization

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Index

A accessibility, 34 accountability, 41 Activity Based Costing (ABC), 261, 262, 263 model, 262 steps for performing ABC, 263 American National Standards Institute, 44 American Society for Quality Control, 44 audit audit criteria, 272, 274, 276 audit evidence, 272 audit finding, 272 definition, 272 external audits, 274 internal audit, 274 quality audit, 271, 273, 274, 275 quality audits, 272 B benchmarking, 297, 298, 300, 302 benchmarking process, 298, 299, 300, 301 establishing benchmarking, 300 brands (trademarks), 225 business and congress tourism, 12 Business Excellence Model, 281 C cause-and-effect diagram, 285, 286 certification, 212, 213, 215, 226, 227 certification/registration body, 214 charter flights, 27 classification, 225 cohesion, 129 commitment, 162 communication, 128, 163 companyâ&#x20AC;&#x2122;s image, 57, 91 competition, 24, 27, 29, 51, 53, 54, 79 price competition, 53

competitive advantage, 50, 56 complaint management, 50, 103, 104, 105, 106, 108, 109 best practice of, 106 financial impact of complaints, 110 conformity assessment, 212 continuous improvement, 162, 201, 204 COPOLCO, 219, 220 corporate culture, 125, 126 attributes of, 128 strong culture, 127 weak culture, 127 cost of quality, 143, 241, 246, 247, 249, 252, 256, 259, 260 appraisal costs, 246, 248, 250, 251, 252, 257 COQ curve, 251 COQ model, 250, 251 COQ reduction, 245 cost of conformance, 254, 255 cost of nonconformance, 255 cost of quality programmes, 256 cost tracing, 261 cost-tracing management, 255 customer-dissatisfaction cost, 243 customer-incurred cost, 243 external failure costs, 249 failure costs, 246, 247, 248, 249, 250, 251, 252, 253, 257, 258 internal failure cost, 248 loss-of-reputation cost, 244 lost-opportunity cost, 245 poor-quality cost, 245 prevention costs, 248 price of conformance, 250 price of nonconformance, 250 proactive cost, 249 reactive cost, 249 total COQ, 250 credit cards, 27

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critical incidents, 58 Critical Incident Technique (Critical Point Analysis), 292, 294 customer (tourist) expectations, 37, 47, 80, 82, 90, 91, 92, 105, 117, 120, 124, 238, 240, 249, 296 antecedents of expectations, 92 prior customer expectation, 229 customer (tourist) needs, 83 customer (tourist) overall experience, 81 customer (tourist) perception, 91 customer as co-producer, 88, 94, 98 customer care initiatives, 87 communications care, 87, 88 flip care, 87, 88 lead care, 87, 88 quality care, 87, 88 customer clubs, 304 customer confidence, 22 customer databases, 70 customer defined quality, 88 customer focus, 42, 129, 161, 178, 201, 202, 238, 297 customer loyalty, 22, 63, 64, 69, 71, 76, 86, 289, 306 customer orientation, 85 customer participation, 36, 96 customer roles, 102 customers as competitors, 100 customers as contributors to quality, 99 customers as productive resources, 98 customerâ&#x20AC;&#x2122;s roles, 98 levels of, 97 customer perception, 229 customer retention, 65, 66, 72, 73, 74, 306, 307 customer satisfaction, 37, 47, 50, 51, 53, 71, 81, 82, 111, 161, 196, 258 customer segmentation, 70 customization, 40, 236 cycle of competitiveness, 28

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D database management, 70 delivery uncertainties, 42 demand structures, 29 Deming Application Prize (DAP), 278 demographic changes, 29 departmental interaction, 175 differences between goods and services, 31 discretionary effort, 116 distance travelled, 13 distribution chain, 28 duration of the stay, 13 E employability, 130 employees, 114, 234 employees behaviour, 132 employees commitment, 132, 144 empowerment, 42, 146, 147, 152, 287 barriers to, 152 benefits of, 149 ways to, 151 environmental focus, 179 error prevention, 162 European Foundation for Quality Management, 278, 281, 282 European Quality Award, 281, 283, 284 expectations expected performance, 228 pre-sale touristsâ&#x20AC;&#x2122; expectations, 79 experience properties, 34 exterior people, 148 F factual approach, 201, 205 financial capabilities, 179 fishbone diagram, 285, 287 fluctuation in demand, 20 frontline staff, 34, 42, 90, 117, 122, 239 G global distribution systems (GDS), 24 global value chain, 28

globalization, 23, 24, 25, 208 consequences of, 25 demand factors, 24 supply factors, 24 H HACCP, 227 heterogenity of tourism, 18, 95 holiday experience, 19, 26, 77 horizontal integration, 22 hotel chains, 27 hotel sector, 27 House of Quality, 289, 290 human resource capabilities, 179 human resource management (HRM), 86, 125, 158 I information sources, 92 company communications, 93 individual-specific information sources, 92 intra-encounter information sources, 92, 93 pre-encounter information sources, 92 situational factors, 93 information technology, 24, 27, 70, 190, 223 innovations, 23, 27, 28, 142, 179 technological innovations, 28 interactions, 48 interior people, 148 internal customer, 110 internal environment, 112 internal marketing, 72 international arrivals, 14 interpersonal interaction, 118 factors of, 118 motivations, 119 perception of people, 118 social competence, 118 interpersonal relationship, 140 involvement of people, 201, 202 ISO International Organization for Standardization, 187

management system standards, 190 quality management principles, 201 quality management requirements, 192 ISO 9000 family, 198 ISO 9001 in tourism sector, 216 motivation for registration, 208 J job satisfaction, 57, 61, 64, 74 K knowledge focus, 179 L large-scale tourism, 23 leadership, 83, 88, 112, 132, 133, 134, 144, 148, 152, 160, 163, 174, 175, 176, 177, 179, 191, 201, 202, 206, 281, 297, 303 leadership for quality, 131 loyalty, 63 customer loyalty, 71 staff loyalty, 72 loyalty programmes in tourism, 303, 309 loyalty-based business system, 65 loyalty-based management customer loyalty ladder, 308 main principles of, 63 second-order effects, 74 M Malcolm Baldrige National Quality Award, 59, 242, 278, 283, 284, 298 management commitment, 131 management planning, 175 management style, 173 management system standards, 211 marketing customized marketing, 70 external marketing, 72 interaction marketing, 72

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internal marketing, 71, 72, 110, 111, 112, 113, 114, 116, 131, 146 one-to-one marketing, 304, 306 relationship marketing, 67, 70, 71 marketing strategy defensive marketing strategy, 69 offensive marketing strategy, 68 mentoring, 135, 136, 143 moments of truth (MOT), 123 motivation, 109, 111, 112, 114, 119, 124, 144, 275, 277, 306 mystery guest, 293 N nature of the trip, 13 O occupancy, 20 organizational culture, 120, 125, 127 elements of, 127 organizational structure, 175 P Pareto 80/20 Rule, 266 Pareto chart, 267, 268, 271 Pareto chart interpretation, 270 vital few and trivial many principle, 266 perceived quality, 101 perceived quality (performance), 229 perception of people, 118 perishability, 20 physical evidence, 232, 234 physical facilities, 34 physical tangibles, 34 prevention-appraisal-failure (PAF) approach, 252, 253, 254 price of conformance, 254 process approach, 201, 203 process focus, 179 process management, 192 process orientation, 164 profits, 56 purpose of the visit, 13

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Q quality â&#x20AC;&#x153;customer-ledâ&#x20AC;? definition, 45, 47 areas of improvement, 178 corporate quality, 231, 232 customer defined quality, 88 definition, 43, 44, 47 functional quality, 232 hygiene factors of, 50, 54 interactive quality, 231 internal quality, 132 output quality, 232 perceived, 49 perceptions of quality, 36, 233, 234, 239, 289 physical quality, 231 process quality, 232 process-based definition, 46 product-based definition, 45 quality terms, 43 supply-led definition, 46 technical quality, 232 user-based definition, 47, 48 value-added approach, 66 value-based definition, 47, 48 quality assurance, 155 quality awards, 132, 277 quality chain, 87 quality characteristics, 35 quality control, 154 quality culture, 125, 136 establihing quality culture, 136 quality development, 177 quality function deployment, 288, 289, 292, 300 quality gaps communication gap, 239 delivery gap, 239 management perception gap, 238 perceived service gap, 239 specification gap, 238 quality in tourism quality dimensions in tourism, 80 quality labels, 226 quality management arguments for, 56 aspects of, 54

challenges, 21 concepts, 153 definition, 50 economic aspect, 54 evolution, 153 information aspect, 55 law aspect, 55 marketing aspect, 54 proactive approach, 50 reactive approach, 50 social aspects, 55, 60 strategic aspect, 54 strategic quality management (SQM), 51 technological aspect, 54 quality management in tourism, 59, 60 quality-oriented organization, 133 R registration, 213 relationship marketing, 67, 68, 70, 71, 73, 75, 303, 304, 305, 306, 307 establishing aÂ relationship, 68 relationships supplier-customer relationships, 87 rent-a car sector, 27 reporting systems, 163 repurchase intentions, 53 retention profitability, 66 return on quality, 256, 258

service encounter, 19, 37, 48, 87, 94, 104, 116, 119, 124, 143, 233, 234, 292 service facilities, 37 service industries, 31 service process, 30, 33 service quality, 89 customer effects on, 94 definition, 43, 49 determinants of quality service, 114 service trinity, 116 service-profit chain, 64 servicescape, 94, 95, 101 SERVQUAL, 234, 235, 240 servuction system model, 101 shared values, 171 signs of quality, 34 small and medium sized enterprises (SMEs), 22, 23, 25, 26, 121 social bonds, 75 social competence, 118 soft competences, 123 staff fluctuation, 20, 21, 57 staff turnover, 122 standards, 206 strategic alliances, 24 strategic quality management (SQM), 51 sustainable tourism, 29 SWOT analysis, 276 system approach, 201, 204 systems thinking, 162

S seasonality of tourism, 20, 81 self-assessment, 277, 279, 280 self-audit, 274, 275, 276, 277 service, 30 evidence of service, 234 service attributes, 33, 38 heterogeneity, 37 inseparability, 36, 78, 81 intangibility, 33, 34, 39, 81, 116, 234 perishability, 20, 33, 35, 36, 78, 81 simultaneity, 33, 36, 234

T teamwork, 129, 162 technical ability deficiencies, 123 technical capabilities, 179 top management focus, 161 total quality approach, 155 total quality management (TQM), 153, 155, 177, 197 basic principles of, 160 definition, 154 implementation process, 160 implementation process, 165 in aÂ TDA, 180

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profits of implementation, 167 Total Quality Tourism Consortium definition, 182 tourism, 12, 14, 17, 20, 24, 119, 218 concept of tourism, 12 domestic tourism, 13 forms of tourism, 13 inbound tourism, 13 outbound tourism, 13 tourism sectors, 12 tourism consumption, 20 tourism demand, 16 fluctuation in demand, 20 tourism destination area (TDA), 18, 19, 60 TQM concept, 180 tourism destinationâ&#x20AC;&#x2122;s image, 84 tourism dual economic structure, 22 tourism generating area (TGA), 18 tourism industry, 14, 23, 25, 27, 53, 57, 60, 186, 190, 218 tourism product, 17, 18, 19, 59, 80, 82, 124 characteristics of, 81 demand-related characteristics of, 81 supply-related characteristics of, 81 tourism product quality, 77, 84, 182, 183, 184 barriers to quality enhancement, 119

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WTOâ&#x20AC;&#x2122;s definition, 84 tourism quality control gap, 18, 19 tourism quality perception gap, 80 tourism sector model, 23 tourism value chain, 18, 19 tourist destinations, 19 training, 162 social skills training, 119 training methods, 142 V variability, 38 variation, 37 vertical integration, 22 visibility, 41 visitors, 13 same day visitors, 14 tourists (overnight visitors), 13, 14 W word of mouth (WOM), 34, 68, 83, 93, 104, 105, 118, 224, 229, 258, 289, 292 work environment conditions, 62 working conditions, 121 World Tourism Organization, 12, 218, 219, 221, 332 Z zone of tolerance, 75