For immediate use
June 30, 1997
Hotel and retail industries top list
of best companies for customer service
CHAPEL HILL--What kinds of businesses offer the best service to their customers? Hotel and retail companies, according to a new international study conducted in part by a researcher at the University of North Carolina at Chapel Hill's Kenan-Flagler Business School.
Aleda Roth, associate professor at Kenan-Flagler, Richard Chase, director of the Center for Service Excellence at the University of Southern California's Marshall School of Business, and Chris Voss of the London Business School described this and other findings in the new report, "Service in the U.S."
The report, the first strategic benchmarking study of a variety of U.S. service firms, identifies the practices and performances that lead to being the best in the world. Using specially developed models of service management, the researchers looked at five key service sectors: retail, hotels and catering, health care, utilities, and professional and financial services.
"We identified the top 10 companies that have set the standard for service quality in America over the past decade and uncovered the secrets of the global leaders," Roth said. "Each excelled by systematically linking the drivers of service excellence: leadership, people, processes and performance management. We discovered that delivering service quality goes beyond simplistic prescriptions about people issues, and instead extends to strategic factors, such as organizational design, leadership and market acuity, to orchestrate the entire service encounter."
From a survey of 181 American companies, the researchers identified 10 companies as worldwide leaders in providing service: Toyota, Federal Express, Disney, Ritz-Carlton, Xerox, Motorola, AT&T, Nordstrom, Hewlett Packard and Sony.
The researchers found vast differences among the service sectors. The retail and hotel industries were the two highest performing sectors in the survey; the researchers found they follow best practices, achieving good results. The hotel industry also paid more attention to customer service than any other sector, which paid off in hefty returns.
Not all hotels are wonderful, but those that succeed manage the "evidence" of quality, such as how the hotel looks and how employees dress. These hotels also manage customer interactions and continuously communicate their high standards to employees, according to the study.
Other pacesetter sectors in the study are industrial service and telecommunications companies.
The researchers found that financial-services companies satisfy customers, but they concluded that the institutions may be yielding good performance without being brilliant strategists. Many are riding a wave of low interest rates and a favorable economy.
For example, some financial institutions seemed complacent about managing customer interactions, compared to their counterparts in other service sectors. By stressing re-structuring and reducing their staffs at the expense of customer service, businesses like banks and insurance companies may be vulnerable to future market changes.
Professional services such as legal and architectural firms were found to be "surprisingly weak" in both practice and performance.
Of the top 10 service practices emphasized by senior executives, half are customer-focused: accessibility, listening to customers, competitive positioning, consistently meeting customers' needs and customer orientation.
Accessibility is the new "location, location, location" of service. It refers to a customer's ability to contact someone in a company easily, and at many companies, 24 hours a day.
The top 10 companies were described as having "global-service leadership," demonstrating world-class capabilities, regardless of the geographic market of a company's location. Nordstrom, the retail chain, was cited as a classic example of a company that maintained world-class standards in both practice (such as how they control quality and handle complaints) and service performance (such as value, quality, satisfaction, business performance and customer retention).
The study also found that managing change is one of the biggest hurdles to achieving global service leadership. However, by world standards, the top American service businesses enjoy a supremacy role similar to that of Japan's manufacturing sector.
The researchers were involved an in-depth, year-long survey of medium- to large-size service companies in the United States. They conducted three-hour interviews with senior executives who, besides responding to 80 questions about their own company, rated other American companies on their quality of service.
Participants were not allowed to identify themselves in the "best company" category. The results show that 39 percent of the 181 companies surveyed had the potential to become global leaders in delivering good customer service, although only 13 percent of these companies have achieved both world-class performance and world-class service management practices.
The research team also surveyed 21 governmental and non-profit organizations. The results clearly show a need for improvement in governmental agencies.
With the exception of altruism and cost performance, the study found that productivity, quality service and customer growth and retention lagged behind private enterprises. The researchers found most government organizations do not measure value or are not striving sufficiently to create it.
Major changes in management and the approach to customer are needed to produce better results, Roth said.
The study was funded by Severn Trent, a British utility company, the British Department of Trade and Industry, the British Department of National Heritage, UNC-CH's Kenan-Flagler Business School, USC's Marshall School of Business and the London Business School.
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(Note to reporters: Copies of the study is available through Aleda Roth, 919-962-5087.)
News Services contact:
Karen Stinneford (email: [email protected])
Kenan-Flagler contact: Allison Adams, 919-962-7235
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