Performance Management in Service Sector

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Performance managementin service operational settings:

a selective literature examinationMahmoud M. Yasin

Department of Management and Marketing, East Tennessee State University,Johnson City, Tennessee, USA, and

Carlos F. GomesSchool of Economics, University of Coimbra, ISR-Institute of Systems and

Robotics, Coimbra, Portugal

Abstract

Purpose This paper aims to examine, the specific literature related to performance measurement inthe service sector. In the process, it also aims to classify and examine innovative approaches andmodels utilized to measure performance in service operational settings. Based on this investigation, thepaper seeks to identify relevant benchmarking implications.

Design/methodology/approach A database of 141 peer-reviewed publications, publishedbetween 1981 and early 2008, was utilized for the purpose of this paper. The published worksincluded contributions from both practioners and scholars.

Findings The International Journal of Productivity and Performance Managementis found to bethe leading journal in terms of contributions to performance measurement in service operationalsettings. It contributed 25 articles. The bulk of published work appeared in international journals.These contributions were mixed in nature. They included empirical, conceptual, case studies,literatures reviews and interviews. The focus of the articles examined was also mixed. These articlestended to emphasis operational, customer, strategic, supplier, and environmental aspects of service.

Research limitations/implications Based on the findings of this paper, it is concluded that thisarea of research is in need of more future efforts aimed at solidifying theoretical constructs andpractical applications.

Practical implications Findings derived from this investigation have relevant benchmarkingimplications. In this context, understanding the different approaches to performance measurement asutilized in service organizations is critical to the efforts of these organizations performanceimprovement efforts.

Originality/value Understanding the types and scopes of the different approaches and modelsutilized to measure performance in service operational settings is important in light of the growingsignificance of the service sector.

KeywordsPerformance measures, Service industries, Performance management, Literature

Paper typeResearch paper

IntroductionPerformance measurement is considered an important aspect of management(Pongatichat and Johnston, 2008). This critical organizational process provides thebasis for an organization to assess how well it is progressing toward its planned andtargeted objectives, helps to identify areas of strengths and weaknesses, and facilitatefuture initiatives aimed at improving organizational performance (Purbeyet al., 2007).In this context, benchmarking is instrumental to the process of organizational

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performance improvement (Dawkins et al., 2007; Debnath and Shankar, 2008; Kwonet al., 2008; Goncharuk, 2008). Organizations which fail to make benchmarking as anintegral part of their performance management efforts and practices tend to experiencelower than expected performance improvements, and higher dissatisfaction and

turnover of employees (Longenecker and Fink, 2001). However, the absence of abalanced set of performance measures, which take into account the multi-faceted natureof organizational performance, make it rather difficult for organizations to take the fulladvantage of systematic benchmarking efforts aimed at improving the different facetsof organizational performance.

Several authors have explored the nature and design of performance measurementsystems (PMSs) in manufacturing operational settings (Cross and Lynch, 1988-1989;Kaplan and Norton, 1992; Neely et al., 1996; Neely et al., 2001; Pun and White, 2005;Shepherd and Gunter, 2006). However, less emphasis has been placed on performancemeasures and measurement in service operational settings. This is attributed to thedifficulties associated with the intangibles aspects of different services (Brignallet al.,1991; Doneyet al., 2007). Owing to these difficulties, service organizations, in the past,tended to resort to performance measures which emphasized the financial aspects ofperformance. More recently, however, these organizations began to realize theimportance of non-financial measures, such as measures focusing on service quality(Duggirala et al., 2008; Chau, 2009).

In this paper, the literature related to performance measures and measurement inservice operational settings is overviewed. For this purpose, key journals are surveyedfor articles dealing with innovative performance measurement approaches and modelsin key service sectors. Specifically, articles published between 1981 and early 2008 areanalyzed to determine the scope and nature of the performance measurementmodels and approaches proposed, and/or applied in service operational settings.The research methodology utilized is consistent with the literature (Gomes et al., 2004;

Yasinet al., 2006).The next section provides a brief background relevant to the issues underinvestigation. In method section presents the methodology utilized in this research.The results section presents an overview of the evolution of issues and concerns relatedto performance measurement. The results section also presents specific results relatedto key themes, journals, countries, articles, and finally nature of the studies examined.The final section offers a summary of the findings and suggestions for performancemeasurement research in the growing service sector.

BackgroundA PMS can be defined as the set of metrics used to quantify both the efficiency andeffectiveness of actions (Neelyet al., 2005). It also can be viewed as a balanced, dynamic

system which supports the decision-making process by monitoring, gathering, andanalyzing performance-related information (Garengo and Bititci, 2007; Bititci et al.,2000). As such, this system includes a set of performance measures that provides anorganization with useful information that helps to plan, manage, control, and effectivelyperform the activities relevant to the different processes of an organization. Someauthors tend to emphasize the managerial and management aspects of performancemeasurement. In this context, they tend to advocate a performance management,rather than a performance measurement perspective (Greiling, 2006; Dey et al., 2008).

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The information managed by the PMS must be accurate, relevant, timely, andaccessible. Such informational capabilities and characteristics must be incorporatedinto the design of the PMS. Furthermore, performance measures must also be carefullydesigned in order to reflect the most important factors influencing the productivity of

the different processes found in the organization (Tangen, 2005).A well-designed PMS is vital for ensuring that an organization delivers

cost-effective, high-quality services, which meet and exceed the needs of customers(Moullin, 2004). In this context, performance measures and measurement are viewed asimportant drivers of increased efficiency and improved service delivery quality(Greiling, 2006). Therefore, the PMS and related processes and activities should be animportant part of any service organization (Bruijn, 2002).

In general, there are several difficulties associated with performance measurementefforts. These difficulties are more vivid in service operational environments.Healthcare and public services are cases in point (Gomes et al., 2008, 2010). Thesedifficulties are attributed, in part, to the diverse interests of the stakeholders involved(Bruijn, 2002; Moullin, 2007). For example, in public sector services, there are manystakeholders. These stockholders have different and, sometimes, conflicting agendasand performance expectations (Wisniewski and Olafsson, 2004). These stakeholderstend to have different perspectives on organizational performance. In such operationalenvironments, it is difficult to set targets, and/or to make decisions solely based onmeasured results, due to the conflicting objectives and interests of the stakeholders.Therefore, when implementing a PMS, the conflicting views and needs of differentstakeholders must, somehow, be reconciled (Mettanen, 2005; Lawton et al., 2000).Therefore, PMSs and related processes must be designed carefully to incorporate thedifferent perspectives on performance. This is critical to the success of the performancemanagement efforts in manufacturing environments (Neely et al., 2001), and serviceenvironments as well (Deyet al., 2008).

The literature on benchmarking as it relates to performance measurement in serviceorganizations tends to point to common difficulties (Vagnoni and Maran, 2008) Thesedifficulties appear to be shared by service organizations, regardless of the nature oftheir services (Narayan et al., 2008). Despite the inherent difficulties associated withmeasuring and benchmarking certain aspects of service performance, serviceorganizations are facing increasing pressure to improve the different aspects of theirperformance. In the process, these organizations are looking for innovative andsystematic approaches and models to enhance their performance improvement efforts.The study at hand surveys the relevant literature in order to shed some light onperformance measurement approaches and practices of service organizations. Theseapproaches and practices have practical benchmarking implications to serviceorganizations, as they struggle with performance measurement and management

practical concerns.

MethodFor the purpose of this study, several databases and search engines, such as Agricola,Ask web, Emerald, Eric, Google Scholar, Inderscience, ProQuest, Questia, andScienceDirect, among others, were utilized. The objective of this process was to identifyarticles which dealt with issues related to performance measurement in service.An emphasis was placed on articles addressing innovative practices, approaches

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and models. The literature search generated the titles and abstracts of over 200 articles.In an effort to focus this literature review, the authors judged the relevance of thearticles in terms of offering innovative and specific models, applications or approachesrelevant to performance measurement in service. This criterion was utilized to narrow

the scope of the search, thus to avoid potential duplications. As a result of this selectiveliterature review, 141 relevant articles spanning the time from 1981 to early 2008 wereidentified. The 1981 start was dictated by the results of the search. The early 1980s sawthe beginning of a serious interest in this type of research. The research methodologyutilized is consistent with the literature (Gomeset al., 2004; Yasin et al., 2006).

ResultsOverviewHistorically, PMSs were developed as a mean of monitoring and maintainingorganizational control. In a larger context, such systems were utilized to ensure that anorganization pursues performance-based strategies aimed at the achievement of overall

goals and objectives of the organization (Purbey et al., 2007). In general, theperformance measurement orientation and focus went through two stages (Ghalayiniand Noble, 1996). The first stage, extended from the 1880s to the 1980s. This stage wascharacterized by its cost accounting orientation, emphasis on financial measures suchas profit, returns on investment, and productivity measures. The second stage began inthe 1980s. It was a result of the changes that world markets underwent, including theimplementation of new manufacturing technologies, and new production managementphilosophies (Daz et al., 2005). This stage was marked by placing more emphasis onnon-financial measures (Johnson and Kaplan, 1987; Santori and Anderson, 1987; Crossand Lynch, 1988-1989; Kaplan and Norton, 1992; Neelyet al., 1995). From a managerialperspective, the first stage was marked by a clear emphasis on organizational efficiencyand control. On the other hand, the second stage tended to have more emphasis on

organizational effectiveness. This shift in the approach to organizational performance,from over emphasizing efficiency, to a more balanced performance approach, wasconsistent with a broader shift from a closed system organizational orientation to amore open system organizational orientation. Under the open system organizationalorientation, managers are finding it necessary to balance the multifaceted nature oforganizational performance. Thus, managers are paying closer attention to themeasurement and benchmarking of performance aspects related to customers,suppliers, and overall organizational effectiveness.

The service performance measurement literature spans different types of serviceorganizations. Such service organizations include health care organizations,universities, municipal governments, corporate real estate organizations, police,banks, and hotels, among others (Wilsonet al., 2003; Modell, 2003; Ho and Chan, 2002;

Brignall and Modell, 2000; van Peursem et al., 1995). The main task of performancemeasurement and related activities is to support the decision-making process throughgathering and analyzing information regarding the accomplishment of performancetargets. By measuring and analyzing actual performance, the success/failure to achievedesired performance can be assessed and managed (Rantanen et al., 2007). In thiscontext, performance measurement provides the basis for an organization to assesshow well it is progressing towards its predetermined objectives, helps to identify areasof strengths and weaknesses, and decides on future initiatives aimed at improving


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organizational performance (Purbey et al., 2007). Thus, it is no surprise thatorganizations which do not integrate ongoing performance measurement andbenchmarking into their management practices and systems tend to experiencelower than expected performance improvements, and higher dissatisfaction and

turnover of employees (Longenecker and Fink, 2001). In this context, managers areadvised to approach performance measurement systematically, thus avoiding costlypiece-meal and me-too practices, approaches, and short-term thinking.

There are some positive and negative effects for performance measurement. Thepositive effects of performance measurement include increased transparency,incentives for output, and improved accountability. On the other hand, in somecases, the negative effects may include game playing, increased internal bureaucracy,and decreased motivation and innovativeness (De Bruijn, 2002). In this context,managers should carefully examine their organizational PMS and processes in order toeliminate any potential negative activities and behaviours.

Specific resultsIn the 1980s, performance measurement issues and concerns in service operationalsettings become more relevant in the literature. The result of this study shows that itwas not, until 1998 that a crescent and interrupted flow of publications appeared in theexamined literature (Figure 1). Therefore, the analysis in this study was focused on theperiod 1998-2008.

Based on the results of the analysis, the International Journal of Productivity andPerformance Management was responsible for at least one-third of this number ofpublications between 2005 and 2008. Thus, signifying a recent interest in this area ofresearch on the part of this journal. The lack of similar interest on the part of otheroperations and management-related journals is noted. The lack of emphasis by such

journals on issues related to innovative performance measurement practices in service

operational settings may be attributed to a more emphasizing more manufacturingconcerns, and the devotion to other emerging research issues.At the journal level, the International Journal of Productivity and Performance

Managementwas found to be the biggest contributor. It contributed 25 publications.

Figure 1.Articles published inservice sector by year(1981-2008)

0

5

10

15

20

25

Numberofarticles

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

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Managing Service Quality, andInternational Journal of Public Sector Managementheldsecond place, with eight publications each. International Journal of ContemporaryHospitality Managementfollowed with seven publications.Performance Measurementand Metric, andInternational Journal of Health Care Quality Assurancefollowed, with

six publications each. Managerial Finance and Managerial Auditingcontributed fivearticles each. International Journal of Operations & Production Management, andFacilities Journal contributed four publications each. Together, these ten journalsaccounted for 55 percent of the articles published. Traditionally, these journals tendedto cover service operations-related issues.

Figure 2 shows a breakdown of performance measurement articles by first author.Between 1998 and 2001, the USA and the UK-based authors were responsible for thebiggest share of performance measurement service-related articles (60 percent). After2001, the number of authors from other organisation for economic co-operation anddevelopment (OECD) member countries and non-OECD was on the increase, except for2004. In sum, the USA and the UK-based researchers contributed the bulk ofperformance measurement in service research between 1998 and 2001. After 2001,researchers based on other OECD countries took the lead in this research area. Perhaps,signifying increased attention to performance in service.

Figure 3 shows a breakdown of performance measurement-related publication byfocus. Five different focus areas were detected. The first focus was the operational,which included efficiency, quality, flexibility, and reliability. The second focus was thecustomer-related, which included customer satisfaction, service, and responsiveness.The third focus was the strategic, which included market share, competitive position,and organizational effectiveness. The fourth focus was the supplier-related, whichincluded supplier relationships, material availability, material quality, and certification.The fifth focus was the environmental-related, which included standards, governmentalregulations, and safety standards. This area has strong managerial implications, as

todays managers are struggling to ensure that their practices meet and exceedgovernmental regulations and standards requirements. Based on Figure 3, theoperational focus received thirty percent of the contributions between 1998 and 2008.

Figure 2.Articles published in

service sector by firstauthor country (1998-2008)0

10

20

30

40

50

Percen

tage 60

70

80

90

100

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

USA UK Other-OECD Non-OECD


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This is despite no receiving contributions in the year 2000 and 2008. In the same timeperiod, there were also 27 percent of the contributions to the customer focus, with theexception of 2007 and 2008. In addition, the strategic focus received 36 percent of thecontributions in all the years between 1998 and 2008, with the exception of 1998.Overall, the environmental, and supplier focus areas received the least attention.Therefore, environmental and supplier-related performance aspects representopportunities for research as they are important, however they did not receivedconsiderable research. Despite their growing importance, these two areas appear to beunder researched. More applied research in these two areas may prove to be helpful topracticing managers, as they attempt to understand the dynamic and complexrelationships between their organizations and the different components of the

operational environment.Figure 4 shows a breakdown of performance measurement publications by nature of

the study. Five different categories were identified. They included empirical,

Figure 3.Articles published inservice sector by focus ofthe article (1998-2008) 0

10

20

30

40

50

Percentage

60

7080

90

100

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Operational Customer Strategic Supplier Environmental

Figure 4.Articles published inservice sector by nature ofthe study (1998-2008) 0

10

20

30

40

50

Percentage 60

70

80

90

100

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Empirical Conceptual Case study Literature reviews Other/interviews

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conceptual, case study or field study, literature review, and interview-based studies.The case study methodology took the lead with 31 percent of the contributions,followed by conceptual papers with 28 percent, and empirical studies with 22 percent.Therefore, both conceptual and empirical efforts are needed to advance the science and

practice of performance measurement in service operational settings.

Concluding remarksThis study examined a selective performance measurement literature in serviceoperational settings. An emphasis was placed on articles which dealt with innovativeand systematic performance measurement practices, approaches, or models. A total of141 articles were examined and analyzed for the purpose of this study. Based on thisliterature review the following conclusions and implications are offered.

First, a significant portion of articles dealing with performance measurement inservice appeared in few journals. Perhaps, this signifies the limited coverage of thisimportant research area in favor of manufacturing studies. The recent growth in the

service sector justifies more research in this area in order to offer service organizationsbetter approaches to the management of their performance. Research capitalizing onthe benchmarking implications and lessons learned based on the manufacturingexperience may prove to be helpful to service organizations as they struggle withservice performance challenge and concerns.

Second, the published works appear to emphasis mainly operational and, to someextent, some strategic performance concerns. Environmental-related and supplier-relatedperformance issues appear to be under researched. As customers of most serviceorganizations are becoming more sophisticated, service organizations are finding itnecessary to broaden their criteria regarding effective organizational performance. Thus,external aspects such as the environmental and suppliers-related should be incorporatedin this broader perspective. This represents an opportunity for future research.

Third, empirical studies dealing with performance issues in service appear to belagging behind, as most of the studies examined were not empirical in nature. Moreconceptual and empirical research is needed in order to clarify and validaterelationships among theoretical constructs, which can be integrated into practicalmanagerial frameworks.

Finally, future research is called for to help service managers improve the differentaspects of organizational performance through benchmarking best practices inmanufacturing as well as other service organizations.

At the conclusion of this research, the authors would like to express theirappreciation to the capable reviewers of this journal for their valuable input. At theconclusion of this research, the authors would like to express their appreciation to thecapable reviewers of this journal for their valuable input.

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Boussabaine, H. and Kirkham, R. (2006), Whole life cycle performance measurementre-engineering for the UK National Health Service estate, Facilities, Vol. 24 Nos 9/10,pp. 324-42.

Brackertz, N. and Kenley, R. (2002), A service delivery approach to measuring facilityperformance in local government, Facilities, Vol. 20 Nos 3/4, pp. 127-35.

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Brun, M. and Siegel, J. (2006), What does appropriate performance reporting for politicaldecision makers require? Empirical evidence from Switzerland, International Journal of

Productivity and Performance Management, Vol. 55 No. 6, pp. 480-97.Carvalho, J., Fernandes, M., Lambert, V. and Lapsley, I. (2006), Measuring fire service

performance: a comparative study, International Journal of Public Sector Management,Vol. 19 No. 2, pp. 165-79.

Cassab, H. and MacLachlan, D. (2006), Interaction fluency: a customer performance measure ofmultichannel service, International Journal of Productivity and Performance


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About the authors

Mahmoud M. Yasin, PhD, in Industrial Management from the Clemson University, and he is aProfessor of Management at East Tennessee State University. His research has appeared injournals, such as Journal of Operations Management, OMEGA, International Journal ofProduction and Operations Management and Business Research. He currently serves on severaleditorial boards. He is the recipient of several teaching and research awards and recognitions.Mahmoud M. Yasin is the corresponding author and can be contacted at: [email protected]

Carlos F. Gomes is an Assistant Professor in the School of Economics at the University ofCoimbra and a Research member at the Institute of Systems and Robotics, Portugal. He receiveda PhD in Industrial Management, an MS in Industrial Management, a postgraduate certificate ofAdvanced Studies in Industrial Quality and International Business, and a BS in ElectricalEngineering, all from the University of Coimbra. His main research interests are performancemeasurement, operations strategy and optimization of production systems. He has published inmany refereed journals and proceedings of professional meetings.


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