Exploring customer experiences and the voice of the customer at a large HR service provider

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Master Thesis

‘’Exploring Customer Experiences and the Voice of the Customer at a

large HR Service Provider’’

Student Information

Ruben Sonius (10666273)

Faculty of Economics and Business

Master in Business Administration: Innovation Management & Entrepreneurship

Supervisor Information

First Supervisor: Dr. W. van der Aa Second Supervisor: Dr. G. T. Vinig Delivery Date: 16-01-2015

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1. Introduction

Customer experience has become a central theme for companies all over the world. Especially service oriented companies pay close attention to the experiences of customers. Many organizations redesign their services to reach higher levels of customer satisfaction and create superior customer experiences. Another challenge is that companies face more demanding customers. Customers do not only demand lower prices, they also demand better services (Lovelock et al., 2001). This situation has created a tension; companies need to pay attention to high levels of customer satisfaction and at the same time focus on high levels of efficiency. In other words; to survive in the dynamic

marketplace service oriented firms have to focus on two sides of the coin. Competitive firms acknowledge this and try to find methods to systematically increase process efficiency and at the same time increase customer satisfaction. One way to do this is to focus on the customer’s point of view to improve service processes. For example, lean six sigma approaches are using this philosophy. According to Hermann et al., (2000) it is an interesting and complex translation process to bridge this gap between internal quality improvements and the external focus of customer needs. This master thesis tries to make a significant contribution to this translation process.

This research is performed at a large HR Service Provider. One of the goals of the company is to achieve higher customer satisfaction and at the same time achieve more operational excellence and process efficiency. The company has a wish to increase operational excellence in the future with the help of lean six sigma practices. The primary goal of a lean management program is to increase productivity, quality and reduce lead times and costs (Sriparavastu and Gupta, 1997). On the other hand the company has a wish to more explicitly listen to the needs, wants and experiences of customers. Over the time organizations have used a variety of tools to gather customer insights. Some of these tools focus on current experiences of customers with the company’s products or services. By gathering insights into experiences of customers, organizations are able to discover ways to improve these experiences. A tool that gained popularity over the last decade is customer journey mapping. This map shows the experiences of the customer during the touchpoints of the service process. For many companies this tool has proven its value for the development of new services and products. An important attribute of the customer journey is that it puts an emphasis on the

customer’s experiences during the touchpoints with the company. This way companies can make a good assessment of the opportunities that exist to improve the customer’s experience.

To improve process efficiency, companies can use a variety of approaches. For instance, lean six sigma practices are common in many organizations. However, before implementing such practices it is important to know what customers require from the service quality of the organization. This is crucial because companies could otherwise invest resources and money in process improvements that have limited effect on customer’s perception of service quality. Discovering the needs, wants

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5 and requirements of customers is called listening to the voice of the customer (Aguwa et al., 2012; Katz, 2002). For companies it is important to listen to the voice of the customer (VOC) because it forms the basis for further lean six sigma implementation. The main benefit of this approach is that the customer is constantly kept in mind. Furthermore, applying such a method helps companies becoming more customer focused, which is often described as a basis for competitive advantage (Bharadwaj et al., 2012).

In this study two theories have been identified that help discover the customer requirements and VOC. The first method is the SERVQUAL, originally developed in 1988 by Parasuraman et al. (1988) and later refined in 1991 (Parasuraman et al., 1991). These authors have explored five dimensions on which customers evaluate the quality of a service. A high service quality is important because it has a close relation to customer satisfaction. Satisfied customers are easier to retain and create positive word of mouth (Parasuraman et al., 1991). The second concept that is used to discover customer requirements is the sand cone model of improvement of Ferdows and De Meyer (1990). This model states that firms can increase their performance by focusing on cumulative capabilities. These dimensions can be seen as important because they help organizations build a proper foundation to excel.

To summarize, this research focuses on the exploration of customer experiences through the customer journey map. In addition, customer requirements are discovered by listening to the VOC. In this research two important types of information (experiences and requirements) are captured. A process model is developed to effectively prioritize customer requirements based on customer experiences. This will result in an overview of touchpoints and requirements that form valuable input for lean six sigma based improvements.

To date, the author has identified limited research that has performed a combination of the VOC and the customer journey. The benefit of such an approach is that the strengths of two

approaches are combined and form a powerful method to capture and prioritize customer requirements in a new way. The results from this approach can lead to a translation process that enables the company to improve the experiences of customers while at the same time make improvement to internal processes. The approach that is explored in this research could be used by companies that operate in a B2B service context like the HR service provider. However, the author thinks this research is also beneficial for other organizations, since the experience economy is gaining more relevance each day (Pine and Gilmore, 1998).

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6 In order to answer the main question that is discussed in this thesis, the following research question has been developed.

Research Question:

What are the less positive customer experiences regarding the service process of USG Professionals and what are the critical customer requirements related to those experiences?

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2. Company Description

In this section the company is described and a clarification is made about the customer service process of the organization. The research is performed at a large HR service provider. The core business of the HR service provider is the secondment market of higher educated professionals. The subject that is discussed in this thesis is especially relevant for the HR service provider, because the company operates in a mature market. Therefore it is important to create higher levels of customer satisfaction while at the same time improving operational excellence. The company operates in B2B service environment and has several clients that can be considered as top 100 firms in The

Netherlands. The HR service provider is divided into five operational companies. Market research is performed in all these operational companies to get a complete image of the experiences and requirements customers have with the service process of the HR service provider in the secondment market.

Two important customer groups can be identified for the HR service provider. The first group is the business clients who ask the company to provide them with professional employees for their long and short term projects. The second group is the professional employees (these are called candidates in the rest of this thesis). In most situations, approximately 80%, this group has a

permanent contract with the company and is placed at projects of the business client. It is important to mention that the customer service process in some operational companies is intertwined for both candidates and business clients. This means that account managers have contact with both

candidates and business clients. However, a functional movement is currently taking place, so that account managers are responsible for only candidates or clients.

In the company not much explicit insights are available that provide the company with an in-depth understanding of the customer experience. Much knowledge about customers is tacit

knowledge and is currently present through close relationships with clients and candidates.

Relationship management is for this reason important. The company wants to do market research in order to gather more insights on the corporate level. At the same time, there is an increasing focus on lean six sigma and quality management practices. Several training programs in the company have started to reach the desired efficiency of the internal processes within the organization.

Customer Service Process

In the context of the HR service provider, the client and candidate process is defined as the process in which contact with the candidates and clients occurs (i.e. the front-office processes instead of the back-office processes). The front-office processes are important because the customer obtains tangible evidence of the back-office processes, which is out of the customer’s view (Tseng et al., 1999). Furthermore, it is in this process that the experiences of customers emerge. Therefore a focus

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8 is set on the front-office processes of the service company. Most of the time the account manager and sales executives are involved in this process. In most of the operating companies, process and information charts exist which the account managers can consult to see what process should be followed. However, most of these practices are imbedded in the operational companies.

The beginning of the service process starts when clients or candidates are looking for the HR service provider. However, in many situations the HR service provider already has a close relationship or some kind of contract with the lending firm. In this case the service process starts when the HR service provider receives a vacancy of a client. In other situations stakeholders come in first contact with the organization by networking, visiting the company’s website or having an explorative appointment or phone call. However, it is also possible that the HR service provider approaches clients and candidates via social media or their professional network. Before the client and candidate are successfully matched, several contact moments (touchpoints) exist. For example, the exploration of client needs or the evaluation of candidates’ resumes.

The middle of the process starts when the client and candidate have been successfully matched. Often some form of agreement or contract is signed in this phase. In this phase the HR service provider brings the two parties together (find candidates for client projects and vice versa). This should result in a candidate that gets placed at a client organization. In this phase extensive contact moments exist with both clients and candidates to guaranty the project is successfully executed.

When the project of a candidate stops the last phase of the process starts, which is relationship management and after-sales. When the project ends it is important to keep close contact with the client. This ensures that possible future vacancies can be filled in by the HR service provider. In the meantime the company searches for a new client project where candidates can be placed. During the whole customer service process relationship management and sales is important. It is also noticed that many touchpoints exist, ranging from face to face meetings to e-mails and phone calls. It is for this reason that the customer experience is highly relevant in the case of the HR service provider. In appendix 1 the service process of clients and candidates is shown.

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9 Research Scope

At last, it is important to notice that this research is conducted in the secondment market. A clear scope has been set for this market to make the research project manageable. The scope has been also been set for this market because it is a mature market. Lean six sigma practices can lead to desired effects on productivity, quality, reduced lead times and costs because processes are

established. There is no focus on new business models or prospect clients in this research. Because of this reason the research will result in process improvement in current processes and incremental innovation in current company offerings. If the company seeks more radical innovation it is advisable to perform research with prospect clients that are seeking for new solutions for their HR problems.

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3. Literature Review

3.1. A Combination of Customer Journey Mapping and the VOC

Several authors have been exploring a translation process from external customer needs into internal process improvements (Herrmann et al., 2002; Gregorio, 2008; Tseng et al., 1999). Tseng et al. (1999) apply an IDEF3 method to capture the service experience and translate these experiences to

operational improvements. Tseng et al. (1999) are actually one of the first authors that make an attempt to develop a method that points out areas for operational improvement based on the customer’s experience. The IDEF3 is a process flow diagram that presents all possible modes of customer behavior to reach a desired outcome (Tseng et al., 1999). Insights in such a scheme can offer adequate information about the customer’s perspective towards the service process. This way an organization is able identify opportunities for improvement by comparing the customer

expectations with the actual performance of the company (Tseng et al., 1999). This approach is helpful because operations management must be able to identify relevant areas for improvement. A customer experience assessment like the IDEF3 can help significantly with the identification of such areas.

Herrmann et al. (2002) proposes an extended quality function deployment (QFD) approach, which is normally used to translate customer wants and needs into design criteria for products, services and processes. This extended approach improves the QFD approach on two aspects. First, behavior-forming utility and values of the customer are included. Second, satisfaction rates of customers are included to help assess whether the customers’ needs are fulfilled. Their research adds significant value because it tries to complement the current QFD approach with an extended focus on customer satisfaction. Because customer satisfaction and customer experience are closely related, this approach can generate improvement for the development of products, processes and services.

The final author that is elaborated is Gregorio (2008). In his thesis the author performed a combined approach for the translation process of customer needs and wants into internal

specifications like KPI’s. This translation process is performed with ideas from the KANO model, SERVQUAL, Taguchi loss function, Important Performance Analysis and a new model, which is called trade-off importance. Although customer experiences and satisfaction is not fully integrated into the approach the authors makes a valuable contribution to literature because the author describes a hands-on approach to make a customer focused translation process from customer insights into the improvement of KPI’s, specifications and requirements of the service process.

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11 The reason why an approach that translates the experience of the customer into operational improvements is beneficial is that it can create a win-win situation for organizations. First, non-desirable experiences can be identified with a customer experience method like customer journey mapping. Second, these customer experiences can point out where operational improvements should be made in the internal processes to achieve higher and more constant levels of service performance. The voice of the customer can help discover customer requirements related to touchpoints that are negatively experienced. This way the customer’s experience can be improved while at the same time higher levels of quality and operational excellence are achieved.

The concepts of operational excellence, quality management and customer journey mapping have been applied in many organizations. However, it is remarkable that a limited amount of

academic scholars have researched a combination of the two concepts. It is likely that this is mainly due to the more internal focus of operational excellence and quality management and the external focus on customers of the customer journey map. To further explore a combination of these concepts some research has been performed based on available sources. Consultancy firm Ordina (2013) reports that a combination of customer journey mapping and lean six sigma projects is recommendable because both approaches can significantly strengthen each other. Lean six sigma tries to apply an outside-in approach through exploring customer needs and wants. This is often done through listening to the voice of the customer. Interviews, surveys and observations can help with this. However, such an approach could be more powerful if the organizations have more insights into the emotional experiences the customers have during the service process. This enables firms to point out where specific problems occur during the service process and where operational

improvements have to be made to create better experiences. In other words; it enables the company to identify quick wins. Such an approach will have positive effects on customer satisfaction, which in turn has positive effects on overall firm performance. This approach is highly relevant forms the basis for this particular research.

It is not without a reason that customer journey mapping gained popularity and resulted in valuable outcomes for different types of organizations. If such a tool can be combined with a method that tries to achieve higher levels of quality and operational excellence, it can be of great value for both the organization and the customer. A Dutch sales professional’s website (Sales Gids, 2014) proposes a method that uses both the voice of the customer and the customer journey map as a basis the development and improvement of (multichannel) operations. According to this source the organization should focus on the moments of truth, where customer’s make a go/no-go decision to do or continue to do business with the organization. Generally, a customer Journey should take up to five moments of truth, which deserve extra attention for operational improvement.

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12 customer journey mapping is valuable because the most important experience points in the

customer journey map give a good indication of a valuable places to capture VOC data. This VOC data can then be used to modify the customer journey. This is performed by optimizing the touchpoints that occur in the customer journey. The approach of Wheeler (2014) is similar to the one that is applied for the HR service provider in this research. It can be observed that interest is received from the business world for the two concepts. However, a method that combines the two tools has not been researched in literature. This research explores a method like this and adds significant value in the field of innovation management, marketing, quality management and operations management.

3.2 The Relation between Customer Experience and Customer Satisfaction

According to Foss et al., (2011) innovation and marketing studies have paid increasingly attention to the fact that firms can become more innovative by tapping into the knowledge of customers and clients. Many firms acknowledge this and use a variety of tools to gather deeper insights into their customers. But why is the role of customers so important for service oriented firms? According to Miles (2008) services have two distinctive characters opposed to products. First of all, services are intangible. Services often involve transformations leading to certain desirable outcomes. Because of the intangible character it is hard for the customer to judge or evaluate the service in an objective manner. Second, interactivity seems crucial in the context of services. Most of the services require the presence and participation of the customer. Because of the intangible character of services and the interactivity with the customer, experiences become crucial during the service process. The experiences that customers have evolve during the contact moments with the service firm. In other words: Customer service experience relays on the service contacts that occur during the service process (Tseng et al., 1999). It is therefore argued that when a customer purchases a service, he or she purchases an experience that is created through the service operations of the service company (Bateson, 1995). Service oriented companies should therefore aim to constantly improve the interaction moments with their customers to reach high levels of customer satisfaction. Customer experience has a close relation to customer satisfaction. Improvement of the customer experience has a positive effect on both customer satisfaction and firm performance (Tseng et al., 1999). Competitive success of a service oriented firm ultimately depends on the satisfaction of the customers (Tseng et al., 1999). Research by Horovitz (1990) has shown that customers who are dissatisfied with a service tend to reveal their experience with at least three people. This results in negative word of mouth and reduces the customer base of an organization. Furthermore, because of negative word of mouth, it becomes increasingly difficult for the service organization to attract new customers (Tseng et al., 1999). Marketing studies suggest that it is 5 to 10 times more costly to acquire a new customer than to retain an existing customer. Thoughtful service

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13 organizations are aware of this fact and pay close attention to the customers’ experiences during the service process. Before organizations try to improve their customers’ experiences they have to explore where points of improvement exist and where quick wins can be made. It is advisable that organizations use a market research tool which enables them to obtain the perspective of the

customer. This prevents an internal focus, which could result in biased decisions and falsely identified points of improvement.

A tool that recently has gained popularity is customer journey mapping. Much value can be added using this tool because companies obtain a customer perspective towards the service process. Customer journey mapping is a graphic display of the customers experience with a service process or product (Liedtka and Ogilvie, 2011). In this graphic display so called touchpoints are identified. In a service context, touchpoints are those points where customers interact with the service of a firm. They can range from face to face contact to virtual interactions on the company’s website. In a journey map these touchpoints can be connected with a line, based on the experiences of customers. These experiences are also called emotional highs and emotional lows. This results in a graphic overview that is often accompanied with customer quotes to enforce the findings.

3.3. Customer Journey Mapping: A Design Thinking Tool

Before going deeper into the concept of customer journeys some contextual background is given on the topic. Customer journey mapping is one of the tools that are used in the philosophy of design thinking. This philosophy entails the process of continuously redesigning the business, using insights retrieved from customers and clients (Liedtka, 2014). According to Liedtka and Ogilvie (2011) design thinking can bring such innovative benefits for organizations that it comparable with the benefits that total quality management (TQM) brought for quality. One of the first companies that took a design driven approach towards industrial product design is IDEO. Founded in 1991 the company gained a lot of attention from media and scholars throughout the world. According to the CEO of this firm, design thinking is a discipline that uses the designer’s sensibility and methods to match people’s needs with what is technological feasible. Furthermore, business strategies are explored that can convert new propositions into customer value and market opportunity (Brown, 2008).

Design thinking is not only useful for the design of new products. It also adds significant value for services. Stickdorn and Schneider (2014) argue that five key principles must exist for design thinking in a service context. First, it has to be user-centered, which means that services have to be experienced through the customer’s eyes. Second, it must be co-creative. Different groups of internal and external stakeholders should be included in the service design process. Third, sequencing is important. The service should be visualized as a sequence of interrelated actions. Fourth, evidence should be provided. Physical artifacts can help the service become visualized (a customer journey

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14 map is a great example of a mean to do this). At last, service design thinking should be holistic, meaning that the whole environment of the service should be considered.

It is important to notice that design thinking is not merely about creating new products and services. Several other benefits exist when using a design thinking approach. A clear advantage is that different forms of collaboration evolve during the process. Service design thinking is an interdisciplinary approach that combines several tools and methods used by various disciplines (Stickdorn and Schneider, 2010). Internal collaboration during design thinking activities gets different departments together creating an ongoing dialogue between those departments. Authors like Cooper (1984) and Cooper and de Brentani (1991) have proven that communication and cooperation between marketing, engineering, manufacturing and R&D leads to greater new product success and more profitable products and services for the organization. In addition, external collaboration with customers can help the organization become more customer-centric, while developing a deeper understanding of the customer’s perceptions and experiences (Bharadwaj et al., 2012). Customer journey mapping is a great example of a tool that builds on the principles of design thinking. This makes it a value adding tool for companies that want to gain innovative power.

3.4. Customer Journey Mapping

‘’If we could add only one design tool to a manager’s repertoire, it would be journey mapping’’ (Liedtka and Ogilvie, 2011).

According to Norton and Pine (2013) the customer journey is the sequence of events that customers go through to learn, purchase and interact with company offerings. These offerings can be

commodities, goods, services or experiences. Often the customer journey map is presented as a flowchart where emotional highs and lows are presented including the meaning that the experience holds for a customer. As mentioned earlier, customer quotes can help significantly to put emphasis on the experiences. The emotional highs and lows are considered key to identify value-creating innovations (Liedtka and Ogilvie, 2011). According to these same authors this particular tool helps managers and employees to focus on the right ideas. The customer journey map is a powerful tool that shifts the focus from ‘’what does my firm want?’’ to ‘’what is the customer trying to perform?’’. Too often new ideas and innovations fail because companies have an internal focus and tend to misjudge what customers really want. During the last decades the experience economy, as described by Pine and Gilmore (1998), has proven its relevance for western economies. It is for this reason that it is important to understand and shape the sequence of events that customers experience. The customer journey is not simply about good service. It is about creating a journey that creates memorable events and engages each customer in a personal way (Norton and Pine, 2013). When

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15 organizations are able to perform this task, they will deliver more value to the customer, profitability to the company and differentiation from the competition.

Different techniques exist to capture the customer journey. Examples of techniques are interviews, process mapping, shadowing, observation and video ethnography. When companies want to capture the customer’s experience, it is important that they walk in the customer’s shoes. For example, in the case of a museum that is often visited by children, it is helpful to walk through the museum at the height of a child (Holmlid and Evenson, 2005). The techniques to capture customer experiences can be different and are often adjusted to the purposes and resource constraints of the company.

Although the means to capture the experiences are different, the goal of customer journey mapping is the same. That is to get a full understanding of the experiences customers have with a product or service. But what happens if the organization has successfully captured these

experiences? In general the customer journey can be used as input for the design process of new services, products or processes (Stickdorn and Schneider, 2010). In other words; the customer journey is a helpful tool to provide the organization with input for different types of innovation. When a customer journey is finished companies arrive at a new stage where new concepts can be devised, evaluated, and prototyped (Liedtka and Ogilvie, 2011). Typically, insights from a customer journey map are used to generate new ideas for different types of innovation that a firm is looking for. A customer journey can help with this because emotional lows point out areas where value can be added through innovative solutions. The principle of improving the customer’s experience (i.e. turning emotional lows into emotional highs) is important when new ideas are generated.

Furthermore, the customer journey map can be used to develop an ideal journey (Liedtka and Ogilvie, 2011). A tool that can be used for generating ideas is brainstorming. Brainstorming ensures that ideas are considered that can result in fundamentally new ideas for concepts. In the next stage the most promising ideas are used to develop concepts and evaluate them using both customer and business criteria (Liedtka and Ogilvie, 2011). It can be noticed that in this stage promising ideas can be killed because they don’t show enough business potential.

Besides the benefits of customer journey mapping some possible pitfalls exist for

organizations. In a situation where Customer journey mapping is used to improve service offerings a relevant question that rises is ‘’when is enough, enough?’’. Schroer (2003) explored this question and argues that it is important to set clearly defined service boundaries. Often companies tend to focus on wishful thinking, which focuses on a desired service experience in a perfect world. This could be dangerous because often such service offerings and processes cannot be achieved. Even if those levels of services can be achieved, the organization risks not achieving these service standards for all its customers. As a result organizations could face high customer expectations that cannot be

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16 satisfied.

In this thesis the author explores a different angle of incidence related to how the findings of the customer journey maps are used. As mentioned in the introduction, the customer journey will help specify where current customer requirements are not met and where experiences are currently not satisfying enough. This way, opportunities for the improvement of the service process can be identified. Furthermore, emotional lows in the customer journey point out where in the service process quality improvements deserve extra attention. Such an approach is interesting because to date not much is known about a combined method that takes both an external customer approach and an internal quality improvement approach. Some research attempts have been made (Herrmann et al., 2002; Gregorio, 2008; Tseng et al., 1999) to translate customer needs and wants into internal specifications and requirements. However, customer journey mapping has not yet been used for this translation process. Much of the existing research in both fields has been studied within two

different domains. On the one hand the internal process focus and on the other hand the external focus on customers. Bridging the gap between those fields is considered an important yet complex translation process (Herrmann et al., 2002). This research makes the initial steps to further explore this translation process in a commercial B2B service context.

3.5. The Voice of the Customer

Several authors have proposed definitions of the voice of the customer. According to Aguwa et al. (2012) the VOC is a critical analysis procedure that provides precise information about the customer input requirements for a service/product output. To perform an adequate VOC analysis it is crucial to listen to the customer’s needs from the customer’s vantage point (Bharadwaj, 2012). Katz (2002) have proposed a widely accepted definition of the voice of the customer: ‘’A complete set of customer wants and needs, expressed in the customer’s own language, organized the way the customer thinks about, uses and interacts with the product’’. The term voice of the customer is mentioned in different fields of literature including lean six sigma, total quality management (TQM) and quality function deployment (QFD). It must be noticed that the term voice of the customer can have different meanings depending on the context and field it is mentioned in. For example, in QFD the VOC is used as an input for the design of new products, services and processes. In lean six sigma literature the VOC is captured with the aim to improve existing processes and create operational excellence. It is important to mention that the lean six sigma explanation of the VOC is similar to the explanation of the VOC in this research and is therefore held in the rest of this thesis.

In his article Andersson et al. (2006) describes similarities and differences between TQM, six sigma and lean management. Although the definitions of these concepts are different, similarities exist between the three concepts. The main objective for organizations is improving their

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17 performance by minimizing waste and resources while improving customer satisfaction and financial results. Furthermore, the concepts have the same origin, namely the quality development in Japan after the Second World War. It can be noticed that all the concepts keep the customer in mind to create value for the customer. All three concepts focus on the understanding of the customer´s perception of value. So understanding what customers value can be considered as the listening to the voice of the customer.

The VOC can be captured by several tools. There is not a single best method to perform this task, so organizations often make a selection of tools to capture the voice of the customer. The results of an online survey of 360 managers (Brandt, 2012) indicate that the following methods are common when companies try to capture the VOC. These are; Customer and market surveys, focus groups, in-depth interviews, information forwarded by customer contact personnel, mystery

shopping, complaints and communication through e-mail, letters, and social media. When companies explore the VOC it is important to discover what the quantifiable needs of the customers are related to the organization’s service or products. In lean six sigma terminology these quantifiable needs are called critical customer requirements (CCR’s). These requirements are relevant for organizations because they serve as an input for key performance indicators (KPI’s), internal specifications and internal requirements. This lean six sigma approach is discussed in the next chapter.

3.6. Translating the VOC into Internal Specifications: A Lean Approach

In a lean six sigma approach capturing the VOC is part of a translation process towards internal specifications. The first step in this process is to capture the VOC. The second step is to assess what the critical customer requirements are. These CCR’s specify what the need of the customer exactly is in more measurable terms. These requirements are highly relevant because they help the company to assess what requirements customers have related to the service quality of the company. The last step is to verify whether the appropriate standards and specifications for delivering the customer requirements are in place. This can be performed with the help of indicators and KPI’s. These indicators are developed based on the requirements. If appropriate standards are not in place the organization is able to give priority to improvement projects and action planning.

To clarify the translation process an example is drawn where the VOC is translated into the CCR and then into an indicator. In the case of a service delivery process of a package, the voice of the customer could be: ‘’I want quick delivery of my ordered item’’. A CCR could then be: ‘’I want delivery of my package within 24 hours from the time of purchase’’. In this phase it is important to ask the customer what his CCR is related to his need or want. This way it becomes more clear to the organization what it has to improve in order to satisfy its customers better. The last step is to translate the CCR into an indicator. Based on the example above, the following indicator or KPI can

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18 be developed: % of packages that is delivered within the 24 hours from the time of purchase.

According to de Koning and de Mast (2007) the development of indicators is a first step towards making a project objective more measurable. In other words: It enables the firm to do a 0-measurement to explore how the organization is currently performing. It is important to take this step because otherwise no meaningful and appropriate quantity or percentage can be placed on a quality measure. For this reason it is important that an indicator is developed to measure the current quality situation. When analyzing internal process performance it is important that organizations do not solely focus on financial figures but also focus on the measurement of more intangible indicators (Gunasekaran and Kobu, 2007). Intangible indicators seem to be relevant because indicators are formed on the basis of customer requirements. In many situations these requirements can have a less intangible character.

When desirable performance indicators are developed, it is also important to keep the voice of the business (VOB) in mind. The VOB is a reflection of the organizations strategy, direction and financial information and data (Sullivan, 2010). Understanding this voice can assist internal

stakeholders with the identification of the most promising improvements. The goal here is to identify those projects who contribute most to the goals and the objectives of the organization.

Such an evaluation is important because this way the company pursues the right improvement projects. For example, if a company wants to excel in fast and efficient delivery, projects that improve efficiency and speed would be a right choice. At last, it is important that firms effectively capture the CCR’s before developing any indicators. Otherwise, there is a change companies develop indicators that do not trustworthy mirror de quality requirements of customers. Because the CCR’s are so important in the translation process, theories can be used to adequately retrieve the right requirements from customers. In the next chapter, these theories are discussed.

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3.7. Theories for Discovering Critical Customer Requirements

SERVQUAL

Because it can be challenging to effectively capture the customer requirements, tools can be applied to help organizations perform this task. In this phase it is important that organizations ask customers about the quality requirements of their services. This is relevant because high service quality is acknowledged to have a strong impact on business performance, lower costs, customer satisfaction, customer loyalty and profitability (Seth et al., 2004). It is for this reason that many scholars,

managers, practitioners and researchers have paid close attention to the concept of service quality. Quality is defined by the customers and not by the company’s specifications. Therefore it is crucial that quality is measured conformance the customer’s specifications (Berry et al., 1994). It is relevant to notice that the perceived quality of the customer is a function of the customer’s satisfaction. It can be observed the two are interrelated (Parasuraman et al., 1988).

A service quality model can be helpful for the exploration of requirements, because it measures the service quality dimensions which are considered most important for customers. Furthermore, it could help customers talk about their CCR’s more easily because they have a proper foundation to express their requirements.

A literature overview of service quality models is presented by Seth et al. (2004). In his paper the authors discuss a total of 19 models that are evaluated based on parameters which are

considered relevant in today’s service economy. A consistent factor among most of the models is that the customer’s expectations need to meet the actual service delivery in order to satisfy customers and retain a high quality of the service. If the actual service delivery does not match the customer’s expectations it will result in dissatisfied customers. One of the most well-known models of service quality is the SERVQUAL model of Parasuraman et al., (1988). The strength of this model is that it presents five dimensions of service quality that have been extensively researched and refined over the years. Customers use these dimensions as criteria to judge the service quality of companies. The quality dimensions of this research are discussed below.

Tangibles. This refers to the presence of physical facilities, equipment, personnel and communication materials. According to Berry et al., (1994) this is the least important dimension and is responsible for 11% of the service quality.

Empathy. This dimension relates to the caring of the organization, which is the individualized attention paid to clients and customers. This dimension is responsible for 16% of the service quality.

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20 Assurance. This refers the knowledge and courtesy of employees and the ability of these employees to convey trust and confidence among customers. 19% of this dimension is responsible for the service quality of an organization.

Responsiveness. This dimension relates to the ability of the firm to help customers and provide prompt and accurate service. Responsiveness is the second most important dimension and is accounted for 22% of the service quality.

Reliability. This refers to the ability to perform the promised service in a dependable and accurate way. This dimension is considered the most important dimension on which customers judge the service quality. It is responsible for 32% of the service quality.

Figure 1: SERVQUAL and its dimensions

It is important to notice that a dimension like the customer’s perception of service costs is not included in these dimensions since they do not fall in the conceptual domain of service quality (Parasuraman et al., 1991). In this thesis the service quality dimensions could be used to discover the critical customer requirements. The benefit of using the SERVQUAL method is that it identifies relevant service quality factors from the viewpoint of the firm’s clients and customers (Seth et al., 2004). For this reason it can be beneficial to combine the SERVQUAL method with a method like customer journey mapping. Both methods can be considered as highly customer-centric.

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21 Sand Cone Model

The sand cone model of improvement states that in order to build organizational and manufacturing capability organizations should build on cumulative capabilities. First, management attention and resources should focus on quality. Second, when quality achieves as an acceptable level, firms can focus on the dependability of the production system. Third, when these capabilities reach an acceptable level, efforts can be made to improve production flexibility and (reaction) speed. At last, when all these dimensions form a solid base, organizations can focus on cost efficiency. It is

important for firms that they build a proper foundation of each capability before building and developing the next capability. This principle is portrayed as a sand cone (see figure 2).

Figure 2: The Sand Cone model of Manufacturing Capabilities

In their paper Schroeder et al. (2010) suggest that there is no universal support for the sequence of the different capabilities. These authors argue that in some occasions manufacturing firms follow the sand cone sequence while others are not. The authors prove that the sequence is not a fixed order or universal phenomenon. However, the dimensions are still strong indicators for the capabilities that need to be developed in order to reach high levels of performance. But how do these dimensions relate to service quality? It could be argued that because these capabilities are important for organizations they could be used to discover customer requirements. Firms always strive for superior performance and development of the appropriate capabilities, so asking the customer’s requirements regarding those dimensions could generate valuable information. It can be concluded that some similarities exist between the sand cone model and the SERVQUAL. Both speed/responsiveness and dependability/reliably are overlapping themes that are present in both theories. Later in this thesis a method is presented by the author that will help capture the critical customer requirements.

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3.8. Theoretical Conclusion

Several theories have been discussed in the literature review. In the first part, a tool has been elaborated that discovers customer experiences. This is the customer journey, which has gained immense popularity in the last decade. The benefit of the customer journey is that companies take a customer perspective towards innovation and improvement projects (Liedtka and Ogilvie, 2011). Many organizations acknowledge the benefits of such an approach and shift their innovation focus from an internal perspective into an external customer perspective. Companies using an outside-in approach tend to perform better. They deliver more value to the customer, profitability to the company and differentiation from the competition (Liedtka and Ogilvie, 2011). It seems that

customer journey mapping is a great tool to gather useful customer insights and translate these into innovation projects. It is not without a reason that businesses around the world show extensive interest into the topic.

In the second part of the literature review the VOC and the translation of the VOC into CCR’s and indicators was discussed. In the lean VOC approach insights from the customer are crucial. However, the purpose for which the VOC is used is different than customer journey mapping. The main difference is that customer journey mapping is used for innovation projects, while the VOC is used as input for lean six sigma improvement projects. Capturing critical customer requirements is an essential part of the VOC. These CCR’s can be captured with the help of different theories (for

example: SERVQUAL and the sand cone model of improvement). The last step in the process is the development of indicators and KPI’s based on the CCR’s. These indicators and KPI’s measure if the appropriate quality standards related to the service processes are in place. However, the

development of indicators and KPI’s is not part of this master thesis. Both customer journey mapping and the VOC are customer centric tools that can be used for different purposes. It is for this reason that a combination of both tools can be valuable for business practice and could result in diverse insights for companies. This thesis performs a method that combines both approaches. This method is visualized in a conceptual model, which is elaborated in the next chapter.

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3.9. Conceptual Model

The approach that is applied for this research can be depicted in a process model (figure 3).

First, the box that relates to customer experiences is elaborated. Second, the box that relates to the VOC and CCR’s is discussed. At last, the third box is discussed. It is important to notice that the concept of indicators and KPI’s fall out of the scope of this research. The main reason for this is the time constraints of the research and the focus on a combined approach of the two methods. Third, the integration of both theories is discussed. The main focus of this integration is to prioritize CCR’s based on the experiences of customers with the service process of the firm. It is important to be aware that this process model is executed for two types of customers. These are the clients and the candidates of the firm.

The first box refers to capturing the experiences of customers. The customer experience in this research is captured through a customer journey canvas (Stickdorn and Schneider, 2014). By using such a canvas, the customer journeys of the interviewed clients and candidates can be plotted. In this graphic display emotional highs and lows represent positive and negative experiences with the service proces of the organization. Emotional highs confirm that a company is performing well on a specific touchpoint. However, further improvement of these emotional highs has a limited influence on the overall service experience of customers. Therefore these positive experiences are not further investigated. The biggest improvements in overall service experience are made by improving the emotional lows that customers have. These emotional lows refer to negative service experiences and can result in negative consequences for the firm. A good example is negative word of mouth, which is generated by customers. It is recommendable that organizations focus on improving emotional lows before proceeding with emotional highs.

In the second box the discovery of the VOC and the CCR’s is a central theme. The first step in this box is the relevant dimensions that help customers talk about their needs, wants and

requirements. Two theories have been identified in literature that could be beneficial for this task. This is the SERVQUAL of Parasuraman et al. (1988) and the sand cone model of improvement by Ferdows and the Meyer (1990). For this study, the dimensions of both theories (in total 10) are combined into five dimensions. These five dimensions are discussed in the casus description. Together, these dimensions will help explore the VOC. In addition, these dimensions help discover the CCR’s. The discovery of these requirements is crucial, because they will form the input for the development of indicators and KPI’s.

In the third box the customer experience box and VOC/CCR box come together.

At this stage CCR’s have been captured. However, a question that arises now is how to make sense and prioritize the big amount of CCR data. At the same time, emotional lows have been identified with the help of customer journey mapping. In this study these emotional lows fulfill the task of

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24 prioritizing the CCR’s. As mentioned before, these emotional lows form great opportunities to

increase the overall service experience of customers. It is for this reason that it is effective to prioritize CCR’s based on the identified emotional lows in the customer journey. With the help of these prioritized requirements companies are able to further translate these requirements into relevant indicators and KPI’s. This process model not only assures that companies focus on the right requirements when making the translation process to indicators and KPI’s, it also ensures that those indicators are measured that have a significant impact on the customer experience.

Figure 3: Conceptual Model

Voice of Customer (VOC) Critical Customer Requirements (CCR) Ferdows and De Meyer (1990) 5 Dimensions SERVQUAL Parasuraman et al. (1988) V O C / C C R High Priority Critical Customer Requirements Integration Customer Journey Canvas Customer Journey Emotional Highs Emotional Lows Cu st o m er E x p eri en ce

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4. Casus Description of the HR Service Provider

4.1. Casus Description: The Customer Journey

As mentioned earlier, a touchpoint is a point where customers interact with the service of a firm (Liedtka en Ogilvie, 2011). It is important to notice that there does not necessarily have to occur communication within those touchpoints. For example, a visit on the company’s website is also typified as a touchpoint. The most important touchpoints are so called moments of truth. These points refer to those few interactions when customers invest a high amount of emotional energy in the outcome (Beaujean et al., 2006). For the HR service provider it is important that these moments of truth are identified, since there exist hundreds of touchpoints in the intense B2B service process of the HR service provider. The aim of this research is to capture the experiences with the most relevant touchpoints of the service process, instead of focusing on a small part of the service process. For this reason it is important that an adequate selection is made of the most relevant touchpoints.

The initial step to perform this task was by holding two interactive sessions with an external consultancy firm. A marketing manager, commercial manager, business process manager and a quality manager from the HR service provider attended this session. This consultancy firm helped visualize and capture the general client and candidate process of the HR service provider (without paying specific attention to the five operational companies). After this was performed, the

researcher evaluated the service process (including the touchpoints) with both the business process manager and the quality manager. The touchpoints were limited to 12 to 14 of the most relevant touchpoints. These activities resulted in a service process for both clients and candidates (see appendix 1).

Because it was likely that the service process would be different for each operational company, meetings were arranged with commercial managers of each operational company. Definitions of the terms touchpoint and moment of truth were presented to inform the commercial managers about these concepts. In these sessions the general client and candidate touchpoints were verified and adjusted for different segments in their operational companies. Because not all the clients and candidates go through the same service process, segments where developed for both the candidates and the clients. This way an adequate segmentation was made based on the

heterogeneity of the customers. These meetings ultimately resulted in 12 to 14 verified touchpoints for each segment in each operational company. These touchpoints were then elaborated with candidates and clients in the interviews.

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26 Segmentation

Segmentation of clients was based on the contract form they have with the HR service provider. This resulted in the following three segments: 1) Clients who made use of a broker as an intermediary, 2) Clients who have a framework contract with the HR service provider and 3) Clients who do not have a framework contract with the HR service provider. The commercial managers of the operational companies were asked to identify one client within each of these segments to conduct an interview with. Two specific criteria were used for this selection. First, the client must have completed the service process in the secondment market. Second, the client is relevant in a specific segment for the operational company. For some operational companies certain segments were irrelevant, because they had no customers in a specific segment. In that case no client was identified. For example, for one operational company no clients were identified. The reason for this is that the company is a new start up within the HR service provider. As a result, none of the clients went through the complete service process.

In the case of the candidates, the segmentation was based on the characteristics of the candidates. Segmentation was developed based on the time they have been working for the

company and if they had a fixed contract with the company or a project based contract. This resulted in the following three segments: 1) Posted workers, who are working for the HR service provider longer than a year. 2) Posted workers, who are working for the HR service provider less than a year, and 3) Freelancers. Commercial managers of the operational company of the HR service provider were asked to identify one candidate within each of these segments. Two criteria were used for this selection. First, the candidate had completed the service process of the HR service provider or was at the end of the service process (in case the candidate worked less than a year for the company). Second, the candidate is relevant in a specific segment for the operational company. If a segment was irrelevant for an operational company no candidate was identified.

Identification of Client Persons

After all the client firms were identified, client persons were identified for all the selected companies. The identification of client persons was an important step in the research process because the researcher was able to identify the right client person that had to be interviewed in relation to a specific part of the service process. For instance, it is possible that in the beginning of the process a HR Purchaser of the client firm was involved, while at the middle of the process (when a candidate is working on a project) a functional manager of the lending firm was involved. The identification of client persons was performed with the commercial managers after the touchpoints were validated and the client firms were selected. The identification of client persons was not performed for the group candidates because only one customer (the candidate) is involved in this process.It is

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27 important to notice that for each touchpoint in the service process the involved client person was identified. This approach led to a complete image of the experiences of the client organization. An example of this identification process is shown in appendix 2. The most common functions that were identified were the HR purchaser, the functional manager and the financial administrator.

Customer Journey Format

To capture the emotional highs and lows of clients and candidates a customer journey format was used. An original format was subtracted from the website thisisservicedesignthinking.com (see appendix 3). This format is specifically developed to capture the customer´s experience in a service related context. It originates from the book of Stickdorn and Schneider (2010), which takes a service approach towards design thinking. The lay-out was adapted and modified for this specific research (see appendix 4). The main focus would rely on the most important customer touchpoints that customers experience during the service process. In every box a touchpoint is presented to the interviewees. Together with the interviewee the degree of an emotional high or low was determined and marked in one of the boxes. The emotional rating ranged from 1 to 5. The following definitions of the 5-point scale were given to the interviewees.

1) = Very Dissatisfied 2) = Dissatisfied 3) = Neutral 4) = Satisfied 5) = Very Satisfied

With the information from the filled in format the researcher was able to plot the emotional highs and lows in a graphic display so that a customer journey would arise. This was performed in an Excel document for each client company and candidate that was interviewed. Appendix 5 shows an example of an Excel template, in which the data from the interview was processed. Further

explanation on the method that was used in this research is given in chapter 5. Next to the emotional highs and lows, the VOC and the CCR’s were captured. In the next session a case description is given about these topics.

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4.2. Casus Description: VOC & CCR’s

To discover the quality requirements of customers in the context of services, companies often use a method like the SERVQUAL method. For example, (Jeong and Oh, 1998) have taken such an approach when applying the QFD method in a service context. In their research these authors adopted and modified some of the service attributes of Parasuraman et al. (1994) to discover the needs of customers. Such a modification of the SERVQUAL is also used in this research. For this particular research a method is used that integrates the dimensions of the SERVQUAL method with the sand cone model of improvement to discover the CCR’s. The main reason to choose for an integration of these models is to create 5 dimensions that stand on their own.

Several arguments can be brought up to clarify why the dimensions of the SERVQUAL are not used in this research. First, some dimensions in the SERVQUAL can be perceived as overlapping. Examples of such dimensions are responsiveness and assurance. Especially when these terms are translated in Dutch, candidates and clients can experience difficulty to interpret these dimensions, which could result in more biased answers of interviewees. Second, as Parasuraman and his co-authors explain themselves: ‘’The SERVQUAL items are a skeleton underlying service quality that can be supplemented with context-specific items when necessary’’ (Parasuraman et al., 1993, p. 145). In this research this is done by complementing dimensions from the SERVQUAL with dimensions from the sand cone model of improvement.

Several reasons can be identified why some dimensions of the sand cone model of

improvement are used to complement the SERVQUAL dimensions. First, one of the sister brands of the HR service provider has performed VOC research. This research was performed in collaboration with consultancy firm KPMG. To discover the needs, wants and requirements of the customers, interviews were held with the help of five different dimensions. These dimensions were based on the sand cone model of improvement by Ferdows and De Meyer (1990). Second, viable insights were obtained through presenting these dimensions to customers. The fact that a consultancy firm, like KPMG, uses the dimensions for VOC research indicates that these dimensions are an effective tool to discover CCR’s.

It is important to notice that the five dimensions that are developed for this research are not universal dimensions, which are proven predictors of service quality. These dimensions are only a tool to help customers talk about their critical requirements. Furthermore, in this research

expectations and actual performance of the perceived service quality is not compared. Although this is a prominent aspect of the SERVQUAL method, it is not included in this research. Brown et al. (1993) report problems with reliability, discriminant validity and variance restriction when using ex-ante expectations and ex-post perceptions. It would complicate further analysis of the results, because a strong focus has been set on the customer requirements and the customer journey. For

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29 this reason the scope will lay on the actual performance of the service of the HR service provider. Both the sand cone model and SERVQUAL model have overlapping properties that are discussed in further detail below. At the end of this section the dimensions are presented that are used to discover the requirements of customers in this research.

To recall, the dimensions of SERVQUAL are the following (in order of importance):

1) Reliability (32%) 2) Responsiveness (22%)

3) Assurance (19%)

4) Empathy (16%)

5) Tangibles (11%)

The 5 dimensions from the sand cone model are the following (in order of cumulative capabilities):

1) Quality 2) Dependability 3) Speed

4) Flexibility 5) Cost Efficiency

It can be observed that several dimensions are strongly represented in both theories. The first dimensions that show similarity are reliability (SERVQUAL) and dependability (sand cone). Together these two dimensions will form the first dimensions for this research, which is named reliability. The second dimensions that show similarity are responsiveness (SERVQUAL) and speed (sand cone). For this research these two dimensions are grouped as speed. Now that two dimensions are clearly identified, three dimensions are developed to complement them. The author complements these two overlapping dimensions with one dimension from the SERVQUAL model and one dimension from the sand cone model. Additionally, one dimension is added by the author. The third dimension that is used originates from the SERVQUAL model. This dimension is empathy. The author of this research thinks that this dimension is highly important for the HR service provider, because of the relationship intense B2B market it is operating in. It is for this reason that empathy could be a crucial factor for the success of the business.

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30 The fourth dimension to discover customer requirements is cost (efficiency). This dimension

originates from the sand cone model. Although this dimension is not a real indicator for service quality, as described by Parasuraman et al. (1991), this dimension can generate valuable insights into the needs, wants and requirements of the customers related to certain touchpoints in the service process. The selection of this dimension is justified because Parasuraman et al. (1991) state that context-specific items can be used as a supplement. For example; some touchpoints could result in cost inefficient situations for the hiring firm or cost could be a vital requirement related to a certain touchpoint. Discussing rates is a good example of this. The fifth and last dimension that is added is creativity. One of the HR service provider values is that it wants to differentiate itself from

competitors with creativity and professionalism to provide a tailor made solution for the client. Using this dimension for the discovery of requirements could result in valuable insights. It can point out where in the service process client organizations feel the need for a creative solution from the HR service provider.

Below an overview is presented of the five dimensions that are used to discover the VOC and CCR’s in this research. 1) Speed 2) Reliability 3) Empathy 4) Creativity 5) Cost

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5. Research Methodology

Given the context and in-depth character of this research topic it can be concluded that the choice of qualitative research is appropriate (Edmondson and McManus, 2007). Furthermore, qualitative research is desirable because of the explorative characteristic of this research (Saunders and Lewis, 2012). The main explorative character of this research is that it explores a method that combines a customer experience method with a VOC/CCR approach. For this research qualitative data was obtained from different customer groups of the organization. It was important that their

perspectives were captured because the data obtained from these interviews is designed to help the HR service provider improve and develop its internal specifications and KPI’s in the future. The customer groups that were involved in this study are the candidates who work for the organization and the clients who approach the HR service provider in case of an HR demand. It is important to notice that these candidates and business partners have a professional background and are highly knowledgeable individuals. These individuals were carefully selected, so that honest and

straightforward data was obtained about the service process. Most of these people have

experienced the service process of the company for several years. It is for this reason that qualitative research can bring the viable information and insights that the company is looking for.

5.1. Data Collection

Qualitative data was obtained via personal interviews. 10 client firms and 14 candidates were identified with the commercial managers of the five operational companies. The developed segments helped with the identification of the respondents. Furthermore, clear instructions were given to the commercial managers that the clients had to be relevant, open and critical. By giving these clear instructions to the managers appropriate respondents were identified. This approach had positive effects on the reliability of the research. This is mainly because the subject bias was limited. (Saunders and Lewis, 2012).

The researcher has taken several measures to ensure a high internal validity of the research. This is mainly done through a well prepared method for the data collection and a well designed data analysis. Furthermore, the developed formats and tools help ensure a high internal and external validity of the research. Other researchers could use these formats and cards in the same way to discover customer insights. Such measures result in higher triangulation when this research is replicated in another setting (Tracy, 2010). The account managers of the operational companies helped arrange meeting with the selected client persons and candidates. The account managers send more accurate information that was formulated by the researcher. This information included

Exploring customer experiences and the voice of the customer at a large HR service provider

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Master Thesis