BUYER INVOLVEMENT IN SUPPLIER HUMAN RESOURCE
MANAGEMENT WITHIN SERVICE TRIADS
Master thesis, MSc Supply Chain Management
University of Groningen, Faculty of Economics and Business
RENS SCHOORLEMMER Student number: S2209233 E-mail: rens.schoorlemmer@gmail.com Supervisor: dr. H. Broekhuis Co-assessor: prof. dr. D.P. van Donk
ACKNOWLEDGEMENTS
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ABSTRACT
The purpose of this paper is provision of insights into the way buyers use involvement in supplier human resources management (HRM) as a means of ensuring service quality in service triads. A multiple case study approach into three different service triads is taken to investigate the different effects that the nature of the service and the nature of the buyer-supplier relationship may have on the directness, intensity and specific supplier HRM practices buyers are involved in. The results of the study show that the amount of customer contact in a service and level of service customization, along with supplier dependency are all positively related to the intensity of buyer involvement in recruitment, selection and training of supplier employees. Moreover, it shows that in all service triads studied, buyer involvement in supplier HRM is used as a means of ensuring quality. Due to the fact that this research is exploratory and does not cover all possible settings, results are difficult to generalize but do provide a starting point for future in-depth research. For practitioners, this research offers insights into the suitable circumstances to use different ways of buyer involvement in supplier HRM as a way of ensuring quality in outsourced service delivery.
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TABLE OF CONTENTS
1. INTRODUCTION ... 4
2. LITERATURE REVIEW ... 7
2.1 Service triads ... 7
2.2 Human resources in inter-organizational relations ... 11
2.3 Different inter-organizational human resources in service triads ... 13
3. METHODOLOGY ... 16
3.1 Main methods and setting ... 16
3.2 Unit of analysis & case selection ... 16
3.3 Case descriptions ... 17
3.3.1 Case 1 – Reception services ... 17
3.3.2 Case 2 – Facility services ... 18
3.3.3 Case 3 – University education ... 18
3.4 Data collection ... 19
3.5 Data analysis ... 21
4. FINDINGS ... 23
4.1 Buyer involvement in supplier HRM ... 23
4.1.1 Recruitment & selection ... 23
4.1.2 Training & development ... 26
4.1.3 Motivation, reward & review ... 27
4.1.4 Staff scheduling ... 28
4.2 The role of the nature of the service ... 29
4.2.1 Direct contact ... 29
4.2.2 Type of service ... 30
4.2.3 Service customization ... 31
4.3 The role of the buyer-supplier relationship ... 32
4.3.1 Interdependence... 32
4.3.2 Maturity ... 34
5. DISCUSSION & CONCLUSION ... 35
5.1 Theoretical implications ... 35
5.1.1 Nature of the service ... 35
5.1.2 Nature of the buyer-supplier relationship ... 38
5.2 Managerial implications ... 39
5.3 Limitations and future research ... 39
5.4 Concluding remarks ... 40
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1. INTRODUCTION
Imagine, finding out your suitcase has not made it to your final destination after a flight. An issue for which you require adequate settlement by the airliner, that is obliged to take care of transporting you and your luggage. The airliner, however, puts you in contact with a third-party subcontractor, that they have outsourced their luggage handling to. They fail to find your luggage; you blame the airline for inadequate service. This type of service outsourcing is called a ‘service triad’. A situation in which a buyer has -part of- its services carried out by a supplier that interacts directly with the buyer’s end customer.
More and more firms chose to outsource services over the past years (Kalaignanam, Kushwaha, Steenkamp, & Tuli, 2013). Sometimes, these services even make up a valuable part of the buying firm’s product (Wynstra, Spring, & Schoenherr, 2015). Apart from the financial benefits that outsourcing services offers through pooling demand by specialist suppliers (Zhang, Lawrence, & Anderson, 2015), outsourcing a front-end service in which a supplier has direct contact with end-consumers also brings along challenges. Because “low performance on the side of the supplier immediately affects customer satisfaction” (Van Iwaarden & Van der Valk, 2013, p. 1047) and service failure by the supplier in a triad can impact the buyer greatly in terms of relational and operational costs (Modi, Wiles, & Mishra, 2015; Tate & Van der Valk, 2008).
5 As the supplier’s front-end service employees are influential in the encounter, it offers opportunity for improvement in service quality through buyer involvement in supplier human resources management (HRM) practices, like recruitment, selection and training. Because practices like selecting the right people and providing them with training will influence their performance and thus the service delivery (Fitzsimmons, Fitzsimmons, & Bordoloi, 2013). Hence, as Schneider & Bowen (1993) stated: “human resources management is crucial in service operations”.
In different buyer-supplier relationships, buyers have been using various forms of HRM tools in order to manage suppliers. Examples from multiple settings, in both manufacturing and service industries, have been investigated in past literature (Beaumont, Hunter, & Sinclair, 1996; Kelliher, Truss, & Hope-Hailey, 2004). In different franchising settings, varying levels of buyer control through supplier HRM were found (Kellner, Townsend, Wilkinson, & Peetz, 2014; Truss, 2004). And in one particular service triad setting, (i.e. call-center) HRM tools have been found as a major way of buyer control over service quality (Swart & Kinnie, 2003).
However, franchisees are only linked to one franchisor and deliver a core value proposition (Zhang et al., 2015). Therefore, the findings may not be generalizable to other service triads, since these differ in terms of the service provided, the amount of customer contact and inter-organizational relations (Zhang et al., 2015). Previous research seems to have paid little attention to the relation between these factors and the buyer involvement in supplier HRM, even though the factor of ‘direct contact’ has been mentioned as an important determinant for buyers to engage in involvement in supplier HRM (Swart & Kinnie, 2003). Therefore, studying these factors in different service triads should provide insights in how and when buyers use involvement in supplier HRM to ensure quality of outsourced services when the buyer is absent in the delivery of these services. In order to uncover these uses, this study takes an exploratory approach by adopting the following research question:
6 The theoretical contributions of this study are twofold: firstly, it expands knowledge on managing suppliers in service triads and controlling outsourced services. Secondly, this research provides insights into how different services and buyer-supplier relationships are related to the ways in which buyers deploy involvement in supplier HRM to ensure service quality and therefore provides a starting point for further research into the effective use of buyer involvement as a way to control outsourced front-end services. For buyers in (potential future) service triads, this research shows instances in which they can use a specific way of involvement, respective suppliers can derive ways in which to facilitate buyer involvement with regard to delivery of service quality in triadic outsourcing.
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2. LITERATURE REVIEW
In this section, literature on service triads and inter-organizational HRM will be reviewed. This section consists of three main parts, in which first service triads and their characteristics will be introduced, followed by a review of human resources management in inter-organizational relations and finally, how different service triads may affect the use of inter-organizational HRM in these triads. Through this approach, a theoretical foundation is created, onto which the case research will be based.
2.1 Service triads
Triadic structures in outsourcing exist in different forms. Zhang et al. (2015) observe four fundamental types of triads, from which three service triads can be distinguished. A service triad occurs when a buyer contracts a supplier that delivers services directly to the buyer’s end-customer (Li & Choi, 2009; Wynstra et al., 2015).
In a service triad configuration, the buyer, supplier and customer form a triad in which each of them has a distinct role. The buyer and customer have an agreement on the delivery of a certain service, the buyer outsources -part of- that service to the supplier and the supplier delivers -part of- the service directly to the customer, as depicted in Figure 1.
Service triads can be differentiated by outsourcing either back-end services, front-end services or adopting a franchising structure (Zhang et al., 2015). The three types differ in the increasing amount of direct contact that the supplier has with the buyer’s end-customers, which often results from the tasks performed by the supplier. A common trait of the front-end outsourcing and franchising is that customers have an interaction with the supplier but often associate their experience with the buyer company. In back-end services, this occurs to a relatively lesser extent (Zhang et al., 2015). Moreover, the differing configurations correspond with different agreements and relationships between buyers and suppliers in the triad. A franchisee from a fast-food chain, for example, only has a relationship with one franchisor, whereas e.g. a call-center may
8 provide customer support services to multiple different telecom providers, that all have their own demands and contracts. These factors create different levels of interdependence between buyer and supplier. In turn, higher interdependence can lead to stronger control mechanisms (Krause, 1999).
In a triadic outsourcing structure, it is beneficial for the buyer (‘B’) to possess a ‘bridge position’ between supplier and customer (Figure 2). This is particularly evident in manufacturing or back-end service settings. This intermediate position offers advantages in control and information, as the only way for the supplier (‘S’) and the customer (‘C’) to interact is via the buyer (‘B’)
(Hartmann & Herb, 2015; Li & Choi, 2009). This means this ‘third party’ (‘B’) benefits from a ‘structural hole’ between the two other parties. This situation is depicted in Figure 2. However, Li & Choi (2009, p. 30) state that in a triadic service outsourcing context: “the buyer has no choice but to permit a supplier to directly interface with its customer”, since the service can not be stored by the buyer and then passed on. The buyer must therefore create a service triad.
By partly transfering this ‘bridge position’ of control to the supplier, it becomes important for the buyer firm to control the new link, that now connects the supplier and customer directly (Figure 3). This moment of contact between the customer and supplier, the service encounter, is an important determinant of customer service quality (Fitzsimmons et al., 2013).
Figure 3. Bridging the structural hole; direct contact between supplier and customer. Based on Li & Choi, 2009.
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2.2.1 Managing suppliers in service triads
Through outsourcing a service, the supplier comes into more or less direct interaction with the buyer’s end- customer. In case of more direct contact and delivery of a service, the “operational- and task-level quality tools are in the hands of the supplier, without direct supervision of the buyer” (Van Iwaarden & Van der Valk, 2013, p. 1058). The buyer therefore has to safeguard against service failure by the supplier and opportunistic supplier behaviour, that may reflect on the buyer company (Hartmann & Herb, 2015; Li & Choi, 2009; Modi et al., 2015).
This means the buyer has to find a way to control the outsourced service, without having a presence in the delivery of this service. Besides, since a service is often both produced and consumed simultaneously, it cannot be controlled beforehand. In order to manage the delivery of an adequate quality service and to safeguard for supplier opportunism, different governance mechanisms are used. An obvious attempt to make arrangements and control outsourcing is drafting a contract between buyer and supplier (Barthélemy, 2003). However, drafting an outsourcing contract is not as easy as it may seem. According to Barthélemy (2003), service outsourcing contracts should be precise, complete, incentive based, balanced and flexible. In order to try and meet these goals, buyers often draft service level agreements (SLAs), these should “reflect the objectives that the buyer needs to realise for the end customer” (Van der Valk & Van Iwaarden, 2011; p. 200). However, in practice, it turns out that SLAs are “a challenge to specify and very difficult to measure” (Ellram, Tate, & Billington, 2004, p.27). And, as Tate & van der Valk (2008) report, measures like an agreement on the minimum number of calls in a call center, may even yield the opposite effect on customer satisfaction. Moreover, a contract should be complete, but too many control mechanisms will be perceived by the supplier as bureaucratic, and thus enhance opportunism (Hawkins, Wittmann, & Beyerlein, 2008).
10 suppliers course of action in specific situations” (Hartmann & Herb, 2015, p. 246). Moreover, the dependence on the supplier is larger due to the transfer of the bridge position (Figure 2) on the one hand, and additional vulnerability through the direct contact between supplier and customer on the other (Hartmann & Herb, 2015). This ambiguity and dependency are stated as antecedents that increase the risk for supplier opportunism in service triads compared to dyadic relationships, because a certain distance is created between the buyer and the end-customer.
11 2.2 Human resources in inter-organizational relations
Literature shows different configurations of inter-organizational (for instance buyer-supplier) relationships in which buyer involvement in supplier HRM is present. These range from manufacturing companies training their agency workers in-house (Kelliher et al., 2004) and buyers requesting specific supplier employees to work for them, to determining the pay level of call center employees (Swart & Kinnie, 2003). Moreover, literature shows examples of franchisors unilaterally appointing franchisee managers (Truss, 2004) or deliberately granting franchisees HRM autonomy (Kellner et al., 2014). Apart from this, supplier development activities often also encompass human resource activities (Krause, Handfield, & Scannell, 1998; Krause & Scannell, 2002; Nagati & Rebolledo, 2013), these are found in both production and service industries and can therefore also be seen as a way in which buyers affect supplier HRM. The following section will highlight different ways of buyers getting involved in supplier HRM, in different inter-organizational relations. Apart from analyzing the different ways in which buyers get involved in different practices, the underlying motives as provided in extant literature will also be addressed.
2.2.1 Ways of buyer involvement
Multiple types of buyer’s involvement in supplier HRM have been found in inter-organizational settings. Literature shows differences in terms of the specific HR practices in which buyers are involved, and differences in the way buyers are involved, in terms of direct or indirect involvement. In terms of both practices and directness of involvement, the buyer can be more or less intensively involved. Intensity differs for instance in the way that buyers give only suggestions on appointing certain employees till they unilaterally appoint managers or promote workers without getting the supplier’s (or agency’s) consent first (Kelliher et al., 2004; Truss, 2004).
2.2.1.1 Practices
12 design, recruitment, training and performance management (Noe, Hollenbeck, Gerhart, & Wright, 2006).
Literature provides several reasons for the differing interests that buyers demonstrate in different HR practices within the supplier firm. One of these can be the nature of the service. When the service at stake requires specific skills, this may lead a buyer to refrain from training supplier employees as they do not have the expertise in-house (Swart & Kinnie, 2003). Whereas a service that requires customer contact on behalf of the buyer (or franchisor) will often lead to a buyer providing instructions on employee selection criteria and training on how to represent the buyer (Kellner et al., 2014; Swart & Kinnie, 2003; Truss, 2004). Franchisors, however, often provide support on HR regulations to protect themselves from legal liability and brand damage through franchisees. Yet, for financial motives, franchisors often refrain from involvement in most other franchisee HR practices (Kellner et al., 2014). This shows that buyers have their reasons to get involved in specific HR practices while leaving others up to the supplier. The intensity to which a buyer is involved in a certain practice in terms of resources or decisive power may also be a sign of the interest a buyer has in controlling the practice.
2.2.1.2 Direct and indirect involvement
13 who state that e.g. co-developing a supplier training programme can be seen as indirect, but the buyer actually training supplier employees is a form of direct involvement. This research will adopt the definition as used in supplier development literature and Hunter et al. (1996), due to the clear distinction that is made between direct and indirect with regard to the allocation of resources that the buyer devotes to the involvement initiative. Therefore, indirect involvement comprises demands that do not require financial- or personnel resources of the buyer, or the buyer merely giving input on supplier decisions. Direct involvement comprises financial- or personnel commitment by the buyer or the buyer making a final decision that can overrule the supplier’s own HRM.
Direct involvement activities often occur in mature buyer-supplier relationships and are preceded by indirect activities in less mature stages (Wagner, 2011). Indirect and direct involvement in different supplier HR practices may therefore change over time. This shows that the nature of the buyer supplier relationship is often related to the directness of involvement. Moreover, within direct or indirect, involvement can take different levels of intensity. In different cases with car manufacturers and dealers, for instance, Truss (2004) found that some manufacturers had no compulsory training for dealer employees, some only trained them when a new model was introduced and others had a specified minimum amount of training hours that was enforced through financial repercussions for non-compliance. This shows that even within direct approaches, the level of intensity of buyer involvement in supplier HRM may vary. With regard to indirect involvement, the amount of detail and strictness of the demands indicates the intensity of the involvement.
2.3 Different inter-organizational human resources in service triads
14 triads, it is reasonable to expect that buyers in service triad settings will also view this as a motive to try and impact supplier HRM.
Moreover, task specific motives such as the ‘technical nature’ of the work (Kelliher et al., 2004) and the specificity of the service provided by the supplier (Swart & Kinnie, 2003) were stated as providing a reason for buyers to either take an active, or purposely inactive, role in training supplier employees. Service triads can also differ in terms of the services they deliver, core or supporting, with high or low levels of customer contact (Zhang et al., 2015). Therefore, different service triad contexts in terms of the nature of the service could affect the buyer involvement in different ways. This research aims to explore how these dynamics work by posing the following sub question:
SQ 2.1: How does the nature of the service affect the buyer involvement in supplier HRM in different service triads?
15 Pressures from a buyer with a long-term contract that makes up a large part of the suppliers revenue, may be received by the supplier in a different manner than a relatively ‘small’ buyer that is engaged in an ‘arm’s-length’ relationship. Also, because buyer-supplier relationships often involve more mutual investments in maturity (Wagner, 2011). To explore the dynamics between buyer-supplier relationships and the degree of buyer involvement, the following sub-question is posed:
SQ 2.2: How does the nature of the buyer-supplier relationship in a service triad setting relate to the degree of buyer involvement in supplier HRM?
The proposed relationships have been depicted in the conceptual model (Figure 6).
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3. METHODOLOGY
3.1 Main methods and setting
Given the exploratory nature of this research, a multiple-case study has been conducted, in which different triads were examined from both the supplier and buyer point of view. Multiple methods of data collection have been used, with interviews being the main method. Moreover, secondary data in the form of documents have been used. These multiple sources have not only been used in order to acquire rich data (Voss, 2009), but also to create triangulation, constrain instrumental bias and increase construct validity (Yin, 1994). The rich data has helped to understand the dynamics in the buyer-supplier relationship of the service triads and the buyer involvement in supplier’s HR practices. Case study research is specifically suitable as the variables that come into play in this research could not completely be defined beforehand and room should be offered for other factors that might come forward during the research. Furthermore, the case study approach provided the opportunity to study several service triads in their natural setting (Yin, 1994). The setting in which this research has been conducted is three service triads in the Dutch service industry.
3.2 Unit of analysis & case selection
The unit of analysis is the buyer-supplier relationship within the service triad, as this is where the decisions regarding control and buyer involvement in supplier HRM are made.
17 characteristics between the selected cases allows for clear and structured comparison of service and relationship-related effects, in order to generalize results among cases. For every characteristic, there are two cases that are replicated literally, which are therefore expected to produce similar results. Opposite to that, for every characteristic, one case has been replicated theoretically with the opposite characteristic of the other two cases. Because of this, they are expected to produce contrary results, but for predictable reasons (Voss, 2009). The cases are briefly described in the following section, an overview of the selection criteria is depicted in Table 3.1.
3.3 Case descriptions
This section will briefly introduce the three cases that are part of this study, in terms of service, buyer, supplier and customer.
3.3.1 Case 1 – Reception services
Case 1 revolves around service provider ‘REC’ that provides reception services for mental health institution ‘MHI’. They have dedicated teams of receptionists that work part-time at multiple locations of MHI. REC started providing this service at one location, around eight years ago. Within the past year, the service has grown “explosively”, to over fifteen locations.
Service
The reception services consist of receiving patients, guests and suppliers, notifying therapists, answering the phone, but also taking care of safety and a clean waiting area. “We do clinics that deal with addicts, this means people can become aggressive, and we will need to take measures for that.” [SU1.1] e.g. one of the locations is a Jewish clinic, which means receptionists should “know about Jewish holidays, whether or not to give people a
Case 1 Case 2 Case 3
Service delivered Reception service Facility service University education
Nature of service Type Facilitating Facilitating Core
Customer contact High Low High
Nature of relationship Dependency Multiple services Multiple services One service
Length > 8 years <1 year >3 years
18 hand. You need to know the habits.” [SU1.1]. Moreover, receptionists “are the visible face of the company” [SU1.1].
3.3.2 Case 2 – Facility services
Case 2 revolves around facility services provider ‘FSP’, which is a company that operates under the same holding as ‘REC’ in case 1 and provides facility services for mental health institution MHI. They work with a dedicated team of part-time ‘caretakers’ or ‘handymen’, that take care of facility services in more than ten of MHI’s locations, which mainly concern outpatient clinics. The service has emerged from the already existing relation concerning reception services. FSP has started working for MHI less than one year ago. Since then, locations have kept getting added until ten currently.
Service
The tasks of FSP’s caretakers consist of “simple repairs, small maintenance, internal movements” [DO3]. Moreover, they take care of “controlling the fire extinguishers and signalling and solving possible unsafe situations, technical deficiencies and other disturbances in facility management.” [DO3]. Apart from that, it “depends on what we (FSP) encounter. If it is within our boundaries, we will pick it up” [SU2.2]. All in all, they “make sure the patient and the therapists can do their job.” [SU2.2]. They “might run into” patients but there is ”not much direct contact” [SU2.2].
3.3.3 Case 3 – University education
19 Service
In all three activities, external employees have direct contact with students “almost all the time” [BU3.3]. With regard to the level of autonomy, there is always an UFA employee responsible for the eventual scores and learning goals of a course, from which parts are outsourced. External employees do have some autonomy regarding input and the way the material is communicated to students. However, they have to adhere to learning objectives and boundaries set by coordinators. The coordinator for skills trainings even uses a ‘script’ for training to ensure a certain level of consistency. All tasks can be qualified as “substantially knowledge intensive” [BU3.2], due to the fact that hired people need to be “experts in their field” [BU3.1].
3.4 Data collection
In order to collect rich data, multiple sources have been used. Semi-structured interviews have been conducted on different levels of both buyer and supplier companies, to increase construct validity through triangulation. Interviewees were mainly selected on their relevance in the buyer-supplier relationship and experience, in order to provide reliable insights. The interview data has then been supplemented by secondary data in the form of documents regarding ISO guidelines, customer surveys, personnel manuals, contracts and SLAs in order to increase validity.
The data has been collected by a single researcher during the months April and May 2017. Interview data has been collected by means of face-to-face interviews and video-calls. The documents were retrieved from the focal companies upon request. An overview of collected data can be found in Table 3.2.
3.4.1 Research protocol
20 service, the buyer-supplier relationship, control mechanisms and buyer involvement in supplier HRM. The protocol is supplemented by a sheet with figures and research questions in order to support the explanation of the research purpose to interviewees beforehand (Appendix B).
Case Source Code Amount Subject
Case 1 - Reception service
Semi-structured interviews buyer 1
Facilities advisor BU1 55 min
Semi-structured interviews supplier 2
Director SU1.1 44 min
Regional manager SU1.2 57 min
Documents 4
ISO-guide DO1 41 pages Supplier policies and procedures
Contract & SLA DO2 33 pages Agreements & control mechanisms Personnel manual DO4 15 pages Personnel tasks & responsibilities
Function profiles DO6 10 pages Personnel demands
Case 2 - Facility service
Semi-structured interviews buyer 1
Facilities advisor BU2 39 min
Semi-structured interviews supplier 2
Director SU2.1 47 min
Regional manager SU2.2 61 min
Documents 4
ISO-guide DO1 41 pages Supplier policies and procedures
Contract & SLA DO3 33 pages Agreements & control mechanisms Personnel manual DO5 10 pages Personnel tasks & responsibilities
Function profiles DO7 4 pages Personnel demands
Case 3 - University education
Semi-structured interviews buyer 4
Assistent professor/coördinator BU3.1 64 min
HR Advisor BU3.2 52 min
Coordinator skills trainings BU3.3 44 min
Programme director BU3.4 67 min
Semi-structured interviews supplier 3
External lecturer/supervisor SU3.1 56 min External skills trainer SU3.2 34 min
External teacher SU3.3 62 min
Documents 1
Evaluation form DO8 1 page Evaluation criteria skills trainings Nature of the service, nature of the buyer-supplier relationship & buyer involvement in supplier HRM Nature of the service, nature of the buyer-supplier relationship & buyer involvement in supplier HRM Nature of the service, nature of the buyer-supplier relationship & buyer involvement in supplier HRM
Nature of the service, nature of the buyer-supplier relationship & buyer involvement in supplier HRM
21 3.5 Data analysis
All interviews have been recorded and were transcribed within 48 hours after the interview, before being checked by interviewees for verification and possible additions. The qualitative data acquired through the interviews and documents has been coded and analysed using ATLAS.ti software, initial codes were created by using a method of deductive coding. Afterwards, inductive coding was used in order to add codes that emerged from the data, these concerned topics regarding service customization and the reason for outsourcing. Eventually, 44 codes were categorized in fourteen second order codes that were led back to three aggregate dimensions, that covered the nature of the service, the buyer-supplier relationship and buyer involvement in supplier HRM. The initial and final coding trees can be found in Appendix C. This method was used in order to discover patterns and extract useful quotes from the interview transcripts, which were backed-up by data from the documents.
After coding, useful quotes have been used to create a within-case analysis per case (Appendix E), in which relations between the concepts were analysed per specific case. The forms of involvement that were found are presented in the first part of the ‘Findings’ section. As an overview, Table 4.1 is presented in which the involvement per practice is displayed, along with a score of the involvement intensity.
22 Subsequently, the following cross-case analyses have been made: First case 1 has been compared to case 2, to find compare similarities due to the type of service and interdependence, These cases were then compared to case 3, in order to find patterns through checking the differences on type of service and interdependence and their influence on buyer involvement. Following this, case 1 and 3 have been compared due to the high levels of customer contact and their relation to buyer involvement. Finally, case 1 and 3 were compared to case 2 based on the different levels of direct contact, in order to find a cross-case pattern regarding the relation between the level of customer contact and buyer involvement. Checking the relations between concepts across cases is also used to enhance external validity.
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4. FINDINGS
This section displays the findings of the data analysis as described before. The section is built up as follows: first, the different ways of buyer involvement in supplier HRM that have been found in the cases will be discussed. By addressing these, a general view of the types of involvement and the situations in which they occur will be provided. After this, the way in which the specific nature of the service and the buyer-supplier relationship plays a role in the way buyers get involved in supplier HRM will be addressed.
4.1 Buyer involvement in supplier HRM
This section will highlight what forms of buyer involvement in supplier HR practices have been found in the service triads that have been investigated. An overview of all ways of involvement can be found in Table 4.1. Table 4.1 also shows the directness and intensity of involvement per practice. Relative intensity of the involvement per practice is scored, to allow for comparison between cases. The following sections will elaborate on the extent to which buyers were involved in specific HR practices in order to control service delivery.
4.1.1 Recruitment & selection
In case 1, most employees are recruited especially for this buyer, or even location. MHI has indirect involvement through providing input on the tasks and the desired employees, to ensure that they ‘fit to the location’. These contain more ‘hard criteria’, such as “40+, experience in mental healthcare or hospital” [DO4], as ‘soft criteria’, which apply more to personality and are checked in interviews conducted by REC. After the recruitment of multiple suitable candidates, MHI has direct involvement through making the final decision on who they want to work for them: “We introduce two to three people per job opening. And they (MHI) can choose: this one and not this one.” [SU1.1; DO1], in this way MHI ensures selecting a suitable candidate without the effort of recruitment. REC’s regional manager recalls that if MHI says so “I will reject them, even though I thought she was a good candidate.” [SU1.2].
24 twenty years via their previous external supplier. They were satisfied with this employee and thus proposed and assisted transferring to FSP, even bridging the difference in salary this would cause. However, this was a ‘special case’. Generally, MHI has indirect involvement by specifying basic recruitment criteria in terms of ‘hard criteria’ such as: “vocational education, certificates for ‘safe working’ and working with electrical systems following ‘NEN 3140’ guidelines” [DO7] and more ‘soft criteria’ such as: “independent and flexible working attitude, being service oriented” [DO7]. MHI provides this input to make sure employees have the required skills, but that the criteria are “not very specific” and “do not divert much from our own (FSP) standards” [SU2.1]. After recruitment, MHI’s regional coordinator has direct involvement through making the final decision out of two candidates, to make sure they are satisfied with the eventual employee. FSP’s regional manager mentions that “maybe the (MHI) decision maker can be influenced, if we (FSP) have a certain preference.” [SU2.2], but also that FSP would not introduce people that they were not satisfied about in the first place.
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Case/supplier HR practice Buyer involvement Directness Intensity
Case 1 - Reception service -, +-, +, ++
Recruitment Detailed input on hard and soft criteria Indirect +
Selection Making final decision on candidate Direct ++
Training Many direct trainings Direct ++
Development Ongoing training demands Direct +
Motivation No involvement
-Reward No involvement
-Review Input for assessment Indirect +
Scheduling Requests for evening hours Indirect +
Case 2 - Facility service
Recruitment Input on hard and soft criteria Indirect
+-Selection Making final decision on candidate Direct ++
Training No involvement
-Development No involvement
-Motivation No involvement
-Reward No involvement
-Review Input for assessment Indirect +
Scheduling Request for new locations Indirect
+-Case 3 - University education
Recruitment Direct approach of candidate Direct ++
Selection Direct selection of candidate Direct ++
Training Goals and guidelines communicated Indirect +
Development No involvement
-Motivation No involvement
-Reward Negotiable tariff Direct +
Review Direct, but unstructured review Direct +
Scheduling Discussing best possibility together Indirect
-and unstructured, UFA does have strict dem-ands -and direct involvement in both, to ensure quality.
Table 4.1: Overview of buyer involvement in supplier HRM in different cases.
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4.1.2 Training & development
In case 1, reception employees receive some basic training from REC after selection: “new employees get reception training, introduction course, communication training, and the e-learning academy for languages, MS Office, stuff like that.” [SU1.2]. However, MHI has direct involvement through providing “quite some compulsory trainings: emergency response, phone training, new employee training, focus on safety training and some e-learning courses” [SU1.2]. These concern their company culture, the IT systems and phone terminal the receptionists have to work with, and training on how to handle aggressive behaviour. MHI does this to ensure safety and consistency of service and representation. Most trainings are offered by MHI directly, since they are “in their package”. MHI does, however, ask REC to pay for half of the training expenses. Even though REC’s regional manager states that “where possible we try to let them (MHI) pay.” and “It depends on the buyer-relation and size of the assignment” [SU1.2], the manager admits that they accept paying for half of the training expenses because MHI is “such a large buyer” [SU1.2].
In case 2, employees do not receive many extra trainings before starting work. FSP gives them a ‘standard’ communication training and access to e-learning if they want, but no (buyer) specific skills trainings are added. FSP’s regional manager states that the facility employees “do not get any specific training from us (MHI)” [BU2] because employees should already have all the skills they need when recruited. Therefore, no real involvement is present in training: “nothing is obliged apart from the requirements beforehand” [SU2.2]. The same goes for development, FSP is responsible for ‘refreshing’ their certificates, but MHI does nothing on this part.
27 someone else” [BU3.1]. The only thing UFA might offer is a UTQ, which “takes a couple of hundreds of hours” [BU3.1] of teaching, but UFA does not want to make such an investment in an external teacher.
4.1.3 Motivation, reward & review
In case 1, MHI has no involvement with regard to motivating and rewarding REC’s employees because they are not MHI employees. REC’s director states: “That is something we do ourselves. They get company outings (…) and a gift and a personal letter on their birthday” [SU1.1]. REC also does assessment meetings with their employees, since “they are our employees. They (MHI) do get to give input for our talks.”. The indirect involvement in assessment input is always asked for by REC’s regional manager and can concern “pretty much anything” [SU1.2] ranging from things like punctuality and attitude to the way they pick up the phone. The assessment of the employees is done by REC’s regional managers, who take input from the meetings with MHI’s regional coordinators into account.
28 evaluations. But I am not going to feed that back to them in detail. I just say: ‘Oh, it went well’” [BU3.1]. Sometimes, review is in between courses, for example discussing the assessment criteria before ‘grading moments’ to ensure consistency, but once again “one (UFA) teacher does this more intensive than the other. There are no official end-meetings or something” [BU3.1]. The training coordinator also uses informal contact in between training sessions to discuss experiences and ensure consistency and quality of the outsourced tasks. However, it is also confirmed that another coordinator might do it completely different: “I am not representative for the rest of the university. Because this is just the way I do it.” [BU3.3]. So, UFA does use direct review to ensure quality and consistency, but the implementation is informal and irregular.
4.1.4 Staff scheduling
In case 1, as a final form of indirect buyer involvement in supplier HRM, MHI makes requests regarding REC’s staff scheduling to ensure continuity of service: “they (MHI) say: ‘We will open in the evenings, can you arrange that?’ (…) but they mean: ‘You have to arrange it’.”[SU1.2]. Moreover, REC has to adapt scheduling to MHI employees that are rehabilitating behind the shared reception desks. MHI’s facility advisor states that planning and coordination is “their (REC’s) task and not ours” [BU1].
In case 2, MHI sometimes requests FSP to deploy their personnel in additional locations to ensure continuity of service. FSP’s director mentions that “they (MHI) can request, but it has to fit in our part-time philosophy” [SU2.1]. Since FSP is the sole supplier for this service, the director states that they “determine what happens eventually” [SU2.1].
29 4.2 The role of the nature of the service
This section will address the role that the nature of the service plays in this buyer involvement. First, buyer involvement in case 1 and 3 has been compared to case 2, in order to find differences related to the level of direct contact. Subsequently, the involvement in case 1 and 2 has been compared to case 3 in order to find differences based on the type of service. Finally, the differences in buyer involvement are related to the high level of customization in case 1, compared to low service customization in case 2 and 3, since this factor emerged from the data.
4.2.1 Direct contact
For the reception service in case 1, the fact that REC’s employees often come into direct interaction with MHI’s patients is stated as an important reason for MHI to exert indirect involvement by giving detailed input in recruitment and strong direct involvement in both selection and training. On the one hand because receptionists are the “visible face of the company” [SU1.1] and it is important that “people should feel that they are treated nicely and very respectfully.” [SU1.2]. This is reflected in the fact that, as recruitment input for REC, MHI demands representability and serviceability [DO6]. On the other hand, one of their tasks is taking care of safety. At MHI “there are a lot of people with mental problems entering, and they might snap” [SU1.2]. Because of this, REC’s receptionists are provided with training in ‘dealing with aggressiveness’ and other specific communications trainings by MHI “for their own safety” [BU1], and because service failure on that part could potentially cause a dangerous situation.
30 direct contact” [SU2.1] they have with MHI’s patients because the way patients are addressed is “less important for facility employees” [BU2].
In the university education, it is stated that external employees have direct contact with students “almost all the time” [BU3.3]. This leads to the fact that with regard to recruitment and selection, multiple UFA interviewees mention that it is important to “have knowledge of students, knowing when you can be loose or strict” [SU3.1] and “have some teaching experience” [BU3.4]. Because, as the training coordinator states: “working with students is just different.” [BU3.3] than working in a company. UFA programme director states they stress to external teachers to pay attention to things that students value, such as quick replies to e-mails and clarity regarding assignments and feedback. Because, in the past not paying attention to these specific issues has led to complaints and bad evaluations, which in turn causes “extra work” for the responsible coordinator [BU3.2]. UFA needs to ”be able to trust them to do a good job” [BU3.2], because in the event a thesis is found insufficient for accreditation, they would have “an enormous problem” [BU3.2]. Therefore, UFA uses their relatively intense involvement in recruitment, selection and customer-related instructions to ensure that sufficient quality is delivered during the direct contact between supplier and customer.
These results show that both cases with high levels of direct contact show direct and intense buyer involvement, especially in recruitment, selection and training before service delivery. In both cases, the direct interaction with the buyer’s end-customer causes the buyer to protect themselves from the risk of service failure by making sure contact employees are suitable and well prepared before service delivery. Moreover, the case with low levels of customer contact supports that their behavior towards the customer is less important and therefore involvement in supplier HRM is lower.
4.2.2 Type of service
31 (MHI) to perform their core service” [SU2.1]. In case 3, the educational tasks are indeed said to be “essential” [SU3.1], but could also be “taken back by the responsible coordinator” [SU3.1] if it would be necessary. So there is a certain importance in all three cases, but both the reception service and the education are not solely performed by the suppliers in the case, and can therefore be checked for consistent quality. The facility service is completely outsourced to FSP and therefore faces less involvement related to consistency.
With regard to other factors related to the nature of the service and the specificity of tasks in particular, another factor emerged from the data. All three cases mentioned the factor of service customization to play a role in the way buyers were involved in supplier HRM.
4.2.3 Service customization
With regard to customization, it can be noted that the reception service has a higher level of customization than both facility service and university education. The receptionists have many buyer-specific rules and protocols they have to follow, often these even differ per location [DO4; DO6]. These comprise the way they have to pick up the phone, connect people, specific IT systems used and the way “confused or irritating” [SU1.1] patients need to be dealt with. Moreover, they have to take into account the characteristics of specific locations. For instance, for one location with a Jewish background they demand “knowledge of the Jewish religion” [DO6] from candidates. The high level of customization leads to more detailed demands in recruitment and more direct involvement in selection: “this week, someone (MHI) said: ‘I don’t think this candidate matches with our company’ and then I will reject them” [SU1.2]. Moreover, the buyer’s specific needs are also at the base of the direct involvement in the additional trainings that MHI offers.
32 and maintenance or fire safety checks” [DO3; DO7] are fairly standardized tasks. The university case also shows low levels of service customization. It is stated that someone who meets the entry requirements, could also perform the tasks elsewhere. A UFA programme director states that, with the right background, teaching tutorials “is not rocket science” [BU3.2] and for someone who has supervised theses at another university before, it should not be much different at UFA.
These results show that if there is not much that has to be adapted to the buyer, the buyer will pay less attention to things like “fit to buyer” in recruitment, and especially less involvement in training. The buyer involvement in trainings in case 1 mainly concern representation of the buyer and working with buyer specific systems and the patients, which can explain the link between customization and buyer involvement in supplier HRM. Tasks in case 2 and case 3 are less buyer-specific and therefore the buyers are not involved in providing extra training to the supplier employees in order to develop certain skills. UFA states that external employees do not get extra training because ”they are professionals already” [BU3.1].
4.3 The role of the buyer-supplier relationship
This section will focus on analysis of influences related to factors of the buyer-supplier relationship. First, the buyer involvement in case 1 and 2 will be compared to case 3, in order to find differences that can be related to the level of interdependence between buyer and supplier. Following this, the different levels of maturity will be analysed to find similarities that can be related to changing levels of buyer involvement in supplier HRM.
4.3.1 Interdependence
33 would not be very complicated to replace REC or FSP in the long term. As FSP’s regional manager states: “of course there are a lot of other parties that could provide these services.“ [SU2.2]. With regard to their relationship with FSP, MHI states that “everybody can be replaced” [BU2] and concerning the reception service, MHI notes that they also have their own employees and another third-party supplier that currently provide this service. Therefore, one could say that both suppliers are more dependent on the buyer than vice versa.
REC indicates that their compliance to buyer demands “depends on the buyer-relation and the size of the assignment” [SU1.2], in the case of MHI, they adhere to all demands and even pay part of the training expenses because MHI is “such a large buyer” [SU1.2]. FSP also states they adhere to most requests of MHI, even though MHI poses fewer demands for them. FSP’s director notes that they have a bit more autonomy due to the way they use employees for multiple locations: “They can make requests, but they outsource the service, so they cannot influence the way we organize it.” [SU2.1].
When compared with case 3, university education, most external employees UFA hires are self-employed trainers or freelance consultants. This, along with the fact that they are often hired for a specific course, thesis process, or series of trainings, results in more arm’s-length relationships between the two parties. Almost all suppliers note that they are “not dependent” [SU3.2; SU3.3] on UFA when it comes to revenue. They are, however, somewhat more loyal because they can use their affiliation with the university for their other business activities as well. These reputational benefits causes them to work at a lower tariff [SU3.3]. Suppliers know that UFA is not very dependent on them personally: “If I’m not available they will call someone else” [SU3.2]. The low level of dependence does make that UFA are “not going to invest anything extra” in training what they call “a flexible and temporary shell” [BU3.1]. Nor are they investing in a solid review and assessment structure for external employees: “If that is needed, we will just not hire them anymore, we will look for someone else.” [BU3.1].
34 The supplier dependence all three does lead to a more submissive stance taken by the supplier when facing buyer involvement.
4.3.2 Maturity
In case 1, REC was already providing reception services at one MHI location for eight years. However, during the past year the volume of services and size of the relationship has grown “explosively” [SU1.1] to around 15 locations that are (either shared or completely) being outsourced to REC. The growth has not changed the level of involvement but did cause the addition of more non-HRM related quality evaluation mechanisms. These include ‘mystery calls’ and ‘mystery visits’ [DO2] for the reception personnel, to get more grip on quality and consistency.
In case 2, FSP is “just getting started” [SU2.2] at MHI and growing in service volume.. An SLA has been drafted, but “has some loose ends” and should “be elaborated a bit more” [SU2.2] Requirements on the maximum solving time for a ticket might be added in the future, but control and frequency are “still to be determined” [DO3].
In case 3, all suppliers had worked with UFA for three or four years. UFA prefers to work with the same people multiple times, or use people from their “fixed pool of external personnel” [BU3.2]. This is due to the certainty of quality delivered: “you rather have someone ‘tried and tested’” [BU3.2] and the effort it saves in recruiting, introducing someone to the organization and “briefing and preparing” new employees [SU3.2]. When someone is able to work to UFA’s satisfaction, less effort is put in involvement through HRM practices: If someone “does a course for the third time (…) they know the rules and that is nice because you often do not have any bother with them.” [BU3.2]. This indicates that, at UFA, HRM is mostly used as a tool to ensure quality the first times someone is appointed as an external teacher, until they can be trusted to do a good job.
35
5. DISCUSSION & CONCLUSION
This section will compare the findings from the previous section to the theory and possible additional literature in order to find similarities, answer the research questions and eventually present propositions.
5.1 Theoretical implications
With regard to the main question: “How do buyers intervene in suppliers’ human resource management in different service triad settings?”, it can be stated that in all studied service triad settings, buyer involvement in supplier’s HR practices like recruitment, selection and training beforehand, and review afterwards are used as means to guarantee supplier service quality in service triads. Factors related to the nature of the service seem to play a bigger role in buyer involvement than factors related to the buyer-supplier relationship. This research therefore presents three propositions related to the nature of the service.
5.1.1 Nature of the service
36 Proposition 1: More customer contact between supplier service employees and buyer’s end customer increases the risk of supplier service failure and therefore increases directness and intensity of buyer involvement in recruitment, selection and training of supplier employees.
The findings in this research indicate that the extent to which a service is customized to a specific buyer influences the buyer involvement in directly training a supplier employee. The facility service employees in case 2 are sourced based on their ‘technical abilities’ and should therefore not need any additional training. Comparable are the external teachers in case 3, that are sourced because they are ‘experts in their field’ and therefore only receive some basic instructions on the learning goals of the course they are involved in. Even though the receptionists in case 1 are also sourced due to their ‘specialism’, customization is inherent to the reception service. These are customized regarding both buyer representation and requirements of the specific customer group, which are both covered by the intense direct training programme that the buyer offers. This is in line with franchisors involvement in franchisee employees’ training (Kellner et al., 2014; Truss, 2004), since franchisees have completely adapted their service to a sole franchisor and franchisors try to achieve consistency over the service. This research adds that in service triad settings, service customization to buyer requirements forms an important reason for buyers to be involved in recruitment and provide additional training to supplier employees. This research therefore suggests the following:
Proposition 2: In service triads, a service that is more customized to the buyer will lead to more direct and intense buyer involvement in training due to the buyer-specific competences needed to provide the service.
37 perform it internally with ‘specialized temporary labor’. Since, in case 3, final responsibility and setting goals are still with the buyer employees, and none of the tasks is executed solely by external employees, this case fits that description.
Similar to this, the reception service in case 1, which is called an important facilitating service, is also partly provided in-house and through another third party supplier. Therefore, it could also be seen as ‘temporary labor’ on the insource/outsource continuum (Ellram et al., 2008; Figure 7). However, Ellram et al. (2008) do not focus on triadic relations. Because, in service triads, the service is delivered to the buyer’s customer directly, there is a need for consistency when providing a service both in-house and through an external provider. Both interviewees in case 1 and case 3 noted that consistency of service delivery is a concern when engaging in recruitment, direct selection and direct training of supplier employees.
This is in line with franchising literature that states the need for consistency amongst geographically dispersed franchises as a reason for franchisor involvement (Truss, 2004; Zhang et al., 2015). This research extends this reason for involvement to a wider service triad context by posing the following:
Proposition 3: When a service in a service triad is not solely provided by one supplier, the buyer involvement in supplier HRM becomes more direct due to a need for consistency in service delivery.
38
5.1.2 Nature of the buyer-supplier relationship
Literature indicates buyer dependence as a reason for buyers to engage in supplier development activities, in order to ensure that suppliers meet quality standards and future needs (Krause, 1999; Swart & Kinnie, 2003). In this research, neither of the buyers indicate dependence on their respective suppliers. Both case 1 and 2 mention that the supplier could be replaced either through insourcing or replacement by another supplier. Case 3 sees the external employees as a ’flexible and temporary shell’ that they do not want to invest in. Since in none of the cases in this research the supplier is seen as strategically important by the buyer, the findings do not provide ground to support statements on buyer dependence.
However, according to Swart & Kinnie (2003), the eventual degree of buyer involvement in inter-organizational settings also depends on the way the supplier manages the buyer involvement. The studied cases do show that supplier dependence causes a more submissive supplier attitude towards buyer involvement. Especially case 1, where the supplier mentions to pay for half the buyer trainings due to large proportion of revenue the buyer represents. In case 3, suppliers accept a lower tariff for their work due to the reputational benefits that representing the university offers.
This suggests that this specific service triad characteristic, i.e. the supplier representing the buyer in service delivery, can constitute a benefit that causes the supplier to be more submissive towards buyer involvement. Yet, supplier dependence is not mentioned by interviewees as a reason for buyers to intervene in supplier HRM practices. It merely causes suppliers to take a permissive attitude towards buyer interventions.
39 5.2 Managerial implications
This research provides several managerial implications. First, it shows that involvement in supplier HRM is used by buyers to guarantee quality of outsourced service delivery in service triads. Moreover, this research highlights the importance of matching the way of involvement to the service triad setting, in terms of the service provided. Managers of supplier firms that provide customized or ‘high contact’ services, such as the reception service in case 1, should take buyer involvement into account when shaping their HR practices, since it may help them to deliver service quality for multiple buyers. In return, buyers should assess the service they outsource and to what extent they would like to ensure service quality, to determine how they should get involved in supplier HRM. 5.3 Limitations and future research
40 5.4 Concluding remarks
41
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