Do Professional Service Organizations Financially Benefit from Conformance and Experiential Quality?

Abstract

The professional service industry encompasses a major part of the U.S. economy and yet, several factors that affect its financial sustainability remain largely unknown. When catering to their customers, professional service providers have to combine conformance quality – adherence to strict technical standards, with experiential quality – ability to adapt service delivery to the unique customer. Conformance quality and experiential quality reflect respectively the dimensions of efficiency and flexibility of the service delivery process. Studies show that ambidexterity, or the ability to reconcile efficiency and flexibility, improves financial performance in many settings. However, professional services face unique challenges that make this relationship uncertain. This research investigates the financial benefits from ambidexterity using secondary data from a professional service sector, namely from 2830 hospitals, collected over a three-year time period. Financial performance is measured through both occupancy rate, which reflects potential for revenue generation, and cost effectiveness dimensions. Findings reveal no direct relationship between experiential quality and cost effectiveness, and a negative relationship between experiential quality and occupancy rates. However, we find strong synergies between conformance quality and experiential quality with regard to both cost effectiveness and occupancy rates. This suggests that ambidexterity is a financially beneficial strategy for professional service organizations. We discuss implications for theory and practice.