Does haste always make waste? Service quantity, service quality, and incentives in speed-intensive service firms

Abstract

Research demonstrates a tradeoff between service quantity and service quality that creates a tension for firms who wish to incentivize both aspects of service performance. We propose a category of speed-intensive services in which prompt responsiveness is the primary driver of service quality. In these firms, service quantity and quality should exhibit a positive interrelationship. Daily data on service quantity and quality performance were collected for 24 months, for a total of 1414 observations, from a telephone directory service firm, an affiliate of major telecommunication firm in an Asian country. We use a generalized method of moments (GMM) estimation to test their interrelationship and the effect of financial incentives on service performance. Contrary to the typical tradeoff effect, the results reveal that service quantity positively affects service quality performance and vice versa. In addition, we surprisingly find that incentives have no effect on service quantity performance and decrease service quality performance, and that overall performance declines with employee experience. This suggests that these firms do not face a tradeoff between service quantity and quality, but may face a long-term tradeoff between customer satisfaction and employee satisfaction.