Quality versus productivity in service production systems: an organisational analysis

Abstract

The study presents an organisational analysis into the linked issues of service productivity and perceived service quality. The operations management literature postulates that a trade-off exists between service productivity and perceived service quality, an assertion which is supported by evidence from managerial experiences and other academic researches. However, is it possible to prevail over the trade-off between productivity and perceived quality? Further, what is the effect of the trade-off on company profitability? To respond to these questions, a retrospective longitudinal study is performed, based on analysis of data collected from 52 offices of a major European banking group over the years 2010–2011. A first analysis verifies the existence of the trade-off. A second then examines the suitability of the employee incentive system intended to overcome the trade-off. Finally, a multiple linear regression model is developed in order to verify whether service productivity and perceived service quality impact on company profitability, and to what extent.