In past columns, I have discussed the idea of services engineering, the importance of understanding businesses as service providers, and the characteristics of different types of services. This column looks at the challenges of measuring and managing process performance in services industries.
How important is it to measure and manage performance in services? Many people have examined performance in services industries and have come to discomforting conclusions: the cost of services is inflated 30 to 80 percent by waste; 50 percent of service cost is work that adds no value; 90 percent of process time in services is work waiting to be performed.
Since about 80 percent of our GDP is generated by services, the waste associated with services is both a tremendous problem and a tremendous opportunity for those who work to improve and innovate processes. If we can apply the same kinds of productivity improvements to service industries that we have delivered to manufacturing industries in the last 50 years, we can contribute to a long period of economic growth and improvement in our standard of living.
Characteristics of Services
Given the characteristics of services, we can understand why it is so hard to measure and manage process performance in services. As a recent article in McKinsey Quarterly stated, “Measuring performance in services is ever more important for most companies – but hard. The biggest hurdles: services are highly customizable and the people who deliver them differ unpredictably in experience, skills, and motivation.” Another issue is that the definition of “good service quality” differs for each customer. The process performed to deliver a service may necessarily vary from customer to customer. Delivering a service may involve many processes. And the customer is a “co-producer.”
Services are often performed by knowledge workers. Outcomes may vary from one performance to another and from one performer to another, and comparisons may be difficult. Services are frequently consumed at the moment they are produced. A service may be delivered in multiple performances over time. Services re perishable and cannot be stored and inventoried. Service processes are less likely to be defined and may seem to be “invisible.” Services are, at least to some degree, intangible.
Measuring Services
The net result is that it is significantly more complicated to measure performance in services and even more difficult to manage performance appropriately. One research study suggests that a set of useful dimensions of meaningful performance measurements in services would include competitive performance, financial performance, quality of service, flexibility of the service, resource utilization, and innovation in services offered. Managing performance in all these dimensions requires fresh thinking about what we measure and how we measure it. This is the challenge for the discipline of services engineering.
IBM is sponsoring academic research in what they call Services Sciences, Management and Engineering (SSME). Sam Palisano, IBM’s CEO, has said the goal of their research is to “move services out of the realm of art and into the realm of science” and that doing so will “fundamentally improve the standard of living around the world.” All BPM practitioners should be involved in the effort to find more effective and innovative methods of improving, innovating and optimizing services processes. We will all benefit.
