The performance impact of operational improvement competence in service operations

Abstract

This research employs two perspectives (i.e. continuous process improvement perspective and frontline employee perspective) to develop a new approach, operational improvement competence (OIC), and explores new, useful, empirically-based insights into the effectiveness of OIC in improving operational, service recovery and new service development performance. OIC is conceptualized as an operational team's ability to use a process perspective and structured methods to continuously improve operational activities and comprises three operational practices 1) continuous improvement; 2) process management; and 3) structured methods. However, the operational environment of service firms is often more dynamic and challenging than that of manufacturing firms so that the effectiveness of OIC in service operations may be affected by certain characteristics concerning service processes, employee characteristics and contextual factors. To offer useful insights into the challenges of OIC adoption in service operations, we conduct three empirical studies as follows: Study 1, guided by the operations management (OM) literature and agency theory, proposes that the effectiveness of OIC in operational performance in service operations is contingent on two factors, namely operations control and process control formality. Specifically, we theorize that operations control enhances the effectiveness of OIC by suppressing frontline service employees' discretion in service processes and guiding them to follow proper procedures to perform OIC activities. In addition, when there are high levels of ethical risks, operations control will become particularly important. Study 2 examines the impact of OIC on new service development (NSD) performance. Since creative ideas are crucial to NSD and it is common that service firms involve frontline employees in the process of NSD, we argue that frontline employees' creativity enhances NSD performance. In addition, since OIC pertains to making changes and solving problems regularly, we argue that OIC has a positive impact on employee creativity. Furthermore, we draw on the contingency theory to argue that the relationships between OIC, employee creativity, and NSD performance are contingent on team's characteristics and contextual environment. Study 3 argues that OIC leads to improved service recovery performance. However, the effectiveness of OIC in enhancing service recovery performance can be hindered by one common problem in service employees, namely stress. We draw on the role stress theory and the conservation of resources theory to argue that the negative impact of stress can be alleviated by job resources, including organization inducement and psychological resilience. Thus, we propose that frontline employees' stress and two types of job resources (i.e. organization inducement and psychological resilience) can moderate the effectiveness of OIC in improving service recovery performance. Based on data from 146 frontline teams in the banking industry of China, we empirically test the posited hypotheses of these three studies. The main contribution of this research lies in its consideration on the job characteristics of frontline service employees and use of several relevant theories to ascertain the intricacies between OIC and performance outcomes with respect to operational performance, service recovery performance and NSD performance.