Difficulties of Measuring Performance in Service Industries

The difficulties of measuring performance in service industries are those features that distinguish manufacturing from service industry. Though performance management is on its own problematic in complex modern organizations but the current trend of organizations wanting to be seen as lean and virtual has compounded the problem.

Companies that would be classed as pure manufacturing companies in the past now refer to themselves as ‘service focused businesses’ and that makes it even more exciting. If you are an accountant and you are not equipped with the necessary skills needed to efficiently and professionally measure performance in a dynamic fluid environment, then you are courting irrelevancy.

This short post is written to draw your attention to problems that you may encounter in a bid to measure performance in a modern day service oriented companies.

5 Features of Service Industry That Makes It Difficult To Measure Performance in a Service Company

Simultaneity

This is because of the fact that they offered and received services at the same time thereby making difficult to be captured and the measured. The service you received from a restaurant that not be saved for future analysis for example. This however does not mean that management will not attempt to quantify this information.

One way of doing this is to ask for feedback from the customers using either a questionnaire or survey. It is relatively cheap nowadays to reach out to your customers. The only problem here is that people are still sceptical when it comes to giving out their personal information that a company can reach them on. The use of freebies in exchange for their contact details is not a bad idea.

Homogeneity

All services are different each time they are offered- even from the same individual. This problem is compound by the way the consumers perceive the services offered to them. You will get different response from two individuals that are served by one person when you ask for a feedback from them.

One effective way that I have seen work in practice is for supervisors to approach customers while they are still consuming the service and ask for their feedback but not in the presence of the deliverer of the service.

For example, a manager at a restaurant can politely ask for feedback from customers that have finished eating and about to pay. This works but not all the time and personal judgement should be applied when employing this tactics.

Intangibility

One cannot touch or feel the texture and quality of services provided by certain service provider. A holiday maker cannot reliably tell you what value of the holiday meant to them when asked to do so.

I remember trying to relate my sweet spa experience to my daughter the other but find myself struggling to do so. Imagine what I would if a company asked me to narrate my experience to them.

Perishability

Service is the most perishable of all commodities. An attempt can be made to preserve the most fragile vegetable for future use but this is almost impossible for services.

I am still waiting for that technological breakthrough that can help preserve services so that people can travel back in time and re-enjoy a really positive experience. Any service that is consumed at the time of delivery is gone forever.

Non transferability

One cannot transfer service that he or she has used to another person. This coupled with other features of a service industry that makes performance management difficult pose some limitations to performance management.

Because it is not possible for a customer to transfer the wonderful service they received from that beautiful hotel, it will be nearly impossible to effectively measure verifiably measure the amount of pleasure that the received from the service.