Total Quality Management & Business Excellence

ISSN: 1478-3363 (Print) 1478-3371 (Online) Journal homepage: http://www.tandfonline.com/loi/ctqm20

Establishment of a Quality-Management System

for Service Industries
Ching-Chow Yang
To cite this article: Ching-Chow Yang (2006) Establishment of a Quality-Management System
for Service Industries, Total Quality Management & Business Excellence, 17:9, 1129-1154, DOI:
10.1080/14783360600750428
To link to this article: http://dx.doi.org/10.1080/14783360600750428

Published online: 24 Jan 2007.

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Date: 16 December 2016, At: 08:32

Total Quality Management

Vol. 17, No. 9, 1129 1154, November 2006

Establishment of a Quality-Management
System for Service Industries
CHING-CHOW YANG
Department of Industrial Engineering, Chung-Yuan Christian University, Taiwan, Republic of China

ABSTRACT Excellent service quality generates a competitive advantage for service organizations,
but firms must implement a comprehensive system of quality management if they are to develop
effective and reliable service quality. In contrast to manufacturing industries, most service
industries lack a well-managed and comprehensive system of quality management. The present
study develops a holistic quality-management system for service organizations based on sound
theoretical and pragmatic considerations. The feasibility and effectiveness of this qualitymanagement system for service organizations is demonstrated by using the HP and IBM
companies in Taiwan as case studies. In addition, the results of a separate empirical case study
reveal that the insurance, hotel, and airline industries are well advanced in implementing quality
management. However, other service industries need to make improvements in some aspects of
quality management. These analytical results represent a useful benchmarking reference for those
service organizations that have lower implementation levels in some quality-management
practices. The present study thus presents an innovative and comprehensive quality-management
system for service industries and demonstrates its theoretical and practical application in a
number of service industries.
KEY WORDS : Total quality management, total quality service, quality-management system

Introduction
The future success of enterprises is determined by their ability to fulfil their customers
present needs, to anticipate those customers prospective needs and expectations, and to
enhance their relationships with their customers (Gale, 1990; Kandampully, 1998). Several
studies on quality management have demonstrated that delivering superior service quality
enhances productivity, reduces costs, increases customer loyalty, improves market share,
and brings other general benefits to a service organization (Thompson et al., 1985;
Zeithaml et al., 1988; Kandampully, 1998). In a highly competitive market, service firms
must therefore devote their energies to satisfying (and even delighting) customers with a
view to developing and maintaining a large and loyal customer base (Kandampully, 1998).

Correspondence Address: Ching-Chow Yang, Department of Industrial Engineering, Chung-Yuan Christian

University, Taiwan, Republic of China. Email: chinchow@cycu.edu.tw
1478-3363 Print=1478-3371 Online=06=09112926 # 2006 Taylor & Francis
DOI: 10.1080=14783360600750428

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C.-C. Yang

Over several decades, the landscape of the manufacturing world has undergone a
quality revolution resulting in a plethora of tools, techniques, critical dimensions,
and other organizational requirements for the effective implementation of total quality
management (TQM) (Sureshchandar et al., 2001). With the blossoming of the service
sector in almost every economy, quality imperatives have also come within the province
of service organizations, who are now facing the same basic realities that confronted their
manufacturing counterparts in the past (Sureshchandar et al., 2001). It is widely recognized that the principles of quality management implemented in the manufacturing
sector should naturally apply to the service sector. However, the practical transfer of
manufacturing quality-management practices to the service sector requires careful
analysis given that services are different from goods in several respects. These include the
intangibility and perishability of services, the fact that production, delivery, and consumption
occur simultaneously, and the variability of requirements (and expectations) among
customers of services (Sureshchandar et al., 2001). For these reasons, service organizations cannot simply copy the quality practices that have been implemented in manufacturing. Sureshchandar et al. (2001, 2002) have therefore propounded the critical
dimensions of total quality service (TQS). These dimensions are divided into two groups:
(i) those practices of manufacturing quality management that can be effectively used
in service organizations; and (ii) those practices that are distinctively applicable to service
organizations.
In recent years, the study of quality practices in general, and the TQS framework in
particular, has gained in importance as evidenced by the studies of such researchers
as Shetty & Ross (1985), King (1987), Behara & Gundersen (2001), and Sureshchandar
(2001, 2002). However, although various studies have emphasized the importance of individual service-quality practices in isolation, no study had taken all the practices into
consideration collectively and provided a holistic model for the effective implementation
of a quality-management system in services. Sureshchandar et al. (2001) developed an
integrative framework for total quality service, but not a completely holistic model,
based on evidence from the literature and their own logical reasoning.
The successful implementation of TQM does, indeed, result in better business performance (Hendricks & Singhal, 1996; Gunasekaran, 1999; Hansson & Eriksson, 2002). TQM
has therefore been widely adopted by firms in both the manufacturing and service sectors
(Powell, 1995; Zabaha et al., 1998). However, there are several reports of cases in which
the implementation of TQM has failed, or in which TQM has failed to produce the
expected results (Hubiak & ODonnell, 1996; Anonymous, 1996; Hellsten & Klefsjo,
2000; Hansson & Klefsjo, 2003). Pande et al. (2000) pointed out several major TQM
gaffes as being reasons for these failures including a lack of integration, leadership
apathy, fuzzy concepts, unclear quality goals, failure to break down internal barriers,
inadequate improvements in performance, and so on.
In todays competitive environment, shareholders of all companies are demanding
that management takes urgent steps to achieve profitability through business excellence
(Kanji, 1998). Service organizations therefore need to adopt critical quality practices and an
outstanding quality-management system not only to delight customers and to increase
customer loyalty, but also to pursue excellence in business performance.
Based on literature reviews, practitioner interviews, and the authors expertise, the
present study therefore examines the critical quality practices that are suitable for
service organizations, and integrates them into a holistic quality-management system.

Establishment of a Quality-Management System for Service Industries

1131

The author acknowledges Kanjis (1998, 2002) excellent business model as an important
influence on this research. The integrated system developed here is thus based on sound
principles of pragmatism and theory.
Literature Review
Rosander (1980) discussed the issue of quality control in service industries and asserted
that quality control in these industries requires a much broader approach to quality than
is required in goods-oriented industries. Quality control in service industries must
include such elements as:
.
.
.
.
.

quality
quality
quality
quality
quality

of
of
of
of
of

human performance;
equipment performance;
data;
decisions; and
outcomes.

Heskett (1987) suggested a concept of strategic service vision for service organizations. The elements of this vision included identification of a target market segment,
development of a service concept to address the needs of the targeted customers,
codification of an operating strategy to support the service concept, and design of a servicedelivery system to support the operating strategy. It is obvious that these elements are
linked, and can be integrated.
Parasuraman, Zeithaml and Berry have conducted numerous studies of service quality.
They developed a model of service quality that reflected their contention that consumers
perceptions of quality are influenced by five distinct gaps in the total transaction process
(Parasuraman et al., 1985). These gaps (on the service providers side of the transaction)
can impair consumers perceptions of the delivered service quality (Parasuraman et al., 1985;
Zeithaml et al., 1988). These gaps can be summarized as follows:
. Gap 1: the difference between consumer expectations and management perceptions of
consumer expectations;
. Gap 2: the difference between management perceptions of consumer expectations and
service-quality specifications;
. Gap 3: the difference between service-quality specifications and the service actually
delivered; and
. Gap 4: the difference between service delivery and what is communicated about the
service to consumers.
The existence of these gaps will result in a final gap, which is:
. Gap 5: the difference between customer expectations and perceptions.
Service quality as perceived by customers depends on the size and direction of Gap 5 which,
in turn, depends on the nature of the gaps associated with the design, marketing, and delivery
of the service (Parasuraman et al., 1985). The implication of this service-quality model is that
elimination of the gaps (by the company) will improve service quality (as perceived by

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C.-C. Yang

customers). In subsequent studies, the authors propounded an extended model of service

quality showing the various organizational factors and their relationships to the
service-quality gaps (Zeithaml et al., 1988, 1990). If firms take appropriate action with
respect to these organizational factors, the gaps will be effectively reduced. The authors
also asserted that knowing what customers expect is only part of the challenge. Another
part indeed, a more significant part of the challenge is actually meeting these expectations. They therefore posited five service imperatives: (i) define the service role; (ii)
compete for talent (and use it); (iii) emphasize service teams; (iv) aim for reliability; and
(v) be committed to problem resolution (Berry et al., 1990).
King (1987) developed a quality-assurance system for service organizations that corresponded to a manufacturing quality-control system in four respects; (i) quality of design;
(ii) setting of product standards; (iii) quality of conformance; and (iv) reduction in defects.
This approach has proved to be a valuable resource for the present study in developing a
quality-management system for service organizations.
Behara & Gundersen (2001) empirically developed and validated 11 constructs for
quality management in services. To highlight the many distinct quality-management
constructs in services, these authors then compared their findings with other empirical
quality-management studies based on the seven criteria of the Malcolm Baldrige
National Quality Award (Behara & Gundersen, 2001). Although they did not consider
the question of linkages and integration among these quality practices, their results do
provide valuable reference material for determining appropriate quality practices for
service industries.
Based on an extensive review of the vast literature on TQM and TQS, Sureshchandar
et al. (2001) identified 12 dimensions of TQS as being critical for effective implementation of quality management in service organizations. These dimensions have specific
functions to perform in a TQS movement. The authors also portrayed the various functions
executed by these dimensions in an integrated framework for total quality service. This
framework demonstrated the relationships among these functions and provided a systematic structure for these relationships (Sureshchandar et al., 2001). In their subsequent study,
the same authors have empirically investigated the relationships among the different
dimensions of TQS and the various factors of service quality using multiple regression
analysis (Sureshchandar et al., 2002). The results indicate that the TQS dimensions, as
a whole, are good predictors of service quality.
Kanji has published many studies on: (i) a model of business excellence; and (ii) Kanjis
business scorecards. In an early work, Kanji (1998) propounded 14 dimensions to be used
in the measurement process of business excellence. These dimensions can be categorized
into four perspectives of a business scorecard: (i) stakeholder value; (ii) delighting stakeholders; (iii) process excellence; and (iv) organizational learning. He then integrated these
perspectives and dimensions into a model of business excellence (Kanji, 1998). Kanjis
model and business scorecard have been the basis of a series of studies (Kanji & Sa, 2002).
Kanji & Sa (2002) integrated Kanjis business scorecard (which is a measurement
model as well as a conceptual model) with the well-known Balanced Scorecard
(Kaplan & Norton, 1992, 1996). The implementation of this integrated model can help
organizations to develop and implement strategies required for business excellence
(Kanji & Sa, 2002). In addition, Kanjis business scorecard can also provide direction
for the development of a quality-management system for service organizations. A
useful comparison of the quality practices, dimensions, and constructs described

Establishment of a Quality-Management System for Service Industries

1133

(above) in this literature review can be made using Jurans (1986) quality trilogy. According to this trilogy, managing for quality consists of three basic quality-oriented processes:
. quality planning;
. quality control; and
. quality improvement.
It should be noted that this trilogy (planning, control, and improvement) is essentially
practical in nature. Because the objective of the present study is a comprehensive conceptual model with practical applications, Jurans (1986) practical trilogy provides an appropriate basis on which to present a comparison of the quality practices described in this
literature review. The comparison results are shown in Table 1.
Development of a Quality-management System for Service Organizations
Preparatory Reorganization of Quality Practices
In developing a quality-management system for service organizations, the present study
first reorganized certain quality practices into a suitable framework (see Table 2). This
reorganization was a result of: (i) a study of theory in the literature (the practices reorganized from Table 1); (ii) quality practices adduced from Kanjis models; and (iii) collection
of practical information from business executives (especially as a result of interviews with
the CEO of Hewlett-Packard, Taiwan).
The three processes of Jurans quality trilogy (of planning, control, and improvement)
were first reorganized into five stages: (i) long-term planning; (ii) short-term planning; (iii)
daily management; (iv) check; and (v) action (see column 1 in Table 2). This rearrangement was, in part, inspired by Kanjis work in which long-term planning, short-term
planning, daily management, performance measure, and improvement action are critical
aspects of business operations (Kanji, 1998, 2002; Kanji & Sa, 2002).
The quality elements, imperatives, practices, constructs, and dimensions listed in
Table 1 were then reorganized. These are listed in column 2 of Table 2.
As previously discussed, Kanjis model of business excellence and his business scorecard
(Kanji, 1998, 2002; Kanji & Sa, 2002) can provide valuable guidance in the development of a
quality-management system for service organizations. The quality practices of Kanjis work
have therefore been reorganized and integrated. These are shown in column 3 of Table 2.
In addition to referring to the literature (columns 1, 2, and 3 of Table 2), the present
study also included practical information from practitioners and experts in several
service organizations especially Hewlett-Packard (HP) Taiwan Ltd. The present author
and HP Taiwan have worked cooperatively in this regard for two years. The quality
practices resulting from this cooperation are located in column 4 of Table 2.
Finally, the relationships and linkages among the items listed in columns 2, 3, and 4 were
analyzed. As a result of this analysis, the appropriate quality practices for a comprehensive
quality-management system for service organizations are listed in the fifth column of Table 2.
A Quality-Management System for Service Organizations
Following the above preparatory reorganization, a quality-management system for service
industry has been developed. The full system is shown in Figure 1. This shows the

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C.-C. Yang

Table 1 The comparison of the quality practices suggested in several previous researches based on
the Jurans quality trilogy
Jurans quality
trilogy

Quality planning

Quality control

Quality
improvement

Rosander (1980)
(Quality
elements)

Quality of decision

Quality of human
performance
Quality of equipment
performance
Quality of data
Quality of outcome

Improvement
based on the
outcome

Heskett (1987)
(Quality
elements)

Target market
segments
Positioning
Operating strategy

Service concept
Service delivery system
Strategy-systems integration

Value-cost
leveraging

Berry et al. (1990)

(Quality
imperatives)

Define the service role

Compete for talent

Emphasize service teams
Go for reliability

Be great at
problem
resolution

King (1987)
(Quality
Practices)

Define customer wants

and expectations
Design service
delivery and support
systems

Customer satisfaction
measures
Transaction observation
Shopping services

Take
improvement
project

Bahara &
Gundersen
(2001) (Quality
constructs)

Benchmarking

Compensation
Training management
Empowerment
Participation
Assessment
Teamwork
Technology management
Process management
Outcome measurement

Improvement
based on the
outcome

Sureshchandar
et al. (2001)
(Quality
dimensions)

Top management
commitment and
visionary leadership
Customer focus
Benchmarking
Technical system

Human resources
management
Information and analysis
system
Employee satisfaction
Union intervention
Service capes
Service culture

Continuous
improvement
Social
responsibility

essential elements in such a system with the arrows indicating the direction of the
relationships between these various elements. A short explanation of the main features
of the system is provided below.
Long-Term Planning
Corporations values and top-management commitment. The top-left panel of
Figure 1 features corporations values and top-management commitment. The corporations values are represented by the companys policies with respect to overall business

Quality
management
stages

Reorganized quality practices

suggested in the previous
studies (see Table 1)

The quality practices by

referring the Kanjis models

The quality practices

collected from the interviews
with CEO of HP Taiwan

Long-term
planning

Top management commitment

and visionary leadership
Benchmarking
Customer focus
Target market segments
Positioning
Design service delivery and
support system
Quality of decision

Business excellence
Organizational value
Customer focus (delight the
customer)
Define quality goals
(top leader)
Strategic planning
(top leader)

Mission & vision

Organizational culture
change
Strategy planning &
management
Analysis of customer needs
and expectations

Short-term
planning

Operating strategy
Define the service role
Human resources management
Technical system
Information and analysis
system (quality of data)

Organizational learning
Process standardization (all
work is process)

Process design
Layout
Employee training
Organization adjust

Reorganized quality practices by

interviewing and analyzing the
practices in the previous three
columns
Management principles and top
management commitment
Mission and vision
Target market segments and
positioning
Strategy planning and
management
Customer focus
Define quality policy and target
Design service delivery and
support system
Design service process
Organization design and adjust
Employee education and training
Standardize the operating
procedures
Information system and analysis
Empowerment
(Table continued)

Establishment of a Quality-Management System for Service Industries

Table 2. The list of reorganized quality practices by integrating and analyzing the quality practices suggested in the previous studies and by the interviews
with CEO of HP Taiwan

1135

Daily
management

Check

Action

Reorganized quality practices

suggested in the previous
studies (see Table 1)

(Continued)

The quality practices by

referring the Kanjis models

The quality practices

collected from the interviews
with CEO of HP Taiwan

Reorganized quality practices by

interviewing and analyzing the
practices in the previous three
columns

Service concept and culture

Employee satisfaction
(compensation)
Participation and
empowerment
Training and training
management
Compete for talent
Go for reliability
Value-cost leveraging
Strategy-system integration
Process management
Technology management
Service teams (team work)
Union intervention
Servicescapes
Shopping services
Transaction observation
Assessment
Customer satisfaction measures
Quality of human performance
Quality of outcome (outcome
measurement)

Management by fact
Process measurement
Prevention
Team Work
People make quality
Day-to-day leadership
(quality value)

Employee motivation
Leadership (heads of
departments)
Process control
Quality control
Information management
Input control
Service reports

Leadership (heads of
departments)
Employee motivation
Input control
Marketing process control
Service design control
Service delivery control
Daily information analysis

Customer satisfaction
measures
Internal customer measures

Customer satisfaction measures

Internal customer measures
Quality audit

Improvement based on the

outcome
Take improvement project
Be great at problem resolution
Continuous improvement
Social responsibility

Continuous improvement
Participate and support
quality improvement
initiatives (heads of
departments)

Customer satisfaction
measures
Employee performance
evaluation
Complaint analysis
Audit of quality activities
Improvement action
After service

Continuous improvement
Customer service

C.-C. Yang

Quality
management
stages

1136

Table 2.

Establishment of a Quality-Management System for Service Industries

Figure 1. The quality management system for service organization

1137

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C.-C. Yang

direction, and its operational strategies. The commitment of top management, which is
significantly influenced by the companys values, is a prerequisite for successful
implementation of the proposed quality-management system for service organizations.
Mission and vision. The top-right panel of Figure 1 features mission and vision. A
mission statement is useful for focusing on the nature of the business and the present
needs of its customers (Thompson & Strickland, 1998). In addition, a clear and
entrepreneurially astute strategic vision is a prerequisite for effective strategic leadership.
(Thompson & Strickland, 1998). The creation of a mission statement and a strategic vision
is thus not merely an exercise in wordsmithing that is designed to produce a catchy
company slogan. Rather, it is an exercise in strategic thinking about a companys future
with a view to forming a viable concept of the companys future business and putting
the company on a strategic path to which management is deeply committed (Thompson
& Strickland, 1998).
Target market segments and positioning. The panel on the left-hand side of the second
row of Figure 1 refers to target market segments and positioning. Service organizations
must make strategic decisions that take account of the future directions of the business. In
the interests of high profitability and long-term development, decisions must be made
about targeted customers, the needs of those targeted customers, business activities to
be pursued, and the long-term market position to be achieved.
Strategic planning and management. The panel on the right-hand side of the second
row of Figure 1 refers to strategic planning and management. Strategies are the business
approaches that are adopted by a company to position itself in its chosen market arena, to
compete successfully, to please its customers, and to achieve good business performance
(Thompson & Strickland, 1998). Excellence in management involves both excellent
strategies and excellent execution of those strategies. This panel in the model strategic
planning and management is therefore an important and powerful management tool for
creating, establishing, and executing excellent strategies.
Customer focus. The panel in the third row of the model shown in Figure 1 focuses on
customers needs and expectations. This enables an organization to have a better market
orientation than previously, thus providing a competitive edge over its rivals and enhanced
business performance (Sureshchandar et al., 2001). In todays world of intense competition, satisfying customers might not be enough. A competitive advantage in a quality
revolution comes from the delight and loyalty of customers. Understanding the customers
needs and expectations is therefore a critical aspect of a quality-management system.
Define quality policy and target objectives. The left-hand panel in the fourth row of
Figure 1 refers to the definition of quality policy and the targeting of objectives. Quality
policies must be specific enough to provide useful guidance for quality activities and to
allow objectives to be prioritized. Quality objectives facilitate the achievement of a high
level of quality performance in service organizations. The purpose of creating quality
policies and objectives is to pursue customer delight and loyalty.

Establishment of a Quality-Management System for Service Industries

1139

Design service delivery and support system. On the right-hand side of the fourth row
of Figure 1, a panel features design of service delivery and support system. This is a fundamental effort to guarantee the delivery of service with high quality. It consists of space
planning, inputs, outputs, processes, specifications for suppliers, equipment selection,
measures of efficiency, and so on.
Short-Term Planning
Design service process. The left-hand panel of the fifth row refers to the design of the
service process. This involves the identification and design of all service processes and
specifications for delivery efficiency. Decisions need to be made on the innovative use
of technology for service processes and service quality. New technology should be carefully evaluated to reduce operating costs.
Organization design and adjustment. The next panel in Figure 1 (fifth row, centre)
refers to decisions about the operating team, leadership, supervisors, and communication
techniques. The original organization must be adjusted to suit the innovative qualitymanagement process, and the desired behaviours of employees must be identified. In
addition, the needs and expectations of employees must be defined, and an appropriate
compensation system should be defined.
Employee education and training. Employee education and training is addressed in
the next panel (fifth row, right-hand side of Figure 1). The education and training needs
of employees must be considered, and ongoing skills training is required for all employees.
The knowledge-management system should be designed, and innovative education for
employees should be enhanced. Increased resources will be required for education and
training.
Standardize the operating procedures. The left-hand panel in the sixth row refers to
operating procedures. Standardization is required in the procedures of the service
process and operational instruction. These procedures should be documented. The performance level for each procedure should be established, and the operating and audit
system should be designed.
Information and analysis system. In the central panel of the sixth row, the information
and analysis system is addressed. This provides employees with prompt, sufficient, and
pertinent information to monitor the service process and the delivery system with a
view to maintaining the high level of service quality. This system can also help the
company to satisfy the customers requirements in any situation, especially in peak
periods.
Empowerment. The right-hand panel in the sixth row refers to empowerment. This is
concerned with the provision of power, information, knowledge, and rewards to customercontact personnel to ensure that they can serve customers autonomously. Employees
should be empowered in day-to-day decision-making, and employees should be made
responsible for their own quality assurance.

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C.-C. Yang

Daily Management
Leadership (heads of department). The left-hand panel of the seventh row refers to
leadership. The heads of department provide training and instructions in the work skills
required of their subordinates. Leaders should empower and encourage the employees
to satisfy customers speedily, and to do the thing right first time.
Employee motivation. The right-hand panel of the seventh row refers to motivation.
The company should provide an attractive compensation and benefit system for employees. This will ensure that there are appropriate incentives for good work in the qualityimprovement scheme. Interpersonal communications and teamwork relations should be
smooth and effective.
Input control. The panel in the centre of the next row in Figure 1 refers to input
control. This plays a critical role in the quality control of service delivery. It includes
maintenance of the facility, the creation of adjustable capacity, the facilitation of goods
procurement and inventory, and efficient daily work-shift scheduling (Fitzsimmons &
Fitzsimmons, 2001).
Marketing process control. The panel in the ninth row refers to the use of marketing
research to understand the market and individual customers. Marketing strategies,
programmes, and activities can be then planned, implemented, and followed up (Gronroos,
1990). Customer-contact personnel can accurately identify customers needs and
expectations. Managers can receive an accurate perception of individual customers
requirements by communicating with customer-contact personnel.
Service-design control. The panel in the tenth row refers to control of the service
design. The individual customers requirements can then be transferred accurately into
a designed service. The desired quality characteristics and the required specifications
should be identified. These can then be met by the organizations capabilities and
systems. It is then that the managements perceptions of recognition for quality commitments to customers can be guaranteed (Zeithaml et al., 1988).
Daily information analysis. The left-hand panel in the 11th row features daily information analysis. This refers to the use of the monitoring and supervisory systems to
collect online and on-time data related to customer service, delivery processes, delivery
time, the utilization of facilities, and so on. The information and analysis system is then
used to integrate and analyse these data thus providing useful information for management to monitor service quality, take appropriate actions for improvement, and institute
service recovery as required.
Service-delivery control. Service-delivery control (right-hand panel, 11th row)
involves several management assessments the ability of employees to serve customers,
the employees behaviours and job quality, the appropriateness of tools and technology for
performing the job, the need for simplification and streamlining of the service-delivery
processes, and the monitoring and control of the delivery processes.

Establishment of a Quality-Management System for Service Industries

1141

Check
Customer-satisfaction measure. The measurement of customer satisfaction (left-hand
panel, 12th row of Figure 1) is a crucial activity for enterprises. It is used by firms to evaluate the service quality, and the analytical results can be a fundamental basis for further
improvement actions. Brief questionnaires and telephone surveys can be used in transaction surveys. For a more extensive study, customer surveys (with mailed questionnaires)
and customer interviews are common methods for measuring customer satisfaction (Yang,
2003a).
Internal customer measure. Several studies have shown evidence of a strong relationships between employee perceptions of employee well-being and customer perceptions of
service quality and satisfaction. The central panel in the 12th row of Figure 1 addresses
this matter. In addition to having a focus on service quality for external customers, organizations must also concentrate on employee satisfaction (Sureshchandar et al., 2001). The
measurements of employee satisfaction and commitment, employee morale, work
achievements, values, and so on are important practices if a new quality-management
system is to be successfully implemented by the organization.
Quality audit. The right-hand panel in the 12th row features quality audit. The
service organization can establish a service standard or quality standard for the
quality attributes that they consider to be important, and they can use such established
standards (or performance levels) to conduct their quality measurements and internal
audits (Yang, 2003a). The organization also needs to audit the quality activities conducted
within the organization, and measure process variation, labour productivity, and the cost of
poor quality.
Action
Continuous improvement. The purpose of a customer-satisfaction survey is not only to
learn the actual satisfaction level, but also to highlight the strengths and the areas for
improvement (Yang, 2003b). In the bottom row of Figure 1 (left-hand panel) the
subject of such continuous improvement is addressed. The service organization should
take appropriate actions to improve any quality attributes that have a lower satisfaction
level as assessed by analysis of customer surveys or customer complaints.
Customer service. The final panel of Figure 1 (right-hand side, bottom row) addresses
customer service. The service organization needs to have a satisfactory system for dealing
with customers complaints. In addition, it can provide attractive value-added service to
customers as a strategic weapon. The organization can also plan (and implement) practices
of customer-relationship management with a view to fulfilling the future demands of customers and to ensuring close relationships with customers.
Case Study
For the past two years, the present author has worked cooperatively with Hewlett-Packard
(HP) Taiwan on various aspects of quality management. A comparison of HPs system of
quality management and the innovative quality-management system presented here was

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C.-C. Yang

therefore undertaken as a case study. The results of this comparative case study demonstrate that the proposed quality-management system for service organizations is both
comprehensive and practical.
In addition, senior management of IBM Taiwan also provided data on the practices and
constructs of total quality service (TQS) as practised in that organization. The present
author interviewed the vice-chief executive officer several times. During these interviews,
the quality-management system presented in this paper was carefully studied. This
allowed IBM Taiwan to compare its own TQS initiatives with the proposals of the innovative quality-management system presented here.
Table 3 presents the practices adopted by HP Taiwan and by IBM Taiwan with reference to the constructs of the new quality-management system.
Empirical Study
In addition to the case studies performed in cooperation with HP Taiwan and IBM Taiwan,
the present study also conducted an empirical study with several service organizations.
The aim of this empirical study was to investigate the adaptation and implementation of
the proposed quality-management system for service industries.
The methodology involved interviews and a questionnaire survey of the service organizations. Because this quality-management system is comprehensive and focused on the
long term, only organizations with well-developed quality-management systems could
make use of this system. The sample was therefore selected to include only those
service organizations with a good reputation in various service industries. The sample
companies are listed in Table 4. The sample group included eight banks, seven hospitals,
four insurance companies, four department stores, three hotels, three airlines, and three
others.
The chief executive officers (CEOs) or vice-CEOs of these service organizations were
interviewed. These interviews were used to discuss the comprehensiveness, adaptability,
and feasibility of the proposed system for the service organizations in the sample. They
were unanimous in their support for the proposed service-quality management system.
In addition to providing information through interviews, the respondents were also
requested to fill out a pre-designed questionnaire about the implementation status (in
their own organizations) of each practice item of the system. A five-point Likert-type
scale was used: 1 for not implemented; 2 for minor implementation; 3 for acceptable implementation; 4 for good implementation; and 5 for very good implementation. The means of the scores for implementation of each practice for the eight
categories of service organizations are listed in Table 5. The mean scores for all practices
were between 2 and 5. All the practices in the quality-management system for service
organizations had been implemented to some degree by these service organizations.
In the long-term planning stage, the practices of design service delivery and support
system and target market segments and positioning had the highest levels of implementation. The practice of mission and vision had a lower level of implementation. The
insurance industry has the highest implementation levels for the practices in the longterm planning stage (mean of 4.27), followed by the hotel industry (mean of 4.22).
These two industries emphasized the practices of target market segments and positioning
and customer focus. The department-stores industry had poor implementation levels for
the practices in the long-term planning stage (mean of 3.09). The firms in this industry

Table 3. The Quality management system for Service Organizations: Case study in HP Taiwan and IBM Taiwan
Elements

HP, Taiwan

IBM, Taiwan

HP way

1. Dedication to every clients success.

2. Innovation that matters for our company and for the world.
3. Relations build on trust and personal responsibility.

Mission & vision

HP way
Shared value

Mission
1. Inventing the industrys most advanced information technology.
2. Helping customers apply those technologies to improve what they do and how they
do it.
Vision
1. A company of professional.
2. Taiwan On Demand.

Target market
segments and
positioning

Marketing research(IDC, Gartner.)

Business group(enterprise, public
sector, SMB and consumer segments)

Target market Segments

Financial Sector
Industrial Sector
Public Sector
Communication, Travel and Distribution Sector
SMB territories
Positioning
Market leader in targeted segments
Leader in e-Business On Demand

Strategy planning
and management

Long term planning

1. An interdependent system(strategy;
structure and processes; metrics,
results and rewards; value and
behaviour)
2. Balanced scorecard

Planning (guidance: IBM Business leadership model)

Long term strategic planning
Annual business budgeting
Annual business unit business planning
Management
Balanced scorecard
Management councils
Personal Business Commitment

1143

(Table continued)

Establishment of a Quality-Management System for Service Industries

Management
principles and
top management
commitment

1144

Table 3. (Continued)
HP, Taiwan

IBM, Taiwan

Customer focus

Focus group/customer visit HP service

performance standard(speed, power,
passion)
Needs investigation process CFS
(Customer Feedback System)
Compliment and complaint handling
system(CCHS)
Value proposition(HP delivers more)

Opportunity identification and management system. IVP (Industry Value Proposition)

and integrated industry solutions.
Critical solution and skill requirements.
Sales teams account plan, service teams account service plan.
System assurance and service quality assurance.
Service quality review board.
External customer voice management.
CRC (Customer Relationship Centre)
CSMC (Customer Satisfaction Management Committee)
CAC (Customer Advisory Committee)
ThinkPad User Community
Transaction customer satisfaction survey
Client teams top account visit
Service management teams customer visit

Define quality
policy and target
objectives

HP service performance standards

Balanced scorecard
Value proposition

Product service quality (response time, first time fix, resolution time)
Project delivery quality(schedule, cost, customer acceptance)
CRC customer complaint resolution time
Balanced scorecard

Design service
delivery and
support system

Structure & processes (operating

model)
Service contacts and items
New service design

IGSM (IBM Global Service Methodology) for solution design and delivery process.
WWQAS (World Wide Quality Assurance System), a preventive quality assurance
system for solutions or professional services.
SA (System Assurance) for assessing the RAS (reliability, availability, serviceability)
of proposed systems and solutions.
SPC (System Package Centre) for customizing and testing volume products before
shipping.
SPOCA (Single Point Of Contact and Action) and dispatching centre for product defect
services.
SSC (Sales Service Centre) for contract preparation.
Web tools for customer self services.

C.-C. Yang

Elements

Standard of business conduct.

Operating model
Installation process
ISO 9000/2000
Business fundamental table(BFT)

ISO 9001 for product services, IT professional services, system integration and
consulting services, outsourcing services.
IGSM for solution design and delivery processes.
WWQA for the preventive quality management of proposed solution and professional
services.
SA for the preventive quality management of our proposed HW/SW products and
solutions.
Service reporting system to measure service quality and productivity/usage.
CRC process for customer satisfaction management.
Web tool for customer self services.

Organization
design and adjust

Structure & processes (operating

model)
Organization plan and adjust
Employee position plan Executive
committees

Opportunity management
Face to face sales organization: cluster sales teams, territory dales teas, HW/SW
brand sales teams, Services sales teams.
Web and tele sales organization: ibm.com
Sales support organization: Pricer, SSC. marketing team
Fulfilment or logistics: CSO, services operations
Customer service requirements
What to do: Business consulting services
How to do: Business consulting services and integrated technology services.
Do it for me: Business consulting services and integrated technology services.
Operate it for me: Outsourcing and integrated technology series.
Funding me: IBM global financing.
Customer voice management
Customer grievance management: CRC, customer satisfaction management
committee.
Customer advice: Customer advisory board customer opinion survey: CRC
Leadership
IBM business leadership model
On Demand enterprise
IBM values
Management councils
Capability building: Foundational competencies, sales competencies, leadership
Competencies, mentor or coach program, e-learning, knowledge management.

1145

(Table continued)

Establishment of a Quality-Management System for Service Industries

Deign service
process

1146

Table 3. (Continued)
Elements

IBM, Taiwan

Employee
education and
training

Performance review (development

plan) e-learning
Field development training
Putting customer first (training course)

1. Every employee should have an IDP (Individual Development Plan) in system. His/
her IDP should tie-in with his/her annual PBC (Personal Business Commitment)
plan.
2. Apply four tiers learning model: learn from 1) information, 2) system interaction, 3)
peer collaboration, 4) face-to-face session.
3. Besides formal learning programs, IBM makes informal learning infrastructure such
as e-learning, KM, mentoring, coach, OJT (on job training) etc. available for
employees.
4. Besides visible items such as a job related content skills and knowledge, also
emphasize invisible soft competencies such as culture, competencies.
5. Have qualification and certification processes in place for high potential
professionals.

Standardize the
operating
procedures

Standards of business conduct

ISO 9000/2000 BFT

1. ISO 9001
2. IGSM
3. WWQA
4. Technical operation guides or manuals
5. Auditing guides
6. Business conduct guideline

Information and
analysis system

Managed services design and delivery

information system (MSDD)
Asia Pacific IT system
CRM system
IDC, Gartner

1. Internal information: real time and on demand service operating processes

management systems such as dispatching system, time reporting system, quality
assurance system, IGSM etc..
2. External information: Market research data base, daily news clip, business reports or
brief book from contracted vendors.
3. Major internal and external information are stored in one common web based
system. Authorized users can retrieve and then analyze their required information.
4. Employee profile/CV also existed in web system for people searching purpose.

C.-C. Yang

HP, Taiwan

1.Values and behavior (in

interdependent system)
2. Matrics, results and rewards (in
interdependent system)
3. Project management
4. Balanced scorecard
5. BFT
6. ISO 9000/2000

1. Pervasive formal & informal learning environment to equip employee the required
professional skills or knowledge, and other competencies.
2. Processes simplification to make front-end people doing the things easily.
3. Various awards such customer satisfaction award, tem award, IBM equals service
award etc.
4. Individual performance objectives and execution programs or actions are mutually
agreed between manager and employee. Manager is responsible for supporting
subordinates realizing the performance plan.
5. Customer first program for front-end people to settle customer issue right on the spot.
6. ICM (Intel lecture Capital Management) data base, ERTAIN (Remote Technical
Assistance Information Network) data base, OM (Opportunity Management) system,
BluePage for people searching, etc. tools or systems are available for employees.

Leadership(heads
of department)

Value proposition
Open door
Project management

1. Leadership competencies.
2. IBM business leadership model.
3. Tools: PBC (Personal Business Commitment), IDP (Individual Development Plan),
reward system, awards etc.
4. High performance culture.
5. Employee grievance: Speak up!, Open door! Skip level interview.

Employee
motivation

1. e-award
2. Rewards system
3. Employee program

1. High performance culture.

2. Challenges and development opportunities
3. Equal opportunity and diversity policies
4. Man/manager relationship focus
5. Total compensation practice: Above the average of local leading companies; pay
differentiation.
6. Recognition programs.

Input control

1. Contract renew/review process

2. Input quality control
3. ISO 9000/2000

1. Authorization level: Input by authorized user only, and process owner decides
various authorization levels for the users.
2. ISO 9001

1147

(Table continued)

Establishment of a Quality-Management System for Service Industries

Empowerment

1148

Elements
Marketing process
control

Service design
control

HP, Taiwan
1. Needs investigation process
2. Contract renew/review process
3. Channel management
4. ISO 9000/2000
1. Contract renew/review process
2. New service design
3. Project management

Daily information
analysis

1. Information analysis in using MSDD

2. Project management

Service delivery
control

1. Project management
2. BFT
3. ISO 9000/2000
4. Installation process
1. Measuring the total customer
experience (end-to-end; life cycle,
category; transaction; touch point;
operational metrics)
2. Analysis of customer complaints
1. Performance review/ranking
2. Balanced scorecard
3. Project management review
4. Position plan /progression chart

Customer
satisfaction
measure

Internal customer
measure

IBM, Taiwan
1. One voice marketing plan and control process.
2. Market research process.
3. Customer data base marketing.
4. Contract management process.
1. Proposal review process.
2. IGSM
3. Project management.
4. ISV or service partner selection and qualification process.
1. Service quality analysis.
2. Customer satisfaction analysis
3. Project status analysis.
4. Market information analysis
5. Service quality exceptions analysis.
1. Project review
2. Service quality review.
3. Alert and CRISIT (Critical Situation) Processes for service quality exceptions
management.
1. Customer satisfaction.
2. Customer loyalty or order propensity.
3. Market share.
4. Brand image.
5. Customer complaint.
1. Employee satisfaction index.
2. Challenge and opportunity index
3. Leadership competencies assessment
4. Managerial style assessment.
5. IT user satisfaction level.

C.-C. Yang

Table 3. (Continued)

1. Quality maturity system (QMS) 2.

ISO audit
3. Balanced scorecard
4. BFT review

1. Quarterly SACA (Self Assessment, Checking, Action) review.

2. ISO audit.
3. Internal and external auditor auditing.
4. Service quality review meeting.
5. CRISIT review.
6. CSMC review.

Continuous
improvement

1. 6 s-program
2. Business process reengineering
(BPR)
3. Improvement project

1. Management council review.

2. Service quality, customer satisfaction/ complaint reviews.
3. Key project status review, issue project review.
4. CRISIT review quarterly CAC meeting.
5. Quarterly CAC meeting.
6. Individual PBC plan and periodic review.
7. BP, ISV or service vendor review.
8. ACT (Acceleration Change Together) team.

Customer service

1. CCHS
2. Implementation of CRM
3. CFS

1. Transformed to a service led technology company

2. Focus on integrated end -to-end industry solution.
3. People quality: Professional kills, knowledge, soft skills or competencies.
4. e-Business On Demand: Solutions, offerings and delivery process.

Establishment of a Quality-Management System for Service Industries

Quality audit

1149

1150

C.-C. Yang
Table 4 List of the reviewed sample companies

Industrial
category

Bank

Hospital

Insurance

Department
store

Hotel

Airlines

Others

Total

Numbers
Percentage

8
25

7
21.9

4
12.5

4
12.5

3
9.4

3
9.4

3
9.4

32
100

devoted less attention to the practices of define quality policy and target objectives and
mission and vision.
In the short-term stage, the insurance industry again devoted much attention to quality
practices, and had high implementation levels on all practices in this stage. The department-stores industry again had low implementation levels on the practices in this stage.
The practices of empowerment and organization design and adjustment had lower
implementation levels by all service organizations. Overall, service organizations
implemented the practices in this stage better than those in the other stages.
In the daily management stage, similar results were obtained. The insurance industry
had good implementation levels on the practices in this stage, but the department-stores
industry had lower implementation levels than other industries.
In the check and action stages, similar analytical results were obtained.
As can be seen in Table 5 in which the implementation levels of all practices in the
proposed quality-management system can be found it is apparent that the insurance
industry exhibited the best quality management, followed by the hotel industry and the
airlines industry.
Good implementation levels were found for the following practices:
. in the long-term planning stage target market segments and positioning; design
service delivery and target objectives;
. in the short-term planning stage employee education and training; standardize the
operating procedures; information and analysis system;
. in the daily management stage employee motivation; and
. in the check stage quality audit.
In contrast, some practices require more attention and improvement actions. These include:
.
.
.
.

mission and vision;

empowerment;
daily information analysis; and
internal customer measure.

Different service organizations have different weaknesses with respect to these practices, but every service organization needs to improve the practices that have lower
implementation levels.
Conclusion
The present study has developed and presented a comprehensive innovative qualitymanagement system for service organizations. This system has been confirmed as a

Practices

Bank

Hospital

Insurance

Department store

Hotel

Airline

Others

Total

Mean

Mean

Mean

Mean

Mean

Mean

Mean

Mean

S.D.

Long-term planning
Corporations value and top management
Mission & vision
Target market segments and positioning
Strategy planning and management
Customer focus
Define quality policy and target objectives
Design service delivery and support system
Average

3.75
3.12
4
3.88
3.75
3.88
4
3.77

3.43
3.29
4
3.43
4
3.93
4.14
3.75

3.5
3.5
4.75
4.25
4.75
4.625
4.5
4.27

3.5
2.75
3.25
3
3
2.625
3.5
3.09

4.33
3.34
4.67
4
4.67
4.50
4
4.22

3.67
4
3.67
3.67
4
4.335
4.33
3.95

3.67
3
4.33
3.33
3.67
3.835
4.33
3.74

3.66
3.39
4.06
3.65
3.94
3.925
4.09
3.82

0.83
0.59
0.88
1.01
0.84
0.985
0.78

Short-term planning
Design service process
Organization design and adjust
Employee education and training
Standardize the operating procedures
Information and analysis system
Empowerment
Average

4
4
4.13
4.13
4.63
3.38
4.05

4.14
3.86
4.14
4
4.14
3.29
3.93

4.5
4.5
4.5
4.75
4.75
4.75
4.63

2.75
2.5
3
3.5
2.75
3
2.92

4.33
4.33
4.33
4.33
4
4
4.22

4
3.67
4.67
4.33
4.33
3.67
4.11

4.33
4
4.33
4.33
4
3.33
4.05

4
3.84
4.13
4.16
4.16
3.56
3.98

0.92
1.05
0.82
0.78
0.98
0.95

(Table continued)

Establishment of a Quality-Management System for Service Industries

Table 5 The means of the implementation levels of each practice for the eight categories of the service organizations

1151

1152
C.-C. Yang

Table 5 (Continued)
Bank

Hospital

Insurance

Department store

Hotel

Airline

Others

Mean

Mean

Mean

Mean

Mean

Mean

Mean

Mean

S.D.

Daily management
Leadership (heads of department)
Employee motivation
Input control
Marketing process control
Service design control
Daily information analysis
Service delivery control
Average

3.75
4.38
3.63
3.5
3.63
3.5
3.5
3.70

3.86
4.29
3.86
3.57
3.57
3.29
3.43
3.70

4.5
4.25
4.5
4.75
4.75
4.25
4.25
4.46

2.75
3.25
2.5
2.25
2.5
3
2.75
2.86

4.33
3.67
3.67
4.33
4.67
4
4.33
4.14

4.33
4.67
4.33
4.33
4.33
3.67
4.67
4.33

4.33
4.0
3.67
4
4
3.33
3.67
3.86

3.91
4.13
3.72
3.72
3.81
3.59
3.69
3.80

0.89
0.95
0.96
0.99
0.93
1.05
0.82

Check
Customer satisfaction measure
Internal customer measure
Quality audit
Average

3.88
3.75
4.25
3.96

4.28
4
3.86
4.05

4.25
4.25
4.5
4.33

2.5
2
2.75
2.42

4.33
4.33
4.33
4.33

4
3.33
4.67
4.00

3.66
2.67
4.33
3.55

3.87
3.57
4.06
3.83

1.1
1.24
0.89

Action
Continuous improvement
Customer service
Average

3.88
3.75
3.82

3.71
3.71
3.71

4.75
4.25
4.50

3
3
3.00

4.33
4.33
4.33

4
4
4.00

3.67
4.33
4.00

3.88
3.84
3.86

0.94
0.99

Practices

Total

Establishment of a Quality-Management System for Service Industries

1153

powerful and useful model by using case studies of HP Taiwan and IBM Taiwan. The
study has also demonstrated, through an empirical study, that well-managed service organizations have good implementation levels on the practices of the quality-management
system especially in the insurance, hotel, and airlines industries.
The results of the empirical study provide valuable information about the implementation status of the practices of the quality-management system for various service industries. These results also represent a useful reference for benchmarking for those service
organizations that have lower implementation levels on some practices.
Suitable management tools for example, strategic planning, balanced scorecard,
Six Sigma, total quality management, and so on can be integrated into this qualitymanagement system. This innovative and comprehensive quality-management system
provides many avenues for fruitful future research.

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