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ISSN 1392-2785 ENGINEERING ECONOMICS. 2005.

No 3 (43)
INFLUENCE OF QUALITY MANAGEMENT OF THE COUNTRY’S ECONOMY

Concept of Productivity in Service Sector

Jonas Rutkauskas, Eimenė Paulavičienė


Kauno technologijos universitetas
K. Donelaičio g. 73, LT- 44309, Kaunas

Productivity shows whether the activity of an organi- Introduction


zation is efficient and effective. Though the terms like pro-
The origin of productivity management is deeply rooted
ductivity, efficiency and effectiveness are used together
in the context of mass production therefore issues of produc-
and practicians sometimes alternate their meanings, how-
tivity are mainly analyzed in this sphere. This may be the
ever we must not identify productivity with efficiency
main reason for the prolonged neglect of the productivity
and/or effectiveness. Productivity requires both efficiency
issues in the sphere of service. Service organizations are
and effectiveness, because a certain activity will not be
recognized as the largest and fastest-growing segment of the
productive if it is only efficient, but not effective, or effec-
economy in the world (Sahay, 2005). Johnston and Jones
tive, but not efficient. Productivity in economic position is
(2004) states, that despite the importance of productivity
defined as the relation between output and input. Input
management in service organizations it is surprising that
element in an organization consists of resources used in
there is relatively little empirical research on this topic.
the product creation process, such as labour, materials,
Organizations that deliver service must broaden their
energy. Output consists of a given product, service and the
examination of productivity from the conventional organi-
amount of both.
zation-oriented perspective to a dual organization – cus-
Mostly productivity is analyzed in manufacturing
tomer perspective. This broadened approach can help rec-
sphere. Productivity in the service sector was not analyzed
oncile conflicts between improving service quality and
before the end of the twentieth century, while productivity
boosting productivity (Sahay, 2005). According to Parasu-
in manufacturing has been analyzed for more than two
raman (2002), customers are often involved into activity of
hundred years. Many researchers argued that application
an organization providing some amount of input in the
of productivity concept in service sector is more compli-
form of time, physical effort and mental energy.
cated task than its application in manufacturing.
With the expansion of point of view towards the ex-
Productivity concept in manufacturing is analyzed in
amination of productivity to the point of organization –
the scope of organization, but in the service sector this scope
customer perspective, the problem of quality productivity
is larger and involves an external element from the organ-
ratio becomes more relevant. Some researches state that
izational position – customer. Some of the service organiza-
quality and productivity are two unrelated concepts (Brig-
tions reduce an input element by including customer to their
nall et.al., 1996), (Heskett et.al., 1994). However, most re-
activity and thus boosting service productivity.
searches state that quality and productivity can not be ap-
The quality aspect in manufacturing is not gauged, be-
proached as separate concepts (Sahay, 2005), (Kontaghior-
cause input and output are measured by quantity units
ghes, 2003), (Parasuraman, 2002), (Murugesh, 1997).
which quality is seemingly the same. The quality in service
Productivity of manufacturing organizations is meas-
sector is very important. Customers often evaluate a given
ured in quantitative units of input and output with rela-
service not only by its amount. If only one unit or package
tively the same quality. There were several attempts to
of service is purchased, output is mostly gauged only by
measure service sector productivity in the same way, i.e.
the quality aspect. Input commonly is gauged both by the
using only quantitative dimensions of input and output
quantity and quality aspects. Quantity and quality aspects
(McLaughlin, 1990).
in the determination of productivity will differ in different
At least there are two reasons for inadequacy of this
spheres of service sector.
type of service sector productivity measures. The first rea-
Service sector input elements such as materials, ma-
son is the fact that input and output of service sector pro-
chines and energy are not as important as in manufactur-
ductivity consist not only of quantitative elements but also
ing. The main element in service sector is labour because
qualitative (Reid, 2005). The second reason is the fact that
service sector is more personnel-intensive comparing to
quality and productivity in all the sectors of service are
manufacturing. Output in manufacturing is measured by
strongly correlative (Gummesson, 1992). Customer in-
quantity units and boosted by increasing the amounts of
volvement to the organizational activity in the service sec-
production, its realization. Service sector output usually
tor generates many output quality variations. Therefore,
has no high values by the quantity aspect, therefore it is
output of service sector in many cases could be measured
mostly increased by the attempt to provide higher quality
only by measuring its quality variations. How can service
services to the customer, seeking for better customer satis-
sector productivity be determined? What parameters are
faction.
primary in the determination of service sector productiv-
Keywords: productivity, service sector, quality, quality ity? How are these parameters related? What are the singu-
and productivity ratio. larities in the determination of service sector productivity?

29
These topics illustrate the core of the research problem. be discussed within. Almost any process in an enterprise is
The concept of productivity has been analyzed for fed with several types of input (e.g. labour, capital, mate-
more than two hundred years, though only in the manufac- rial and energy) and has more than one output (e.g. product
turing sector. The concept of productivity in the service A, product B). We must be able to separate partial produc-
sector was not analyzed before the end of the twentieth tivity (output related to one type of input) from total pro-
century and only a few resources have been detected after ductivity (output related to multiple types of input). Con-
comprehensive literature analysis concerned with research sidering existing hierarchical levels, it is not difficult to
topic. These literature resources provide the analysis of comprehend that the strategical perspective management
productivity service in specific service sector spheres. towards productivity will differ from operational view of
Nachum (1999) analyzed issues of productivity measures productivity among operators (Tangen, 2005).
of consulting firms, while Gupta (1995) in health-care en- The literature shows that the concept of productivity is
vironment. Regarding the level of the problem analysis, it important in order to understand it properly and to distin-
is important to render a conceptual analysis of service sec- guish it from most related terms of efficiency and effec-
tor productivity. Lithuanian researchers have not done such tiveness (Salck, 2001), Sumanth (1998), (Koss, 1993),
researches and the concept of productivity was analyzed (Misterik, 1992), (Sink, 1989). The terms often have not a
only in the manufacturing sector. These reasonings illus- clear definition and are even identified with the term of
trate scientific novelty. productivity.
The aim of the article is to accomplish the analysis of ISO 9000 series standard defines productivity as an ex-
productivity concept in the service sector, to perform the tent to which planned activities are realized and planned
conceptual analysis of service sector productivity determi- results achieved (LST EN ISO 9001:2001). The concept of
nation, and to provide the analysis of quality and produc- productivity is often confused with the efficiency term.
tivity ratio in the service sector. Therefore it is important to understand that efficient per-
formance of unnecessary work is not productive. Therefore
The objective of the article is the use of productivity
productivity requires both efficiency and effectiveness
concept in the service sector.
(Sumanth, 1998).
The chosen research method is logical analysis of ISO 9000 series standard have defined efficiency and
scientific literature. productivity very similarly (LST EN ISO 9000:2001).
Output is the result achieved and input is the resources
The definition of service productivity used. Therefore it could seem that the same subject has
different titles.
The term of productivity economically is defined as
Actually there is no single accepted view about these
the ratio between output and input (Mohanty, 1998).
terms. Usually effectiveness is described as “doing the
Output right things”, while efficiency means “doing things right”
Productivity = ; (Sink, 1989). Efficiency is strongly linked to the utilization
Input
of resources and it mainly influences the input of the pro-
ductivity ratio. This means that efficiency in manufactur-
On the one hand productivity is related to utilization of
ing can be seen as the minimum resource level that is theo-
resources, on the other hand productivity is related to the
retically required to run the desired operations in a given
creation of value. Therefore good productivity is achieved
system, compared to how much resources are actually
when activity of an organization and resources in the prod-
used. The efficiency ratio is rather simple to measure,
uct creation process create value for getting product. Pro-
whether it is based on time, money or something other.
ductivity can also be related to loss, which must be elimi-
Effectiveness is a more comprehensive term and in
nated if productivity increases (Sauian, 2002). A common
most cases it is very difficult to quantify it. It is often
mistake is to relate productivity to the amount of services
linked to the creation of value for the customer and affects
offered. Therefore a common mistake is to think that the
the output of the productivity ratio. Therefore a single fo-
more products are made the more productivity increases. It
cus on effectiveness does not seem to be a fruitful way to
is important to keep in mind the fact that productivity is a
increase productivity. Only the combination of high values
relative concept and it cannot be said to increase or de-
of both efficiency and effectiveness in the transformation
crease by making such comparisons. Productivity depends
(producing manufacturing product or service offered)
on variations from competitors or other standards at a cer-
process leads to have the higher productivity values. Thus,
tain point of time or on changes over time. According to
it is possible for an effective system to be inefficient and
Misterik et.al. (1992), an increase in productivity can be
for an efficient system to be ineffective.
caused by five different relationships of input and output:
According to the basic principle of economic rational-
• Output and input increases, but the increase in input ity, the purpose is to achieve a given result with minimal
is proportionally less than increase in output; resources, or to get the maximum result with a given set of
• Output increases while input stays the same; resources (Vourinen et.al., 1998). However, it is very diffi-
• Output increases while input is reduced; cult to talk about the maximum level of performance in the
• Output stays the same while input decreases; production of services. Hence, it is important to elaborate
• Output decreases while input decreases even more. the economic evaluation of service operations on the basis
It is also important to understand the ambiguous nature of the concept of productivity.
of productivity. There exist a few types of productivity as Despite the importance of productivity to many service
well as different hierarchical levels where productivity can organizations, it is surprising that there is relatively little

30
empirical research on this topic (Johnston and Jones, tivity ratio of service operations may vary greatly from one
2004). According to Adam et.al. (1995), the concept of time period to another, if it is measured as a quantity ratio.
productivity mostly analyzed in manufacturing is too nar- Due to the variation in the amount of the total demand
row in the case of service sector. Therefore, we have to across time, the service provider has to solve two basic
interpret the analysis of productivity in the service sector in problems related to the quantity aspect: capacity size and
a broaden way than in the traditional manufacturing sense. capacity scheduling (McLaughlin et.al., 1991).
We must include quality to our definition in the analysis of
the productivity of service operations (Grönroos, 1990). The quality aspect of service productivity
We can define service productivity at the outset of analysis
as the ability of a service organization to use inputs for The quality aspect is a dimension that is difficult to de-
providing services with quality matching the expectations fine objectively. According to Gummesson (1992), there is
of customers (Järvinen et.al., 1996). a humanistic quality approach. At the one extreme we must
The quantity and quality of service sector cannot be pay more attention to the customers, personnel, leadership
treated in isolation, because it may be impossible to sepa- and culture, whereas at the other end lies a technical ap-
rate the impact of service process on conventional produc- proach concerning operations management, statistics and
tivity from its impact on service quality (Kontaghiorghes, methods of measurement. Lehtinen and Lehtinen (1991)
2003). Hence, both the quantity and quality aspects must talk about physical quality, interactive quality and corpo-
be considered together to provide a joint impact on the rate quality, and on the other hand they talk about the qual-
total productivity of the service organizations. ity of process and output. As our ratio suggests, we divide
We can define service sector productivity to the fol- quality into input and output dimensions, which are paral-
lowing ratio: lel to Lehtinen and Lehtinen’s latter division of quality
aspect. Therefore we could state that output consists of a
Quantity of output and quality of output total service offering in terms of quality, and the input in-
Service productivity = ; cludes both tangible and intangible elements.
Quantity of input and quality of input
The output in the form of quality is what the customer
In order to understanding the ratio better, we will ana- in fact pays for, which is mostly intangible and may be
lyze it in a more detailed fashion factors (quantitative and difficult to quantify (Adam et.al., 1995). Service quality is
qualitative aspect) inside ratio. generally defined as customer perceived quality which
stresses the individuals’ assessment of the value of the total
service offering (Gummesson, 1994) and there is differ-
The quantity aspect of service productivity ence between expected service quality and experienced
The quantity aspect of service productivity is identical service quality (Grönroos, 1982). When purchasing ser-
to the manufacturing productivity and consists of material, vices, customers’ attention is often limited to a small num-
labor, capital. Service business is personnel-intensive, there- ber of tangible inputs (Zeithalm, 1984). Physical environ-
fore productivity of many service spheres is low compared ment – buildings, offices and interior design – affects cus-
to manufacturing sphere. Therefore many providers of ser- tomer beliefs, attitudes and satisfaction (Zeithaml and Bit-
vices investing to technologies as alternative of using labor ner, 1996), and provides an opportunity to tell the “right”
(e.g. automated teller machines replace operators, World story about a given service (Berry, 1984). It is also very
Wide Web business replace sellers in the shops). It shows a important how contact personnel dresses, articulates,
way to increase productivity trough investing to the tech- writes, designs and presents proposals (Levitt, 1983).
nologies in expenses of input element of capital. Though As intangible input, the service personnel represent the
capital mostly impacts service productivity, we have no use service, the organization and the marketers in the cus-
for only this partial (capital) productivity measures. tomer’s eyes (Zeithmal and Bitner, 1996). The quality
It might seem that output, amount or quantity is the management of personnel includes such things as motivat-
primary factors to measure productivity. When a proposed ing, managing information, training, career planning, re-
service consists of one or several standardized compo- cruiting and retaining the right people (Normann, 1991;
nents, output of service is easy to measure (Quinn and Zeithalm and Bitner, 1996). Service business is personnel-
Paquette, 1990). Therefore output can consist of a number intensive, meaning that quality supplied to the customer is
of standardized services adapted to individual customers essentially a result of the way personnel perform (Nor-
(e.g. in the case of a unique service package). Therefore mann, 1991). Both employees and customers will experi-
defining the service output is a difficult task. ence more positive outcomes when the organization oper-
It is strategically important for the service provider to ates with a customer service orientation and management
have enough of resources in order to match demand for the supports it (Blois, 1989).
service. This strategy is oriented towards the quantity. According to Gummesson (1994) there are attempts to
However, from the customer’s view, the volume of the include customers in the service organization activity.
service output is hardly a significant issue, because the Martin and Horne (2001) refer to it as a common phe-
customer usually buys only one unit of output (e.g. haircut) nomenon. It provides an opportunity to utilize customers as
or one package of service (e.g. holiday tour). The customer free inputs in order to increase productivity from the view-
is therefore inclined to give priority to service quality in- point of service provider. Therefore customer cannot be
stead of quantity (Sahay, 2005). Yet, the actual volume of considered in isolation from the organization of offering
operations is determined by the variation of demand over and delivering services.
time (McLaughlin, 1996). As a consequence, the produc- Another important intangible element is service cul-

31
ture. By participating in the service delivery process, cus- both tangible and intangible elements.
tomers influence and even create perceived service culture. 3. Analysis of productivity concept in service sector
High levels of intangibility call for image building and helps to reconcile conflicts between improving ser-
maintenance to attain reliance based on reputation and sub- vice quality and boosting productivity.
jective impressions of the service (Cowell, 1988). In the 4. The most important element in the determination of
long run, image depends mainly on what the organization productivity of service sector is not quantity, but
actually provides but in the short run image can be used as quality. It is especially clearly revealed in determi-
a tool for the creation of new reality (Normann, 1991). nation of output. From the customer’s view, the
Service sector productivity is heavily dependent on volume of the service output is hardly a significant
fast developing technologies and automation (Gummesson, issue, because the customer usually buys only one
1998). Customers, instead of interacting with a contact unit of output or one package of service and quality
person, they transact using an automated teller machine or becomes the most important aspect of output. De-
a computer. According to Normann (1991), there are five termination of service output could be a difficult
main reasons for using information technologies: task because of its intangible nature.
1. Reducing costs by substituting service officers for 5. One of the most effective ways of boosting produc-
information technologies tivity is investing to new technologies, which helps
2. Standardizing services to reduce labour element of input and to reach
3. Increasing availability (24-hour access to services higher values of productivity.
using appropriate machines or computers) 6. Input element is decreased with including custom-
4. Linking customers into the service system ers to the organization service delivery system and
5. Affecting customer and personnel relationships and thus boosts the service productivity.
behavior.
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Singapore, 1996. tatyvumas ir efektyvumas. Tačiau šios są vokos dažnai n ėra aiškiai
apibrėžiamos ar net sutapatinamos su produktyvumo są voka.
36. Zeithalm, V.A. How consumer evaluation process differ between ISO 9000 serijos standarte rezultatyvumas apibrėžiamas kaip
goods and services // Service Marketing. Prentince-Hall, Englewood planuotų priemonių į gyvendinimo ir planuotų rezultatų pasiekimo
Cliffs, NJ, 1984. laipsnis, o efektyvumas – kaip pasiekto rezultato ir panaudotų išteklių
santykis. Produktyvumui reikia efektyvumo ir rezultatyvumo kartu.
Jonas Rutkauskas, Eimenė Paulavičienė Pagrindinis ekonominio racionalumo principas yra pasiekti nu-
matytą rezultatą, sunaudojus kuo mažiau išteklių arba gauti maksi-
Produktyvumo samprata paslaugų sferoje malų rezultatą , sunaudojus numatytus išteklius. Tačiau paslaugų
Santrauka sferoje labai sud ėtinga nustatyti aukščiausią pasiekimų lygį . Tod ėl
svarbu remiantis produktyvumo koncepcija ekonomiškai į vertinti
Produktyvumas ekonominiu požiū riu apibrėžiamas kaip į vesties paslaugų operacijas.
ir išvesties santykis. Įvest į organizacijoje sudaro sunaudoti ištekliai Nagrin ėjant produktyvumą paslaugų sferoje, turime jį interpre-
produkto gavimo procese, tai yra darbas, kapitalas, medžiagos, ener- tuoti plač iau nei jis pateikiamas tradicin ėje gamybin ėje sampratoje.
gija; išvestį – gautas produktas, jo apimtis. Analizuojant produktyvumo są voką paslaugų sferoje, į apibrėžimą
Produktyvumas paslaugų sferoje prad ėtas nagrin ėti tik XX amži- reikia į traukti kokyb ę. Analizės pradžioje galime apibrėžti paslaugų
aus pabaigoje, nors gamyboje jis prad ėtas nagrin ėti daugiau nei prieš produktyvumą kaip paslaugų organizacijos geb ėjimą panaudoti savo
du šimtus metų. į vestis siekiant suteikti kokybiškas paslaugas vartotojams patenkinant
Gamybos sferoje produktyvumo koncepciją nagrin ėjama organi- jų poreikius ir lūkesčius.

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Produktyvumą paslaugų sferoje galima apibrėžti šia formule: neapčiuopiamą į vestį. Kartais bandoma į traukti vartotojus į paslaugas
teikianč ias organizacijų veiklą kaip laikinus darbuotojus. Tai leidžia
Išvesties kiekybė ir išvesties kokybė panaudoti vartotojus kaip laisvas į vestis didinti produktyvumui
Paslaugų produktyvumas = .
Įvesties kiekybė ir įvesties kokybė paslaugos teik ėjo požiū riu.
Vartotojai, dalyvaudami paslaugos teikimo procese, daro įtaką ar
Kiekyb ė ir kokyb ė paslaugų sferoje negali bū ti nagrin ėjamos at- net kuria paslaugos kultū rą .
skirai viena nuo kitos, kadangi neįmanoma atskirti paslaugų proceso Produktyvumas paslaugų sferoje didinamas d ėl sparč iai be-
poveikio produktyvumui nuo poveikio paslaugų kokybei. sivystančių technologijų ir automatizavimo. Vartotojai, užuot ben-
dravę su kontaktiniu asmeniu, gali są veikauti su automatine atsakymų
Kiekybinis paslaugų produktyvumo aspektas į pasiteiravimus mašina ar kompiuteriu.
Tolimesnių tyrimų gaires gali nurodyti paslaugų produktyvumo
Kiekybinis aspektas paslaugų produktyvume yra toks pats kaip ir matavimo problemos.
gamyboje; jį sudaro šie pagrindiniai įvesties elementai: žaliavos, darbas,
kapitalas. Dėl intensyvaus darbo jėgos panaudojimo paslaugų sferoje
Išvados
daugelyje šios sferos sričių produktyvumas yra labai žemas, palyginti su
gamybinės srities. Todėl daugelis paslaugų teikėjų daug investuoja į tech- 1. Mokslin ės literatūros, susijusios su nagrin ėjama tema, anal-
nologijas, kurios būna alternatyva darbo jėgos naudojimui. izė parod ė, kad produktyvumo są voka paslaugų sferoje ilgą
Vartotojo požiū riu, paslaugos išvesties apimtis dažniausiai n ėra laiką nebuvo taikoma.
reikšminga, nes vartotojas neretai perka vieną išvesties vienetą arba 2. Nustatant produktyvumą paslaugų sferoje, reikia į vertinti
paslaugos komplektą . Tod ėl vartotojas teiks prioritetą paslaugos į vesties bei išvesties elementus ir kiekybiniu, ir kokybiniu
kokybei, o ne kiekybei. Produktyvumo santykis paslaugų operacijose aspektu. Tod ėl išvestis susideda iš bendrojo paslaugos pasiū -
skirtingais laikotarpiais gali žymiai keistis, jei bus matuojamas lymo kokybiniu požiū riu, o į vestis – iš matuojamų ir
kiekybiniu aspektu. Kei čiantis bendrajai paklausai laike, paslaugos nematuojamų elementų .
teik ėjas turi spręsti dvi pagrindines problemas, susijusias su kieky- 3. Produktyvumo koncepcijos nagrin ėjimas paslaugų sferoje
biniu aspektu: paj ėgumų dydžio ir paj ėgumų kalendorinio planavimo. padeda spręsti prieštaravimus tarp kokyb ės gerinimo ir pro-
duktyvumo didinimo.
Kokybinis paslaugų produktyvumo aspektas 4. Dažnai nustatant produktyvumą paslaugų sferoje svarbiausias
aspektas yra ne kiekybė, o kokybė. Vartotojo požiūriu paslaugos
Kokyb ę paslaugų sferoje reikia nagrin ėti humanistiniu požiū riu,
išvesties apimtis dažniausiai nėra reikšminga, nes vartotojas
be to, viena vertus, ypatingą d ėmesį skirti vartotojams, personalui,
dažniausiai perka vieną išvesties vienetą arba paslaugos kom-
lyderystei ir kultū rai, o kita vertus, nagrin ėti techniniu požiū riu sie-
plektą, ir svarbiausiu išvesties aspektu tampa kokybė.
jant ją su operacijų vadyba, statistika ir matavimo metodais. Kokyb ė
5. Vienas veiksmingų produktyvumo didinimo metodų paslaugų
yra dalijama į į vesties kokyb ę ir išvesties kokyb ę. Tod ėl galime
sferoje yra investavimas į į vairias naujas technologijas; tai
teigti, kad išvestį sudaro bendrasis paslaugos pasiū lymas kokybiniu
padeda sumažinti didelį darbo į vesties elementą ir siekti
požiū riu, o į vestis – matuojami ir nematuojami elementai.
didesnio produktyvumo.
Paslaugos kokyb ę galima apibrėžti kaip vartotojo suvokiamą ko-
6. Vartotojo įtraukimas į organizacijos veiklą gali padaryti j ą
kyb ę, kuri pabrėžia individualią bendro paslaugos pasiū lymo vert ę ir
į vesties elementu, sumažinti bendrą į vestį ir tokiu būdu
yra skirtumas tarp tik ėtosios ir patirtos paslaugos kokyb ės. Pirkdami
padidinti produktyvumą .
paslaugą, vartotojai savo d ėmesį dažniausiai atkreipia tik į mažą dalį
ap čiuopiamų į vesčių . Paslaugas teikiantis personalas reprezentuoja Raktažodžiai: produktyvumas, paslaugų sfera, kokybė, kokybės ir produkty-
paslaugą, organizacij ą ir paslaugos pardavėjus vartotojų požiū riu kaip vumo santykis.

The article has been reviewed.

Received in November, 2004; accepted in June, 2005.

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