BUSM4569 group report PDF

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Assignment 3BGroup Assignment on a Service Quality Management issueSubject Code BUSMSubject Name Service Quality ManagementLocation RMIT Vietnam SGSStudent Name - Student NumberDo Thi Thanh Vy - s Tran Nguyen Phuong Uyen - s Ha Ngoc Phuong Thuy - s Nguyen Quynh Thien Nga - s Vo Le Dieu Vy - s Ha Gia...

Description

Assignment 3B Group Assignment on a Service Quality Management issue

Subject Code

BUSM4569

Subject Name

Service Quality Management

Location

Student Name - Student Number

RMIT Vietnam SGS

Do Thi Thanh Vy - s3818523 Tran Nguyen Phuong Uyen - s3754339 Ha Ngoc Phuong Thuy - s3818531 Nguyen Quynh Thien Nga - s3836603 Vo Le Dieu Vy - s3836515 Ha Gia Han - s3800394 Pham Minh Quan - s3824104

Lecturer

Word Count

Dr. Nuno F. Ribeiro

2500

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Table of Contents Abstract ..................................................................................................... 3 I. Introduction ........................................................................................ 4 II.

Theory .............................................................................................. 4

1. What is Service Quality?...............................................................................4 2. Internal Service Quality ................................................................................5

III. Challenge ......................................................................................... 6 IV. Impact............................................................................................... 7 1. High turnover rate .........................................................................................7 2. Low job performance ....................................................................................7

V. Recommendations............................................................................... 7 1. Financial incentives based on performance ................................................8 2. Non-direct financial compensation ..............................................................8 3. Reward & Recognition (R&R) program .....................................................9

VI. Conclusion ..................................................................................... 10 VII. References ...................................................................................... 10 Appendices .............................................................................................. 19

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Abstract This report aims to demonstrate the fundamental issue and adversity that the Vietnam tourism and hospitality (T&H) industry is facing in managing the level of service quality and then providing the appropriate solutions to address the problem. This challenge significantly influences the process of ensuring the customers’ demands and satisfaction in T&H. After conducting the learning materials and research in quality management concepts and models, the report indicates that human resources (HR) play an important role that contributes to the development of the industry and organization. Accordingly, several reasons lead to the problem namely lack of employees’ compensation and benefits. Specifically, since hotel employees are faced with poor working conditions including extensive working hours, difficult customers, and low salary, they decide to leave the industry for better treatments. To enhance the level of service quality in Vietnam, considerable solutions were provided that included adjustments in policy and supported personal development programs. Organizations will pay wages depending on the employee’s expertise and experience, while the rewards and bonuses will be awarded for workers to strengthen the motivation. In order to advance employee’s welfare, non-direct financial compensation and reward and recognition programs should be provided to enhance employee’s quality of life as well as their work performance.

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I.

Introduction

Thanks to the 1986 “Doi Moi” or “Renovation”, Vietnam recognized the importance of T&H in the country’s economic development (Din et al. 1989; cited in Hall & Page 2000). Cooperation with the WTO in 1991 allowed Vietnam to establish tourism as one of the dominant drivers of economic development (Go & Jansen-Verbeke 1995).

Moreover, with cultural and natural attractions, and the Government's "Strategy on Vietnam's Development of Tourism until 2020, Vision to 20301" in 2011 (Ha Nguyen 2019), Vietnam's T&H has witnessed booming expansion throughout the meteoric development period (Suntikul, Butler & Airey 2008) and was ranked 7th among the fastest-growing destinations in the world in 2019 (VNA 2020a). Particularly, Vietnam welcomed 18 million international tourists in 2019 (VNA 2020b), rendering the industry an indispensable pillar with a share of 8.8% of Vietnam's GDP (WTTC 2020).

As T&H is “a labor-intensive service industry” (Amoah & Baum 1997, cited in Zagonari 2009, p.2, Gallardo et al. 2010), the personnel aspect plays an indispensable role to the industry’s success, but still challenging to manage (Muhlemann & Witt 1994, cited in Forster & Sharpley 2003; Otthenbacher & Harrington 2007). Despite the social-economic advantages (Crotti & Misrashi 2015, cited in Le, Klieve & McDonald 2018), Vietnam faces vexing obstacles that directly impact its sustainable growth of T&H (Viet Nam News 2018).

The report’s objective is to discuss the service quality models and analyze the Vietnam’s personnel challenge: poor compensation alongside the impacts including high turnover ratio and low job productivity. Finally, suggestions would be made to enhance the standard of Vietnam’s service.

II. Theory 1. What is Service Quality? Recently, a fiercely competitive market requires hoteliers to continually innovate service quality to attract customers. Jun & Cai (2010) said that the most important factor determining the success of the T&H industry is the attention to service quality from the customer's perspective. Regarding Parasuraman et al. (1988), the service quality’s concept is the comparison of customer perceptions and expectations about service quality before using the service with their experience (Kassim & Abdullah 2010). Customer is an important element in determining the quality, if the service provider does not meet the customers’

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expectations, it will negatively affect the business performance (Ford, Sturman & Heaton 2012). Customer expectation and experience - moments of truth are formed from the first encounter between the customer and the service provider (Clow & Vorhies 1993; Garbarino & Johnson 1999; Yi & La 2003, cited in Fernández-Barcala, González-Díaz & Prieto-Rodriguez 2009). Since service quality can affect the performance regarding customer satisfaction, consistently delivering good service quality is difficult but might bring back potential profit.

Many organizations use the SERVQUAL model to improve their service quality (Kassim & Abdullah 2010). This model is used to analyze the gap between customers’ perception and expectations, and illustrate the tangible and intangible factors that affect the experience of the service provided to the consumer. SERVQUAL is based on 5 service dimensions namely tangibility, reliability, responsiveness, assurance, and empathy (Appendix 1) (Parasuraman et al. 1988, 1991, 1994, cited in Tibebe 2012). Therefore, to enhance customer satisfaction, service providers must provide a top-notch experience in both tangible and intangible aspects.

2. Internal Service Quality Regarding Pitt et al. (2008), service quality measurement concentrates on behavior, expectation, and satisfaction of external customers; however, the internal service quality is also an integral element affecting the business’s performance (cited in Large & König 2009). Reynoso and Moores (1995) declared that employee satisfaction and customer enjoyment are symmetrical since employees are considered the main asset and the most influencing factor on hotel performance and customer satisfaction (citen in Tsaur & Wang 2001). Therefore, hospitality must provide excellent internal services to satisfy the external customers’ needs (Hallowel, Schilesinger & Zornitsky 1996; Kang, James & Alexandris 2002).

Mentioning in Week 6: The Service Profit Chain in the BUSM4569 Service Quality Management lecture (Ribeiro 2017), satisfied employees lead to satisfied customers, which means that an engaged and productive employee providing good service will create loyalty for customers and gain value from wordof-mouth (Appendix 2). Regarding Billy et al. (2006), job satisfaction and employee commitment to the organization affect internal service quality (Chen 2013). Furthermore, good internal service quality is conducive to retaining excellent service staff (Wildes 2007, cited in Kang, James & Alexandris 2002).

High-quality internal service can improve employees’ satisfaction and motivate them to deliver service enthusiastically through working performance (Hallowell, Schlesinger & Zornitsky 1996). Therefore, employee satisfaction mainly comes from support policies, including factors like job design/workplace

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design, development pathway, and employee remuneration system (Appendix 2) (Bellou & Andronikidis 2008).

III. Challenge As aforementioned, the T&H industry is in general ‘a people‐oriented service’ (Gallardo et al. 2010, p. 321). Therefore, customers often evaluate the service quality of a hospitality company based on the employee delivering service (Kong, Wong & Wan 2014). The perspective and attitude of customer‐contact employees will directly impact on both guest satisfaction and service quality performance (Gonzalez & Garazo 2006). Furthermore, the amount of effort that a staff spend in their work to achieve business’s objective depends on whether the employee think that this attempt will result in the satisfaction of his or her needs and demands (Baum, Lam & Zhang 2001; Ng and Sorensen 2008, Michel et al. 2013 cited in Marshall 2015). Therefore, satisfying employees' needs or in other words, enhancing their motivation is considered as one of the main factors contributing to the organization's success (Yeh 2013).

It is a popular knowledge when defining the economic concerns as the motive for working (Cetin 2013). While the employees try to achieve the job requirements to ensure their main source of income, the T&H organizations may use the compensation elements to effectively manage the human resource. Accordingly, the compensation includes the various forms namely salary, benefits and rewards (Chesser 2016).

Salary is a crucial factor affecting employees’ loyalty and work performance in the T&H industry (Tran & Tran 2020). Since the T&H requires qualified HR to satisfy customers’ expectations, appropriate compensations could be used to enhance employees’ dedication, and collaboration (Nelson 2005, cited in Tessema, Ready & Embaye 2013). The Trading Economics (2019) reported that the average worker’s monthly wages in July is 6520m VND, however, the minimum average monthly spending is 6500m VND (Das 2019). This proved that wages can cover the living expenses for only one person. In case the workers have family, money would become a burden. Furthermore, T&H’s working conditions are stressful due to work-overload, the ‘24-hours nature of the industry’, and difficult clients (Poulston 2009). Hence, many employees in the T&H industry do not scrutinize recent jobs as a long-term career path (Hoang & Kieu 2020).

Rewards can be a solution in enhancing employees’ living standards, hence, they can concentrate on jobs and personal development (Herzberg 2003, cited in Poulston 2009; Edirisooriya 2014). To meet the organizations’ business goal, rewards are considered as the effective management tool to influence the employee’s needs and ensure their working performance (Dobre 2013). However, 86% of Vietnam’s

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underemployed workers responded that they prioritize welfare and benefits while applying for jobs (VietnamWorks 2019). Additionally, 25% of Vietnamese workers reported their “low satisfaction'' with the current benefits, and 90% of whom decided to find a new job they feel appreciated. Furthermore, 50% of employees commented that the benefits are “normal” and most of them are seeking new jobs (Navigos n.d.). Although the service quality is decided by customers, this created by the employees; therefore, lacking of employees’ motivation in T&H may result in adverse impacts on customer service (Cetin 2013).

IV. Impact Obviously, the T&H employees are facing pressure due to the poor financial compensation (Kong, Wong & Wan 2014). Therefore, high turnover rate and low job performance are the most common unexpected results.

1. High turnover rate According to Ellingson, Michel & Tews (2013), unfortunately, the employee turnover ratio is among the top in T&H sector. In specific, turnover rates of entry-level staff in hotels and restaurants can surge up to 50% (Hinkin & Tracey 2000, cited in ibid.). As a result, this will significantly damage businesses’ performance and cause vulnerability in the fierce competition (Ann & Blum 2018) as managers are faced with a constant Recruitment and Development process (Ellingson, Michel & Tews 2013) as well as high costs to train new staffs (Tran & Tran 2020). Besides, losing senior workers negatively affects service quality and client satisfaction (Le, Klieve & McDonald 2018).

2. Low job performance It is stated that the scarcity of motivation in the hospitality industry may result in declining employee productivity (Afful-Broni 2012). Particularly, employees do not enjoy working and failure to complete the tasks on time, which can be the main reason that leads to the low job performance (Cetin 2013). This leads to negative influence on the quality of services and product delivery and thereby on the satisfaction of customers in T&H sector (Cetin 2013; Vrtiprah & Sladoljev 2012, cited in Gašić et al).

V. Recommendations Companies in the service industry are struggling with retaining competent employees (Murray 2018). Therefore, to improve service quality hospitality establishments should focus on investment in human resources systems, specifically on development of employee compensation programs that will help to retain employees and gain their commitment (Batt 2007; Tanke 1990 cited in Swarn, Mitzi & John 2011).

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1. Financial incentives based on performance Employers can utilize 360-degree feedback to measure employees’ performance which is a subjective multisource evaluation of employees’ behavior and skills including upward and downward appraisals, peer feedback, customers’ reviews, and self-assessment (Appendix 4) (McCarthy & Garavan 2001). As reported by Pizam and Neumann (1998), meaningful work and peer-feedback are the two significant factors that influenced the employees’ satisfaction, and customers’ evaluation of the service quality is also pivotal to a hospitality firm’s success (cited in Titz 2009). Learning through past errors is critical to self-analysis and have a major impact on employees’ motivation that in turn leads to increased perceived service quality (Appendix 5) (Hays & Hill 2001). Based on 360-degree feedback, the ranking system can be deployed to identify outstanding performers and sign bonuses.

According to Campbell (2012), employee ranking system is a technique to maintain the qualified human resources and enhance competitive advantages among colleagues and organizations. This system also stimulates task significance and distinguishes employees based on their capabilities to accomplish jobs (Appendix 6) (Roberts 2003; Grote 2005). The process of workforce ranking appraisal is evaluating the performance of personnel based on KPI, predetermined categories and 360-degree feedback; the main purpose of this system is to distinguish excellent performers among the whole human capital (Hazels & Sasse 2008). Consequently, outstanding employees deserve an appropriate competency-based payment. For instance, Holiday Inn Worldwide has incentive programs tailored to certain groups of employees (Appendix 7) (Arthur 2001). Since the service sector operates by the performance of employees, ranking and paying adequate salary is mandatory to satisfy hospitality professionals, as well as giving low performers a chance to find a more suitable occupation (Cira & Benjamin 1998; Hon 2012).

2. Non-direct financial compensation Moreover, Ward & Davis (1995) suggested the strong impact of benefit coverage and employees’ perceptions about their benefits on job satisfaction and organizational commitment. The value of benefits to employees is determined by the extent to which the benefit meets employees’ needs (Miceli & Lane 1991, cited in Sinclair, Leo & Wright 2005). Therefore, Vietnamese hospitality firms need to understand what employees expect regarding their benefits by surveying them, and then design compensation packages accordingly. By providing benefits, companies take care of other life aspects of employees to minimize distractions and facilitate productivity. Food and transport discounts on services of companies-partners can be offered, for example, vouchers on Grab application to simplify transportation to the workplace.

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Shaw & Williams (1994) suggested that various retirement plans will help to retain permanent employees in high qualified positions. Pensions in Vietnam are provided for according to the social insurance scheme where a laborer has to contribute 8% of their monthly salaries for at least 20 years to receive a lifetime pension which still is inefficient to live on (Nguyen 2020; Giang 2004). Therefore, an effective private retirement plan should be additionally conducted to help people save for their future. For instance, according to the IHG’s retirement plan, the employer contributes 5% (for staff members) and 10% (for executives) of basic annual salary to the Individual Retirement Account while employees can make additional savings on a volunteer basis and withdraw whenever they need. Furthermore, employees can become a member of the Automatic Investment Plan where a percent of their salaries is deducted to purchase growth assets which will move into fixed interest assets by retirement age (IHG n.d.).

Additionally, since companies should consider providing comprehensive healthcare plans including dental, vision, disability insurances like Marriott Corporation which prioritize employees’ welfare (Gibbons 2020) (Appendix 8-9). ‘Take care of associates and they will take care of your customers’ is the key philosophy underlying Marriott’s HR strategies (Marriott & Brown, 1997, p. 34).

3. Reward & Recognition (R&R) program Besides pay and benefits, employee recognition should become an inherent part of organizational culture to validate the importance of their work, which can be in the form of financial or nonfinancial rewards (DeCenzo & Robbins 2010, cited in Tessema, Ready & Embaye 2013; Ventrice 2003). Interestingly, managers are more concerned about the amount of reward whereas line staff are willing to exert more effort with recognition and social approval (Namasivayam, Miao & Zhao 2007; Caligiuri et al. 2010). Employee motivation initiatives can be effective only when R&R programs are appropriately implemented (Hansen, Smith & Hansen 2002). At the year-end, the company should organize employee recognition events to honor best performing employees by giving them prizes and titles that specifically represent their contribution, for example, ‘Best customer service’ award. Educational scholarships or training reimbursement can be also offered to outstanding performers to develop their potential and assist in career advancement. Based on Skinner's theory, the reward is the most effective way to reinforce employees’ desired behavior, thus an appreciated employee is likely to be more consistent in performing the job which is critical in service delivery to build customer loyalty and sustain competitiveness (Wei & Yazdanifard 2014; Bell & Menguc 2002, Botha 2016).

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VI. Concl...