BUSINESS PROCESS IMPROVEMENT AND SERVICE QUALITY IN KENYA’S AIRLINE INDUSTRY
In today’s competitive market environment, businesses dependent on their ability to react to changes, and adjust their business processes to the new market requirements. In order to achieve this, organizations need to improve their business process continuously and offers quality service to customers in order to beat competition. Business Process Improvement and service quality becomes an effective approach to improve and optimize organizations’ operations and processes. Business processes have become strategically important for service industry most specifically the airline industry just as it is important to other service sectors and manufacturing sector. However, the adoption of Business Process Improvement approaches in the airline industry still appears to be in its early stage. There is limited research reported in the academic literature regarding these process improvement approaches in the airline industry. This research therefore explored the existing phenomena of Business Improvement Process adoption and service quality through studies carried out in the airlines operating in Kenya. These Business process Improvement approaches include approaches such as Business Process Reengineering (BPR), Total Quality Management (TQM), Six Sigma and Lean Production. There is need to have more interest in the processes that focus on customers in order to achieve both process excellence and world class customer service for airlines.
The study started by analysing the literature review of BPI approaches and service quality concerns by various scholars, which provided the initial theory context. After developing the framework, airline company representatives were interviewed to determine how they introduced BPI approaches and how they conducted service quality initiatives. The resulting insights helped to develop a theory model that aimed to provide understanding of the outcomes of BPI approaches and service quality in the airline industry.
Later, the empirical data was analysed, by restating the observed evidence in the field in relation to the literature review. This was done in order to answer the research question on BPI approaches and service quality in airline sector in Kenya.
This research contributes to the body of knowledge in the area of operations and quality management, in particular to the BPI approach and service quality for the airline sector, but potentially also in a wider context of other service providers. The main contribution is the development of a theory model to explain how airlines adopt BPI approach for improving service quality, providing a better understanding for airline personnel in implementation of the process improvement approaches and service quality aimed at streamlining processes and offering better services to customers. The proposed theory model is therefore considered a basis for further empirical work, both qualitative and quantitative, relating to the BPI approach and service quality in the services industry.
CHAPTER ONE: INTRODUCTION
This chapter provides an overview of the research. Section 1.1 introduces the background and importance of the study. Research aims, questions and objectives is covered in section 1.2. Section 1.3 details the research scope. Section 1.4 presents contribution of the research. The structure of the thesis is outlined in section 1.5
Globalization has increased competition in today’s global markets. Many organizations face fierce competition when trying to increase their market share and attract more customers. Organizations must pay more attention to quality of their service as well as satisfying customers and retain their loyalty to gain repeat business and improved profits. For organizations to achieve this, they should make decisions and react to market changes and customer expectations quickly. As a result of this development, efficient management of business processes is gaining increased attention and many organizations are trying to improve their business processes continuously in response to market changes. Business Process Improvement has become a major approach, it is a management discipline which has gained popularity during last decades and aims at lifting organizations’ performance through management, improvement and control of business processes. The purpose of this management tool is to increase accuracy and efficiency in service provision and control of costs. There is an extensive body of research on the effects of Business Process Improvement in organizations and its adoption by many industries.
1.1.1 Airline Industry
The organization that regulates standards for airline members (International Air Transport Association) IATA in its (2014) publication, stated that in the last 25 years, the airline industry has been growing rapidly. The Airline industry plays a core role in supporting the world trade, international investment, and tourism activities amongst other growth parameters. Because of these roles, it is often said that the airline industry in any given economy is the center of globalization for other industries (Hanlon, 2000). The growth of airline industry provides opportunities as well as challenges to the business entities in the industry. The growth of this industry has led to the different governments around the world to deregulate the industry by enabling the formation of low cost airlines; this has further increased the competitiveness of the industry in terms of providing preferred service at an affordable price (Zimmermann, 2011)
Domestically, the air service sector is playing a very important role in the Kenyan economy. The industry has contributed to lifting the country’s image on the world map. As of 2010, the airline industry accounted for a total of Ksh. 24.8 billion in GDP to the economy (https://www.iata.org/policy/Documents/Benefits-of-Aviation-Kenya-2011). The opportunities in the airline sector in Kenyan market have increased due to the high demand for the airline transport services. On the other hand The financial difficulties and global competition in airline industry, coupled with informed consumer on the market choices, has made it necessary for airlines to adapt and develop in almost every dimension of their operations such as business structure, distribution channels, sales and customer service, etc. (Nakornthab, 2007) in order to stay competitive.
Airlines have increased the importance of streamlining processes centered to a customer-focused approach for delivering customers with the highest value services, responding to their demands and increasing expectations. The quality of airline services has been generally regarded as improving, creating new value for customers. Considered as a crucial way to stay competitive and sustain long term profitability. Various Business Process Improvement methodologies have also been widely adopted in airlines in Kenya, aiming to improve efficiency, reduce operating cost, and deliver world-class service to customers.
Focus of this research is on the airlines in Kenya, they include Kenya airways (KQ), Fly 540, East African air safari and African express. There are other airlines that operate to kenya and they include South African airlines, Air Mozambique, Air Mauritius, Air Madagascar, Precision Air, Ethiopian Airline, NAS Air, Egypt Air, Air Arabia, Qatar Air, Etihad, British Airways, KLM and Emirates (Source: Kenya Airports Authority ground handling safety 2015).
Furthermore, there are stringent measures that ensure the safety of the passengers in flight that are currently applied in almost all countries. These conditions demand all players in the airline industry to continuously improve in their operations in terms of both services and technology used to deliver quality services and better safety to the consumers (Zimmermann, 2011).
1.1.2 Business Process Improvement
Business Process Improvement is a managerial approach which helps organizations to align their strategic objectives with operational goals in increasing efficiency and effectiveness in the ever changing business environment. The objectives of an organization are achieved by a set of business processes that should be continually improved. Business Process Improvement is a combination of operational practices that focuses on driving organizational value through a process-oriented culture.
Hammer and Champy (2001) define a process as a collection of activities that takes one or more kinds of input and creates an output that is of value to the customer. Lately, almost all operation initiatives, including Total Quality Management and Business Process Reengineering, have focused on process improvement (Slack et al., 2012), with the end aim of increasing overall value, to both internal and external customers, along the value chain. Business process improvement (BPI) is a strategic planning methodology aimed at identifying the operations or employee skills that could be improved to encourage smoother procedures, more efficient workflow and overall business growth.
Business Process Improvement initiatives have become strategically important for many organizations (Harrington, 1991; Hammer, 2002; Snee, 2004). These methodologies include business approaches such as Process Reengineering, Total Quality Management, Six Sigma, and Lean Manufacturing. The purpose of Business Process Improvement is to improve the quality of process and service in a customer-focused scheme for achieving and sustaining operational and quality of service. Business Process Improvement methodologies have previously been adopted successfully in the manufacturing industry; but more lately, its use has spread widely in the service sector (Antony et al., 2006).
Airline industry is also adopting Business Process Improvement as a strategic initiative (Hammer and Goding, 2001; Hoerl, 2004). A number of academic papers have asserted that Business Process Improvement methodologies can be suitably transferred to the service sector with minor adjustment and adaptation (Bowen and Youngdahl, 1998; Jones et al., 1999; Does et al., 2002; Prajogo, 2005). The adoption of Business Process Improvement in the service sector, however, still appears to be in the early stages. This is a challenge for both practitioners and researchers in understanding the application of Business Process Improvement methodologies, pertinent to the specific service settings.
Adoption of Business Process Improvement in airline organizations has been reported through a number of articles and books, mostly authored by practitioners and consultants (George, 2003; Harry and Schroeder, 2006; Hayler and Nichols, 2007). To date, only limited research has attempted to examine the theoretical foundation of Business Process Improvement adoption in airline service sector. There appears to be no comprehensive existing theory.
Many airlines are trying to initiate Business Process Improvement methodologies to deal with increasing competitive pressures in airline business sector. There may be interesting issues of application, compatibility and adaptation of Business Process Improvement methodologies, which relate to the specific context of each operating airline.
An increasing number of papers have attempted to broaden understanding of Business Process Improvement in the service context. The majority concentrate on a customer-focused approach to Business Process Improvement, which is inherently attractive for service companies with the aim of enhancing customer satisfaction. Some recent articles have focused specifically on understanding the implementation of Business Process Improvement in aviation services (Knights and McCabe, 1997; Allway and Corbett, 2002; Swank, 2003). Additionally, researchers have empirically examined and identified critical success and failure factors, considering also significance for practitioners, aiming to the effectiveness of Business process Improvement application in airline industry (Larsen and Myers, 1997; Al-Marri et al., 2007).
There is developing literature of Business Process Improvement in this area, though the academic research related to Business Process Improvement methodology adoption in airline industry is still not highly covered, and has tended to lack consideration of aspects, such as service quality and the role of employees role in driving this Business Process Improvement initiatives.
1.1.3 Service Quality
Crosby (1979) defined service quality as conformance to requirements. Lewis and Booms (1983) referred to service quality as meeting the requirements of customer expectations. Parasuraman et al (1985) defined service quality as the degree and direction of discrepancy between consumer’s perceptions and expectations in terms of different but relatively important dimensions of the service quality, which can affect their future buying behavior.
Service quality in airlines is so prominent in enhancing competitiveness in a highly competitive sector with high operating cost, reflected in a wide range of improvement initiatives adopted within service organizations (Newman et al., 1998). When aiming to satisfy customers, the improvement of service quality is increasingly important, particularly in high customer-contact services such as the airline industry.
Many scholars have suggested the importance of service quality as a prerequisite for satisfying customers (Churchill and Surprenant, 1982; Cronin and Taylor, 1992; Anderson and Sullivan, 1993; Rust and Oliver, 1994). The link between Business Process Improvement and service quality in the literature remains unclear. A number of studies have attempted to examine this relationship (e.g. Crosby, 1991; Boaden and Dale, 1993; Mehra and Ranganathan, 2008), but the findings have not provided a complete understanding of the key causal relationships. This suggests a need for empirical research to explore the relationships between Business Process improvement initiatives and service quality that translates to customer satisfaction, considering the importance of service quality in many organizations.
Existing service quality improvement frameworks such as the service profit chain (Heskett et al., 1994) and Return on Quality (ROQ) model (Rust, Zahorik, and Keiningham, 1995) provide a good foundation for understanding the impact of improvement initiatives towards various dimensions. Heskett et al. (1994) developed a simple linear conceptual model that establishes relationships between service quality, profitability, customer loyalty, employee satisfaction and productivity. Rust et al. (1995) examined the links between service quality, customer satisfaction and retention, and profitability, providing a more complex framework for measuring the financial impact of quality improvements. Both these models focus upon the business effects of service quality improvement, rather than the process of implementation for Business Process Improvement initiatives. There appears to be a need for further study of these contexts, to develop a theory model which can also provide a practical approach to relating outcomes of Business Process Improvement initiatives, service quality and customer satisfaction.
Most Businesses have put more emphasis in Business Process Improvement practices as a means of efficiency improvement and cost reduction, relatively little in enhancing the quality of service to satisfy customers. Better understanding of the way in which Business Process Improvement methodologies help to improve service quality would provide valuable guidance in assessing Business Process Improvement outcomes from the customer perspective, and to help operational practitioners in focusing on improving areas that directly impact on customers’ needs and expectations. These would help in encouraging and sustaining the improvement efforts within an organization, which has been claimed to be declining in importance after the first initial successes gained (Basu and Wright, 2004).
With this research, it is hoped that many of the findings will be more generally useful and applicable in a wider context of many airlines and other service organizations. This research hence aimed to focus on Business Process Improvement adoption in the airlines in Kenya at the operational level, and exploring the relationships between Business Process Improvement initiatives and service quality for improved customer service. Better understanding of these issues will allow for more accurate targeting of the operations processes to be improved, through the adoption of Business Process Improvement initiatives.
1.2 Research aims, questions and objectives
In the past, organizations operated in a stable market and they had their large consumer markets. By contrast, today’s organizations are challenged by a dynamic marketplace and increasing complexity with high competition. The market is characterized by varying preferences of customers. In this context, The Business Process Improvement as a business driver has gained decisively importance in addressing some of the emerging issues in the industry.
This research aimed to explore how airlines adopt Business Process Improvement initiatives for improving service quality, to enhance customer satisfaction. To explain this adoption, it also aimed to provide elements of theory to explain the linkages between Business Process Improvement initiatives and service quality. The outcomes of this research will provide a theoretical model of Business Process Improvement adoption in the airline context, which will be positioned as a basis for further development of a practical Business Process Improvement framework. The research aimed to address the following question:
• How can airlines execute Business Process Improvement initiatives for improving quality of service, considering the linkages between internal process improvements and customer satisfaction?
In order to answer this research question, the following research objectives were defined:
• To identify gaps from the literature and establish where it is necessary to extend the theoretical foundations of Business Process Improvement adoption in the airline service context.
• The process optimization and how it can be used to improve process efficiency in the airline industry.
• To explore how airlines currently conduct Business Process Improvement and interpret their impact on improving the quality of service to customers.
• To develop a theory model to explain Business Process Improvement adoption in airline sector and in particular to identify the linkages between Business Process Improvement, service quality and customer satisfaction and provide the basis for its implementation in airline business.
Considering the research scope, question and objectives; case study will be used as the main research strategy, specifically following the theory-building process suggested by Eisenhardt (1989).
Today’s business market is increasingly characterized as a service economy. The growth of service sector is considered as an indicator of economic progress and growth. While much of the available literature provides good guidelines for manufacturing companies, there is less focus addressing challenges of adopting Business Process Improvement in service industry. Service sector has its own characteristics other than manufacturing ones and the value creation is ultimately linked with the processes. Because of the important role of service based organizations in the new economic environment, this thesis focused on measuring the application of Business Process Improvement and performance in airlines.
1.3 Scope of the research
This research focused in the areas of Business Process Improvement and Service Quality in airlines in Kenya.
The study centered on studying the mechanisms, outcomes and service quality implications of Business Process Improvement adoption in the airline industry, including approaches such as Six Sigma, Lean manufacturing, Total Quality Management, and Business Process Reengineering among others.
A theory model was developed in the particular context of the airlines in Kenya, where the collaborating case study companies were located. However, it is hoped that it may have more general applicability.
Based on the theory model, a Business Process Improvement framework was developed aimed at assessing Business Process Improvement initiatives at the operational level and was intended as a model for further development in practical use.
1. 4 Contribution of the study
This thesis aimed to contribute theoretically and practically in the following ways:
• Addressing poor quality of process models in organizations that hinders the efficiency and effectivity of processes in today’s organizations. This study tries to model and optimize the improvement processes that will create the quality of service offered to customers by the airlines.
• During last two decades, many Business Process Improvement methodologies have been developed. However, most of them have a general view on organizations mainly the manufacturing industry and do not consider service based organizations as companies with different characteristics. This study identifies the requirements of Business Process Improvement through the analysis of literature available in this field for an effective use in service based organizations.
1.5 Structure of thesis
This thesis is comprised of five chapters. Chapter 1 provides an overview of the research including: research background, research aims, questions and objectives, scope of the research, contribution of the research and structure of the research. Chapter 2 reviews the literature on Business Process Improvement and service quality aiming to build the theoretical background of this study. The research question is proposed to address key gaps identified. An initial conceptual framework is established to provide the research focus.
Chapter 3 describes the research design and methodology used for achieving the research aims and objectives. There is the description of the research design, case study approach, and research methods for data collection and analysis. The background to the case study companies and general information concerning these companies is provided.
Chapter 4 verifies the Business Process Improvement developmen. Step-by-step guidelines for practitioners are described associated with the framework which is implemented. Chapter 5 discusses the findings of this research and the contribution to knowledge. The limitations are indicated, leading to suggestions for future research.
CHAPTER TWO: LITERATURE REVIEW
It is crucial for organizations to design, manage, and improve their business processes to enhance their performance and better on their profitability. Business Process Improvement has become a key factor in order to manage business processes and improve on service quality. In the current business environment, organizations that do not manage their business processes well, experience difficult time in the market environment. The importance of business processes is being felt within organizations and this trend brings into perspective the importance of Business Process Improvement which is a holistic approach and important managerial tool in refining organizational processes.
This chapter will review the relevant literature to provide the theoretical foundations of the research. Three main areas of literature in consideration are Business Process Improvement approaches, service quality, and business process performance measurement. The review of the first two areas aims at clearly identifying the key research gaps and therefore refining the potential areas for the research question. An initial conceptual framework is established to provide the focus of the research.
This chapter has three main sections. Section 2.1 briefly outlines the underlying concepts and theories of four key BPI methodologies: Six Sigma, Lean production, Total Quality Management, and Business Process Reengineering. Section 2.2 reviews the service quality models of SERVQUAL and Grönroos, aiming to identify the critical dimensions of service quality. The literature further examines the link between BPI approaches and service quality principles. Section 2.3 analyses research gaps as defined by this literature review, together with conceptual framework. The performance measurement literature is provided in Section 2.4.
2.1 Business Process Improvement approaches
Processes are designed sequences of tasks aimed at creating value addition in transformation of inputs into material or information in order to achieve intended outputs (Upton, 1996). On the other hand, process improvements are actions taken for improving organizational processes because of the need for organizations to respond rapidly to ever changing environments in the face of stiff competition (Hayes and Pisano, 1994).
Having been widely adopted in manufacturing, BPI approaches have emerged as a powerful strategy for improving operational effectiveness in service organizations (Hammer, 2002; Antony et al., 2006). The customer-focused approach of BPI is inherently attractive for a service organization. Hence, BPI approaches have been widely adopted in service organizations (Hammer and Goding, 2001; Hoerl, 2004). In this research, BPI will be broadly used as an improvement initiatives, adopted for improving a business process to achieve the goals of reducing cost and enhancing customer satisfaction for airline business in Kenya. Four main approaches are reviewed and they are: Six Sigma, Lean production, TQM and BPR.
2.1.1 Six Sigma
Six Sigma is defined by Schroeder et al. (2008) as an organized, parallel structure to reduce variation in organizational processes by using improvement mechanisms, a structured method, and performance metrics with the aim of achieving strategic operation objectives. As a BPI approach, six sigma seeks to identify and eliminate causes of defects, or failures in business processes to advance improvements in quality, process performance, productivity and customer satisfaction (Nave, 2002; Snee, 2004). Six Sigma was developed based on statistical thinking and methods, focusing on the reduction of process variation (Hensley and Dobie, 2005). Motorola is well recognized as the pioneer company that adopted the Six Sigma concept for reducing quality cost in the 1980s (Henderson and Evans, 2000; Antony, 2002). Subsequently, six sigma has been adopted by many large organizations such as General Electric (GE), American Express, and Ford
The term Six Sigma is derived from the minimal level of variation which aims at achieving a maximum of 3.4 defects per million opportunities (DPMO), considering a defect opportunity as a failure in the process that is significant to customers value (Nonthaleerak and Hendry, 2006). Since a product will only be considered defective if it is produced outside of customer specifications, a process with such a high capability will almost produce no defect.
The mathematical calculation of 3.4 DPMO is based on two assumptions: the process output follows a normal distribution, and the process mean may shift up to 1.5 standard deviations in the long term. In the extreme situations when the process mean has shifted 1.5 standard deviations one way or the other, the most number of defects the process will produce can be calculated as P (Z ; 4.5) + P (Z ; 7.5) (Bothe, 2002). Since P (Z;7.5) is virtually zero, Six Sigma is technically P (Z ; 4.5), which is 3.4 per million (see Figure 2).
Figure 1: Six Sigma as a defect rate metric.
Figure 2: Calculating DPMO for Six Sigma (the process mean shifts up to 1.5 standard deviations in the long term).
The strength of Six Sigma, as distinct from other approaches, is a clear focus on achieving measurable and quantifiable operational processes (Antony, 2004b; 2006) Considered as a project-base, Six Sigma provides a constructive approach for measuring and analyzing operational processes to determine exactly how and why defects occur, and then taking steps to address those root causes for improvement (Hammer, 2002).
The two main methodologies in six sigma are Define, Measure, Analyze, Improve and Control (DMAIC) and Design for Six Sigma (DFSS). DMAIC provides a well-structured framework for solving problems by assuring correctness and effectiveness of the execution process (Hammer and Goding, 2001). DMAIC methodology is in line with the problem-solving steps of Deming’s Plan, Do, Check, Act (PDCA) cycle; however, it places more emphasis on integrating specific tools into each step of the method (Hoerl, 2004). A number of tools and techniques are employed during DMAIC phases such as Failure Mode and Effect Analysis (FMEA), cause-effect diagram, statistical process control, etc. (Hoerl, 2004; Schroeder et al., 2008). DFSS is a powerful approach to design new products, processes and services in a cost-effective and simple manner to meet the needs and expectations of the customers (Antony, 2002; Nonthaleerak and Hendry, 2006). Table 2.1 is a summary of DMAIC technique.
Table 2.1: DMAIC method (adapted from Snee, 2004 and Hoerl, 2004)
Define To define the Critical to Quality (CTQ), considering Voice of Customer (VOC), Voice of Employee (VOE), business viewpoint, and stakeholders
Measure To identify the key internal process measures in response to the defined CTQ
Analyze To analyze and identify the root cause of the problem, causing the process variation
Improve To select an effective solution to improve the root cause of the problem
Control To ensure that the improved process is sustained and institutionalized after the project is completed
Though Six Sigma process improvement approach is more than 25 years old, it is still increasing in importance, particularly in service industry (Antony et al., 2007). The underlying concept, which is rooted in understanding the true customer needs, makes Six Sigma appropriate for adoption in service industry and more particularly airlines, to enhance customer satisfaction (Schroeder et al., 2008).
There are many academic research conducted on Six Sigma, they seem to be lagging behind in its understanding of Six Sigma approach on service improvement (Antony, 2004b; Schroeder et al., 2008). Few academic papers have discussed applying the approach to the service sector. This calls for empirical research to develop in-depth understanding for strengthening both the theoretical and practical foundations of Six Sigma across various industries, particularly in the service context. Below is the summary of distinctive elements of Six Sigma.
Table 2.2: Distinctive elements of Six Sigma
Leadership engagement In Six Sigma, senior executives act as champions and they are directly involved in projects. This ensures right projects are selected and receive buy-in from the organization. Black Belts (full-time improvement project leaders) are selected not only because of their technical knowledge but also their leadership skills (Schroeder et al., 2008).
Dedicated Improvement organization Six Sigma requires organizations to use Black Belt which is a convention in Six Sigma to only select an organization’s best employees to fill the Black Belt positions (Eckes, 2000; Harry and Schroeder, 2000; Pande et al., 2000). This dedication leads to effective improvement and also makes the effort easy to measure.
Customer Orientation At the project level, each Six Sigma project is required to clearly demonstrate its value to customers. And the benefits of the project must be clearly visible from customers’ perspective. At the organization level, customer orientation is used as a principle to select and prioritize projects that will clearly be visible from customers’ perspective by the project selection committee (Eckes, 2000; Harry and Schroeder, 2000; Pande et al., 2000).
Metric Focus All Six Sigma projects must have clearly defined goals, expressed in metrics such as Critical-to-Quality (Linderman et al., 2003). Each project is carefully audited on its intended and realized benefits, usually in financial terms and certified by the organization’s finance department (Eckes, 2000; Pande et al., 2000; Schroeder et al., 2008).
Structured Method The method supports structured exploration of root causes and structured control of the process to produce desired output. The emphasis of adhering to a standard method helps create a common language across the whole organization, which benefits knowledge creation and dissemination (Choo et al., 2007a, b).
2.1.2 Lean production
The Lean concept represents a systematic approach for identifying and eliminating non-value added elements in the process, consequently pursuing perfection in delivering service to customers (Anderson et al., 2006).
Womack et al., (1990) highlighted the fact that manufacturing industry has tended to change from mass production to Lean production (also called Lean manufacturing). Previously, mass production introduced a large amount of unseen „waste’ along the whole length of the value chain (Kippenberger, 1997). The term ‘Lean’ was pioneered on the shop-floors of the Japanese automotive industry, at the Toyota Motor Company (Hines et al., 2004). Besides focusing on the shop floor, Womack and Jones (1994) suggest that the Lean concept can be applied throughout the value stream to eliminate waste and to enhance value to the end customers. According to Hines et al. (2004), customer value can be created by reducing internal wastes and adding service features without adding cost; resulting from implementation of the Lean concept. This reflects the philosophy of Lean that aims at improving the processes considering the most economical approach (Dahlgaard and Dahlgaard-Park, 2006).
Eight types of wastes are addressed by Womack and Jones (1996) as follows:
• Defects refer to the mistakes which require rectification
• Over-production of goods that are not needed
• Inventories of goods awaiting processing or consumption
• Inappropriate processing steps
• Unnecessary motion (movement of employees)
• Transport of goods between processes without purpose
• Employees waiting leading to idle time
• The design of goods and services which do not meet the need of customers
Recently a new (eighth) waste has been introduced: the misuse of intellectual capital Womack ; Jones (2003). This waste means not stimulate or use the complete employee capacity in identify opportunities for improvement.
Several tools and techniques are applied for achieving the objective of Lean such as Kanban, Kaizen, 5S, Pull scheduling, etc. Specifically, value stream mapping is recognized as the core method. Hines and Rich (1997) developed the decision-making process for mapping the value stream, providing tool and techniques, to assist in the Lean Production implementation.
Rother ; Shook (1999), detailed value stream as an all action required to bring a product through all flows essential to each product: In the service sector, the application of value stream maps is of great importance. Most of the service organizations use VSM to improve processes because, similarly to manufacturing, the service sector also has direct relation with development, preparation and delivery of service to customers, and these steps, activities or processes are easily mapped using VSM concepts.
According to Slack et al. (2002), Just in Time (JIT) is a paced technique, aiming at improving global productivity and eliminating waste. It comes as a consequence of the use of a balanced production. The customer will have his needs met on time and only for what is needed (it is a pull system, triggered by demand). JIT allows organizations to deliver services more efficiently and with reduced costs, since it intends to provide just the right amount, at the right time, at the place determined and using the minimum capacity from facilities, equipment, materials and people. JIT has a number of tools and techniques that provide operating conditions, such as Kanban (Slack et al., 2002).
Another tool often mentioned in the literature is the use of 5S (Sort,Set in order/Streighten, Shine, Standardize, Sustain). This tool will ensure that the obtained improvement will stay stable. Especially in service areas with expressive movement of people and materials, 5S can help ensure process stability.
Based on the studies of Levitt (1972, 1976) and additionally taking advantage of the emergence of the fundamentals of lean production (Ohno, 1997), researchers Bowen ; Youngdahl (1998) were the first to carry out studies about the transfer of the lean production techniques used in industries to the services sector. They conducted case studies of applications of lean tools and published the results of what became known as lean service. This study presented the characteristics of the lean service applied in a network of fast food restaurants, in a hospital and an airline company. The results of these studies led to new applications in Lean service.
Following this line of new studies about lean services, Allway ; Corbett (2002) presented situations that proved that it is possible to use manufacturing techniques in services, as well as new definitions for lean principles. Later, Swank (2003) consolidated some of lean service results performing a case study of applications of lean in a service applications.
Despite the similarity of some lean service principles and lean manufacturing, lean service does not have a single or specific model that can be taken as reference in any situation or area of service like standard steps, on the contrary, there are several models which can be applied according to the nature of the service.
Following table is the summary of different authors of lean principles for services.
Author Lean characteristics developed to service operation
Swank (2003) – Reduce the performance trade-offs
– Make the value-added processes flow and implement customer-driven system
– Eliminate losses in the value chain of activities, from development to delivery
– Increase customer focus and involvement in the development and delivery processes
– Empower employees and teams
– Segregate activities by complexity
– Publish / present performance results
Youngdahl (1998) – Make the value-added processes flow and implement customer-driven system
– Eliminate losses in the value chain of activities, from development to delivery
– Increase customer focus and involvement in the development and delivery processes
– Empower employees and teams
Womack ; Jones (2005) – Solve the customers’ problem completely by ensuring that all services operate and work together
– Do not waste the customers’ time
– Provide exactly what customers want
– Provide what is wanted, exactly where wanted
– Provide what is wanted, where wanted and when wanted
Sánchez ;Pérez (2004) – Continuous improvement
– Multifunctional teams
– Just-in-time delivery
– Involvement of suppliers
– Flexible information systems
Bicheno (2008) – The new wastes: making the wrong product to be efficient, human capital, inappropriate systems, energy and water and natural resources.
– Seven wastes in customer service: delays, duplication, unnecessary movement, lack of clarity in communication, wrong inventory, missed opportunities and mistakes.
– Fourteen office wastes: screening and research, inappropriate measurement, low load, high load, inappropriate prioritization, interference, inappropriate frequency, startup and end off, mistakes, errors or lack of appropriate knowledge, communication error, sub-optimization, wait, improper presence and inappropriate tradeoff.
Jones (2006) – Specify what creates and what does not create value from the customers’ perspectives
– Identify all the steps needed to design, order and produce the service along the
flow to focus on losses that do not add value
– Make those activities that create value flow without interruptions, return or fragments
– Do only what is driven by the consumer
– Strive for perfection, continuously improving services and value stream
The Lean service operations must offer what customer wants, where he wants it. Airlines focus is to reduce aircraft time on ground. For this, customers are partially involved in some activities to reduce this time, for example, just before landing, the crew requests all passengers to collect their trash and magazines. Besides reducing ground time it help reduce expenses with cleaning. Another lean logistics strategy at airports is the boarding time. Passengers located at different portions of the aircraft are called at different time intervals.
From the advent of the lean concept to the present days, the popularity of lean thinking has really spread. Earlier applications only focused on manufacturing companies. The lean thinking philosophy, however, quickly moved to new areas such as services, trade and the public sector (Womack & Jones, 2005). Even with this expansion to new areas, the major use of lean thinking is still little spread among many service sector organizations. And hence the availability of literature specific with lean applied to the service sector is still scarce (Piercy & Rich, 2008b). The lean transformation to the manufacturing sector is well established, however, the use of lean tools to improve service quality is relatively new, with limited reported benefits and approaches.
2.3.1 Total Quality Management
In today’s global competition and economic liberalization, quality has become one of the key factor for achieving business competitive advantage. Having a high quality product or quality in service allows an organization to attract new and maintain existing customers. That is why most service sector implement Total Quality Management (TQM). This TQM is a philosophy that leads for company to produce product with better quality and aims to satisfy customer needs. For TQM to be successful it needs to keep on continuously improving until in the end satisfy the customer needs.
The most important principle of TQM is customer-focus (Dean and Bowen, 1994). The underlying theory concentrates on management of leadership, people and teamwork, and process improvement, aiming to satisfy customers (Snee, 2004). TQM has been widely disseminated from the early 1980s as a management strategy for performance improvement in both manufacturing and service sectors (Dean and Bowen, 1994). It is viewed as a means of managing the organization to excel on all dimensions of products and services which are critical to customers (Chase et al., 1998). The core elements of TQM can be classified as ‘soft’ TQM and ‘hard’ TQM. These two dimensions should be interrelated and support each other for successful implementation (Bou-Llusar et al., 2009). Prajogo (2005) points out that the soft aspect (e.g. leadership, customer focus, empowerment, etc.) has influenced the adoption of TQM in the service sector. This is complemented by ‘hard’ factors (system approach, proceeds approach and factual approach).
The holistic approach of TQM helps to integrate all functions to focus on the customer needs and organizational objectives through the improvement of quality, productivity, and competitiveness (Kumar et al., 2008a). In this way, Mehra and Ranganathan (2008) suggest that customer satisfaction should be included as an important objective of the TQM implementation. The improvement approach of TQM is based on the Deming or PDCA (Plan-Do-Check-Act) continuous-improvement cycle (Anderson et al., 2006) and the incremental Japanese improvement approach known as Kaizen. A number of tools and techniques are used to improve and control the operational processes such as 7QC (Pareto diagram, Scatter diagram, Cause and effect diagram, Histogram, Flow chart, check sheet, Control chart), Quality Function Deployment (QFD), statistical process control, etc. (Snee, 2004; Anderson et al., 2006). In order to stimulate quality improvement, three well-known quality awards have been established including: The Deming Prize, The Malcolm Baldrige National Quality Award (MBNQA) and European Foundation for Quality Management (EFQM) (Slack et al., 2004). These award models and their criteria have influenced, and been influenced by, the development of TQM, particularly the seven criteria of MBNQA including: leadership, strategic planning, customer and market focus, information and analysis, human resource development, process management, and business results (Chase et al., 1998). The MBNQA has become of interest as a comprehensive framework for companies in improving the competitiveness, and increasing the awareness of quality improvement efforts (Flynn and Saladin, 2001; Pannirselvam and Ferguson, 2001). The seven criteria of the model represent the underlying relationships between quality management and organisational performance. In relation to this, there are a considerable number of academic researches that attempt to link the MBNQA and organisational performance, to understand the impact of TQM implementation.
Wilson and Collier (2000) empirically tested the theory and causal performance linkages implied by the MBNQA, using structural equation modelling methods. Their statistical results provided insights into the specific directions of causation among seven categories of the framework, indicating particularly that process management affects process quality and customer satisfaction much more than it does on financial performance. Similarly, Ghosh et al. (2003) employed the structural equation model to test the relationships between strategic and operational quality planning implied by the MBNQA model, and their impact on performance. Their findings specifically indicated that the strategic planning is a driver of operational quality planning, thereby resulting in the positive business results. All these studies support the relationships among MBNQA criteria and emphasize the adequacy of the MBNQA to substantiate the relationship between TQM practices and organisational performance.
TQM has been empirically demonstrated to be successful in terms of financial results, operating performance, quality, and customer dimensions etc. (Hendricks and Singhal, 1997; Agus, 2004; Kumar et al., 2009). Nevertheless, there are some criticisms and concerns of TQM adoption related to: a lack of structured approach to improve the process, difficulties in measuring TQM outcomes, costs and length of TQM implementation, and effectiveness of TQM in service industries etc. (Hackman and Wageman, 1995; Powell, 1995; Basu and Wright, 2004; Mehra and Ranganathan, 2008).
Earlier studies in TQM suggested that the successful implementation of TQM will result in improved employee involvement, improved communication, increased productivity, improved customer satisfaction, and improved competitive advantage (Belakar, 2014; Madar, 2015; Yung Kil Lee, Ki Woong Kim; Elizabeta Mitreva, et al., 2014). Also, a strong competitive pressure has forced service industries to adopt quality management tools and techniques to offer higher quality products and services as a way to delight and keep their customers intact. Many organizations have implemented TQM and identified several requirements for better business performance in order to improve their position in the global market which has now become an important research area in TQM. (Charu Guptal, R. M. Belakar, 2014; Madar, 2015).
The concept of service quality has emerged from TQM philosophy and now it is treated as an essential criterion for effective TQM. Above all, a new philosophy, a new model of enterprise culture, with the aim to orient towards customers all its activities and processes and optimize them so that they could bring long-term benefits. (Talib, Rahman, ; MN, 2012).
While Padmasiri, (2009) defines TQM as representing a systematic way of managing an organization’s by involving new management strategies, changes in culture and infrastructure, tools and techniques to determine all members of the organization to collaborate and enable continuous improvement of quality defined by the client. The collected review by many authors suggested that service quality can be categorized into number of ways such as customer service quality, online service quality and automated service quality with the common aim to achieve customer satisfaction, improved financial performance, and competitiveness (Talib, Rahman, & MN, 2012; Al-Ali, 2014; Madar, 2015).
2.1.4 Business Process Reengineering
Hammer and Champy (1993) described BPR as a means of radical process redesign in order to achieve large-scale improvement in business performance. They defined reengineering as: “The fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures such as cost, quality, service, and speed.”
Reengineering is different from many other Business Process Improvement approaches because it does not focus on what is, but rather on what should be. It does not seek to alter or fix existing processes; yet, it forces companies to ask, whether or not a process is necessary, and then seeks to find a better way to do it. Peppard (1999) summarizes the key principles of BPR as: ambition, process focus, questioning fundamental assumptions of the process, and that information is used as an enabler and measurement of results, not as activities. He also emphasized the importance of integrating the business process redesign and the corporate strategy of the underlying business.
Many companies have implemented reengineering projects, and some achieved great success, and others failed. BPR has been implemented by both service (Hall et al., 1993, Attaran and Wood, 1999, Shin and Jemella, 2002) and manufacturing companies (Hall et al., 1993, Zinser et al., 1998, Tonnessen, 2000).
A broadly defined process should include more activities so the improvement is more likely to extend throughout the entire business. The depth is measured by the change in six elements: role and responsibilities, measurements and incentives, organizational structure, information technology, shared values, and skills (Hall et al., 1993). While process reengineering could benefits manufacturing and service firms, there should be distinction in its implementation to suit the unique situation of the firm (Shin and Jemella, 2002).
Various critical concepts are applied for achieving the objective of BPR, such as Just-in-Time concepts, process flow charting, customer-focused operations, etc. (Slack et al., 2004). Typically, information technologies are incorporated to enable the redesigning of processes. The underlying approach is the belief that the operations should be organized in end-to-end business processes to deliver value for customers, rather than focusing on the individual activity or function (Slack et al., 2004). In order to achieve the objective of BPR, the improvement team should be members from related functional units, and all the units that depend on the improved process (Hammer, 1990). Two main types of changes resulting from BPR could be viewed as incremental and radical changes (Childe et al., 1994). BPR has been criticized regarding a perceived lack of concrete foundation of the implementation approach, and paying too little attention to the softer employee aspects such as change management, reward and motivation, human involvement training, etc. (Povey, 1998; Shin and Jemella, 2002).
To provide a summary of comparative views of Business Process Improvement approaches, the underlying theory, focus, approaches, and tool and techniques are summarised in Table 2.3. This is adapted from papers that have provided a comparison of BPI approaches (e.g. Nave, 2002; Anderson et al., 2006; Dahlgaard and Dahlgaard-Park, 2006). The following sections will now present key literature related to BPI adoption in services, BPI implementation, and the evaluation of BPI approach.
Table 2.3: The comparison of BPI methodologies (adapted from Nave, 2002: Anderson et al.,2006; Dahlgaard and Dahlgaard-Park, 2006)
Approaches Six Sigma Lean TQM BPR
Origin of BPI approach The quality evolution in Japan and Motorola The quality evolution in Japan and Toyota production system The quality evolution in Japan The quality evolution in Japan
Underlying theory Reduce variation/ no defects -Remove Waste/ non-value added in the process
-Customer value driven Focus on customer -Business transformation
-Radically redesigning the end-to-end business process to add value to customers
Focus To solve the problems in the operations processes, in response to customers’ requirements Flow focused, aiming to eliminate
waste in the process for driving the perfection to customer Customer-focused End-to-end business process (cross
Improvement approach/principles -The main improvement approach follows the DMAIC methods consisting of five phases; Define, measure, analyse, improve, and control
-Design For Six Sigma (DFSS) including: Define, Measure, Analyse, Design, and verify -Identify customer value
-Value stream analysis
-Perfection The improvement approach is based on Deming or PDCA cycle (Plan-Do-Check-Act) -Rethink business process in a cross-functional manner
-Radically rethinking and redesigning the process
-Have those who use the output of the process perform the process
-Put the decision point where the work is performed, build control to the process
Tools/ techniques Statistical process control
Root cause analysis
Cause and effect diagram
Single piece flow process
Analytical and statistic tools
Seven quality control tools
Seven management tools
Statistical process control tools
Quality function deployment
(QFD) Process mapping/flow charting
Activity Based Costing (ABC)
2.1.5 Business Process Improvement approach in the service sector
BPI approaches have long tended to grow from the manufacturing industry into the service sector. These approaches have been growing strongly for service companies as an improvement strategy (Bowen and Youngdahl, 1998; Hammer and Goding, 2001; Does et al., 2002; Antony, 2004a). There are a number of research papers that specifically explore the extension of BPI from manufacturing to service sector. Bowen and Youngdahl (1998) discussed the transformation of Lean from manufacturing to service operations. Prajogo (2005) empirically examined the differences between TQM implementation in manufacturing and service sectors; revealing the insignificant differences, in terms of impacts on quality performance. Jones et al. (1999), studied lean application in the communication industry focusing on the improvement of service quality and operating costs. All these authors suggest that BPIs are suitable and readily applied to the service sector, with minor adaptation and adjustment.
Business Process Improvement approaches in airline services have emerged as the new wave of change in BPI applications. Studies of Allway and Corbett (2002) and Swank (2003) illustrated the success of Lean implementations, through case studies in financial and airline services, showing that a company can benefit both in terms of cost reduction and better service quality for the customer. Shin and Jemella (2002) examined the adoption of BPR in financial institutions for providing guidelines in conducting improvement projects. Resulting from the investigation of TQM adoption in financial services, Knights and McCabe (1997) revealed that a company places more emphasis on cost reduction and control, whilst paying less attention to the softer aspects that are important in measuring the success of initiatives. Due to the similar in service provision of finance services with the airline industry, the studies can be applied directly in the airline sector with minimum modifications.
Criticisms of BPI adoption in services, however, have been posited in the literature, particularly in a lack of consideration of ‘soft aspects’ related to service employees, customer perspective, etc. (Knights and McCabe, 1997; Bowen and Youngdahl, 1998; Elliott, 2003). In the context of this research, the author refers to soft aspects as those outcomes of BPI initiatives, which impact on both employee and customer dimensions, including both objective and subjective attributes (e.g. perception, satisfaction). There are gaps in the literature coverage and evidence, pertaining to these soft aspects, suggesting a need for empirical research to broaden insights into BPI adoption in the airline service sector.
2.1.6 Business Process Improvement implementation
Majority of academic papers related to BPI implementation are based on the manufacturing sector. There are a number of papers seeking to examine the critical success factors of BPI implementation. Coronado and Antony (2002) surveyed and prioritised the critical success factors which are necessary for an effective implementation of Six Sigma projects. Motwani (2003; 2004) examined the critical success factors involved in the implementation of Lean and Six Sigma, using a business process change framework adapted from Kettingger and Grover (1995).
Several papers have tried to identify the key success factors of BPI implementation in the service sector. In an earlier contribution, Larsen and Myers (1997) identified the success and failure factors of BPR specifically focusing on financial services, using in-depth case studies of BPR projects. More recently, Al-Marri et al. (2007) examined the critical success factors of TQM in the banking sector, focusing on the service quality dimensions. Studies by Antony et al. (2004a; 2007) surveyed the critical success factors of Six Sigma in a UK service organization; identifying the linkage with organisational strategy, customer focus, management commitment, culture, and training and education; as important ingredients of successful implementation. It could be noted that the success factors identified for services highlight the importance of ‘soft issues’ e.g. service quality, employees, which are slightly different from that of manufacturing.
There is need in collaboration between TQM, Six Sigma, Lean production and BPR. George (2002) argues that applying Six Sigma alone seems to lack consideration of the improvement in lead time and does not directly address the process speed, whilst Antony et al. (2003) suggest that companies who are engaged in Lean methodology alone have a limitation of improvements across the organization, because of the absence of the cultural and infrastructure of Six Sigma. All these approaches are complementary, with an aim of eliminating wastes, and improving process efficiency (Basu, 2004). Nevertheless, papers in this area are mostly descriptive and conceptual. This would be an opportunity to empirically explore insights into the integration of TQM, BPR, Lean production and Six Sigma in the service context.
Other papers present an integration of Lean and Six Sigma with other approaches. Revere (2003) demonstrates the ease of integrating Six Sigma with TQM effort, providing empirical evidence through a case study in healthcare service. Both papers of Bhasin and Burcher (2004), and Hines et al. (2004) clarify the rationale for integrating Lean with other management approaches or improvement tools without contradiction to provide a higher quality of service to customers. Hammer (2002) argues that various improvement initiatives should be positioned under a larger context of process management; this is in line with Anderson et al. (2006) and Dahlgaard and Dahlgaard-Park (2006), who suggest the benefits from integrating BPI approaches considering Six Sigma and Lean as the key road-maps, supporting the value of TQM and BPR adoption. Hence, an understanding of the way in which various BPI approaches could be integrated to optimize the organization’s benefits leaves a critical gap for future studies.
The last category is the papers that provide a comparison of BPI approaches. Nave (2002) compares different process approaches; Lean, Six Sigma, providing understandings of concepts and effects, and similarities and differences. Papers by Hoerl (2004) and Snee (2004) discussed the evolution of BPI approach and suggest future study areas, while Basu (2004), Bendell (2006), and Anderson et al. (2006) reviewed recent BPI approaches; including TQM, Six Sigma, Lean, and BPR; to identify similarities and differences, as well as the strengths and limitations of each approach. In order to obtain an in-depth understanding of BPI implementation, the exploratory case study is deemed apposite for broadening the range of both theoretical and practical implications.
2.1.7 The evaluation of Business Process Improvement approaches
Many authors have studied the impact of BPI approaches on various dimensions of performance, with the main focus being on the well-established approach of TQM. Mann and Kehoe (1994) examined the effects of TQM and other BPI initiatives on business performance, aimed at assisting a company to select quality activities to solve specific problems. More recently, Kumar et al. (2009) investigated the impact of TQM implementation on multi-dimensional performance. These two studies reveal that improvement initiatives help in improving operational processes, employee relations, financial results, quality standards and customer satisfaction; thereby positively impacting on company performance. The survey results of Terziovski (2006), confirmed positive relationships between TQM and two operational measures: productivity improvement and customer satisfaction. Antony et al. (2007) suggest that the impacts of BPI initiatives are typically located in three major criteria of cost, quality and customer satisfaction.
While the outcomes of BPI in manufacturing have typically emphasised cost and conformance to specification (quality) dimensions, these may not be so appropriate to the characteristics of services, due to the potential importance of softer dimensions (customer expectation, perception and satisfaction). Robinson (1998) and Antony (2004a) both argue that the evaluation of a BPI project may not adequately consider these soft aspects such as responsiveness, empathy, assurance, which are closely linked to customer’s perception of service quality. These authors suggest that the evaluation of improvement initiatives should incorporate both the internal performance standard and external customer perceptions. Additionally, Boaden and Dale (1993) and Antony et al. (2007) indicate the difficulties of measuring BPI outcomes on customer satisfaction, considering the special characteristics of services (e.g. intangibility, heterogeneity, inseparability). This suggests the need for a better understanding of;
1) The outcomes of BPI adoption in the particular context of the service sector and
2) Causal linkages between BPI, service quality and customer satisfaction, which will be significant for developing an effective evaluation framework.
Crosby (1991) developed a road-map to understand the link between improvement initiatives and customer satisfaction measurement in service firms. Flynn et al. (1994) highlighted the importance of measuring the performance of quality initiatives from the customer perspective. Studies by Agus (2004) and by Mehra and Ranganathan (2008) empirically indicated that TQM practices strongly impact on customer satisfaction. Roth and Jackson (1995) highlighted how improvement initiatives adopted in the banking industry helped in improving both technical and functional quality aspects. Papers by Setijono and Dahlgaard (2007; 2008), suggest that the evaluation of initiatives should involve not only costs from the provider’s perspective, but also the outcomes in term of perceived customer value.
As clearly stated by Deming (1986), an improved business process should result in both lower costs and more satisfied customers. Many quality theorists and practitioners are also in agreement with the idea that quality improvement involves both cost reduction and revenue expansion through satisfied customers (Rust et al., 2002). Although indicating that relationships exist, the literature on BPI evaluation to date has not provided a generic explanation of the relationships and causal linkages between BPI and customer satisfaction. A number of authors claim strong links between improvement initiatives and outcome variables relating to customer satisfaction, relatively limited empirical research addresses these relationships. Managerially, it is of interest to understand the linkages between BPI initiatives, service quality and customer satisfaction, in order to identify the internal operations process to be improved that will have the greatest impact on the customer satisfaction (Kordupleski et al., 1993). However, there appears to be no comprehensive theory or model in the literature, which explains how to measure BPI outcomes pertaining to perspectives of service quality. The author, therefore, considered that this area could benefit from further exploratory research, considering the important aspects underlying service quality principles to help understand the outcomes of BPI adoption at the operational level towards customer satisfaction.
Hence, the review of literature in this section suggested the idea of developing a BPI evaluation framework for a particular context of airline service, considering the customer perspective (e.g. service quality, customer value, etc.), in response to the customer-focused approach of BPI implementation.
2.2 Service Quality
Service quality is considered as critical dimension of competitiveness (Lewis, 1989). Providing excellent service quality and high customer satisfaction is the important issue and challenge facing the service industry (Hung et al., 2003). Service quality is an important subject in both the public and private sectors, in manufacturing and service industries (Zahari et al., 2008). It is the extent to which a service meets or exceeds customer needs and expectations (Lewis and Mitchell, 1990; Dotchin and Oakland, 1994; Asubonteng et al., 1996; Wisniewiski and Donnelly, 1996; Seilier, 2004; Zahari et al., 2008). Over the past decade, service quality has become a major area of attention to practitioners, managers and researchers because of its strong impact on business performance, lower costs, return on investment, customer satisfaction, customer loyalty and gaining higher profit (Leonard and Sasser, 1982; Cronin and Taylor. 1992; Gammie, 1992; Hallowell, 1996; Chang and Chen, 1998; Gummesson, 1998; Lasser et al., 2000; Newman, 2001; Sureshchander et al., 2002; Seth and Deshmukh, 2005).
Several conceptual models have been developed by different researchers for measuring service quality. It is envisaged that conceptual models in service quality enable management to identify quality problems and thus help in planning for the launch of a quality improvement program, thereby improving the efficiency, profitability and overall performance (Seth and Deshmukh, 2005). There are two main aspects that describe and affect both service quality; the actual service customers expected (expected service) and services perceived (perceived service). Fitzsimmons & Fitzsimmons (2001) explains that the creation of customer satisfaction for a service can be identified through a comparison between service perceptions with service expectation.
Although the definitions of service quality vary, the definitions are all formulated from the customer perspective: that is, what customers perceive are important dimensions of quality (Lewis, 1989). Gronroos (1982) and Parasuraman, Zeithaml and Berry (1988) were the pioneers in the conceptualization of the service quality construct, these authors maintained that the overall perception of quality was a disconfirmation of a customer’s expectation and his/her evaluation of a service. The dimensions of service quality have also been debated in the literature. Gronroos (1982) proposed technical (the tangible aspects of service delivery) and functional (the expressive performance of the service) qualities as two critical dimensions of service quality. Alternatively, Parasuraman et al. (1988) proposed five service quality dimensions, namely, tangibles, reliability, responsiveness, assurance and empathy. Rust and Oliver (1994) developed a three-component dimensional model and concluded that the service product (technical quality), the service delivery (functional quality), and the service environment were critical dimensions of service quality. Dabholkar, Thorpe, and Rentz (1994) tested a hierarchical conceptualization of retail service quality that proposed three levels: Customers’ overall perceptions of service quality; Primary dimensions; and Sub-dimensions.
Brady and Cronin (2001) adopted the view that service quality perceptions were multidimensional and identified the primary dimensions of their model based on Rust and Oliver’s (1994) findings. Work by Brady and Cronin (2001) has provided a new and integrated conceptualization of service quality. They argued convincingly that customers form service quality perceptions on the basis of their evaluations of three primary dimensions: outcome quality, interaction quality, and environmental quality; these three primary dimensions are composed of multiple sub-dimensions. The aggregate evaluations of the sub-dimensions form their perceptions of an organization’s performance on each of the three primary dimensions, and those perceptions then lead to an overall service quality perception. The debate on service quality dimensions is still ambiguous, but it is generally accepted that perceptions of service quality are multidimensional and the dimensions are industry-specific.
Service quality becomes increasingly important for today’s business, particularly in high-customer involvement industries like airline services. It could be considered as an imperative strategy, which helps a company to attain a competitive advantage, in turn increasing long-term profitability. In airline services, the significance for improving the service quality has been noted in relation to the vulnerability of price competition (Howcroft, 1991). This has left an important agenda for companies, to understand and improve the quality of service to satisfy their customers.
According to Parasuraman et al. (1985), three underlying themes of service quality exist:
• Service quality is more difficult for customers to evaluate than goods quality.
• Service quality perceptions result from a comparison of customer expectations with actual service performance.
• Quality evaluations are not only made on the outcomes of a service, but also involve the process of service delivery.
Academic research in service quality theory has been dominated by two main conceptualizations; the SERVQUAL model developed by Parasuraman et al. (1985) and Grönroos’ service quality model (Grönroos, 1984).
Below are the characteristics of airline services.
1) Intangibility. Like most other services, airline services have both intangible and tangible aspects, though it can be argued that they are more potentially intangible in some aspects than in services where a substantial tangible element is involved. This can cause difficulties in objectively measuring the customer-perceived services outcomes (Parasuraman et al., 1985).
2) Heterogeneity. Complexity of measurement system has been claimed to result from this characteristic of services (Fitzgerald et al., 1991). Lovelock and Gummesson (2004), however, argue that this may not necessary exist in all services types, as the trend towards automation and rigorous application of quality improvement approaches have substantially reduced variability (heterogeneity) of output in services, in particular regarding technical quality.
3) Inseparability. Lovelock and Gummerson (2004), argue that the inseparability of production and consumption is linked only to the service encounter itself. However, the production of airline service may not necessarily all be inseparable, considering, for example, the back operations processes. Sampson and Froehle (2006) concur that the idea underlying this front-back office strategy is to decouple processes that depend directly on customer inputs from processes that can be done independently from customer inputs.
4) Perishability. Vargo and Lusch (2004b) contend that the issue of perishability should be referenced to the value of services, rather than output. Value is co-produced with the customer; the airline services institution can only provide a value proposition (Vargo and Lusch, 2004a). Such conceptions of value should also be taken into account when attempting to measure the performance of services from the customer’s perspective.
2.2.1 Service Quality and Customer Satisfaction
To achieve a high level of customer satisfaction, most researchers suggest that a high level of service quality should be delivered by the service provider as service quality is normally considered an antecedent of customer satisfaction (Cronin, Brady, and Hult, 2000; Anderson et al., 1994; Cronin and Taylor, 1992). However, the exact relationship between satisfaction and service quality has been described as a complex issue, characterized by debate regarding the distinction between the two constructs and the casual direction of their relationship (Brady, Cronin and Brand, 2002). Parasuraman, Zeithaml, and Berry (1994) concluded that the confusion surrounding the distinction between the two constructs was partly attributed to practitioners and the media using the terms interchangeable, which make theoretical distinctions difficult.
Cronin and Taylor (1992) argued against Parasuraman et al.’s (1988) categorization. Cronin and Taylor (1992) found empirical support for the idea that perceived service quality led to satisfaction and argued that service quality was actually an antecedent of customer satisfaction. Cronin and Taylor (1992) asserted that customer satisfaction appeared to exert a stronger influence on purchase intention than service quality, and concluded that the strategic emphasis of service organizations should focus on total customer satisfaction programs. The authors reasoned that consumers may not buy the highest quality service because of factors such as convenience, price, or availability and that these constructs may enhance satisfaction while not actually affecting customers’ perceptions of service quality. Cronin and Taylor (1994) later conceded that the directionality of the service quality – satisfaction relationship was still in question and that future research on the subject should incorporate multi-item measures.
Despite strong correlations between service quality and customer satisfaction, the authors determined that the two constructs exhibited independence and concluded that they were in fact different constructs, at least from the customer’s point of view. Brady and Cronin (2001), endeavored to clarify the specification and nature of the service quality and satisfaction constructs and found empirical support for the conceptualization that service quality was an antecedent of the super ordinate satisfaction construct. In addition, the authors found that satisfaction explained a greater portion of the variance in consumers’ purchase intentions than service quality.
A reverse casual relationship has also been hypothesized between the two constructs. Rust and Oliver (1994) maintained that while quality was only one of many dimensions on which satisfaction was based, satisfaction was also one potential influence on future quality perceptions. In recent years, organizations are obliged to render more services in addition to their offers. The quality of service has become an aspect of customer satisfaction. It has been proven by some researchers that service quality is related to customer satisfaction. In relating customer satisfaction and service quality, researchers have been more precise about the meaning and measurements of both satisfaction and service quality. Satisfaction and service quality have certain things in common, but satisfaction generally is a broader concept, whereas service quality focuses specifically on dimensions of service. Amidst these debates, it is clear that there is a strong relationship between service quality and customer satisfaction, it can be concluded that service quality had significant impacts on customer satisfaction. Sureshchandear et al. (2002) found that service quality and customer satisfaction were highly related.
2.2.3 Service quality dimensions
Apparently, perceptions of service quality are based on multiple dimensions; however, there is no general agreement about the nature and content of service quality dimensions (Brady and Cronin, 2001). An elusive and abstract construct means service quality is difficult to define and measure (Parasuraman et al., 1985; Cronin and Taylor, 1992). Various numbers of service quality dimensions are proposed including; two-dimensional (e.g. Grönroos, 1984; Lehtinen and Lehtinen, 1991), three-dimensional (e.g. Lehtinen and Lehtinen, 1991; Rust and Oliver, 1994; Brady and Cronin, 2001), and the five-dimensional SERQUAL construct. The author, however, observed that all of these require some distinction between the ‘what’ (service outcome) and ‘how’ (service process), as critical to customers’ perception of the quality of service they receive.
To portray the entire picture of service quality, therefore, it is necessary to understand not only ‘what’ the customer gets, but also ‘how’ the customer gets it (Grönroos, 1984). Every service system and service action has to be conceived both in terms of ensuring technical quality, and customer perception of that quality as delivered (Harvey, 1998). It is important that service managers should understand and distinguish both aspects, as both will be perceived by ultimate customers.
2.2.1 SERVQUAL service quality model
SERVQUAL model aims to understand how customers perceive the quality of a service. A survey is used to determine what customers feel the service firm should offer (expectation), and their perceptions of the performance of the actual service (Parasuraman et al. 1988). Boulding et al. (1993) noted that expectation forms the basis of a person’s overall quality perception, which in turn predicts the person’s intended behaviour. The SERVQUAL instrument has been refined and developed into a multiple-item scale for assessing consumer perceptions of service quality (Parasuraman et al., 1988; 1991).
The items in SERVQUAL are grouped into five distinct dimensions including:
Tangibles: Physical facilities, equipment, and appearance of personnel
Reliability: Ability to perform the promised service dependably and accurately
Responsiveness: Willingness to help customers and provide prompt service
Assurance: Knowledge and courtesy of employees and their ability
Empathy: Caring, individualized attention the firm provides for its customers
SERVQUAL provides a broad range of application through its expectations/perceptions format, and it is widely used within the service sector to understand the perceptions of targeted customers regarding their service needs; and to provide a measurement of the service quality of the organisation. However, SERVQUAL may also be applied internally to understand employees’ perceptions of service quality, aiming at improving the quality of service.
Some theories have argued that SERVQUAL model has its weakness in relation to its strong focus on functional quality dimensions, or the process of delivery, rather than the service outcomes (Mangold and Babakus, 1991; Baker and Lamb, 1993; Richard and Allaway, 1993; Woodall, 2001). Richard and Allway (1993) argue that model that utilise only the process quality attributes (functional service quality), may have low predictive validity. Powpaka (1996) concurs that SERVQUAL may not be sufficiently comprehensive to capture the overall service quality construct, since it focuses mainly on the process quality attributes. While Zeithaml and Bitner (2003) argue that service quality pertains primarily to expressive attributes of a service product. These criticisms suggest an important gap pertaining to the under-represented measures of service quality outcomes.
2.2.2 Grönroos’ service quality model
Grönroos (1984; 1990) proposed an influential service quality model incorporating both technical and functional quality aspects. This model includes both how the quality of services will be perceived by customers and in what way service quality is influenced. To measure service quality, expected service and perceived service are the two main variables. The three dimensions of Grönroos’s service quality are technical quality, functional quality and image. The focus of this paper is on Technical and Functional quality.
126.96.36.199 Technical service quality (TSQ)
This dimension refers to an outcome of the service production process, or result of ‘what’ the customer received from the service transaction (Grönroos, 1984; Brady and Cronin, 2001). TSQ is important for customer to evaluate the quality of service. In a manufactured product, technical quality can be objectively assessed, whereas TSQ in a service may be more difficult for customer to evaluate. However, Lehtinen and Lehtinen (1991) argued that the outcome of the service production process can be either tangible or intangible. The difference between ideal and achieved technical quality is used to identify the technical quality dimension (Harvey, 1998).
188.8.131.52 Functional service quality (FSQ)
The Functional Service Quality (FSQ) dimension refers to the quality of service process as delivered, or ‘how’ the customer gets the technical outcome of the service production process (Grönroos, 1984). FSQ is related to the process quality concept proposed by Lehtinen and Lehtinen (1991), which is based on how customers see the process and how they feel themselves fitting into it. Functional quality is a very important dimension affecting customers’ perception of the quality of service (Grönroos, 1984; Parasuraman et al., 1985). Grönroos (1983) argued that technical quality is a necessary; but it may not be a sufficient. This implied that functional quality is likely to be more important to the customer-perceived service quality than technical quality (Grönroos, 1983). Silvestro and Johnston (1990) and Oberoi and Hales (1990) concur that functional quality attributes are major contributors to overall service quality as perceived by customers.
Woodall (2001) suggests that by incorporating both TSQ and FSQ of Grönroos’ model, a more relevant model of service quality will be provided. He states that evaluations of ‘reality’ will potentially have more instrumental and explanatory value than measurements of ‘perception’ (Woodall, 2001, p.604). The author agrees, considering that Grönroos’ proposition is more appropriate to the context of this research, and hence aiming to understand the impact of BPI initiatives on service quality through considering and balancing both TSQ and FSQ dimensions.
Considering the aim of enhancing customer satisfaction, it is of interest that service sector understand the way in which BPI initiatives help to improve both TSQ and FSQ; to ensure that customers are satisfied. Douglas and Fredendall (2004) suggested that the integration of these service quality principles would help in understanding the relationships between improvement initiatives, service quality and customer satisfaction. Since the aim of this research paper is to determine BPI and Service Quality on airlines in Kenya, the author considered that adopting of Grönroos’ model of service quality. An understanding of Grönroos’ service quality dimensions also assists in establishing the conceptual framework on BPI and Service Quality.
2.2.5 Service quality improvement perspectives
Considering increasing competition from alternative airline products and delivery channels, firms in airline services must strive to succeed by improving their performance with an aim of enhancing customer satisfaction (Krishnan et al., 1999). The emphasis on customer satisfaction relies on the basic argument that satisfied customers tend to stay with the firm for future business, in turn achieving long-term profitability (Heskett et al., 1997). Jones and Sasser (1995) considered that complete customer satisfaction is the key to securing customer loyalty and generating superior long-term financial performance. As a salient way of satisfying customers, the strategic focus of the airline services sector has shifted from price to service quality (Frei et al., 1999). Commonly, service quality is considered as a critical prerequisite for establishing and sustaining satisfying relationships with customers, thereby enhancing the business performance (Newman et al., 1998; Lassar et al., 2000).
Extensive studies have examined the consequences of customer satisfaction on customer retention, considered as the key to business performance, revenues and profitability (e.g. Reichcheld and Sasser, 1990; Roth and Van der Velde, 1991; Rust and Zahorik, 1993). The relationship between customer retention and profits has been reported by a variety of researchers (e.g., Anderson and Sullivan, 1993; Reichheld and Sasser, 1990) and companies (Heskett et al. 1997).
Service quality is considered as a key driver in gaining competitive advantages in the airline services industry (Roth and Van der Velde, 1991; Collier, 1991; Soteriou and Zenios, 1999), and reflects a widespread adoption of quality improvement initiatives in this sector (Newman, 2001; Maddern and Maull, 2003).
Edvardsson (1998), stated that the central goal of service quality improvement is to provide the best prerequisites for well-functioning customer processes and attractive customer outcomes. Howcroft (1991) suggested that service quality improvement in service industry involves enhancement of both TSQ and FSQ, as these could be perceived simultaneously by customers. This literature suggests that service companies need not only to focus on improving the internal process, but also consider a broader customer perspective related to both outcomes and processes of service delivered, which reflects the suggestion of Parasuraman (2002). However, Kordupleski et al. (1993) pointed out that quality programs are typically focused on improving internal processes, whilst not being preoccupied enough with the external customer. It is, therefore, crucial to understand the linkage between quality improvement efforts and customer satisfaction, which is still unclear in many literature.
A continuing challenge of service quality improvement programs lies in putting more emphasis in the process improvements and service quality. This leads to high standards of service quality in the airline business and satisfied customers.
2.2.6 Service quality improvement models
Rust et al. (1995) proposed a framework for evaluating the impact of service quality improvements on profits, known as the Return on Quality (ROQ) framework. This approach was developed under the assumption that quality improvement efforts are investments, and must be financially accountable. The results of their empirical studies support the positive relationships running from service quality and customer satisfaction, customer loyalty, and profitability (Loveman, 1998). The approach developed indicates important implications for companies in spending on the quality improvement efforts that achieve the optimal expenditure level (Rust et al., 1995). In essence, the ROQ is a conceptual framework that can be used to guide and justify quality efforts, by focusing upon the financial benefits of service quality improvement. The ROQ is an advance on the Service Profit Chain (SPC), in that it considers cost reductions as well as revenues and market share within the model, but this consideration is not at a detailed level, and the model does not aim to assist the manager who wished to introduce a specific BPI initiative.
The area of quality improvement models in service industry could benefit from further research, considering particularly the important aspects of interpreting such high-level generic service quality models in the contexts of BPI adoption at the operational level. There appeared to be a need for further exploratory study of these context, to develop a theory model which can also provide the basis for a practical approach to assessing the outcomes of BPI initiatives and service quality towards customer satisfaction.
2.3 Research gaps, question and conceptual framework
The literature review has clarified the gaps that were identified within and between two existing bodies of literature, related to Business Process Improvement and service quality. The following are research gaps considered critical for this research.
• The review of BPI approaches indicated that understanding of BPI adoption in the service sector lags behind the manufacturing industry. Relatively little empirical research is evident in the academic literature, and hence this areas appears to be in an early stage of development. There is a challenge for both researcher and practitioner to further explore the existing phenomenon of BPI approach, pertinent to its application.
• The airline services sector is of interest; however, the literature in this area is still quite limited. There is limited attention paid to the ‘soft aspects’ (employee and customer perspectives) of BPI adoption in the service industry. This is an important issue which has not been broadly addressed in the BPI literature, signifying an opportunity to extend an understanding towards service quality principles in airline sector.
• Business Process Improvement adoption outcomes in manufacturing have typically emphasized cost and operational processes, these may not be so appropriate to services. There appeared to be no comprehensive theory or model in the extant literature, which explains how to measure BPI adoption outcomes from the customer perspective (perceived service quality, customer satisfaction). The development of a theory model in this area would be useful to both academic and practitioners, to help understand the linkages between BPI adoptions, service quality and customer satisfaction.
• There is importance in integrating both TSQ and FSQ aspects, to capture the overall service quality as perceived by customers. There appears to be some debate related to these two aspects, particularly in the operations literature. Incorporating both TSQ and FSQ would be more appropriate in understanding the impact of BPI adoption on service quality, considering particularly the airline services sector.
• Introduction of specific initiatives BPI initiatives has not been adequately addressed in this body of literature. Hence, this area could benefit from further exploratory research, considering particularly the important aspect of interpreting such high-level generic service quality models in the contexts of BPI adoption at the operational level.
Considering these related research gaps; this study hence aimed to focus on BPI adoption in airline services at the operational level, and to explore particularly the link between BPI initiatives and service quality. Hence, the main research question is proposed, addressing these research gaps as follow:
‘How should airline business in Kenya conduct Business Process Improvement approaches for improving service quality, considering the linkages between internal process improvements and customer satisfaction?’
In order to reflect the research question, the conceptual framework was established to help provide a theoretical background for conducting this research; as suggested by Eisenhardt (1989). The framework was developed concerning three underlying concepts: BPI approaches, service quality and customer satisfaction. The intention was to establish a preliminary concept of the linkages between BPI, service quality and customer satisfaction from the adoption and implementation perspectives, considering both TSQ and FSQ aspects of service quality.
2.4 Performance measurement system
There is no specific approach currently evident, for evaluating the outcomes of BPI approaches particularly in the service sector. Little empirical research has been found related to the evaluation of BPI initiatives in this context. However there is a considerable general literature in performance measurement which was examined, aiming to identify the important criteria required for developing the BPI evaluation framework.
2.4.1 Performance measurement
It is important that an effective performance measurement system should provide timely, accurate feedback on both efficiency and effectiveness of operations (Kaplan and Norton, 1993). Generally speaking, the underlying objective of a performance measurement system lies in the identification of the measures which are related to ‘what’ operational strategic initiative the organisation is trying to achieve (Neely, 2002). Therefore, performance measurement is considered as an important mechanism for an organisation to systematically evaluate the outcome of any initiatives against predefined goals and objectives.
184.108.40.206 The balanced scorecard
The balanced scorecard (BSC) of Kaplan and Norton (1992) has been widely adopted and recognised as the most effective performance measurement framework. The BSC was developed to encourage the practitioners to overcome the shortcomings of traditional financial measurement, taking a broader view of performance measures (The centre for business performance, 2009). The BSC has been developed to provide an organisation with a balanced approach to measure their performance both in terms of financial and non-financial perspectives (Neely, 2002). The explicit linkages between four performance perspectives (financial, customer, internal business, and innovation) towards the organisational strategy was considered as the most significant strength of the BSC (Kennerley and Neely, 2002; Kulatunga et al., 2006).
To put the balanced scorecard to work, Kaplan and Norton (1993) suggest that organisation should translate the goals related to time, quality, performance, and service into operational measures that focus on improvement activities in the operations units. Additionally, internal operations measures should be developed by focusing on the core of business processes that have the highest impact on customer satisfaction (Kaplan and Norton, 1992). This suggests important means for a company to provide the explicit linkage between internal operations, customer and financial measures to understand the bottom-line of the improvement initiatives. In essence, the BSC could be perceived as a management system that helps an organisation to indicate and enhance the breakthrough improvements in the areas of product, process, customer, and market development (Kaplan and Norton, 1993).
220.127.116.11 Other performance measurement frameworks
Besides the BSC, several other measurement frameworks are briefly considered, in the context of developing a BPI evaluation framework. The performance prism was developed to reflect the importance in satisfying stakeholder requirements towards the stakeholder-centric view of performance measurement (Neely et al., 2002). In contrast with the BSC, the performance prism broadens the group of stakeholders; considering employees, suppliers and regulators, besides focusing on shareholders and customers (Kulatunga et al., 2006). The objective is to manage the relationships of all stakeholders, while simultaneously aligning and integrating strategies, processes and capabilities to understand how they fit together for delivering real value to all stakeholders (Neely, 2002).
Organizations may face a problem of excessive performance measures whilst lacking understanding of how to interpret and analyse the performance data (Neely, 2002). Additionally, measures are outdated if not consistent with organisational strategy (Keegan et al., 1989). These problems can cause negative impact in terms of investment cost, time taken, as well as confusion and complexity (Neely, 2002; Kulatunga et al., 2006). The survey results of Neely et al. (1995) indicate that the main problem of a measurement system has been shifted from identifying what organisation should measure, to how an organisation could clarify a manageable set of measures. This leaves a question regarding how to identify the appropriate set of measures that helps attain the key strategic objective of the organisation.
Kennerley and Neely (2002) suggested that performance measures need to be consistent with management and improvement initiatives that exist within the organisation, such as benchmarking, TQM, BPR, etc. The survey results of Kumar et al. (2008a) indicate the important role of performance measurement in TQM implementation. Robson (2004) indicates that the main objective of performance measurement is to identify and provide opportunities for process improvement. It is particularly important in the service sector to develop sets of metrics that reflect the crucial matters in the operations, by aligning the measures of business process towards the customer interaction (Neely and Austin, 2002). The development of an effective performance measurement system should help an organisation to:
• Evaluate the BPI initiative performance against the desired goal,
• Provide feedback for internal and external benchmarking, and
• Identify required improvement actions. All these outcomes will help encourage the ongoing improvement efforts, resulting from initial BPI adoption.