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Journal of Business and Psychology, Vol. 20, No. 4, Summer 2006 (2005) DOI: 10.

1007/s10869-005-9002-5

MANAGING EMPLOYEES IN THE SERVICE SECTOR: A LITERATURE REVIEW AND CONCEPTUAL DEVELOPMENT Jonathan R. Anderson
University of West Georgia

ABSTRACT: Our economy is slowly shifting from a manufacturing base to a service base. Yet, management literature has been slow to respond. We know little about the unique challenges faced by managers in the service sector. This paper reviews literature on research on management practice and employee perceptions that lead to positive customer outcomes. Specically, relational coordination efforts by a manager are suggested to lead to specic employee behaviors that have been correlated with customer outcomes. This literature review and conceptual development are presented here in hopes that future research will take a deeper look at the challenges faced by service sector managers. KEY WORDS: service management; customer-service employees.

INTRODUCTION The United States Department of Labor and the Bureau of Labor Statistics (1999) state that the service producing sector of the economy is projected to grow by 19.1 million wage and-salary jobs between 1998 and 2008. This represents nearly 95% of total employment growth over that period. In the later year, the service-producing sector will account for almost three out of every four jobs in the [United States] economy (p.1) Additionally it has been noted that the service sector now dominates employment and GNP gures for the United States and, more broadly, the economically developed world (Bowen & Hallowell, 2002). As our economy moves from a manufacturing base to a service base, management scholars have been slow to respond to the unique challenges faced by service sector rms (Bowen & Ford, 2002). In practice, despite the long run of service dominance, we still nd two things to be true. One, key indicators of customer satisfaction with services conrm
Address correspondence to Jonathan R. Anderson, Management and Business Systems, University of West Georgia, Carrollton, GA 30118-3030. E-mail: janderso@westga.edu 501
0889-3268/06/0600-0501/0 2005 Springer Science+Business Media, Inc.

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that in direct phrasing, Service stinks Second, the academic management literature still offers little in the way of comprehensive treatment of the differences between managing service organizations and managing goods-producing organizations (Bowen & Hallowell, 2002). As the service sector grows, some have even suggested that the quality of service in organizations is actually declining (Oliva & Sterman, 2001). Yet, as the service sector becomes the dominant sector in our economy, it is imperative that management scholars better understand the role of management practice in increasing employee service performance (Bebko, 2000; Schlessinger & Heskett, 1991). Much of the management literature focuses on the distinct nature of managing in the manufacturing sector (Batt, 2002). Early work in scientic management and human relations focused on management practices that intend to increase employee productivity (McGregor, 1960; Taylor, 1911). In a manufacturing setting both the design of the job (Hackman & Oldham, 1980) and the reward systems (Skinner, 1953) can directly inuence the performance of an employee. Additionally, management behavior directly inuences the production level and quality of an employee. A manufacturing organizations output (whatever the widget is) will eventually end up in the hands of a customer. This customer will build an opinion of the organization based on the effectiveness of the widget. If the widget works, the company is viewed as successful. The customer may refer friends to the companys products and return for more widgets at a later time. In a manufacturing setting the quality of the widget is a buffer between variables such as employee attitude, employee satisfaction, employee performance, and customer perceptions of the organization. An organization can place many control systems between the employee and the nal widget the customer holds. This is not the case in the service sector. Customers perceptions rather than widget quality are the driving force behind management practice in the service sector (Maxham & Netemeyer, 2002). Service sector rms are aware that if a customer is satised with the organization, the customer will likely do business with the rm many times in the future (Curasi & Norman, 2002). Unlike the manufacturing rm, a service sector rms reputation is built on the quality of service delivery, not on the quality of a widget. Therefore, there is no buffer between an employees attitude, an employees satisfaction, or an employees performance and the customers perception of the organization. Key participants in any service transaction are service employees. It is they whom customers meet on entering a department store or boarding an aircraft. Thus, a single employee may tint a customers image of a service enterprise (Rafaeli, 1989). This challenge is amplied when, as is the case in many service sector rms, the customer

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interacts with an employee who works in the lowest level of the organization. As our economy moves from a manufacturing base toward a service base, it is essential for rms to understand the new economics of service, [such that] frontline workers and customers need to be the center of management concern (Heskett, Jones, Loveman, Sasser, & Schlesinger, 1994). Hesket et al. (1994) suggests that this new focus on the customer as a measure of the bottom line will alter management practice within organizations. Yet, little is known about the inuence of a managers behavior on employee outcomes and how those employee outcomes in turn inuence customer perceptions of organizational performance in a service sector setting (Tellefsen & Nermin, 2002). Improving customer outcomes through improved management practice relies on this triadic link. Understanding this process of management behavior inuencing employee perceptions, and employee perceptions inuencing customer outcomes, is critical to improving management practice in the service sector (Pugh, Dietz, Wiley, & Brooks, 2002). The aim of this paper is to help scholars better understand management practice in the service sector by addressing several research questions. First, does a managers behavior toward an employee inuence how the employee perceives the organization and his or her work? Second, does the employees perception of management and the organization inuence how an employee interacts with a customer and is a customers outcome inuenced by the employees perceptions of the organization? Finally, do employee perceptions have a mediating effect between management practice and customer outcomes? These questions will be addressed throughout this paper on the manageremployeecustomer triad level. The intended contribution of this paper is to identify the relationships between constructs that provide a framework for understanding and managing employees in a service sector setting. Organizations in the service sector work continually at building and maintaining customer loyalty. Many service organizations spend large sums of money as they work to create customer satisfaction with improved interactions between employees and customers. Yet, it is difcult to directly measure the inuence of these programs on organizational performance. This paper will add substance and direction to programs that aim to increase customer outcomes through employee perceptions and managers behaviors. If an organization intends to create better relationships between management and employees in an effort to increase positive customer outcomes, this paper provides a framework for evaluating customer-service programs and their intended impact on organizations.

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MANAGING EMPLOYEES IN THE SERVICE SECTOR Managers in the service sector are faced with increasing challenges. The span of control of these managers continues to grow, while the demand for customer satisfaction is also on the rise. With more employees to manage and greater demands on performance, service sector managers can easily feel restricted in their ability to develop relationships with employees on the dyad-level. Indeed, managing employees in a service sector setting provides unique challenges for managers, particularly if the manager attempts to develop quality dyadic relationships with employees. Bowen and Ford (2002) suggest that managing employees in the service sector is different than managing employees in the manufacturing sector on several fronts: rst, the process of delivering a service involves the customer in the production process; second, service employees must respond to each situation in a unique manner; third, emotional labor is an important part of the work in a service setting; and fourth, service employees not only perform work, they are required to manage the service delivery process. It is the human element of service delivery that distinguishes management practice in a service setting from management practice in a manufacturing setting. A typical employee in a service setting has direct contact with customers; this customer contact generally takes place between employees at the lowest levels of the organization. If a service sector employee is frustrated with the work environment, this frustration does not only inuence the employees performance on the manufacturing line (as it would in a manufacturing setting), it can directly inuence a customers perception of the organization (Schlesinger & Heskett, 1991). Schneider, Parkington, and Buxton (1980) saw the importance of linking manager behavior to customer outcomes mediated by employee performance and perceptions. The authors studied the inuence of organizational culture on employee perceptions and then linked employee perceptions to customer outcomes. They collected data from 23 branches of a large bank. Samples of employees and customers from each branch were surveyed. Each employee was asked to respond to questions about the culture of the bank, and customers were asked to respond to questions about the banks service. Correlations between the employee responses and the customer responses reveal that employees and customers generally agreed on the level of service provided to the customer by the bank; additionally, branch service orientation or service culture (created by management) correlated with customer perceptions of overall quality of service. This study suggests that employees can identify the culture or service orientation of an organization (created by management) and that a customers perception of service quality may correlate with these employee perceptions.

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Building on this work, a series of projects studied the macro-level relationship between organizational culture or organizational policies and customer perceptions of organizational performance. This approach suggests that the culture of service within the organization (created by management) will lead to higher levels of customer satisfaction. This relationship has been supported in studies in an insurance organization (Schlesinger & J, 1991), 57 branches of a large bank (Johnson, 1996), a hospital setting (Niedz, 1998), and a large retail store (Borucki & Burke, 1999). These studies all suggest that a customers perception of the quality of service is correlated with the service climate in the organization. This research builds support for the importance of organizations building a culture of service in an effort to increase customer satisfaction; however, it does not speak to the process that managers should follow as they work to improve employee perceptions and customer outcomes. Another approach has been to address this question on the employeecustomer dyad level. That is, how do the perceptions of employees lead to customer outcomes? In a retail banking setting, an employees perception of obstacles in the workplace has been correlated with lower levels of customer satisfaction (Brown & Mitchell, 1993). In a survey of 774 customeremployee transactions in the hotel, restaurant, and airlines industries, employee attitudes were correlated with customer outcomes (Bitner, Booms, & Mohr, 1994). In a survey of 160 ofces in a service-oriented organization empirical support was found for a positive relationship between employee attitudes and customer satisfaction (Schmit & Allscheid, 1995). Using a qualitative approach, a positive link was found between employee relationship building and repeat customer satisfaction in a retail sales setting (Beatty, Mayer, Coleman, Reynolds, & Lee, 1996). Using data from seven different service areas, three diverse samples, and two methods of measuring a service relationship, results suggest that a customer who was able to develop a relationship with one customer-service person was more satised than a customer who repeatedly changed customer contact employees (Gutek, Bhappu, LiaoTroth, & Cherry, 1999). Employee organizational citizenship behaviors have been linked to higher customer outcomes (Yoon & Suh, 2003); and it has been found that both climate variables and employee variables play a central role in determining customer outcomes (Yoon, Beatty, & Suh, 2001). From this literature we can summarize two things. First, there seems to be a relationship between the culture of an organization or the policies set by management and employee perceptions of the organization and management (Piercy, Lane, & Nikala, 2001); and second, there is a relationship between an employees perceptions and customer outcomes (Svensson, 2001). However, to date we do not yet understand the relationship between a managers behavior, employee perceptions, and

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customer outcomes on the triad level. This is one large shortcoming of current writings on management in the service sector. MANAGERIAL BEHAVIOR In the literature, attempts at addressing these questions have used high-involvement management practices as a proxy for managerial behaviors. Recent research has linked high-involvement work practices with an employees perceptions of his or her role in the organization (Wu & Lee, 2001). High-involvement work practices generally include at least three areas of management practice: high skills required by employees, employee discretion, and employee collaboration (Batt, 2002). Highinvolvement work place practices are often aimed at encouraging active employee involvement in work processes. Using high-involvement workplace practices as a proxy for managerial behavior has allowed studies on the organizational level to correlate policies with organizational nancial outcomes (Huselid, 1995; Jackson & Schuler, 1995). Yet, in a service setting it is important for managers to understand which manager behaviors, not necessarily policies, will elicit in employees the behaviors that will encourage quality service performance (Humphreys, 2002; Piercy et al., 2001). The concept of relational coordination seems to gather the spirit of high-involvement management practices on the individual manager level. Relational coordination addresses the specic managerial behaviors, rather than organizational policies, that inuence the dyadic supervisorsubordinate relationship. RELATIONAL COORDINATION Relational coordination is a construct developed recently in the literature to conceptually identify components of the relationship between two people or two groups. Relational coordination is a two component process (Gittell, 2000, 2003). First, a manager and an employee develop a relationship; second, they participate in different types and levels of communication. Gittell (2003) suggests that the type of relationship an employee shares with his or her manager consists of three subdimensions: shared goals, shared knowledge, and mutual respect. Additionally, she divides communication into the frequency, timeliness, and the problem-solving nature of the communication. These two processes have a direct impact on employee and organizational outcomes. In her research in the airline industry (Gittell, 2000, 2001), she links high relational coordination to employee and team performance measures such as gate turnaround time and the number of ights that depart on schedule. Her research suggests if a manager and an employee share the same

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idea of what needs to be done and share accurate and timely communication directed toward problem solving, their relationship and their productivity will improve. This is consistent with the tenants of exchange theory in that employees are more likely to perceive that they have an equal exchange with the organization and their manager if they receive information that they believe is equal to the demands of the task (Blau, 1964). An underlying tenant of relational coordination is that the process begins with the manager. It is the manager that must disseminate information throughout the organization, and it is often the manager who sets the standard for communication between him or herself and the employee. If an employee perceives that his or her manager is open to developing shared goals and open communication, it is likely, that the employee will perceive that he or she has a better relationship with the manager and that they are better able to perform effectively as a dyad. Relational coordination focuses on the managerial behaviors that elicit responses from the employee. If managers attempt to garner shared goals, knowledge, and mutual respect with their employees and they are willing to engage in frequent, timely, and problem-solving oriented communication with their employees, the employee will likely perceive he or she has a higher quality relationship with the manager and in turn higher service performance. The two indicators of relational coordination efforts by a manager are the degree of information sharing with the employee and the amount of problem-solving communication engaged in between the manager and the employee (Gittell, 2000, 2003). Each of these components of relational coordination can enhance the quality of the supervisorsubordinate relationship (Sorenson & Savage, 1989). Additionally, the problem-solving orientation of the communication encourages the employee to be a part of the process. The nature of this communication sets relational coordination apart from the human relations era of the past (Miles & Snow, 1984). That is, previously human relations experts suggested that employees who are listened to will perform better. This was the heart of the human relations movement. Relational coordination suggests that it is not listening to an employee that makes the difference, but actually sharing information with them and including them in problem solving. This communication is distinct from communication in the human relations paradigm in that a manager actively shares information with the employee that will help improve his or her performance on the job and vice versa. It is the manager that must actively engage in relational coordination efforts in manageremployee dyads. It is the manager who must share information with the employee regarding a transaction. It is the manager who must include the employee in problem-solving oriented communication in an effort to build a quality relationship with the

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employee and produce quality work. The level of relational coordination efforts engaged in by the manager, namely information sharing and problem-solving oriented communication, will positively correlate with desirable employee outcomes. As previously discussed, employee outcomes have been correlated with customer outcomes in the service sector (Montes, Fuentes, & Fernandez, 2003; Pugh et al., 2002; Yoon et al., 2001, Yoon & Suh, 2003). Yet, understanding how relational coordination efforts by a manager will inuence employee outcomes has not yet been developed. The discussion that follows identies four employee variables that are proposed to be outcomes of relational coordination efforts by a manager. The quality of the leader-member exchange, employee justice perceptions, self-efcacy, and role clarity will each be discussed in turn particular to their relationship with the relational coordination efforts of a manager.

LEADER-MEMBER EXCHANGE Research on leader-member exchange theory began in the early 1970s with a series of studies that focused on relationship differences between superiors and subordinates dyads. Prior to this time research in this area assumed a manager developed similar relationships with all his or her subordinates (Dansereau, 1995). It was suggested that leaders would act more openly toward and share more affect with those in the in-group than those in the out-group. Research began to show that supervisors discriminated between employees based on individual and situational characteristics, such as how similar the subordinate was to the superior and how much affect was shared between the superior and the subordinate. These realizations encouraged researchers to move toward a dyadic supervisor-subordinate view. Researchers began to look at each superior and subordinate relationship as being unique. This approach was labeled the vertical dyad linkage (VDL) (Dansereau, Graen, & Haga, 1975). Two extensions grew from this original VDL research. First, Graen and associates began work on the leader-member exchange perspective (Graen, Johnson, & Orris, 1973), which considers the role of groups in determining the outcomes of the superiorsubordinate relationship. This perspective began to explore how and why different superior subordinate relationships developed. It addressed questions such as how and why the in-group and out-group members interact differently with the leader and began to identify contextual factors that inuenced the dyadic supervisorsubordinate relationship. The second stream of research focused on a different model forwarded by Dansereau and colleagues (Dansereau et al., 1975). They

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aimed their efforts on the antecedents and outcomes of the dyadic relationship. Their research suggests that the dyadic relationship exists independent of all other dyads in the organization, and it is worth studying by itself. If a superior and a subordinate have a working relationship, it is likely that their relationship has components that are independent of all other relationships in the organization. They term this perspective individualized leadership (IL) (Dansereau et al., 1995). Both streams suggest that each characteristic of the dyad is a result of actions and perceptions of the supervisor, the employee, and the dynamics of their relationship and work environment. Many empirical studies have linked LMX to employee outcome variables such as subordinate satisfaction, subordinate performance (Graen, Novak, & Sommerkamp, 1982), career outcomes (Wakabayashi & Graen, 1984) and decreased likelihood of turnover (Vecchio, 1982). (For meta-analyses see Gerstner & Day, 1997). This literature suggests that each relationship between a supervisor and an employee has unique features that are worth studying. The quality of a leader-member exchange has correlated with a number of employee and supervisor behaviors in a variety of settings (Graen & Uhlbien, 1995). Yet research has not addressed specic manager behaviors that lead to an employees perception of the quality of the leader-member exchange. Relational coordination efforts by a manger seem to begin to ll this gap. As manageremployee dyads share information and engage in problem-solving oriented discussions, the relationship between the two individuals will begin to change (Kacmar, Witt, Zivnuska, & Gully, 2003). As managers share information with employees, the employees will see their managers as helpful and interested in the employees success. Additionally, as the manager engages in problem-solving oriented communication with the employee, the employee will see the manager as a team player and as a helpful resource. This relationship will develop largely on the degree to which the manager engages in relational coordination efforts with the employee. The opposite can also be true, if a manager withholds information or does not engage the employee in problem-solving oriented communication, the employee will see the manager as a hindrance to performance rather than a team player. Therefore, it is suggested that the degree of relational coordination efforts engaged in by the manager will positively correlate with the employees perception of the quality of the leadermember exchange. Proposition 1A: Relational coordination efforts by a manger will lead to the quality of leader-member exchange perceived by the employee.

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JUSTICE In addition to the quality of the leader-member exchange, an employees perception of justice in the organization is thought to be an outcome of the relational coordination efforts of the manager. Organizational justice has received substantial attention in recent management literature (Folger & Cropanzano, 1998). Organizational justice is rooted in the theories of cognitive dissonance (Festinger, 1957) and social exchange (Blau, 1964). Cognitive dissonance theory suggests that individuals need to reconcile their thoughts, perceptions, and actions. It suggests that if there is a discrepancy between what someone thinks and does, or between how someone thinks they should be treated and how they are treated, this discrepancy will cause cognitive dissonance in the individuals mind. This cognitive dissonance can be a motivating force for action within an individual (Festinger, 1957). Social exchange theory recognizes this and suggests that a perceived inequality in a social exchange can be a source of cognitive dissonance within an individuals cognitive processes (Adams, 1965; Blau, 1964). The policies, processes and actions of managers within an organization can inuence an individuals perception of dissonance and equity in the workplace (Folger et al., 1998). Authors built on this concept to suggest that individuals in workplace settings do not have a set standard for comparison, but compare their standing to others in the organization and use that as a basis for consistency or dissonance in their mental processes (Adams, 1965). This perception of equity that one employee develops based on how they are treated compared to similar others in the organization is the basis for the organizational justice perspective (Adams, 1965; Folger and Cropanzano, 1998). Many extensions of this organizational justice perspective have appeared in the literature. Authors have suggested that relative deprivation can be viewed as a source of both distributive (concerning the amount of rewards given an individual), procedural (the process of selecting how to distribute rewards) justice, and interactional justice (fairness in the manageremployee relationship (Skarlicki & Folger, 1997). An employees perception of justice in the workplace can impact his or her behavior. One author found that an employees perception of procedural justice was negatively correlated with employee theft within a manufacturing facility (Greenberg, 1990). Skarlicki and Folger (1997) also found that an employees perception of justice in the workplace was correlated with the likelihood of employee retaliation. This and other ndings suggest that an employees perception of justice in the workplace inuence his or her behavior. Recent research in organizational justice suggests that organizations may develop justice cultures. Similar to a service culture, organizations

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can have a culture based on treating employees fairly or not. It may be that organizational justice is not necessarily the individual level variable it has been conceptualized as, but may be more of a social contextual variable (Naumann & Bennett, 2000, 2002). Additionally, research has shown that this aggregate perception of justice can inuence organizational performance (Scandura, 1999; Simons & Roberson, 2003). Yet even within organizational climates, managers can inuence organizational justice perceptions on the dyadic level (Scandura, 1999). Therefore, it is suggested that relational coordination efforts by a manager will lead to more information sharing and more problem-solving oriented communication between the employee and the manager. This in turn will lead to higher justice perceptions by the employee. This is not to say that the employee will agree with everything the manager says or does, but the employee will perceive that the process of decisions and the interactions are fairer than they would be otherwise. It seems that the information ow between the manager and the employee and the level of problem-solving oriented communication they engage in will positively inuence the justice perceptions of the employee. It is suggested that the relational coordination efforts of the manager will positively correlate with the justice perceptions of the employee. Proposition 1B: Relational coordination efforts by a manager will lead to employee perceptions of justice.

SELF-EFFICACY Each employee in an organization has a certain perception of his or her ability to perform a given task. An employees condence in his or her ability to perform a task can inuence the employees performance (Bandura, 1977, 1982). The concept of self-efcacy, or an individuals belief in his or her ability to perform a task (Gist & Mitchell, 1992), has long been of interest to researchers in cognitive psychology and management (Bandura, 1986). Self-efcacy plays a large role in personal agency or the actions an individual selects to perform. Self-efcacy also is a direct antecedent to the likelihood of attempting an action and a direct antecedent to performance (Bandura, 1991). An employees self-efcacy has been linked to performance (Harrison, Rainer, Hochwarter, & Thompson, 1997), sales volume (Bagozzi, 1978), hope, optimism (Cario & Rhodes, 2002), burnout (Salanova, Peiro, & Schaufeli, 2002) and other employee outcomes. However, tests of the self-efcacy performance relationship in actual job settings remain limited (Harrison et al., 1997).

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Bandura (2001) suggests that there has been a paradigm shift in the way that human decision and control is viewed in the literature. He suggests that psychology is beginning to understand that human agency plays a larger role in human behavior than previously considered. Accordingly, if human decisions are based more on an individuals perceptions than on rewards and punishments as previously considered (Kreitner & Luthans, 1984), self-efcacy can play a large role in determining how effectively and efciently an employee completes his or her work. If an employee has high levels of self-efcacy, it is likely that the employee will perform at a higher level. Also this self-efcacy is based partially on the information the employee has about the task to be performed and the employees ability to handle problems as they arise (Bandura, 2001). If a manager engages an employee in problem-solving oriented communication, the employee will likely learn through the problemsolving process. As the employee learns how to better handle problems as they arise with transactions, the employee will likely feel that he or she is better able to perform the tasks required by the job. Additionally, as an employee receives information from the manager concerning the work to be completed, this information will help the employees condence in his or her ability to perform the task. Therefore, it is here suggested that relational coordination efforts by a manager (information sharing and problem-solving oriented communication) will positively correlate with an employees level of task specic self-efcacy. Proposition 1C: Relational coordination efforts by a manager will lead to an employees task specic self-efcacy.

ROLE CLARITY Like self-efcacy, role clarity is an individual level variable that has received attention as an antecedent to employee behaviors (Bray & Brawley, 2002a, b). Banduras (1977, 1982) original work on the social learning and social cognitive theories suggests that the more clearly an employee perceives the responsibilities they are expected to accomplish, the more likely they will put forth the effort to perform. A role is dened as a pattern of behaviors (Tubre & Collins, 2000, p. 155) while role clarity is a situation in which the expected behaviors designated for a role are clear (Tubre & Collins, 2000). Low role clarity has been found to magnify the relationship between high job demands and stress, high job control and stress (Bliese & Castro, 2000), and role efcacy and performance (Bray & Brawley, 2002a, b). Low role clarity has also been linked

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to tension (Jackson & Schuler, 1985) and low job performance (Tubre & Collins, 2000). Research in role clarity suggests that it is a critical component in individual and team performance (Bray & Brawley, 2000, 2002a, b). In a service setting as managers share information with employees and engage them in problem-solving oriented communication, it is likely that the employee will perceive that he or she has a better understanding of his or her role in the work of the organization. The information the employee receives and the problem-solving oriented communication the employee engages in with the manager will help clarify for the employee what he or she is supposed to do. A clear understanding of the nature and responsibilities concerning the task, received from information sharing and communication from the manager, will help the employee see how his or her role ts into the larger picture of the organization. Therefore, relational coordination efforts by a manager are likely to increase the role clarity of an employee. Proposition 1D: Relational coordination efforts by a manager will lead to an employees perception of his or her role clarity. These four variables: the quality of the leader-member exchange, perceptions of justice, self-efcacy, and role clarity are all thought to be outcomes of relational coordination efforts engaged in by the manager. If the manager is willing to share information with an employee and engage in problem-solving oriented communication with him or her, the employees positive perceptions of his or her relationship with the manager and the organization will increase. Yet, for this relationship to inuence rm performance in the service sector, it is critical for manageremployee relationship to link to customer outcomes. Next, I will discuss how each of the above employee perceptions link to desirable customer outcomes.

EMPLOYEECUSTOMER LINKAGES As organizations adapt into the service sector, a better understanding of how to manage employees who provide service directly to the customer will be increasingly important (Chu, 2002). In fact, as discussed above, in the service sector a customers perception of the organization can be a direct result of the customers perception of the employee (Beatty et al., 1996; Bitner et al., 1994; Grifth, 2001). A customers willingness to do business with the organization, his or her satisfaction with the business experience, as well as his or her willingness to speak highly of the rm to others can directly inuence the rms ability to

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retain current and attract new customers (Curasi, & Norman, 2002; Johnson, Boles, & James, 2001). In a literal sense, customer perceptions of an organization may become a good measure of rm performance (Heskett et al., 1994; Heskett, Sasser, & Schlesinger, 1997, 2003). As we move toward a service economy, customer outcomes will become a good intermediate-level measure of the viability and success of an organization (Lee, Yoo, & Dongkeun, 2000). In a service setting the customer deals directly with a lower-level employee and the employees perceptions of the organization will inuence this relationship. Specic employee perceptions may inuence how a customer perceives the transaction and the organization as a whole (Liu & Mark, 2001; Palmer & Martin, 2003). The employee perceptions listed above are thought to inuence customer outcomes (Lassk, Cravens, Moncrief, & William, 2001). Each of these relationships is discussed below. LEADER-MEMBER EXCHANGE AND CUSTOMER OUTCOMES One consistent nding in the leader-member exchange literature is that the employees perception of the quality of the relationship is a good predictor of work outcomes (Liden, Wayne, & Sparrowe, 2000; Wayne, Shore, & Liden, 1997). Additionally, the quality of supervision experienced by an employee has been linked to customer outcomes (Grifth, 2001). In a service context as an employee deals directly with a customer, small changes in the relationship between a manager and an employee can inuence the interaction between the employee and the customer. If an employee has a positive relationship with his or her manager, the employee will likely carry this relationship on to the customer. If an employee feels comfortable discussing problems with his or her manager and is engaged by the manager in information sharing, the employee will likely engage in these same behaviors with the customers he or she deals with. These employeecustomer relationships will directly inuence the customers perception of the employee and the organization as a whole. On the other hand, if an employee perceives that he or she has a low quality relationship with his or her supervisor, the employee may manifest the negative outcomes from that poor relationship in the manner in which the employee treats customers. Frustration, dissatisfaction and the uncomfortable feelings that are often associated with an uncomfortable manageremployee relationship may cause the employee to treat the customer with less respect and may cause the employee to pay less attention to the details of the transaction. These employee behaviors will in turn lower desirable customer outcomes. Proposition 2A: An employees perception of the quality of leadermember exchange will lead to customer outcomes.

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JUSTICE AND CUSTOMER OUTCOMES Justice perceptions of an employee have been linked to outcomes on the organizational (Simons & Roberson, 2003), climate (Naumann & Bennett, 2000), group (Naumann & Bennett, 2002), manageremployee dyad (Scandura, 1999), and individual (Cheng, Jiang, & Riley, 2003; Fields, Pang, & Chiu, 2000) levels. An employees perception of justice can inuence employee productivity, counterproductive employee behaviors, organizational citizenship behaviors and other employee outcomes variables (Cohen-Charash & Spector, 2001). Similarly, a customers perception of justice in the transaction process has been associated with customer outcomes (Maxham & Netemeyer, 2002, 2003). Yet the explicit link between an employees perceptions of justice in the organization and customer outcomes is still underdeveloped. As employees develop perceptions of the organization, justice theory suggests that these perceptions are based on at least three foci: the processes within the organization (procedural justice), the interactions between employees in the organization (interactional justice), and the distribution of rewards and punishments throughout the organization (Moorman, Blakely, & Niehoff, 1998; Niehoff & Moorman, 1993). If an employee perceives that the organization is treating him fairly, it is likely that the employee will feel some obligation to put forth quality work for the organization. In a service context, this suggests that the employee would work to provide better service to the customer. The opposite would also be true. If an employee perceives that the organization and his or her direct manager is not dealing justly with him or her self, this perception will lead the employee to perform a lower quality of service toward the customer and in turn lower customer outcomes. Therefore, it is suggested that an employees perception of justice in the organization will positively correlate with customer outcomes. Proposition 2B: An employees perception of justice will lead to customer outcomes

SELF-EFFICACY AND CUSTOMER OUTCOMES An employees perception of his or her ability to perform a given task, or level of self-efcacy has been correlated with many employee level variables such as learning (Martocchio & Judge, 1997), job performance (Prussia, Anderson, & Manz, 1998), job satisfaction (Gardner & Pierce, 1998; Prussia et al., 1998), sales performance (Krishnan, Boles, & James, 2002), workplace attitudes (ONeill & Mone, 1998), work-related stress (Jimmieson, 2000), equity, and burnout (Van Yperen, 1998). In

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many cases it has been used as a mediating variable between previously connected individual-level variables (Staples, Hulland, & Higgins, 1999). Several attempts have been made at linking employee perceptions of self-efcacy to customer outcomes (Hartline & Ferrell, 1996; Hartline, Maxham, & McKee, 2000; Susskind, 2000; Waldersee & Luthans, 1994). However, it seems that self-efcacy is a necessary but not sufcient condition to motivate an employee to perform quality customer service. As an employee goes about his or her business in a service sector organization, the condence the employee has in his or her ability to perform the tasks required will directly inuence the work done. As the relationships above suggest, an employees self-efcacy directly inuences his or her performance. This relationship is critical to investigate in service sector organizations. As customer outcomes are critical to a service rms success, an employees self-efcacy is a critical component in developing positive customer outcomes. If an employee has a high level of task specic self-efcacy, the employee will manage his or her relationship with a customer smoothly. The employee will have the condence to work smoothly through challenges or obstacles that occur throughout the transaction. The opposite is also true. If an employee has a low level of self-efcacy, the employee will likely be uncomfortable managing the transaction and as obstacles arise, the employee may not respond as quickly or as clearly to the customer. If an employee lacks the condence needed to perform a task, the customer will likely become frustrated with the employees inability to perform. Therefore, it is suggested that the employees level of self-efcacy will positively correlate with customer outcomes. Yet it is recognized that self-efcacy alone is not a sufcient condition for producing high levels of customer-service quality by an employee. Proposition 2C: Employee task-specic self-efcacy will lead to customer outcomes.

ROLE CLARITY AND CUSTOMER OUTCOMES Role clarity has been correlated with many employee perceptions such as higher order need fulllment (Teas, Wacker, & Hughes, 1979), social network position (Morrison, 2002), proactive information seeking (Morrison, 1993), work demands, work support (Bliese & Castro, 2000), and role performance (Bray & Brawley, 2002a; Tubre & Collins, 2000). It seems the more clearly an employee understands his or her role in the organization, the better they will t socially and the better they will be able to perform.

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In a service sector setting, an employees ability to understand how the employee ts into the rm is critical to quality service delivery and desirable customer outcomes. If an employee understands what his or her role is in the organization, it is likely that the employee will be able to answer questions put forth by customers. An employee who has high role clarity will be comfortable in lling his or her position in the organization and this comfort will correlate with desirable customer outcomes. The opposite is also true. If an employee does not understand his or her role, the employee will not feel comfortable answering customer questions. The customer may see or hear the employee face questions or requests with uncertainty. The employee will be less able to directly answer questions or give guidance to the customer. This lack of clarity in the employee will cause the customer to question the organization and the employee. Therefore, it is suggested that an employees level of role clarity will positively correlate with customer outcomes. Proposition 2D: An employees role clarity will lead to customer outcomes.

CUSTOMER OUTCOMES Many customer outcomes have been identied and studied in the literature. Several authors correlated the level of involvement that a customer had in the transaction process inuenced the customers satisfaction with the transaction (Goodman, Fichman, Lerch, & Snyder, 1995). Maxham and Netemeyer (2003) found that an employees perception of organizational justice in the workplace and shared values with the organization lead to the customer a customers willingness to perform extra-role behaviors, satisfaction with the transaction, willingness to discuss the product with others and purchase intent. Additionally, Maxham and Netemeyer (2002) found that positive perceptions of satisfaction with the organization, likelihood of positive speaking about the rm, and repurchase intent all decreased with failed service attempts. As rms continually rely on service sector business to improve their bottom lines, it seems that customer outcomes, as they relate to a given transaction with an organization, will become more relevant to management practice and rm performance. Customer variables of particular interest to rm performance are: overall satisfaction with the rm, favorable word of mouth (or willingness to speak highly of the rm), and purchase intent (Maxham & Netemeyer, 2002, 2003).

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MODERATORS IN THE MODEL Like most conceptual relationships in management, the propositions stated above are likely to be found only under certain conditions. First, the transfer effect of relational coordination efforts by a manager to perceptions of an employee is more likely to take place if the manager is intelligent, able, and motivated. Similarly, the longer a manager has been in a supervisory position the more likely the manager will be to nd value in communication and quality relationship-dyads. For these reasons, the above variables serve as moderators in the relationship between relational coordination efforts by a manager and employee perceptions. Additionally, the transfer effect of employee perceptions of the organization into quality customer-service behaviors will depend on the intelligence, ability, and motivation of the employee. Tenure is also a consideration. The longer an employee has been in the service sector the more exposure the employee will have to the customer-service process and the more likely the employee will be to understand and value behaviors that produce high-levels of customer satisfaction. Indeed employee intelligence, ability, motivation, and tenure will moderate the relationship between employee perceptions and customer outcomes, such that the higher each of these variables is the more likely employee perceptions will translate into quality customer-service employee performance. Intelligent, able, motivated and experienced supervisors and employees provide a clear channel of communication to transfer behaviors and perceptions from the manager through the employee to the customer (Figure 1).

SUMMARY AND CONTRIBUTION The contribution of this paper is to provide a theoretical framework for future research on management practices in the service sector,
Figure 1 Conceptual Model
Employee Leader-Member Exchange Justice Self-Efficacy Role Clarity Moderators: Supervisor Tenure, Intelligence, Ability and Motivation Moderators: Employee Tenure, Intelligence, Ability and Motivation Customer Complete Transaction Satisfaction Reciprocity

Supervisor Relational Coordination

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particularly the relationship between management practice, employee perceptions, and customer outcomes. Specically I suggest that a managers relational coordination efforts will positively correlate with an employees perception of the quality of the leader-member exchange, justice, self-efcacy, and role clarity. Additionally it has been suggested that these employee perceptions will positively correlate with the customer outcomes of satisfaction, willingness to speak favorably about the rm, and willingness to do business with the rm. Finally it is suggested that the managers behavior will lead to customer outcomes mediated by an employees perception of the quality of the leader-member exchange, justice, self-efcacy, and role clarity. This framework provides a review of literature and conceptual development for future research in managing service sector employees. It is presented here in hopes that future research in the management literature will focus on the distinct nature of managing employees in the service sector.

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