Managing Service Quality: An International Journal

Organizational effectiveness indicators to support service quality

G. Ronald GilbertAli M. Parhizgari

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G. Ronald GilbertAli M. Parhizgari, (2000),"Organizational effectiveness indicators to support service quality", Managing
Service Quality: An International Journal, Vol. 10 Iss 1 pp. 46 - 52
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This paper focuses on the identification of

internal performance indicators of
organizational structures and processes that
can serve as measures of organizational
effectiveness. Such measures could aid
organizational leaders in their efforts to track
progress within their organizations and
pinpoint specific performance measures
where the greatest opportunity for internal
improvement may exist. Specifically, this
paper seeks to:
(1) Identify organizational performance
measures that employees view to be
important to enable them to perform their
tasks and, thereby, accomplish the aims
of the organization.
(2) Demonstrate that such characteristics are
sufficiently generic so their existence is
measurable in a wide variety of both
public and private sector organizations.
(3) Use the measures as standards from
which to compare the effectiveness of
organizations with one another, as well as
for purposes of benchmarking to identify
best practices.

Techniques
Organizational
effectiveness indicators
to support service
quality
G. Ronald Gilbert and
Ali M. Parhizgari
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The authors
G. Ronald Gilbert is Associate Professor and
Ali M. Parhizgari is Professor of Finance and
International Business, both at Florida International
University, Miami, Florida, USA.
Keywords
Organizational effectiveness, Service quality,
Internal efficiency, Customer orientation
Abstract
To survive in increasingly competitive markets, customer
focused organizations are challenged to create and
sustain long term loyal and supportive customers. To
ensure long term service quality, organizations need to
have quality focused internal structures and processes in
place to support those on the front line who make or
break the organization's reputation with their customers.
This paper introduces nine scientifically developed
measures of internal structures and processes that are
associated with service quality. These measures are
applicable to organizations in a variety of industries in
both the public and private sectors and can serve to
benchmark ``best in class'' practices. They were developed
from ratings obtained from 8,924 employees from over
100 organizations. When organizations provide
supportive structures and processes for their front line
employees, these employees are better able to provide
top quality products and services to their external
customers.

The research register for this journal is available at

http://www.mcbup.com/research_registers/
quality.asp

The approach employed in this study to

identify organizational effectiveness criteria is
based on the assumption that employees of
organizations have invaluable knowledge and
expertise, and can help identify measures of
organizational effectiveness. The effectiveness
criteria that are of concern in this study are
centered on the question: ``What do
employees need in order to perform their
tasks effectively to accomplish the goals of a
quality focused organization?''
This paper is organized as follows. First, a
brief discussion of the methodological
framework is presented. Next, the
methodologies employed to develop the
questionnaire and gather the data are
described. The empirical applications, results,
and findings are then discussed in terms of the
three aims of the paper that are noted above.
The summary, concluding remarks, and
practical implications for managers of
customer focused organizations are included
in the last section.

The current issue and full text archive of this journal is

available at
http://www.emerald-library.com

Methodological framework

Managing Service Quality

Volume 10 . Number 1 . 2000 . pp. 4651
# MCB University Press . ISSN 0960-4529

Today's organizations are compelled to

deliver quality to their customers. Managers
are challenged to create and sustain internal

Electronic access

46

Organizational effectiveness indicators to support service quality

Managing Service Quality

Volume 10 . Number 1 . 2000 . 4651

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G. Ronald Gilbert and Ali M. Parhizgari

development workshops offered by a

management development consulting firm
were queried regarding what they thought
they needed from their organizations in order
to demonstrate quality work and succeed in
their continuous improvement efforts.
Approximately 1,500 employees were
involved in these individual and group
interviews and written feedback sessions.
Concurrent with these interviews was a review
of relevant literature pertaining to
organizational excellence and quality
management to identify internal
characteristics attributed to high
organizational performance.
From these two research sources, 197
statements were written for use in a
preliminary questionnaire. They were pilot
tested on convenience samples of several
hundred practitioners attending training
workshops and seminars. The participating
practitioners completed the initial pilot-type
questionnaires and then, in focus group-like
forums, they critiqued the statements in terms
of their clarity and applicability.

systems and controls to assure their quality

focused strategies are being implemented
(see, for example, Peters and Waterman,
1982; Choi and Behling, 1997; Roth et al.,
1997; Byrne, 1993; Becker, 1993; Whiteley,
1991; and the criteria set forth by the US
Department of Commerce's Malcolm
Baldridge National Quality Award, 1999).
While management literature is abundant
with studies pertaining to organizational
structures and processes that advance
organizational effectiveness, what is missing is
an empirically derived measurement base that
cuts across multiple industries from both the
private and public sectors. Such a
measurement base would provide managers
of organizations a basis for gauging the quality
of their own internal systems to enable them
to gain insight about their own organization's
effectiveness and areas most in need of
improvement.
In quality focused organizations,
organizational effectiveness is aimed at the
relationship between systems within the
organization and their effects on the quality of
services and products afforded the
organization's external (ultimate) customers.
For example, the service profit chain
(Loveman, 1998) assumes a set of
interdependent sequential events that
connects internal systems support with
external service quality. Internal
organizational support leads to satisfied and
loyal employees who provide better quality
service to their external organization
customers. This leads to the creation of
enduring customers whose continued loyalty
and patronage will further the organization's
long term profitability (Reichheld and Teal,
1996; Heskett et al., 1997; McCarthy, 1997;
Loveman, 1998; Rucci et al., 1998).
Loveman's model of this service profit chain
is exhibited in Figure 1. In the quality
approach, an effective organization requires
sound internal structures and processes in
order to demonstrate sustained quality service
for external customers over time.

Phase 2: development and

administration of the initial survey
instrument
Following a review of critiques attained from
the participating practitioners, the first survey
instrument was developed for actual
administration among employees within
organizations, data gathering, and systematic
empirical analysis. It was termed the quality
effectiveness assessment and it included 154
statements. The statements were written so
the respondent could report agreement or
disagreement on a seven point, Likert-type
scale (1 = strongly disagree, 4 = neither agree
nor disagree, and 7 = strongly agree).
Examples of statements included in the initial
pilot effort are as follows:
This organization:
Has a good working environment.
Treats its employees fairly.
Has too many rules and regulations that get in
the way of doing the work.
Seeks the employees' = ideas to improve things.

Development of the questionnaire and

data

A total of 1,369 employees were included in

the initial survey. The sample included all
employees who worked in 28 individual
organizational units as well as 261 employees,
representing a variety of organizations, who
had already attended employee and

Phase 1: formulation of areas to be

analyzed
For a period of three years, employees
attending quality management training and
47

Organizational effectiveness indicators to support service quality

Managing Service Quality

Volume 10 . Number 1 . 2000 . 4651

G. Ronald Gilbert and Ali M. Parhizgari

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Figure 1 The service profit chain

management development training

workshops. All of these respondents
completed the quality effectiveness
assessment instrument based on how they
would rate their own organizations.

Importance of the mission

Measures the perceived clarity of
organizational purpose and the degree to
which the employees view the organizational
purposes to be important. Scale reliability of
this measure (alpha = 0.848).

Phase 3: creation of the refined

instrument
Following an analysis of the data derived from
the initial survey instrument, a more precise
and refined survey instrument was developed.
This instrument, which was termed the
organizational assessment for quality (OAQ),
included 60 statements as compared to the
154 that were included in the quality
effectiveness assessment described in Phase 2,
above. Out of these 60 statements, 47
statements were identical to those included in
Phase 2, and the rest were included for
further exploration.
The ratings of 7,555 employees from 48
quality oriented organizations who completed
the OAQ survey instrument were compiled.
In most cases all employees working in the
organization under analysis were invited to
complete the survey instrument.

Supportive policies toward the work

force
This dimension measures the extent to which
the work force believes the organization treats
its employees fairly and genuinely cares about
the employees' welfare. It demonstrates the
degree to which the employees think the
organization is committed to them as valued
resources (alpha = 0.906).
Appropriateness of the organizational
design
This measure identifies the degree to which
the organization is bound by red tape and
other bureaucratic mechanisms that are
perceived to impede timely decision making
to serve the customer (alpha = 0.735).
Working conditions
This effectiveness criterion identifies the
quality of the organization's environment.
Organizations facilitate quality performance
by assuring the work force adequate facilities
and supplies and providing a safe and healthy
place in which to work (alpha = 0.838).

Empirical application
After the data were collected, a factor analysis
procedure was administered using principal
components and varimax rotations to derive
nine measures of internal organizational
structures and processes or organizational
effectiveness. They are identified below along
with the Cronbach reliability alphas that are
estimates of the internal reliability of each
measurement scale.

Pay and benefits

This dimension measures the degree to which
employees report their pay and benefits to be
good when compared with those of employees
elsewhere (alpha = 0.605).
48

Organizational effectiveness indicators to support service quality

Managing Service Quality

Volume 10 . Number 1 . 2000 . 4651

G. Ronald Gilbert and Ali M. Parhizgari

Following the systematic development of

the nine organizational effectiveness
measures, tests were conducted to determine
if the nine measures were associated with
employees' estimates of the effectiveness of
their own organizations (i.e. V070, V071).
For this test, fresh samples were taken of two
organizations. All employees in a private
sector financial institution consisting of 213
employees and 419 employees working in a
public sector military institution completed
the organizational asessment for quality with
V070 and V071 added to the instrument. The
Pearson r test of association was used to assess
the relationships between the ratings by those
in these two new groups on each of the nine
factors derived earlier with their ratings of
their organization per statements V070 and
V071. The majority (i.e. 44 of 54) Pearson r
correlations that were computed were
statistically significant at the 0.001 or lower
levels; six were significant at the 0.05 or lower
levels; and only four of the 54 associations
were not significant.
When analyzing the results from the two
added organizations, all but one of the nine
previously derived factors were found to be
moderately to strongly correlated with
employees' judgments about their
organization's performance per statements
V070 and V071. Additionally, further analysis
of the data from this study revealed that the
relationship between the employees'
assessments of their organizations on the nine
factors and their assessments of their
organization's effectiveness was strong at all
employee levels (i.e. executives, managers,
supervisors, project leaders, non-supervisors),
and not merely a function of the perceptions
of front line employees alone[1].

Positive supervisory practices

This measure identifies the extent to which
employees view their supervisors to be
providing positive training, coaching,
involvement, team work and direction
enabling the employees to perform effectively
(alpha = 0.899).

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Work force loyalty and pride

This dimension identifies the degree to which
employees demonstrate loyalty and pride in
their work and toward the organization (alpha
= 0.810).
Operational efficacy
This is a measure of both efficient and
effective operational practices. It parallels the
characteristics of just-in-time practices of
quality focused organizations (alpha = 0.745).
Customer oriented behavior
This criterion identifies the extent to which
customer focused behavior is practiced both
internally, within the organization, and with
the organization's external customers (alpha
= 0.873).
All factor loadings of the variables
comprising the nine measures were greater
than 0.5, and with the exception of ``pay and
benefit'', all reliability alphas were greater
than 0.7.

Validation of the measures

To test if there is an actual association
between high scores on the nine OAQ
measures and overall organizational quality
and effectiveness, two additional statements
were added to the OAQ assessment tool.
These two statements queried the employees
regarding their judgment about their
organization's effectiveness in terms of the
quality of its customer service (labeled as
variable V070) and the organization's overall
effectiveness (V071). The statements about
the organizations' effectiveness were:

Ratings of public and private sector

agencies: an example of a practical
application of the measures
A total of 48 organizations were included in
Phase 3 of this study. A total of 33 were
public (government) and 15 were from the
private sector. Nine measures were
empirically derived and were found to be
reliable and valid for both public and private
sector organizations. When public and private
sector ratings were compared, significant
differences were found. When ratings of
organizations were compared within each

V070: Overall, the quality of customer service

provided by this organization is excellent.
V071: The overall effectiveness of this
organization is excellent.

These statements were included at the end of

the OAQ and were structured so that
respondents would answer then using the
same seven point Likert-type scale that was
applied elsewhere in the OAQ questionnaire.
49

Organizational effectiveness indicators to support service quality

Managing Service Quality

Volume 10 . Number 1 . 2000 . 4651

G. Ronald Gilbert and Ali M. Parhizgari

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sector, notable differences were found, as

well. Such comparisons between sectors and
within industries make it possible to
benchmark best-in-class practices to enable
leaders of organizations to identify
opportunities for improvement within their
own systems. Additionally, when applied
within an organization, tools like the OAQ
can aid quality focused leaders pinpoint
internal benchmarks and areas within their
systems where improvement may be merited.

Discussion, summary and conclusions

To provide enduring customer service
excellence, organizations need to have
internal structures and processes in place that
enable employees to succeed in carrying out
the tasks they do to create products and
customer support services. By doing so,
organizations develop dedicated and loyal
employees who can deliver what is expected
of them and will even go beyond expectation
to serve their customers. Such effort leads to
long term loyal external customers and
enables the organization to make more
confident predictions about its own financial
success. This paper sought to:
.
Identify organizational performance
measures employees view to be important
to enable them to perform their tasks and,
thereby, accomplish the aims of the
organization.
.
Demonstrate that such characteristics are
sufficiently generic so their existence is
measurable in a wide variety of both
public and private sector organizations.
.
Use the measures as standards from
which to compare the effectiveness of
organizations with one another, as well as
for purposes of benchmarking to identify
best practices.
Nine empirically derived measures of internal
structures and processes were identified that
were found to be highly reliable and
associated with indicators of customer service
quality and organizational effectiveness.
These measures were identified based on
research from over 100 organizations
consisting of over 8,000 employees.
To attest to the practicality of the use of
these measures of organizational
effectiveness, actual applications of them have
been employed by the US Navy, Air Force,
50

Army, Marines, National Guard, Office of

Personnel Management, Environmental
Protection Agency, Agriculture, Justice, and
local and state governments, as well as from
private sector organizations that represent
retail, mass media, banking and finance,
manufacturing, competitive sports and
recreation, health care, leisure and hospitality
services, and the like. The findings enabled
these organizations to identify internal
structures and processes where the greatest
opportunities exist for improvement.
Survey tools such as the OAQ should not be
used to find fault with people within the
organization. Rather, they need to be used to
identify internal organizational barriers to
quality, and then create new ways to manage
them to improve the quality of the
organization's products and services. Note:
where such barriers were identified by the
OAQ measures and actions were taken to
address them, organizations were able to
demonstrate significant improvements in their
systems as a result (see report issued through
the US Office of Personnel Management on
the Presidential Award winning US Navy
SUPSHIP organization, 1997).
The nine measures identified are generic.
They are applicable in a variety of settings and
among different organizational levels.
Measures like those included in the OAQ can
aid leaders of organizations in their efforts to
learn more about their agencys' performance
effectiveness, both among internal systems
within their organizations and other
organizations within their particular
industries.
Future research will include the expansion
of the database to foster comparisons among
and within industries, and further review the
strength of the internal validity of the
measures employed. It will also use other
measures of organizational effectiveness to
test the validity of the nine measures
identified in this study, and use the data to
identify characteristics of best-in-class
practices and the organizational contexts that
enable such to occur[2].
In summary, although organizational
effectiveness continues to remain an elusive
term, this study has identified nine key
measures of organizational structures and
processes that apply to a large sample of
quality focused organizations in both the
public and private sectors. These measures
hold promise for champions of quality who

Organizational effectiveness indicators to support service quality

Managing Service Quality

Volume 10 . Number 1 . 2000 . 4651

G. Ronald Gilbert and Ali M. Parhizgari

seek to improve the capacity of their

organizations to provide sustained quality to
their external customers.

Loveman, G.W. (1998), ``Employee satisfaction, customer

loyalty, and financial performance: an empirical
examination of the service profit chain in retail
banking'', Journal of Service Research, Vol. 1,
pp. 18-31.
McCarthy, D.G. (1997), The Loyalty Link: How Employees
Create Loyal Customers, John Wiley & Sons, New
York, NY.
Peters, T. and Waterman, R.H. (1982), In Search of
Excellence, Harper and Row, New York, NY.
Reichheld, F.F. and Teal, T. (1996), The Loyalty Effect,
Harvard Business School, Cambridge, MA.
Roth, A.V., Chase, R.B. and Voss, C. (1997), ``Service in
the US: a study of service practice and performance
in the United States'', Research Monograph, KenanFlagler Business School, Chapel Hill, NC.
Rucci, A.J., Kim, S.P. and Quinn, R.T. (1998), ``The
employee-customer-profit chain at Sears'', Harvard
Business Review, Vol. 76 No. 1, pp. 83-97.
United States (1999), Malcolm Baldridge National Quality
Award Criteria for Performance Excellence, US
Department of Commerce, National Institute of
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US Office of Personnel Management (1997), Supervisor of
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Whiteley, R.C. (1991), The Customer Driven Company,
Addison-Wesley, New York, NY.

Notes

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1 More detailed statistical forms of analyses used to

support the conclusions of this paper at each phase
of analysis are available from the authors.
2 Research is also underway to gain insight into the
appropriateness of the OAQ measures in other
languages and cultures outside the USA.

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51

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