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Productivity Is Difficult to Improve in the Service Sector

In: Business and Management

Submitted By hazel1607
Words 933
Pages 4
Baumol (1967), many years ago stated that productivity improvements in services are harder to achieve than in goods producing industries. There is no exact data about this but only some notion of hypothesis by the economists and business men support Baumol that it is hard to improve productivity in service sector due to some reasons. Service industry means one is offering their service using a platform and most commonly used platform till today is the labour force. The first reason that leads to the difficulty in improving productivity of a company is because service industry typically needs the intensity in their labour force to compare to the manufacturing industry. This is because the labour will deliver their service to the customer. They tend to involve a significant amount of customization or customer interaction, so their operations rely heavily on these labours. The more services to be delivered or the more customers to be reached, the more labour force will be required which then, costly per each labour salary they need to pay. For example, Hotel industry is labour-intensive since they need to hire more labours to satisfy their customer since they are delivering intangible goods to the customers and the only important platform of delivering that service which is the labour, must be qualified and enough. Talking about the importance in delivering the service to satisfy the customer, this is said to be the other reason for its harder to improve the productivity in service industry. Usually in manufacturing industry, the marketer will find out first what is the customer’s buyer behaviour but they don’t directly seek for that while they talking to the customer, yet they study it from their behaviour. After that the marketers will conclude and give their company idea on what product to manufacture to be delivered to their target market. However, in service industry, they will deliver their service first then study to adapt the customers’ behaviour. This is hard since they need to tailor their service to many people which having different needs and wants. This means, the company need to hire qualified labour that can adapt to every different customer easily. For instance, in a college, the company cannot hire their lecturer with an average knowledge if they want to deliver best education to their student. Since they are facing with a lot of student, their hired lecturers need to know how to adapt to each of his student depending on their student’s behaviour because this will also affect the learning process. The success in bringing the best education their student means they are delivering good service and if the students satisfy and more get higher grade, this means the college is currently having increase in their productivity. The next reason for why it is hard to improve the productivity in service industry is because they need professionals labour to carry intellectual task. This means, the company will have to invest more money onto hiring these professional labours in order to carry an advanced task. The investment is basically high which basically the more educated and qualified the persons are, the higher they have to pay for their service. However, this will worth to invest if these labours can deliver their service really well to the customer. For instance, people whom had passed Degree level will be paid more than people with Diploma certificate. This is because they will need to carry tougher task which involve to critical thinking onto how to deliver their service to the customer really good so that the customer will be satisfy. Most of manufacturing industry today has been automated and mechanized to enhance the customer satisfaction. This is because, the use of technology will save a lot of time and make the production faster to be done. However, when we talk about the service industry, can we really mechanize our labour to deliver better and faster service? If we want to mechanize our service, we might need the labour to be replaced by robot. However, will the customer feel comfort dealing with robot? Another problem can be driven is about the customization. The machine or robot has been set its functionality earlier, means, the customer could not ask for more than what have been programmed into the machine or robot. We can take a look on example of a machine used in service industry which is the bank industry. It is true that ATM deliver faster service than dealing at the counter. The problem is, the customer can only do the programmed service on that machine, the rest they still need to go to the counter to deal it in person. This can cause to the decreasing of the productivity if the company mistake step on what part to mechanize and how if the customer is resistant to the mechanism. The last reason for why it is difficult to improve productivity in the service industry is because it is often difficult to evaluate the quality of service to compare as measuring the quality of a product. The fact is, raising the number of customers helped doesn't necessarily increase the quality of service they're provided. However, the opposite may be true, customers who feel they've been rushed through or given generic service may be unlikely to return. It may also be unsafe, in the health care industry, for example, nurses are judged based not just on the quantity of patients they help, but on the quality, as well. As a result, if increasing productivity is not in the best interests of the customer, there's little incentive to improve it.…...

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