The Influences of Operational Performance Objectives to Customer Satisfaction, Intention to Return and Word of Mouth

Chapter 1: Introduction

Topic Description/ Context

Context and rationale for the study

Operations management is vital for organizations. Optimal performance is required in operations management performance, and inadequate performance may decrease the effectiveness and efficiency of the clients, and thus, the company may not be able to meet the needs and preferences of the clients. For this reason, they may not be satisfied with the services offered, and this adversely affects their intention to return or loyalty, as well as lack of endorsement of the company via word of mouth. In fact, clients who are less satisfied based on the inability of the firm to offer excellent services are more likely to have the push to return for the same services (Torres & Kline, 2013). As such, based on past experiences, clients can determine whether to return or not for similar services ((Zhang, Zhang, Wang, Law, & Li, 2013; Torres & Kline, 2013). Operations within the company most of the time encompass involvement of corporations personnel, as well as the bulk of the assets. The critical factors for ensuring that an organization has an effective operations management performance objectives is the capability of providing client feedback and developing effective operational effectiveness goals.

As such, developing operational performance objectives is vital for companies and is the foundation for competitive advantage in the service and hospitality industry. There are five operational performance objectives that companies must observe, which form the backdrop for the strategic operations. These are quality, speed, dependability, flexibility, and costs (Slack, Chambers, Nelson, 2007). Quality entails doing the right thing to ensure the client satisfaction. Mainly, quality is a significant factor in satisfying clients in the hospitality and service sector and involves consistency in producing the service or product. It is an essential aspect in considering operational performance objectives as it is the main component of reducing costs and increasing dependability or reliability (Drohomeretski, Gouvea da Costa, Pinheiro de Lima, & Garbuio, 2014). Speed allows for operational effectiveness and performance by increasing the value to the clients.

Also, speed is vital internally primarily because it helps reduce inventory, thereby allowing a business to reduce the risks (Slack et al., 2007). Dependability, which increases customer loyalty, as well as their likelihood of marketing the business via word of mouth is also vital in enhancing the operational performance, and thus, is a factor that should be considered in making operational performance goals and objectives (Slack et al., 2007). However, it is usually established over time, and thus, it overrides other factors in that it helps an enterprise to retain clients, and therefore, it is an indicator of the level of satisfaction among the clients. Essentially, regardless of how cheap a service is, how fast and innovative is presented to the client, if the client is not sure that the service will be delivered at the right quality, then it is impossible to retain the client as there are other options in the market. On the other hand, flexibility is related to how operations can be able to introduce new and modified services, ability to produce a wide range and mix of services, the capability of changing the level of output and time of delivery (Slack et al., 2007; De Weerd-Nederhof, Visscher, Altena, & Fisscher, 2008). In essence, flexibility in these aspects should be considered when coming up with operational performance objectives, which is vital in improving the client satisfaction (Slack et al., 2007; De Weerd-Nederhof et al., 2008). On the other end, it is the objective of every firm to keep the operational costs low while providing a quality service. Essentially, this creates the basis for making profits. Therefore, these five aspects should be considered while setting operational performance goals. Essentially, increased operational effectiveness, which is established by effective operational performance objectives, is vital for increased client retention, intention to return or loyalty, as well as the ability of the client to market the firm via word of mouth.

Problem Statement

For organizations in the service and hospitality sector to derive success, operational performance goals must be explicitly set. Effective operational management objectives should be adopted to ensure increased performance in the delivery of services. Even though there is visible progress in the sector about the transformation of services to encapsulate improved delivery, this has not always been matched by a sufficient capacity in sustaining and delivering quality services (Izogo & Ogba, 2015). Many organizations set goals in regards to improving service delivery, but they do not always stay true to these goals, meaning that even though the organizations in the sector set goals, they are not always clear, which culminates in the business failing in effectively delivering services. Besides, this is compounded by the perception of inefficient and ineffective mechanisms that deal with the incapacity of effective and efficient service delivery.

Apart from that, some companies in the hospitality and service sector (for example banks) have not implemented support mechanisms, meaning that the departments still struggle with continuous quality improvement in delivering quality services (Saqib, Farooq, & Zafar, 2016; Amin, Isa, & Fontaine (2013). Businesses in the service sector lack an effective operational strategy, and if it exists, the problem of the inability to map services that are provided to ensure the delivery of efficient and effective service subsists. Besides, firm in the sector lack effective service delivery models and strategies, which is often coupled with the lack of standard operational procedures in the various departments. Therefore, quality and service standards in most of the firms have not always improved even with the increases with successive budgets, and in some areas, quality has deteriorated.

This leads to lack of customer satisfaction, which is a critical element in the service and hospitality industry. In fact, it is the basis of having a competitive advantage and firm success. For this reason, without effective and efficient operational performance objectives, there is bound to be lack of positive service delivery, which culminates in the lack of satisfaction. As a result, the company cannot be able to meet the expectations of the clients. It results in lack of loyalty, and therefore, the firm cannot be able to retain the customers (Zhang, Zhang, Wang, Law, & Li, 2013). Their intention to return diminishes, and can no longer market the company via word of mouth. Essentially, once a client receives a quality service, there is a high likelihood that he or will talk about it to friends, acquaintances, and family. This effectively markets the company and provides the basis for the need of quality service. The problem is that the lack of a quality service delivery will adversely affect the client loyalty, and customers can opt for the services of competitors. This can adversely affect the profitability and growth of the firm, which is not the goal of any firm. As such, the purpose of this research is to address the influences of operational performance objectives to customer satisfaction, intention to return and word of mouth.

Purpose and relevance of the study

The purpose of the current study is to investigate the influences of operational performance objectives to customer satisfaction, intention to return and word of mouth. Primarily, the research will cover how the five operations performance objectives of speed, quality, dependability, flexibility, and cost can impact the effectiveness and efficiency of service delivery among services and hospitality firms. The research helps highlight the importance of coming up with effective operations performance objectives that can improve the competitiveness of the firm in the service industry, as well as how it can increase its profitability while also ensuring that growth is achieved (Slack et al., 2007). Therefore, by applying the findings of this research, companies in the hospitality and service sector can realize the merits of having effective and efficient operational performance goals, which will guarantee excellent service delivery, as well as help, improve the competitiveness of the firm owing to the increased level of customer satisfaction. It is significant to note that once the clients are satisfied, then there is a high chance that the intention to return will be positively impacted, which improves the loyalty of clients, as well as the fact that the clients can market the business via word of mouth. As such, client satisfaction will also positively impact the word of mouth. Besides, this will be advantageous as it will lead to increased profitability, better competitiveness, and growth of the firm.

Literature Review

Operations management should have a long-term competitive advantage focus, as they contribute to a large extent the financial performance of a company, for example, reducing sales overheads, as well as allowing for the formation of operations teams that are of importance to the firm as they can provide added value (Slack et al., 2007). Operations can be considered as the part of a business organization responsible for the production of goods and services. Therefore, operations management (OM) entail the managerial area in companies concerned with the design and control of production process and business operations redesign to produce goods and services (Slack et al., 2007). OM can be considered as an essential division for corporations as it streamlines the production of goods and services, ensuring that they do not compromise on quality by mitigating and resolving issues in the production process. Also, through planning, operational management enables organizations to achieve a match of supply and demand and managing the processes involved in the conversion of inputs, such as energy, labor, and raw materials into the outputs, usually as a good or service. Operations management entails the incorporation of principles of factory management, general management, production systems and control, systems analysis, materials planning, manufacturing policy, labor relations, and equipment maintenance among other areas (Slack et al., 2007).

However, operations management cannot operate alone in a company; rather, it needs backing from the other organizational areas and stakeholders. For instance, the finance department has the mandate to secure financial resources at favorable prices, as well as to allocate the resources in the entire organization (Slack et al., 2007). Also, the finance department will enable the analysis of investment proposals, budgeting, and providing financial input to the operations, which is responsible for the production of goods and services. Also, the operations department has to work with the marketing department to assess the consumer needs, preferences, and wants, as well as selling and promoting the goods and services. As such, the operations, marketing, and finance areas within any organizations are interlinked. Also, supply chain and operations are intrinsically linked, and no entity can exist without either. The supply chain is the sequence of an organizations activities, functions, and facilities involved in producing and delivering the products or services, which typically commences with the basic supply of raw mat...