Essay About Service Sector And Nineteenth Century

Lessons in Service Sector
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Lessons in the Service Sector
by James L. Heskett
Reprint 87206
Harvard Business Review
HBR MARCH-APRIL 1987
Lessons in the Service Sector
by James L. Heskett
Alarge food and lodging company creates and
staffs more general management jobs than
any ten manufacturers of comparable size.
This company, like many others dispensing high customer-
contact services, has eliminated functional
lines of responsibility between operations and marketing.
In its planning the company routinely combines
operations and marketing with what I call a
strategic service vision.
The most profitable largeAmerican company daily
assumes the task of managing a work force of window
washers, cooks, and maintenance personnel. An almost
single-minded concentration on people–their
jobs, their equipment, their personal development–
accounts for much of its success.
The quality control process in a decentralized oilfield
services business involves careful selection, development,
assignment, and compensation of employees
working under varying conditions and in
widespread locations where close supervision is impossible.
In this prosperous company, the process
builds shared values and bonds people together.
An international airline, by paying more attention
to market economies than to production scale economies,
reduces the average size of its aircraft and
increases its net income.
Products introduced since 1982 by a well-known
financial service generated 10% of its revenues in
1985. The raw material for these products is data
already existing in other forms in the companys vast
data base.
These examples give a glimpse of forward-looking
management practice. When examined closely, they
offer insights into the ideas on which successful
competitive strategies have been fashioned in the
much-maligned and little-understood service sector.
Its no coincidence that dominant industries have
cutting-edge management practices. Some U.S. railroads
in the nineteenth century pioneered in divisionalized
management of their far-flung systems and
in good procurement procedures to support their sizable
construction and operational needs. At the turn
of the century, basic industries led the way in experimenting
with scientific management. Then the rise
of the large consumer goods manufacturer, epitomized
by the auto industry, spawned concepts of
decentralization and a full product line aimed at
carefully segmented markets.
Today service industries have assumed the mantle
of economic leadership. These industries–encompassing
trade, communications, transportation, food
and lodging, financial and medical services, education,
government, and technical services to industry–
account for about 70% of the national income
and three-fourths of the nonfarm jobs in the United
States. In generating 44 million new jobs in the past
30 years, they have absorbed most of the influx of
Copyright © 1987 by the President and Fellows of Harvard College. All rights reserved.
James Heskett is the 1907 Foundation Professor of Business
Logistics at the Harvard Business School. Currently
he heads an MBA course, Management Policy and Practice.
This article is an outgrowth of his latest book, Managing
in the Service Economy (Harvard Business School
Press, 1986).
women and minorities into the work force, softened
the effects of every post-World War II recession, and
fueled every recent economic recovery.
In view of this leadership role, now is a good time
to look at the exemplars in the service sector for
insights into ways of boosting productivity and altering
competitive strategies. Despite their diversity,
leading companies in many service industries display
some common themes and practices. And they yield
lessons for managers in any sector of business. Lets
look first at the way the best service companies are
structured.
INTEGRATED FUNCTIONS
Most goods-producing businesses follow the traditional
organizational