LINKING COMPONENTS OF THE SERVICE SYSTEM AND PERFORMANCE MANAGEMENT SYSTEM
2 DEVELOPMENT OF PERCEPTION OF THE SERVICE NOTION
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LINKING COMPONENTS OF THE SERVICE SYSTEM AND
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(industry) and tertiary sector. The significance of the tertiary sector grew with the growth of employment rate and also with the onset of ICT, what induced the need to develop scientific thoughts about the service. Closer examination of the issue of services brought about questions related to service definition, measurement of service result, service management and co-production of service.
2.1 Service dominant logic
Service, with regard to the change of its sector position providing 80 % of employment, ceases to be perceived as one of product types – intangible product or addition to a product, the transition to the perception of service as to application of competences (knowledge and skills) in order to create benefit for another party starts (Vargo, Maglio, & Akaka, 2008). This automatically induced also the need of theoretical examination, what led to the elaboration of Service Science.
This theoretical perspective changed the perception of economy through the "logic of goods"
(Goods Dominant Logic - GDL) to "logic of services" SDL (Service Dominant Logic). In SDL, service is conceptualized as a process that represents the basis of social and economic exchange.
It is process of applying competences to benefit another moves the emphasis of exchange resources. Service Dominant Logic focuses on service as an activity with benefit for another party by implication the relationship between service, competency and resources (Bryson, 2014).
Another change was the transition from the perception of services as process of using operating tangible resources (operand resources) in the process of value creation by means of certain activities, to the expression of value perception by means of intangible, dynamically developing resources (operant resources), which are capable to create value between at least two participating subjects in their mutual cooperation. So, whereas the GDL perceives services as the unit of output, SDL perceives the service as collaborative process, which creates value for another subject. The value is always co-created in SDL, whereas tangible products are sometimes involved in this process only as means for service provision.
Services are in both cases provided directly or by means of tangible products, through capabilities and knowledge (competences) of providers and receivers. It is not tangible products, but involved parties who represent the basic source of value creation, because tangible products only support the service implementation.
Service Dominant Logic indicates that the basis of managed service is a general understanding of economic activities of exchange and creation of value. It also requires a change of thinking from notions of "producer" and "consumer" to notions expressing the interaction and joint creation of value, to which corresponds the notion "service system" and co-production process. Evidence of application of this new logic can be found in various theoretically delimited areas, such as information technologies (e.g. information services), human resources (e.g. organizations as learning systems), marketing (e.g. network/social marketing), theory of organization (e.g. theory of resources evaluation), but also in practice.
2.2 Service system
The service system is the basic abstraction of service science and at the same time a useful abstraction for understanding value and value co-creation (Maglio, Vargo, Caswell, & Spohrer, 2009). This abstraction enables to build common understanding and representation of the patterns and behaviours that exist between service providers and service client. Service system is according to Katzan (Katzan, 2008) socially constructed collection of service events in which
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participants exchange beneficial actions through a knowledge-based strategy that captures value from provider - client relationship (Fugate, Stank, & Mentzer, 2009). Service system is always connected to other systems by value proposition (Lyons & Tracy, 2012). If the service system is to be defined by means of value, the service system represents "value co-creation configuration of people, technology, value propositions connecting internal and external service systems and shared information". Resources in the service system include people, organizations, shared information (of language, laws, indicators, measures, methods) and technology, everything internally and externally interconnected with other service systems through value proposition.
Resources have assigned rights, namely owned outright, leased/contracted, shared access, and privileged access. Each service system has a unique identity and is a type or class of service (people, enterprise, institutions). Various types of resources (people, shared information, technology) are used in the service system, with the nature of either a physical resources or conceptual/intangible resource.
Service system is represented especially by events having the nature of interactions. Each service system is represented basically by three types of interactions, which occur in chronological order upon service proposition, preparation of agreement on service and upon the service implementation. The proposition of value co-creation can represent the only interaction of well-defined value co-creation (e.g. document certification), or can represent not exhaustively well-defined and on-going series of interactions (e.g. preparation of tasks plan or training of a new employee).
Agreements can be formal, codified in explicit or implicit legal contracts (for instance in relation of a central body of state administration to its directly controlled organization) or informal (for instance perfunctory determination and allocation of task), in which a misunderstanding or even a dispute can occur, leading to the need of wider negotiations between interested parties about any open issue.
Service Level Agreement (SLA) is an excellent tool for the solution of relationships arising from interaction and requirement for service co-production. SLA forms part of management of the provided service level and represents a set of people and systems in the organization, which enable the organization to assure that the SLA will be complied with and resources required to achieve the required level will be used efficiently. SLA describes products and services which the client receives from the provider, tasks and responsibilities of each involved party, financial issues, method of measurement of the service quality as well as method for recording measurements.
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Figure 7 – Service System using SLA. Source: Own processing based on ISO 9004-2
The purpose of Service Level Agreement is to manage the interaction in the co-production of value creation and to minimise negative effects of accidents and problems. SLA therefore contains also the proposal and management of processes appropriate for coping and dealing with unplanned events by means of preparation of preventive activities. A typical example of participation in value co-creation using the SLA is when the client must make available information, workers, adapt access, equipment and resources needed by workers of the service provider for work on site of the service (at the client’s). The system of measurement required for management through the SLA must cover all said aspects. Indicators for performance evaluation in the phase of service proposition but also implementation must be reflected in it in order to improve the service.
2.3 Public service institution as a Service system
Public service institutions have a double position in the service system. On one hand it represents the creator of legislative mechanisms affecting the interaction between the client (organization, citizen, community) and state, on the other hand it fulfils specific requirements reserved for state administration.
In the case of public service institutions, this represents the fulfilment of one of the main tasks - the creation of optimal environment for the development of society (especially from the legislative point of view). That means that the interaction takes place between the public service institution and business environment. This interaction can be presented in a simplified manner as services provided by the public service institution to the business sector organization (its customer) by making available information to it and adjusting and integrating its sources similarly as it is done within the interaction by the business sector organization. Business sector organizations act as the cooperating system. Value is in this case prepared inside the public service organization (at the service provider), but it is delivered in interaction with the customer (business organization or business system, respectively) using the created environment and applying agreed rules.
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Public service institutions are typical organizations of the service provider. The emphasis on a knowledge-based strategy for the creation of value signifies the importance of people and competences of people in a service exchange. The system of performance management is in public service institutions traditionally focused on the area of financial results (effective consumption of resources) and less on institution strategies, processes and results in relation to interested parties (Bovaird, 2008).