Organizational Performance in Services

The question of performance in service activities and occupations is important for several reasons. First, over two-thirds of employment in advanced economies is in service activities. Second, productivity growth in services is historically low, lagging far behind manufacturing, and as a result, wages in production-level service jobs remain low. In addition, labor costs in service activities are often over 50% of total costs, whereas in manufacturing they have fallen to less than 25% of costs. This raises the question of whether management practices that have improved performance in manufacturing, such as investment in the skills and training of the workforce, may be more difficult or costly to apply to service activities. At the same time, these practices may be even more important for organizational performance in these labor-intensive activities. Third, the role of the customer in production makes the process of service delivery fundamentally different than that found in goods production. Thus, it is useful to focus on the factors affecting performance in services, the topic of this chapter