The 5 E's That Are Key To Service Recovery

You've likely heard laments like these over the last few years. "I was served undercooked branzino last night and had to send it back politely." Or, "They mixed up our brunch order again. It's the third time this month, and I have been a regular at this place for over a decade." Similarly, "The hotel concierge had no idea what to recommend for things to do in the local area." Likewise, "The airline customer center never returns my call."

The service industry contributes to the global economy by significantly impacting businesses that drive economic growth and sustainable development. Key reasons the service industry is vital for the global economy include its contribution to the worldwide GDP and its role in creating employment opportunities. In 2021, the service industry comprised approximately 65% of the global GDP, as reported by World Bank. Moreover, the service sector employed a large portion of the workforce worldwide, accounting for approximately 51% of global employment in 2019, according to the International Labour Organization (ILO)

In recent years, the service industry has changed drastically, and it is important to acknowledge the challenges that the industry faces, particularly in light of the COVID-19 pandemic, supply chain disruptions, and labor shortages in the sector. Despite these compounding issues, it is essential not to overlook the importance of exhibiting compassion toward service failures. Regardless, these challenges should not deter businesses from seeking to recover efficiently.

Being friendly to service industry workers is a virtue, and even dating app users are now using it as a way to screen their potential matches. Leaving this discussion on "how to treat service workers with respect" to one side for a moment, we want you to focus on the recently increased service failure issues. There has been a noticeable increase in the number of documented complaints regarding service failure cases across various service sectors. These cases include incidents where inexperienced airline workers caused missing luggage, overbooked hotel rooms that resulted in customer complaints and mishandled service recovery processes by newly hired employees. Additionally, food orders have been mixed up at full-service restaurants, which were mismanaged by hastily trained service employees.

Despite the rise in service failure cases, the industry has been lagging in responding. Several views attempt to explain this phenomenon. One possible reason is that companies have experienced lower productivity due to extended training hours for new hires with little experience. Consequently, veteran employees have been allocated to training sessions instead of being on the frontline of service. Additionally, business leaders may be uncertain about establishing employee performance management guidelines in the post-pandemic normal setting. Furthermore, contactless services during the pandemic have reshaped people's mindset and behavior on the service experience.

Service managers can take simple yet effective measures to address service failures posed by the current market landscape in the post-pandemic era. The fundamental approach is to focus on service recovery. The Service Recovery Paradox theory proposes that customers who have problems resolved to their satisfaction may be more loyal than those who have no problems. If hiring unseasoned workers is an inevitable reality due to the labor shortage caused by COVID-19, initial service failure could occur unavoidably. To overcome this challenge, we suggest service managers implement the 5 E's of best practices to respond to service failures effectively.

1. Empathize with Customers' Frustrations Quickly: To respond to service failures effectively, it is crucial to rapidly acknowledge the customer's frustration and take steps to resolve the issue in an expedited manner. A study of airlines' online responses to customer feedback via social media demonstrates a compelling finding: when customer inquiries or complaints are addressed within a five-minute timeframe, customers exhibit a willingness to pay nearly $20 more for a future ticket with that particular airline. As this study underlines the significance of prompt and proactive customer engagement, service companies can not only foster customer loyalty but also capitalize on increased revenue opportunities in the long-term perspective.
2. Empower Employees: Leaders at service organizations should empower employees at all levels with decision-making power and provide continuous training to fine-tune their problem-solving skills. Engaged and empowered employees are more likely to deliver remarkable service experiences and create emotional connections with customers. For instance, Ritz Carlton's $2,000 rule is an outstanding model of such best practices. By implementing the rule, the hotel company allows employees to spend up to $2,000 to address service failure cases without getting approval from a manager. This demonstrates that the company is committed to excellent customer service experiences and is willing to go above and beyond to exceed customer expectations.
3. Embrace Technology for Streamlined Service Delivery: Disruptive technology such as AI, the Internet of Things (IoTs), and rich media (virtual and augmented reality) offer unprecedented opportunities to address service failures and enhance the service recovery process rapidly (Buhalis et al., 2019). Service organizations should leverage digital solutions to streamline service delivery processes, reduce response times and increase efficiency. Integrating contactless self-service options, implementing chatbots and utilizing data analytics can improve customers' overall experience, leading to higher satisfaction levels.
4. Emphasize Fostering a Customer-Centric Organizational Culture: Service excellence should be embedded in the organizational culture. Leaders should advocate a customer-centric mindset and imbue a sense of ownership among employees regarding service quality improvement. Businesses can incorporate service recovery principles into their daily operations by investing in comprehensive training and learning that enables employees at all levels, from frontline staff to C-suites, to gain essential knowledge and skillsets. This will lead to building an organizational culture that swiftly addresses service shortcomings, prioritizes service quality optimization and drives the organizational commitment to sustainable success.
5. Elevate an Employee Who Gets It: In the reshaped labor market landscape influenced by the pandemic, managers should leverage the great resignation phenomenon and job mobility across positions and ranks by identifying and elevating employees who demonstrate exceptional skills and implicit knowledge of service recovery practices. When a customer encounters a service failure, an employee who "gets it" handles it adeptly and provides satisfactory resolutions. For example, a study of service employees' responses to customer complaints exhibits that employees with high emotional intelligence temporarily remove themselves from the customer complaint situation by engaging in simple coping behaviors, such as drinking water from the kitchen, avoiding the dissatisfied customer, attending to a different task, or taking a cigarette break. The findings suggest that service employees with such higher proactive coping skills handle customer complaints smoothly and create better service recovery experiences for their customers. Ultimately, organizations can inspire other employees by recognizing and promoting employees with cognitive-emotive-behavioral skillsets who excel in service recovery.

James R. Bailey is a professor of leadership development at the George Washington University School of Business. He is the author of five books and hundreds of articles, and the founder and editor of Lessons on Leadership.

Jung Ho Suh is a teaching assistant professor of management at the George Washington University School of Business.