Quality Fires Up Service Industry

THREE years ago USAA, an insurance company based in San Antonio, Texas, began using statistical measures to guage performance in its new-member service department.That year, according to quality manager Jerry Gass, that department had its highest sales level and highest customer satisfaction ever, despite having fewer sales representatives. Like USAA, other companies in the service sector are learning that quality and quantity go hand-in-hand. Banks, hotels, and other companies are developing quantitative measures of how well employees are serving customers, and then trying to push the performance level to new highs - much as manufacturers work to track defects and then modify the production process to make errors less likely. "You can't improve something unless you measure it first," says S. G. Johnson, chairman of the newly formed service-industries division of the American Society for Quality Control (ASQC), an 85,000-member organization based in Milwaukee. But measuring the quality of a service is not as straightforward as for a product. Some companies, for example, track how long telephones ring before they are answered, or how long it takes for workers to handle calls. USAA expects 80 percent of calls to be answered within 20 seconds. But these benchmarks don't give a complete picture of how the customer was treated. So USAA's program involves a "family of measures," which not only charts timeliness and productivity, but also includes customer surveys and quality audits. In the latter, managers listen in as employees serve customers by phone and give them a percentage ranking. The push for quality is not new to the service sector. "Service companies have measured themselves and their competitors for decades," looking at factors such as the length of waiting-lines in stores, says Martin Stankard, a quality consultant in Westford, Mass. However, "there are a lot of forces that are coming together right now" to make service companies pay more attention to quality, Mr. Johnson says. Among the factors he cites: * Customer demand. "People expect more today." * More publicity about the topic of quality. * Growing foreign competition. First, Japanese carmakers attacked Detroit; next may be United States hotel chains. Comparing US and Japanese attitudes toward quality, he says, "We don't believe in it like they do." * The Malcolm Baldridge National Quality Award. Only one company, Federal Express, has won in the "service" category since the award was established in 1988. But the number of applications from service companies has been growing modestly. Perhaps of greater importance, more companies are asking for applications (208,000 this year, up from 180,000 last year and 65,000 in 1989). Many of these firms will not actually apply. But "thousands of companies are starting to look at themselves" in terms of the rigorous standards of the Baldridge Award, says Mr. Stankard, who publishes Productivity Views, a newsletter on quality and productivity. Twenty-five percent of the ASQC's members are now in the service sector, up from 5 percent about five years ago, says spokeswoman Kimberley Jacobson. "We were really kind of hounded to get the [service industries] division into place," Johnson says. The subgroup of the ASQC was started in May. A number of service companies are starting to look at the flow of work more systematically - as a processes to be continuously improved, Stankard says. Mr. Gass's title at USAA is director of quality measurement and improvement, for example. "You have to find out the best way and then train everybody to do it that way," Stankard says, adding that many people think improving quality means getting employees to try harder. In the process, companies can reap big cost savings as well as improved customer satisfaction. Motorola, a maker of telecommunications equipment and computer chips, is finishing a five-year quality drive that includes all parts of its operations - services such as billing and accounting as well as manufacturing. According to vice president Paul Noakes, the company's accounting costs are down $20 million a year as a result of the program, which aims to bring defects down to 3.4 per million, a level known as "six-sigma," by 1992. Do companies ever spend more money measuring how they're doing than they get back in improved quality? That question is "almost invariably based on a marvelous lack of knowledge," Johnson says. Still, "it costs you to find out what you've got to fix."