Jun Ye, Detelina Marinova, & Jagdip Singh
Executive Summary
Building capabilities to diagnose and resolve implementation challenges is often described as the difference between a market-driven strategy and a market-driven organization. Implementing strategic change in response to market demands is a double-edged sword because it simultaneously generates expected performance gain and unexpected performance loss. Performance loss occurs when change implementation results in a negative effect on performance. When unexpected performance loss dominates or drains away expected performance gain, change becomes ineffective. Thus, organizations often fail to maximize the performance benefits of strategic change because they either do not detect the presence of performance loss or fail to mitigate the loss. The potential for performance loss increases when organizations pursue strategic change involving competing goals, such as cost containment (for internal efficiency) and revenue generation (for market effectiveness).
Implementing strategic change at customer interfaces is especially challenging. These interfaces involve frontline employees (FLEs) as the last link to the customer in the chain of top-down change implementation. Well-intentioned change strategies can be subverted by the detachment and defiance of FLEs. To date, no research has examined the change implementation process with a focus on diagnosing performance loss from a FLE perspective. In addressing this gap, this study emphasizes and captures a useful distinction between performance loss as an outcome (how much is the loss?) and performance loss as a mechanism (why did loss occur?). Making such a distinction allows for diagnosis of the loss.
In turn, diagnosing performance loss allows for the consideration of managerial interventions that provide remedies by suppressing performance loss while maintaining performance gains. Such interventions can curtail or even shut down performance loss mechanisms. This study examines one such intervention mechanism—FLE participation in change decisions. Using a sample of 843 FLEs from five service organizations, this study offers new insights into managing strategic change on the organizational frontlines.
The findings yield several suggestions for strategic change implementation. First, FLE change perceptions are sensitive to the strategic change emphasis. Cost containment strategy increases and revenue enhancement strategy diminishes FLEs' perceptions of change. Second, change perceptions trigger performance loss by fostering FLE detachment—a psychological condition involving a cynical, callous, and uncaring attitude toward others. Third, FLE detachment is a key factor in isolating performance loss because FLE detachment mediates the negative effect of change perceptions on quality performance, and change perceptions have a direct, positive effect on service quality. Fourth, FLE participation in change decisions is effective in mitigating performance loss and enhancing quality performance. With increased participation, FLEs are less likely to experience detachment and more likely to accept change. Thus, FLE participation effectively curtails the performance loss pathways of change, thus enabling the positive pathways to yield functional outcomes.
Managerially, this study suggests that it pays to attend to change processes on the organizational frontlines when implementing strategic change. Without a careful understanding of when and why shifts in strategic emphases promote FLE change perceptions, foster detachment, and undermine performance, the expected performance gains of strategic change are not guaranteed. This research suggests that detachment and subsequent loss of quality performance are more likely when FLEs do not participate in change decisions. Thus, promoting FLE participation fosters functional FLE attitudes and quality performance and alleviates performance loss.
Biography
Jun Ye is Assistant Professor of Marketing in the Lundquist College of Business at the University of Oregon. He received his PhD in Marketing from Case Western Reserve University. He teaches undergraduate-level marketing strategy. His research interests center on the interface of marketing strategy and services marketing. His recent projects focus on marketing strategy implementation in service organizations, the deliberate learning of service employees, and the financial implications of the different dimensions of service quality.
Detelina Marinova is an Assistant Professor of Marketing at the University of Missouri–Columbia. She received a double BS (summa cum laude) in Chemistry and Marketing from West Virginia Wesleyan College and an MS in Quantitative Analysis and a PhD in Marketing from the University of Cincinnati. Marinova's research interests lie at the intersection of marketing strategy and econometric modeling. Her current research focuses on enhancing the financial impact of marketing strategies; the effect of knowledge and market learning on innovation and firm performance; and the role of judgment dynamics in managerial, consumer, and employee decision making in organizations. Her research has been funded by the Institute for the Study of Business Markets and the National Institutes of Health. She has published her research in Journal of Marketing and Journal of Marketing Research. She teaches managerially oriented courses at the undergraduate and MBA levels, including Marketing Strategy, Product and Brand Management, and Marketing Research.
Jagdip Singh is Professor of Marketing in the Weatherhead School of Management at Case Western Reserve University in Cleveland. Jagdip Singh's research involves building and sustaining effective and enduring connections between organizations and their customers, especially in service industries. This research explores organizational dilemmas that arise in developing customer connections based on trust and value relationships. In a related line of research, Jagdip studies how firms organize, implement, and support change and knowledge management to balance the competing goals of productivity and quality in the frontlines. He also studies conflicts of interest in professional markets, concentrating on the medical profession and Big Pharma. Dr. Singh has published his findings in journals such as Journal of Marketing, Journal of Marketing Research, Academy of Management Journal, Management Science, Psychological Assessment, Journal of the American Medical Association, Journal of the Academy of Marketing Science, Journal of Retailing, and Journal of Personal Selling and Sales Management.
Journal of Marketing, Vol. 71, No. 4, October 2007
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