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IJSIM
19,2
176
Received 31 August 2007
Revised 8 January 2008
Accepted 8 January 2008
International Journal of Service
Industry Management
Vol. 19 No. 2, 2008
pp. 176-187
q Emerald Group Publishing Limited
0956-4233
DOI 10.1108/09564230810869720
SELECTED PAPER FROM QUIS 10 2007
Alternative perspectives on
service quality and customer
satisfaction: the role of BPM
V. Kumar, P.A. Smart, H. Maddern and R.S. Maull
School of Business and Economics, University of Exeter, Exeter, UK
Abstract
Purpose – The purpose of this paper is to further investigate the linkages between business process
management (BPM) and customer satisfaction. Also, to challenge the dominance of the customer
contact perspectives on service processes and to propose a more systemic focus on the totality of
service design.
Design/methodology/approach – The research builds on the existing work of Maddern et al.
through the use of structured equation modelling (SEM) tool. The multiple SEM models described here
provide a more robust statistical approach for confirming/refuting the constructs found in the earlier
research.
Findings – This paper presents the results of an empirical analysis, based on longitudinal data from
a large UK bank on drivers of customer satisfaction. The results confirm that process management is a
critical driver of technical service quality. This suggests that companies with reliability/dependability
issues should not emphasise customer satisfaction programmes based on SERVQUAL intangibles
until substantial improvements in process design have been achieved.
Research limitations/implications – The research is limited to a single case study of a UK bank
over a five year period. The generalisibility of these findings is therefore limited. Further work in other
sectors and over longer periods would establish the reliability of the findings. The paper also
highlights some limitations in the service operations literature, particularly the emphasis on customer
presence within the service process.
Originality/value – The paper uses time series data to identify the importance of BPM in achieving
higher levels of customer satisfaction. The authors provide a platform for further research based on
the design of service delivery systems and their impact on customer satisfaction.
Keywords Customer satisfaction, Mathematical modelling, Customer services quality
Paper type Research paper
Introduction
In an era of increased competition, the importance of achieving high levels of customer
satisfaction has gained the attention of researchers and practitioners alike. This is
especially the case in the service sector, where many companies are focusing upon
service quality improvement issues in order to drive high levels of customer satisfaction.
A review of the literature highlights that a number of common factors have been
identified as critical drivers of customer satisfaction. The service profit chain, Heskett
et al. (1994) is one of the most widely supported theories of customer satisfaction.
In brief, it proposes a positive linear relationship between staff satisfaction, service
quality and customer satisfaction leading, ultimately, to profitability. Parasuraman
et al. (1985) also recognise the significance of staff satisfaction and service quality as
drivers of customer satisfaction in developing their SERVQUAL measurement tool. The role
However, they differentiate the service quality construct distinguishing between of BPM
functional service quality (FSQ) (doing things nicely) and technical service quality
(TSQ) (doing things right). Priority has however been afforded to FSQ. More recently,
some researchers have suggested that business process management (BPM) may have
an important role to play in driving customer satisfaction (Frei et al., 1997; Tsikriktsis
and Heineke, 2004). The research presented in this paper builds on previous work 177
(Maddern et al., 2007) which attempted to illustrate, through multivariate quantitative
analysis, a link between process management and customer satisfaction. This research
extends the work of Maddern et al. (2007) through an attempt to challenge the concepts
presented in this previous work. This is achieved by a holistic assessment of the
constructs, using structured equation modelling (SEM). This work therefore seeks to
verify or refute these previous findings through the application of an alternative
analytical method.
The paper is organized in the following sections. The next section examines the
relevant literature. Followed by the section that describes the research objectives and
gives an overview of the core methodology, SEM. The next section discusses the
findings from the research. Finally, the penultimate section offers some conclusions
from the research and suggests potential future research directions.

Literature review
Previous research has indicated that high levels of customer satisfaction are related to
the service quality provided through customer interactions (van der Wiele et al., 2002;
Vilares and Coehlo, 2003). The service profit chain (Heskett et al., 1994) specifically
identifies a relationship between employee satisfaction, service quality and customer
satisfaction. Research investigating these relationships has subsequently generated
support for this model (Loveman, 1998; Anderson and Mittal, 2000; Voss et al., 2004).
The “satisfaction mirror” (Schlesinger and Heskett, 1991; Normann and Ramirez, 1993)
has also been presented as a model for understanding the relationship between internal
aspects of service delivery with external customer satisfaction. Service quality has
formed a nucleus of research incorporating many dimensions of service outcome and
the parameters for achieving these outcomes: costs, profitability, customer’s
satisfaction, customer retention, and service guarantee (Sohail, 2003); corporate
marketing and financial performance (Buttle, 1996). Definitions of service quality have
been found in abundance. For example, conformance to customer expectations (Berry
et al., 1988), the difference between customer expectation and perceived service
(Parasuraman et al., 1985).This latter perspective suggests that dissatisfaction occurs if
expectations are greater than actual performance. As a result, evaluations are not
based solely on the outcome of the service, the technical quality; they also involve the
process of service delivery or functional quality (Grönroos, 1984).
SERVQUAL has been subject to a number of criticisms (Cronin and Taylor, 1992;
Buttle, 1996). In particular, the priority afforded to FSQ within SERVQUAL has been
subject to challenge. In an investigation into service quality in UK banking, Newman
(2001) reports that effective delivery on “hard” factors is a necessary pre-condition for
overall service quality. “Where hard quality, especially reliability of service delivery,
is low, then ‘soft’ quality cannot compensate.” Similarly, Lassar et al. (2000) in a
study of private banking customers, find a much stronger relationship between
IJSIM technical quality and satisfaction than functional quality and satisfaction.
19,2 Nevertheless, SERVQUAL remains the most widely applied measure of service
quality today (Sivadas and Baker-Prewitt, 2000). Indeed, Woodall (2001) considers that
“service quality has effectively become SERVQUAL and vice versa”. However, he goes
on to note that a growing number of companies are focusing on process management in
order to ensure effective performance on hard quality dimensions.
178 This thinking builds upon earlier work by Roth and Jackson (1995), who found that
“business process capabilities had a larger impact on service quality than did people
capabilities”. Frei et al. (1997) also suggest that processes have an important role to
play in driving service quality and customer satisfaction. Banks with good, consistent
processes enjoy higher financial performance. Critically, it is the performance of the
overall “basket” of processes, rather than performance of one or two individual
processes, which determines satisfaction levels. Similarly, in their investigation into
customer satisfaction in US Airlines, Tsikriktsis and Heineke (2004) find that
“reduction of customer dissatisfaction depends upon improvement in process quality”.
Process management has attracted the attention of many businesses (Armistead
et al., 1999). While the concept of managing by “process” intensified during the
re-engineering era initiated by Hammer (1990), it has also, arguably, been and integral
component of many of the prominent, historical, thematic initiatives (Smart et al., 2004).
A strong re-emergence of “process” is now found in the guise of BPM although a
substantial amount of variety in the semantics attributed to this management theme
(Al-Mashari, 2002).
The continued interest in process management can be found in a number of
different contexts, evidenced from a review of current literature. A business-centric
(as opposed to an IT-centric) characterisation of BPM has been undertaken by Smart
et al. (2007) who identify five common application components: process strategy;
process architecture; process measurement; process ownership; process improvement.
Most importantly however, they suggest that these components should be undertaken
in the context of three conceptual components which form a pre-requisite process
mindset. These include: conscious process management (the extent to which process
management is pursued as a conscious activity rather than happening by default);
macro process management (which recognises that processes exist in a hierarchy at
different levels of abstraction/decomposition); centrality of process (where business
processes are inextricably linked to the customer). The recognition of these concepts
facilitates the development of a “process mindset” which attempts to evaluate the
means by which value is created for the customer. From this perspective, a proposition
that process management impacts upon customer satisfaction can be logically derived.
A number of questions arise from the literature which underpin this research:
.
What are the key drivers of customer satisfaction?
. How significant is the role of process management as one of the drivers of
customer satisfaction?
.
Does process management drive TSQ?
.
Is customer satisfaction positively correlated with FSQ, staff satisfaction,
and TSQ?
.
Do FSQ and TSQ have positive correlations with staff satisfaction?
.
Which is the best conceptual model to describe these relations?
In addressing these questions, the research aims to offer both the practitioner and The role
research communities a better understanding of the critical components, and their of BPM
relative significance, for attaining high levels of customer satisfaction.

Research objectives and methodology

The importance of building customer loyalty is paramount to the success of service firms.
Existing models, such as the service profit chain, suggest that this loyalty can be achieved 179
through the attainment of high levels of customer satisfaction which is affected by service
quality. A review of current models also suggests that the major components of the drivers
of customer satisfaction include: staff satisfaction; TSQ; and FSQ. Maddern et al. (2007),
conducted empirical work to identify the drivers of customer satisfaction. The central
argument of this work suggests that process management impacts upon TSQ, and
subsequently affects customer satisfaction (Maddern et al., 2007).
An additional relationship found in this work is a relationship between staff satisfaction
and TSQ. This construct remains substantially unexplained. The objective of this research
is therefore twofold: to verify, or refute, the constructs presented in the Maddern et al. (2007)
model; to explain the relationship between staff satisfaction and TSQ.
The propositions tested by Maddern et al. (2007) indicate a degree of co-relationship
between the drivers of customer satisfaction: Maddern et al. (2007) tested six
propositions but only four of them were considered to be supporting after carrying out
the multivariate analysis. However, during the analysis it was attempted to test all the
propositions. The four main propositions considered are:
P1. TSQ is positively correlated with BPM.
P2. Customer satisfaction is positively correlated with FSQ.
P3. Customer satisfaction is positively correlated with TSQ.
P4. Customer satisfaction is positively correlated with staff satisfaction.
The utility of the approach adopted in this work (investigating each hypothesis
individually) may therefore be questioned. To address these co-relationships (multiple
dependents), and to challenge the existing constructs, structural equation modelling
(SEM) may be used. SEM has been widely used to examine the dimensionality of the
service quality scale and to test relationships among variables and casual models that
involve both observable and unobservable variables (Kang et al., 2002; Kline, 1998).
This has led to the growth in the popularity of the technique (Shah and Goldstein,
2006). There are numerous advantages of using SEM in place of conventional
statistical methods such as multiple regression, correlation, and covariance. While
SEM is similar to multiple regression, it also includes the modelling of interactions,
nonlinearities, correlated independents, measurement error, correlated error terms,
multiple latent independents, each measured by multiple indicators, together with one
or more latent dependents. SEM provides a more appropriate analytical method to
investigate the co-related hypotheses outlined in previous work. It uses confirmatory
factor analysis to reduce measurement error by having multiple indicators per latent
variable. The SEM also has an attractive graphical modelling interface which assists
in the interpretation of the model. In addition, SEM models the mediating variables,
error terms, and handles difficult data such as time series data with auto-correlated
error and non-normal data.
IJSIM Moreover, where regression is highly susceptible to error of interpretation by
19,2 misspecification, the SEM strategy of comparing alternative models to assess relative
model fit makes it more robust. Unlike other statistical methods in SEM the researcher
can analyze the entire theoretical model in one analysis. SEM has the ability to handle
intangible concepts in the analysis such as intelligence, loyalty or satisfaction
(Fitzgerald and Johnson, 2002). Fitzgerald and Johnson (2002) also showed that SEM
180 allows researchers to identify the attributes that predicts overall satisfaction or loyalty
in their research on application of SEM in predicting loyalty. The SEM’s multi-iterated
modelling approach allows understanding of the particular variable in terms of key
influencing factors in detailed. This provides a more robust approach for
confirming/refuting the constructs found in the previous model.
Data for this model were collected as part of an extensive, longitudinal case study of a
large UK bank. Within the sector, customer satisfaction is seen as a key differentiator
(Newman, 2001) and recent deregulation has led to a “shift in strategic focus from price to
service quality” (Frei et al., 1997). The selected company had experienced significant
variation in service quality performance, following a series of mergers and acquisitions
in the late 1990 s and had introduced an extensive BPM programme to address perceived
service weaknesses. The company had robust data for all the key constructs over a five
year period, based upon collection and analysis techniques which met requirements
specified by Heskett et al. (1994), for example, the use of external agencies and adequate,
consistent samples. Analysis of this data supported a demand from the research
community for more longitudinal analysis, in contrast to the prevailing cross sectional
approaches which explore relationships at a single point in time (Voss et al., 2002).
Data sources are outlined below:
. Customer satisfaction. Throughout the period, the company had engaged a
professional research group to conduct 15,000 telephone interviews a month in
which customer were asked, “overall, how satisfied are you with the company?”
.
Staff satisfaction. Again an independent research group had been commissioned
to measure levels of staff satisfaction over the five year period. In addition to an
annual survey of all staff, quarterly surveys, based on statistically robust sample
sizes, were carried out.
. FSQ. The monthly customer interviews also asked questions regarding key
features of the encounter such as staff empathy and expertise. These questions
conform to the variables found in SERVQUAL, specifically those identified by
Grönroos (1984) as reflecting FSQ.
.
TSQ. Kang and James (2004) recognise the challenges associated with
operationalizing the TSQ concept. For this research, TSQ was analysed using
a range of operational metrics such as complaints and adherence to service
levels.
.
BPM. Using criteria established by Maddern et al. (2004), measures of BPM were
identified in a series of facilitated staff workshops.

Table I show the quarterly results over a five year period for each of the key constructs.
Qualitative analysis, based on interviews and a range of secondary data such as
presentations, minutes and internal magazines, provided further insight and validation
of the quantitative findings shown below.
 The role
Customer Staff Functional service Technical service
satisfaction satisfaction quality Complaints quality BPM of BPM
2000-Q1 66.00 50 61.50 4,657 0.000215 36.00
2000-Q2 66.33 45 61.11 5,056 0.000198 39.00
2000-Q3 66.55 45 62.06 4,419 0.000226 48.00
2000-Q4 67.30 44 62.48 4,587 0.000218 48.00 181
2001-Q1 67.27 50 62.35 5,458 0.000183 48.00
2001-Q2 65.97 45 60.93 6,513 0.000154 45.00
2001-Q3 65.77 45 60.71 8,070 0.000124 51.00
2001-Q4 65.53 49 60.36 6,954 0.000144 51.00
2002-Q1 66.33 49 61.35 6,041 0.000166 51.00
2002-Q2 67.17 41 61.97 4,511 0.000222 67.00
2002-Q3 66.43 46 60.79 4,051 0.000247 67.00
2002-Q4 66.73 51 61.12 3,249 0.000308 76.00
2003-Q1 67.03 62 61.30 3,497 0.000286 79.00
2003-Q2 67.40 62 61.72 3,711 0.000269 79.00
2003-Q3 67.33 66 60.68 3,331 0.000300 80.00
2003-Q4 67.30 61 60.61 3,476 0.000288 80.00
2004-Q1 67.93 68 61.08 3,467 0.000288 81.00 Table I.
2004-Q2 67.73 69 60.89 3668 0.000273 81.00 The quarterly results
2004-Q3 68.10 67 61.77 3409 0.000293 86.00 over a five year period for
2004-Q4 68.00 67 60.80 3409 0.000293 86.00 each of the key constructs

Research findings
For this research the SEM analysis was run on LISREL 8.54. The relationships between
the drivers of customer satisfaction were analysed and the conceptual model was tested
using the SEM technique. During the analysis, a number of models were tested, and their
fitness values compared, in order to identify the best fit model; an identification of
appropriate constructs. The comparative fitness measures are shown in Table II.
As indicated in Table II, a total of four best models have been compared against
standard fitness measures. Appropriate fitness ranges for the indices are based on those
suggested in previous literatures (Green et al., 2006; Zeynep and Berry, 1996; Cheung and
Rensvold, 2002; Driscoll et al., 2005). As can be seen from the comparative analysis,
Model 4 accounts for the best fit on all of the fitness indices. Previous research using
SEM suggests that it is advantageous to compare more than two models, in order to find
the best conceptual model. The modelling started with the null hypotheses model with
additional iterative tests seeking to identify better fitness values. A range of models
illustrating this process, and the subsequent findings, are shown in Figure 1, with the
best fit model being shown in Figure 2. Whilst the models tested have very close fitness
measures, Models 1, 2, and 3 do not conform to the main theoretical arguments.

GFI AGFI RMR RMSEA NFI NNFI IFI

Model x2 (. 0.90) ($0.90) (0.00) (#0.05) ($0.90) (1) RFI (1) (. 0.90)

1 0.33 0.99 0.97 0.025 0.00 0.97 5.31 0.91 1.29

2 4.66 0.94 0.77 0.14 0.00 0.60 2 0.03 0.0018 1.05 Table II.
3 0.49 0.99 0.95 0.059 0.00 0.96 5.49 0.87 1.29 Fitness indices of the
4 0.97 0.99 0.95 0.012 0.00 0.97 3.12 0.93 1.11 models
IJSIM
FSQ 0.97
19,2 – 0.18
FSQ 0.95

– 0.18
1.02 SS
0.70 SS
0.49
0.00 TSQ – 0.27 TSQ 0.28
0.02

182 0.90
0.06
0.56
0.43
0.95 BPM 0.23
BPM 0.36
0.79
CS 0.26 CS 0.72

Figure 1.
Chi-Square=0.33, df=3, P-value=0.95498, RMSEA=0.000 Chi-Square=4.66, df=6, P-value=0.58775, RMSEA=0.000
Graphical representation
of Models 1 and 2
(a) Model 1 (b) Model 2

FSQ 0.92
–0.28
1.00 SS

0.19

TSQ 0.26
0.44

0.88 0.77
0.31

1.00 BPM 0.67 CS 0.13

Figure 2.
Graphical representation
of best fit SEM (Model 4) Chi-Square=0.97, df=3, P-value=0.61671, RMSEA=0.000

The constructs within Model 4 provide support for the previous findings of Maddern
et al. (2007). These results therefore provide further evidence highlighting BPM as
an important factor in attaining high levels of customer satisfaction. We find it
disconcerting, however, that there appears to be a lack of clarity surrounding the process
concept, within both the service operations and the broader service management
literature. It is also interesting that, given the prominence of both SERVQUAL and
process management over a prolonged period, the two concepts have not been more
strongly associated in previous research. In pursuit of an explanation, we draw on some
of our parallel research (Ponsignon et al., 2007) which has highlighted customer
centricity as the dominant paradigm within services research. It is arguable that many of
the frameworks and conceptual models found within the services literature, for example:
SERVQUAL (Parasuraman et al., 1985, 1988, 1991); the service profit chain (Heskett et al.,
1994); and service operations frameworks (Chase, 1978; Schmenner, 1986; Silvestro et al.,
1992) have been strongly influenced by an emphasis on “customer contact”.
Furthermore, our observations suggest that, although the “service process” construct
has been widely adopted by both services marketing and service operations as a The role
convenient unit of analysis, it is often interpreted as a “customer process” a part of the of BPM
process where the customer is involved, or a service facility where the customer is
present. This is consistent with a customer contact emphasis within aforementioned
conceptual models. The findings presented here, particularly the relationship between
BPM and TSQ does not correspond to this emphasis. Our representation of BPM within
this research corresponds to a holistic perspective of process management; the entire set 183
of activities and their interrelationships which deliver services to customers. We
therefore highlight the differentiation between holistic approaches to the design of
service delivery systems and reductionist perspectives, often termed (in our view) the
“service process”. Holistic approaches, we would suggest, should be informed by the
plethora of work identifiable within the systems paradigm (Ackoff, 1980; Checkland,
1981; Katz and Khan, 1966; von Bertalanffy, 1968).
The findings of this research are also important for practitioners. It suggests that
performance problems, particularly those associated with customer dissatisfaction
induced by reneging on service promises, cannot be resolved by allocating more
empathetic staff at customer contact points. If companies have problems in
maintaining service promises, there is a requirement to review the service delivery
system: a system of interconnected processes which deliver value to the customer.

Conclusions
The results have important consequences for both practitioners and the research
community. Whilst the results recognise the role of staff satisfaction and both elements
of service quality, they highlight the significance of BPM as a critical factor in driving
customer satisfaction. They suggest that practitioners should focus on process
management to impact upon TSQ rather than simply addressing service quality from a
functional perspective. They also suggest that more research is needed to identify
different configurations of processes within service systems, and to align these
configurations with different outcome measures. This research, through triangulation
and reinforcement of recent findings has provided a much needed longitudinal
perspective on this important topic. These findings provide a platform for future
research on the design of service delivery systems; a move to more holistic approaches
which are not constrained by activities limited by customer contact.
While we would stress the value of exploring the use of alternative analytical methods
(such as SEM) to explore complex issues and to verify previous statistical relationships
and models, the research is subject to limitations. Findings are based on a single case and a
limited data set, requiring bias in the form of exaggeration of the salience of the data and
the prominence of the specific contextual parameters to be recognised. Our research does
not address alternative drivers of customer satisfaction (e.g. culture, leadership, etc.) other
than those limited by the propositions and dataset. The SEM methodology used is also
affected by sample size. In addition, SEM is a confirmatory approach which requires
established theory about the relationships of key parameters as a pre-requisite. These
relationships have been derived from an analysis of extant models relating to customer
satisfaction, synthesised with a process management perspective on value creation.
Future research is therefore required: to apply the model in different contexts; to identify
additional parameters that are not present in our current hypotheses; and to attempt to
falsify the findings which suggest that BPM is a key driver of customer satisfaction.
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About the authors

V. Kumar is a PhD student at the Department of Management in the School of Business and
Economics at University of Exeter. He graduated with first class degree in Metallurgy and
Materials engineering in 2005 from NIFFT, Ranchi, India in 2005. He worked as a part time
research assistant at the Research Promotion Cell, Ranchi, India. He was working as a Research
Assistant in the Department of Industrial and Manufacturing Systems Engineering at The
University of Hong Kong prior to joining University of Exeter. His research interests include
service operations, system dynamics, SERVQUAL, application of Senge’s archetypes, SEM
modelling, supply chain management, and BPM, etc. He is presently associated with the Exeter
Centre of Strategic Processes and Operations at School of Business and Economics, University of
Exeter. He has published more than 11 articles in international journals and conferences such as
IJPR, JEM, IEEE, ACSOM06 (India), QUIS10 (Florida), OSCM07 (Bangkok), etc.
P.A. Smart is the Director of the Exeter Centre for research in Strategic Processes and
Operations within the School of Business and Economics, University of Exeter. He is also on the
Board of the European Operations Management Association, where he is promoting research in
service operations. His post-doctoral research has included projects in the area of business
process management for both the private and public sectors, and he has played a lead role in
collaborative US/European projects exploring enterprise modelling and integration. He has
published over 40 research papers and has acted as a consultant for a number of companies
in both the UK and the USA. P.A. Smart is the corresponding author and can be contacted at:
P.A.Smart@exeter.ac.uk
H. Maddern is a Research Fellow at the Exeter Centre for Research in Strategic Processes
and Operations within the School of Business and Economics, University of Exeter. His research
has focused on investigating the role of BPM within UK financial services. He has gained
numerous professional qualifications in project management and quality management. He has a The role
wealth of experience as a practitioner in financial services including: total quality management,
business process re-engineering, customer relationship management, and activity-based of BPM
management.
R.S. Maull is a Professor in the School of Business and Economics at the University of Exeter.
He has published over 100 research papers on, quality management, operations and production
management and business process re-engineering. In 2006, he was re-elected as a member of the
EPSRC’s Engineering Management College of peers for the fourth time. He has a substantial 187
background in consulting with major organisations.

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