Measuring performance of a service system – from organizations to customer-perceived performance

The purpose of this paper is to investigate the implications of the networked and open nature of the service business on performance measurement. The literature has acknowledged that the value of service is increasingly produced by service systems, but solutions for measuring the performance of a service system are still lacking.

The paper constructs a conceptual framework for capturing performance of a service system by combining ideas from the service management and performance measurement literatures. This framework is then applied in two service systems, one from the public sector and one from the private sector. Two different service systems provide complementary views on the phenomenon of service system performance and call for distinctive measurement solutions. In both cases, interviews, series of workshops and an analysis of documentation of the prevailing measurement systems were conducted when applying the framework.

The results indicate that the performance measurement of a service system necessitates measurement information from three perspectives: the performance of individual actors, the internal efficiency of a network and the customer-perceived performance of service operations. The paper provides empirical evidence about the design and implementation of performance measurement for a service system. It also provides some guidance to overcome the recognized measurement challenges that relate, for example, to the shared responsibilities, to integration of measurement data and to capturing customer-perceived impacts of services.

The paper provides new understanding about performance measurement practice in a service system. It integrates service-dominant management philosophy into the long tradition of performance measurement, which concentrates excessively on organizational structures. Even though the common balanced performance measurement frameworks include the perspective of a customer, the application of the frameworks is easily side-tracked leading to sub-optimization when several organizations and customers participate in value creation.

Empirical evidence illustrates the practical need for a new perspective on performance measurement of service systems. This can be achieved by shifting the unit of analysis from organizations to customer-perceived performance. The practical performance measurement systems need to balance with the aspects of effectiveness and outcomes of services, the efficiency of the production network and the performance of individual actors.