There is a great section of Chip and Dan Heath’s book The Power of Moments where they dig into a study of service encounters. The takeaway is not what you would expect:
Almost 25% of the positive encounters cited by customers [in a study of service encounters] were actually employees’ responses to service failures: slow service, mistaken orders, lost reservations, delayed flights, and so on. When employees handled these situations well they transformed a negative moment to a positive one. Every great service company is a master of service recovery.
It turns out, surprisingly, that it’s never too late. There are opportunities to stand out, even when your back is up against the wall.
The Heaths aren’t the first to note this oddity. Business and consumer psychologists have been researching the phenomenon—known as “service recovery paradox“—since the early 1990s. While no one has yet identified a way to predict the phenomenon, as it relies largely upon specific context, the paradox has been observed time and again in the consumer space.
But what about the business space?
It turns out that, while less studied, there are solid indications that the service recovery paradox (or “SRP,” as it’s known in the literature) has also been observed in business-to-business relationships.
A trio of scholars—Denis Hübner, Stephan M. Wagner and Stefan Kurpjuweit—have explored this topic, proceeding from the more sizable body of research on consumer-facing businesses (B2C). In these relationships, Hübner et al identify four attributes that support service recovery: compensation, response speed, apology, and initiation. Taken together, these four attributes offer consumers a sense of “justice” when faced by a business’s service failure.
In setting out to determine the validity of these attributes as applied to B2B relationships, Hübner et al chose to research the global logistics industry, reasoning that not only are service failures fairly common within the industry, given its scale and complexity, but that they can have significant downstream effects if not adequately addressed by those businesses at fault.
Hübner et al summarize their findings through a series of propositions, which frame out the circumstances in which a B2B service provider is most likely to experience the magical SRP:
1. “The service failure’s potential impact must exceed the ‘zone of indifference’ for the affected client.”
In other words, the failure must be a big enough deal for the client to care. Plus, no one is perfect—when it comes to providing a service, there are always errors. Most of the time, B2B clients understand this and accept the reality of minor errors. In fact, they may even plan for their errors. Architectural project teams (attempt to) build in significant review time for quality assurance to minimize these errors, likewise providing review time on the client side.
2. “Externally attributed failures have a higher propensity to elicit the inter-firm SRP than internally attributed failures.”
It helps when it’s not your fault! Everyone knows that the world is chaotic and unpredictable, so when external forces disrupt your business, it’s understandable—which makes makes it hard for you to blame your service provider. Not so when the blame can squarely be placed internally. If your project team made a pure, internal error, with no outside force to point the finger at, then you’ll have a harder time experiencing service recovery.
3a. “The provision of auxiliary resources containing the magnitude of a service failure is more likely to elicit the inter-firm SRP than limited monetary compensations.”
If you can, fix the problem. If you cannot fix the problem, do whatever you can to ameliorate its impact. Hübner et al suggest providing resources at your disposal to preserve clients’ operations and help them avoid any consequential significant costs that may result from the error.
3b. “Compensations to individuals do not positively affect the individual perception of the service recovery episode.”
You can’t bribe your way back into a client’s good graces. In most cases, the individuals on a client team experience no personal compensation loss from a service error. (They make, of course, experience a loss of face internally.) Plus, Hübner et al point out that such compensatory moves may actually be illegal in many contexts.
4a. “Immediate responses prevent failures from cascading downstream and hence increase the propensity of an inter-firm SRP.”
The sooner they know, the better. Hübner et al observe that this emphasis on immediate response amounts to more than just telling a client, Hey, we have a problem—it amounts to telling a client, Hey, we have this specific problem, and here is our plan to fix it, which we have already activated. This means that not only must a service provider have strong external communication to client stakeholders; they must also have strong internal communication as well as contingency and continuity plans that teams are broadly aware of when these errors surface.
4b. “Providing current information to clients’ boundary spanners enables the boundary spanners to save face in front of internal and external customers and positively influences the individual perception of the service recovery episode.”
Following from the above emphasis on communication, service providers should continue to keep the client connected with the error and its impacts, especially if the provider has enacted a plan to fix it. Because the boundary spanners, referring to those people within an organization who connect internal and external networks, within a client’s organization may be under pressure from their own leadership, it’s critical to keep these people in the loop, which may contribute towards SRP.
5a. “The propensity of a service failure to result in inter-firm SRP increases when service providers communicate their engagement to eliminate the root cause of service failures.”
You have to do more than just say “Sorry.” Sorry doesn’t cut it when business relationships are at stake. The client needs to reasonably be assured that an error will not find its way to repetition—Hübner et al invoke the old business adage: “Never fail the customer twice”—and that the service provider has a plan to address the root cause of that failure. Absent a plan, the client may determine that the error is likely to recur, and seek the service elsewhere.
5b. “Sincere personal apologies from representatives of top management are most effective to convey remorse to affected boundary spanners and positively influence the individual perception of the service recovery episode.”
Bring in the big guns! This is straightforward and sensible advice, demonstrating to client stakeholders that the business relationship is important to the service provider. The presence of top management can also lend credibility to any action plans implemented as part of proposition 5a.
6a. “Proactively enacting in recoveries before customer complaints are voiced increases the propensity of an inter-firm SRP.”
Don’t wait for the client to figure out something is wrong. This proposition is especially true when service providers dive into solving a problem that isn’t their fault, placing themselves in the position of defending their client’s business. As Hübner et al put it: “[S]ervice providers that recognize or anticipate service failures before the client does will delight their clients.”
6b. “Recognizing failures and proactively engaging in recovery solutions creates supporters who spread their positive perception of a service-recovery episode within their organization.
When a service provider is proactive about a problem, this can go a long way towards instilling goodwill at multiple levels of the client organization. Those client stakeholders become cheerleaders for the service provider.
7. “Positive inter-subjective perceptions of the service recovery episode among boundary spanners mediate the firm-level SRP.
Back to those boundary spanners! Expanding on 6b, this proposition observes that the individual cheerleaders can have an institutional effect, solidifying the firm-to-firm relationship and securing the client’s willingness to hold onto the service provider.
Taylor Coe 