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Service Delivery and Financial Sustainability

This chapter is designed to help understand how service delivery and financial sustainability are interconnected. The chapter discusses the roles of client-centeredness, decision making, scheduling, priority setting, effective and efficient flow of services or activities, quality assurance, and continuing quality improvement, and how these factors contribute in their own context to influence positively or negatively the financial sustainability of a nonprofit organization.

WHAT ARE SERVICES?

The term "services" is often used to refer to industrial activities that do not produce manufactured goods, especially when classifying activities in national statistics (John, 1999). This perspective tends to be vague, because types of services vary within specific industries or organizations. For example, Lovelock and Yip (1996) classified services based on core transformation process and distinguished among people-processing, information-processing, and possession-processing services. Lovelock (1983) has categorized services based on the orientation of the service provided, and classified services directed at people's bodies, minds, belongings, and intangible assets.

Further, the term "services" can be the process through which activities are performed for customers. For example, Mohr and Bitner (1995) define services as the "manner in which the outcome is transferred to the customer" (p. 239). In that sense, service delivery is not only a process, but an outcome. Both are important for customer satisfaction. If the process is frustrating or terrible, even when the outcome is great, clients will keep the memory of such an uncomfortable process. This will not only affect their perception about an organization, but also they will seek for alternative ways to obtain the same outcome without going through an unpleasant process. Nonprofit organizations compete for scarce resources. Therefore, the satisfaction of the clients or customers is the best ally that a nonprofit can have to attract additional funding in support of activities and services. On the other hand, if the process is bad and the outcome is awful, the customer will still have a negative experience about services offered by an organization. In fact, customers can be tempted to believe that they were misled by a process that was promising, but did not deliver the corresponding outcome. Such perception has also the potential to affect financial resources generated by an organization.

SERVITIZATION

Sensitization is the process whereby an organization develops creative and innovative ways to create a product-service system that integrates value-based products and service offerings (Vandermerwe & Rada, 1988). Servitization is very popular in the manufacturing industries, especially manufacturing firms in developed economies that strive to adjust to new forms of competition on the global market. For example, Siemens is a company that mainly offers electronic and electrical products. On the other hand, Xerox offers pay-per-click scanning as well as copying and printing of documents. With servitization, they combine their products with various consulting and maintenance services, which add value to the product they are selling. Servitization uses advanced technology-enabled services to reduce costs and negate risks in a way that is beneficial to both the company and the client. This approach transforms the client into an engaged customer. Baines (2013) found that servitization promises sustained annual business growth of 5% to 10%, reduces costs by up to 25% to 30% for customers, and delivers resilience and growth to a country's national economy. Considering servitization as a comprehensive package that is value based, nonprofit organizations can learn from such an approach.

 
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