Assignment 3B
Group Assignment on a Service Quality Management issue

Subject Code

BUSM4569

Subject Name

Service Quality Management

Location

Student Name - Student
Number

RMIT Vietnam SGS

Do Thi Thanh Vy - s3818523
Tran Nguyen Phuong Uyen - s3754339
Ha Ngoc Phuong Thuy - s3818531
Nguyen Quynh Thien Nga - s3836603
Vo Le Dieu Vy - s3836515
Ha Gia Han - s3800394
Pham Minh Quan - s3824104

Lecturer

Word Count

Dr. Nuno F. Ribeiro

2500

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Table of Contents
Abstract ..................................................................................................... 3
I. Introduction ........................................................................................ 4
II.

Theory .............................................................................................. 4

1. What is Service Quality?...............................................................................4
2. Internal Service Quality ................................................................................5

III. Challenge ......................................................................................... 6
IV. Impact............................................................................................... 7
1. High turnover rate .........................................................................................7
2. Low job performance ....................................................................................7

V. Recommendations............................................................................... 7
1. Financial incentives based on performance ................................................8
2. Non-direct financial compensation ..............................................................8
3. Reward & Recognition (R&R) program .....................................................9

VI. Conclusion ..................................................................................... 10
VII. References ...................................................................................... 10
Appendices .............................................................................................. 19


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Abstract
This report aims to demonstrate the fundamental issue and adversity that the Vietnam tourism and
hospitality (T&H) industry is facing in managing the level of service quality and then providing the
appropriate solutions to address the problem. This challenge significantly influences the process of ensuring
the customers’ demands and satisfaction in T&H. After conducting the learning materials and research in
quality management concepts and models, the report indicates that human resources (HR) play an important
role that contributes to the development of the industry and organization. Accordingly, several reasons lead
to the problem namely lack of employees’ compensation and benefits. Specifically, since hotel employees
are faced with poor working conditions including extensive working hours, difficult customers, and low
salary, they decide to leave the industry for better treatments. To enhance the level of service quality in
Vietnam, considerable solutions were provided that included adjustments in policy and supported personal
development programs. Organizations will pay wages depending on the employee’s expertise and
experience, while the rewards and bonuses will be awarded for workers to strengthen the motivation. In
order to advance employee’s welfare, non-direct financial compensation and reward and recognition
programs should be provided to enhance employee’s quality of life as well as their work performance.

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I.

Introduction

Thanks to the 1986 “Doi Moi” or “Renovation”, Vietnam recognized the importance of T&H in the
country’s economic development (Din et al. 1989; cited in Hall & Page 2000). Cooperation with the WTO
in 1991 allowed Vietnam to establish tourism as one of the dominant drivers of economic development (Go
& Jansen-Verbeke 1995).


Moreover, with cultural and natural attractions, and the Government's "Strategy on Vietnam's Development
of Tourism until 2020, Vision to 20301" in 2011 (Ha Nguyen 2019), Vietnam's T&H has witnessed
booming expansion throughout the meteoric development period (Suntikul, Butler & Airey 2008) and was
ranked 7th among the fastest-growing destinations in the world in 2019 (VNA 2020a). Particularly,
Vietnam welcomed 18 million international tourists in 2019 (VNA 2020b), rendering the industry an
indispensable pillar with a share of 8.8% of Vietnam's GDP (WTTC 2020).

As T&H is “a labor-intensive service industry” (Amoah & Baum 1997, cited in Zagonari 2009, p.2,
Gallardo et al. 2010), the personnel aspect plays an indispensable role to the industry’s success, but still
challenging to manage (Muhlemann & Witt 1994, cited in Forster & Sharpley 2003; Otthenbacher &
Harrington 2007). Despite the social-economic advantages (Crotti & Misrashi 2015, cited in Le, Klieve &
McDonald 2018), Vietnam faces vexing obstacles that directly impact its sustainable growth of T&H (Viet
Nam News 2018).

The report’s objective is to discuss the service quality models and analyze the Vietnam’s personnel
challenge: poor compensation alongside the impacts including high turnover ratio and low job productivity.
Finally, suggestions would be made to enhance the standard of Vietnam’s service.

II. Theory
1. What is Service Quality?
Recently, a fiercely competitive market requires hoteliers to continually innovate service quality to attract
customers. Jun & Cai (2010) said that the most important factor determining the success of the T&H
industry is the attention to service quality from the customer's perspective. Regarding Parasuraman et al.
(1988), the service quality’s concept is the comparison of customer perceptions and expectations about
service quality before using the service with their experience (Kassim & Abdullah 2010). Customer is an
important element in determining the quality, if the service provider does not meet the customers’

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expectations, it will negatively affect the business performance (Ford, Sturman & Heaton 2012). Customer
expectation and experience - moments of truth are formed from the first encounter between the customer
and the service provider (Clow & Vorhies 1993; Garbarino & Johnson 1999; Yi & La 2003, cited in
Fernández-Barcala, González-Díaz & Prieto-Rodriguez 2009). Since service quality can affect the
performance regarding customer satisfaction, consistently delivering good service quality is difficult but
might bring back potential profit.

Many organizations use the SERVQUAL model to improve their service quality (Kassim & Abdullah
2010). This model is used to analyze the gap between customers’ perception and expectations, and illustrate
the tangible and intangible factors that affect the experience of the service provided to the consumer.
SERVQUAL is based on 5 service dimensions namely tangibility, reliability, responsiveness, assurance,
and empathy (Appendix 1) (Parasuraman et al. 1988, 1991, 1994, cited in Tibebe 2012). Therefore, to
enhance customer satisfaction, service providers must provide a top-notch experience in both tangible and
intangible aspects.

2. Internal Service Quality
Regarding Pitt et al. (2008), service quality measurement concentrates on behavior, expectation, and
satisfaction of external customers; however, the internal service quality is also an integral element affecting
the business’s performance (cited in Large & König 2009). Reynoso and Moores (1995) declared that
employee satisfaction and customer enjoyment are symmetrical since employees are considered the main
asset and the most influencing factor on hotel performance and customer satisfaction (citen in Tsaur &
Wang 2001). Therefore, hospitality must provide excellent internal services to satisfy the external
customers’ needs (Hallowel, Schilesinger & Zornitsky 1996; Kang, James & Alexandris 2002).

Mentioning in Week 6: The Service Profit Chain in the BUSM4569 Service Quality Management lecture
(Ribeiro 2017), satisfied employees lead to satisfied customers, which means that an engaged and
productive employee providing good service will create loyalty for customers and gain value from wordof-mouth (Appendix 2). Regarding Billy et al. (2006), job satisfaction and employee commitment to the
organization affect internal service quality (Chen 2013). Furthermore, good internal service quality is
conducive to retaining excellent service staff (Wildes 2007, cited in Kang, James & Alexandris 2002).


High-quality internal service can improve employees’ satisfaction and motivate them to deliver service
enthusiastically through working performance (Hallowell, Schlesinger & Zornitsky 1996). Therefore,
employee satisfaction mainly comes from support policies, including factors like job design/workplace

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design, development pathway, and employee remuneration system (Appendix 2) (Bellou & Andronikidis
2008).

III. Challenge
As aforementioned, the T&H industry is in general ‘a people‐oriented service’ (Gallardo et al. 2010, p.
321). Therefore, customers often evaluate the service quality of a hospitality company based on the
employee delivering service (Kong, Wong & Wan 2014). The perspective and attitude of customer‐contact
employees will directly impact on both guest satisfaction and service quality performance (Gonzalez &
Garazo 2006). Furthermore, the amount of effort that a staff spend in their work to achieve business’s
objective depends on whether the employee think that this attempt will result in the satisfaction of his or
her needs and demands (Baum, Lam & Zhang 2001; Ng and Sorensen 2008, Michel et al. 2013 cited in
Marshall 2015). Therefore, satisfying employees' needs or in other words, enhancing their motivation is
considered as one of the main factors contributing to the organization's success (Yeh 2013).

It is a popular knowledge when defining the economic concerns as the motive for working (Cetin 2013).
While the employees try to achieve the job requirements to ensure their main source of income, the T&H
organizations may use the compensation elements to effectively manage the human resource. Accordingly,
the compensation includes the various forms namely salary, benefits and rewards (Chesser 2016).

Salary is a crucial factor affecting employees’ loyalty and work performance in the T&H industry (Tran &
Tran 2020). Since the T&H requires qualified HR to satisfy customers’ expectations, appropriate
compensations could be used to enhance employees’ dedication, and collaboration (Nelson 2005, cited in

Tessema, Ready & Embaye 2013). The Trading Economics (2019) reported that the average worker’s
monthly wages in July is 6520m VND, however, the minimum average monthly spending is 6500m VND
(Das 2019). This proved that wages can cover the living expenses for only one person. In case the workers
have family, money would become a burden. Furthermore, T&H’s working conditions are stressful due to
work-overload, the ‘24-hours nature of the industry’, and difficult clients (Poulston 2009). Hence, many
employees in the T&H industry do not scrutinize recent jobs as a long-term career path (Hoang & Kieu
2020).

Rewards can be a solution in enhancing employees’ living standards, hence, they can concentrate on jobs
and personal development (Herzberg 2003, cited in Poulston 2009; Edirisooriya 2014). To meet the
organizations’ business goal, rewards are considered as the effective management tool to influence the
employee’s needs and ensure their working performance (Dobre 2013). However, 86% of Vietnam’s

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underemployed workers responded that they prioritize welfare and benefits while applying for jobs
(VietnamWorks 2019). Additionally, 25% of Vietnamese workers reported their “low satisfaction'' with the
current benefits, and 90% of whom decided to find a new job they feel appreciated. Furthermore, 50% of
employees commented that the benefits are “normal” and most of them are seeking new jobs (Navigos n.d.).
Although the service quality is decided by customers, this created by the employees; therefore, lacking of
employees’ motivation in T&H may result in adverse impacts on customer service (Cetin 2013).

IV. Impact
Obviously, the T&H employees are facing pressure due to the poor financial compensation (Kong, Wong
& Wan 2014). Therefore, high turnover rate and low job performance are the most common unexpected
results.

1. High turnover rate
According to Ellingson, Michel & Tews (2013), unfortunately, the employee turnover ratio is among the

top in T&H sector. In specific, turnover rates of entry-level staff in hotels and restaurants can surge up to
50% (Hinkin & Tracey 2000, cited in ibid.). As a result, this will significantly damage businesses’
performance and cause vulnerability in the fierce competition (Ann & Blum 2018) as managers are faced
with a constant Recruitment and Development process (Ellingson, Michel & Tews 2013) as well as high
costs to train new staffs (Tran & Tran 2020). Besides, losing senior workers negatively affects service
quality and client satisfaction (Le, Klieve & McDonald 2018).

2. Low job performance
It is stated that the scarcity of motivation in the hospitality industry may result in declining employee
productivity (Afful-Broni 2012). Particularly, employees do not enjoy working and failure to complete the
tasks on time, which can be the main reason that leads to the low job performance (Cetin 2013). This leads
to negative influence on the quality of services and product delivery and thereby on the satisfaction of
customers in T&H sector (Cetin 2013; Vrtiprah & Sladoljev 2012, cited in Gašić et al).

V. Recommendations
Companies in the service industry are struggling with retaining competent employees (Murray 2018).
Therefore, to improve service quality hospitality establishments should focus on investment in human
resources systems, specifically on development of employee compensation programs that will help to retain
employees and gain their commitment (Batt 2007; Tanke 1990 cited in Swarn, Mitzi & John 2011).

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1. Financial incentives based on performance
Employers can utilize 360-degree feedback to measure employees’ performance which is a subjective
multisource evaluation of employees’ behavior and skills including upward and downward appraisals, peer
feedback, customers’ reviews, and self-assessment (Appendix 4) (McCarthy & Garavan 2001). As reported
by Pizam and Neumann (1998), meaningful work and peer-feedback are the two significant factors that
influenced the employees’ satisfaction, and customers’ evaluation of the service quality is also pivotal to a
hospitality firm’s success (cited in Titz 2009). Learning through past errors is critical to self-analysis and

have a major impact on employees’ motivation that in turn leads to increased perceived service quality
(Appendix 5) (Hays & Hill 2001). Based on 360-degree feedback, the ranking system can be deployed to
identify outstanding performers and sign bonuses.

According to Campbell (2012), employee ranking system is a technique to maintain the qualified human
resources and enhance competitive advantages among colleagues and organizations. This system also
stimulates task significance and distinguishes employees based on their capabilities to accomplish jobs
(Appendix 6) (Roberts 2003; Grote 2005). The process of workforce ranking appraisal is evaluating the
performance of personnel based on KPI, predetermined categories and 360-degree feedback; the main
purpose of this system is to distinguish excellent performers among the whole human capital (Hazels &
Sasse 2008). Consequently, outstanding employees deserve an appropriate competency-based payment. For
instance, Holiday Inn Worldwide has incentive programs tailored to certain groups of employees (Appendix
7) (Arthur 2001). Since the service sector operates by the performance of employees, ranking and paying
adequate salary is mandatory to satisfy hospitality professionals, as well as giving low performers a chance
to find a more suitable occupation (Cira & Benjamin 1998; Hon 2012).

2. Non-direct financial compensation
Moreover, Ward & Davis (1995) suggested the strong impact of benefit coverage and employees’
perceptions about their benefits on job satisfaction and organizational commitment. The value of benefits
to employees is determined by the extent to which the benefit meets employees’ needs (Miceli & Lane
1991, cited in Sinclair, Leo & Wright 2005). Therefore, Vietnamese hospitality firms need to understand
what employees expect regarding their benefits by surveying them, and then design compensation packages
accordingly. By providing benefits, companies take care of other life aspects of employees to minimize
distractions and facilitate productivity. Food and transport discounts on services of companies-partners can
be offered, for example, vouchers on Grab application to simplify transportation to the workplace.

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Shaw & Williams (1994) suggested that various retirement plans will help to retain permanent employees

in high qualified positions. Pensions in Vietnam are provided for according to the social insurance scheme
where a laborer has to contribute 8% of their monthly salaries for at least 20 years to receive a lifetime
pension which still is inefficient to live on (Nguyen 2020; Giang 2004). Therefore, an effective private
retirement plan should be additionally conducted to help people save for their future. For instance,
according to the IHG’s retirement plan, the employer contributes 5% (for staff members) and 10%
(for executives) of basic annual salary to the Individual Retirement Account while employees can make
additional savings on a volunteer basis and withdraw whenever they need. Furthermore, employees can
become a member of the Automatic Investment Plan where a percent of their salaries is deducted to
purchase growth assets which will move into fixed interest assets by retirement age (IHG n.d.).

Additionally, since companies should consider providing comprehensive healthcare plans including dental,
vision, disability insurances like Marriott Corporation which prioritize employees’ welfare (Gibbons 2020)
(Appendix 8-9). ‘Take care of associates and they will take care of your customers’ is the key philosophy
underlying Marriott’s HR strategies (Marriott & Brown, 1997, p. 34).

3. Reward & Recognition (R&R) program
Besides pay and benefits, employee recognition should become an inherent part of organizational culture
to validate the importance of their work, which can be in the form of financial or nonfinancial rewards
(DeCenzo & Robbins 2010, cited in Tessema, Ready & Embaye 2013; Ventrice 2003). Interestingly,
managers are more concerned about the amount of reward whereas line staff are willing to exert more effort
with recognition and social approval (Namasivayam, Miao & Zhao 2007; Caligiuri et al. 2010). Employee
motivation initiatives can be effective only when R&R programs are appropriately implemented (Hansen,
Smith & Hansen 2002). At the year-end, the company should organize employee recognition events to
honor best performing employees by giving them prizes and titles that specifically represent their
contribution, for example, ‘Best customer service’ award. Educational scholarships or training
reimbursement can be also offered to outstanding performers to develop their potential and assist in career
advancement. Based on Skinner's theory, the reward is the most effective way to reinforce employees’
desired behavior, thus an appreciated employee is likely to be more consistent in performing the job which
is critical in service delivery to build customer loyalty and sustain competitiveness (Wei & Yazdanifard
2014; Bell & Menguc 2002, Botha 2016).


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VI. Conclusion
In conclusion, HR is the most important aspect of organizational success in the T&H industry since service
is a customer-service provider's interpersonal interaction (Burke 2018). Therefore, the quality of human
labor and HR management determines service quality, customer satisfaction, and business success
(Schneider et al. 2003). Unfortunately, the turnover rate in the industry is among the highest and occurs for
several reasons (Kysilka & Csaba 2013).

Through insightful analysis, the challenge of employees’ poor compensation in Vietnamese service sector
was identified. Facing exhaustive working hours, low salaries and poor treatments (Kusluvan & Kusluvan
2000) in the service industry, employees leave for better jobs where their efforts are paid off. As the ongoing issues of Vietnam’s T&H industry, negatively affect customers' perception of service.

To alleviate the problems, recommendations are being proposed, precisely offering employees a better
compensation program and ideal employee recognition model. Employees will be fairly paid depending on
their competency, while bonuses and benefits will be provided to maintain employees’ determination. Last
but not least, in order to fulfill the desires of the workforce to be recognized in the industry, the R&R
approach should be put into practice. If solutions are implemented properly, the service sector will have the
necessary human labor to provide high-quality service, enabling further development of the industry.

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Appendices
Appendix 1. Definition of 5 dimensions in SERVQUAL (Source: Zeithaml, Parasuraman & Berry
1990 p.26)

Appendix 2. The Service-Profit Chain model (Source: Heskett et al. 2008 p.120)

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Appendix 4. Relationship between service learning, employee motivation and perceived service
quality (Source: Hays & Hill 2001)

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Appendix 5. 360-degree feedback concept (Source: McCarthy & Garavan 2001)

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Appendix 6. Summary and Comparison of Performance Management Tools

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Appendix 7. Holiday Inn competency-based compensation plan (Source: Arthur 2001)

Holiday Inn Worldwide combined both base and incentive pay in the compensation plan to drive
employees’ commitment to accomplish the organizational objectives. Each employee belongs to a certain
achievement-based incentive plan. Also, the groups of employees are differentiated by the position and
geographic location.

Holiday Inn has its measurement scale to indicate the amount of incentives that will be granted to
employees. Each employee’s performance is measured against 9 competencies, however, the benchmarks
are different for each category of job (E.g. professional/technical/administrative jobs).

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Appendix 8. Marriott employees’ healthcare plan

Marriott International Inc. provides numerous options for welfare benefits to promote employee well-being.
Employees of the hotel chain have premium health insurance packages, a considerable portion of which are
covered by the employer. The plan includes vision, dental, temporary, and long-term disability insurance,
life, and accidental death insurance (PayScale n.d.). Marriott is viewed as the top choice for veterans,

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disabled people, and minority groups which are usually disadvantaged in modern workplaces. Furthermore,
Marriott meets employees’ need for work-life balance by providing paid parental leave of 15 weeks for
mothers and 8 weeks for fathers and foster parents. Therefore, 85% of Marriott’s employees indicated high
satisfaction with their jobs (Gibbons 2020).

Appendix 9. Employees’ feedback on Marriott’s benefits packages (Source: Glassdoor n.d.)

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