Improving the productivity of service businesses

Service organizations account for over 60 percent of the GNP, yet management tools are less developed for this sector than for the manufacturing sector. This article describes a new approach to help evaluate and improve the productivity of many types of service organizations, identifies inefficiencies and ways to improve productivity, and provides examples of applications to hospitals and bank branches. These insights are not available from commonly used performance measures. The article presents procedures required to use this technique and discusses ways managers can assess its potential costs and benefits.