Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 44

Employee Involvement

The interaction between customers and line employees is often more direct in service industries than in manufacturing firms. At the same time, we often observe that employees in many service firms (for example, in hotels and airlines) are given authority to respond to customer concerns without having to seek approval from their supervisors. Desk clerks in hotels or gate agents for airlines, for example, are often allowed to offer upgrades, early check-ins, late check-outs, special seats, and so on, as a way to apologize for or remedy problems. It is also a way to proactively build customer satisfaction.

Required

a. How can policies that allow employees to make these decisions help the organization? How might they harm the organization?

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b. You observe these policies less frequently in other service organizations such as banks and other financial institutions. Why might this be the case?

Step 1 of 2

a.

The employees of the organisation have a key role in fulfilment of organisational objective. If the employees are given authority to take decisions for fulfilment of the objectives, it will result in increased customer satisfaction. This in turn will result in increased sales and profitability and can be very helpful for the organizations in the long run.

If the employees misuse the decision making authority given to them it can be harmful for the organization.