TOWARD UNDERSTANDING CONFLICTS BETWEEN CUSTOMERS AND EMPLOYEES’ PERCEPTIONS AND EXPECTATIONS: EVIDENCE OF IRANIAN BANK

This paper aims to determine infl uence factors affecting bank service quality, calculate the relative importance of factors from viewpoints of bank customers and employees, and examine the gaps in customers and employees’ perceptions and expectations of the quality of bank services. Accordingly, an empirical investigation was conducted in one of Iranian leading banks (Bank-e-Refah). For data collection, an adjusted SERVQUAL questionnaire was developed and distributed among 385 customers and 305 employees. The results show signifi cant difference between customers and employees viewpoints. Understanding the gaps helped bank managers to develop more effective customer-oriented service plans and employees’ training and development programs.


Introduction
During the past few decades, service quality has become a major area of attention to practitioners, managers and researchers. This attention is due to its strong impacts on lower costs, customer satisfaction, customer loyalty, business profi tability and fi nally on performance superiority.
There have been many researches on the defi nition, modelling, measurement, data collection procedure, data analysis, etc., issues of service quality. For example, some researchers believe that the importance of service quality for business performance has been recognized through the direct effect on customer satisfaction and the indirect effect on customer loyalty. Quality, in service industries, is an important strategic factor that strongly affects customers' satisfaction, loyalty, retention, and fi nally fi rms' performance superiority.
This paper aims to answer the following fi ve important questions in fi ve steps: Q1: What factors are affecting bank service quality? (Factor determination step) Q2: What are the relative importance weights of each factor from viewpoints of customers and employees? (Factors' weights determination step) Q3: How do customers and employees score bank service quality? (Comparing bank service quality measurement step) Q4: What about the signifi cance of difference between customers and employees' viewpoints on the quality of bank services? (Horizontal or comparative gap analysis step) Q5: What lessons do bank managers learn from understanding the gaps? (Improvement and development of action plan design step) The rest of the paper is organized as follows. Section 2 reviews the literature. Section 3 explains research methodology. Results of an empirical investigation in one of leading and largest Iranian banks are provided in section 4. Finally, section 5 concludes the paper.

Literature review
It is wellknown that service quality, as a key strategic indicator in service industries, strongly affects a customers' satisfaction, loyalty, retention, fi rms' profi t-ability and performance superiority. (Horovitz 1990;Fitzsimmons, J.A. and Fitzsimmons, M. J. 1994). There have been many researches on the defi nition, modelling, measurement, data collection procedure, data analysis, etc., issues of service quality. In literature, common research objectives for services are as follows: • To identify dissatisfi ed customers; • To discover customers' requirements or expectations; • To monitor and track service performance; • To assess overall company performance compared to competitors; • To assess gaps between customers' expectations and perceptions; • To gauge effectiveness of changes in services; • To appraise service performance of individuals and teams for rewards; • To determine expectations of a new service; • To monitor changing expectations in an industry; • To forecast customers' future expectations.
Results of several researches in literature reveal that there is a signifi cant positive relationship between the quality of services and customers' satisfaction and loyalty (Parasuraman et al. 1985(Parasuraman et al. , 1988Oh 1999;McDougall and Levesque 2000;Sureshchandar et al. 2002;Wen-Bao 2007), there is a signifi cant positive relationship between customers' satisfaction and customers' loyalty/retention. (Oliver 1993;Bloemer and Kasper 1995;Gremler and Brown 1996;Spreng and Mackoy 1996;Stank et al. 1999;Lasser et al. 2000;Caruana 2002;Sureshchandar et al. 2002;Papassapa and Miller 2007;Brady et al. 2002), and there is a signifi cant positive relationship between customers' loyalty/retention and fi rms' profi tability and performance superiority.  Fig. 2 shows the sequential relationships among service quality, customers' satisfaction, customers' loyalty and customers' retention with fi rms' profi tability/performance superiority.
What is the quality and how it can be measured? Zeithaml et al. (1990) defi ne it as the comparison of service expectations with actual performance perceptions (Gap Model). The central idea in Gap models is that service quality is a function of the different scores between expectations and perceptions. In other words, service quality is the customer's judgement of overall excellence of the service provided in relation to the quality that was expected. Fig. 3 shows an adjusted Gap model of Parasuraman et al. (1985).
What components create customers' expectations? Fig. 4   . Service: including the appearance of the stores, service waiting time, services processes and service information. 5. Access: including network expansion, troubles in the services system and location of stores.
How could the quality of services be measured? In literature, many instruments and models have been developed to facilitate measuring the quality (Babakus and Boller 1994;Boulding et al. 1993;Cronin and Taylor 1992;Ghobadian et al. 1994;Heywood-Farmer 1988;Nitin et al. 2005;Parasuraman et al. 1991;Parasuraman et al. 1994aParasuraman et al. , 1994bPhilip and Hazlett 1997;Robinson 1999;Robledo 2001;Rosene 2003). Nitin et al. (2005) review 19 service models in the light of the changed business scenario. However, at an operational level, research on service quality has been dominated by the SERVQUAL instrument, based on the so-called Gap model (Rosene 2003). In Gap mod-els, the central idea is that service quality is a function of the difference scores or between expectations and perceptions.
As shown in Fig. 5, service quality is naturally a multi-dimensional concept (Parasuraman et al. 1985;Parasuraman et al. 1988;Carman 1990;Teas 1993aTeas , 1993bZeithaml et al 1990). Five key dimensions of service quality are Reliability, Responsiveness, Assurance, Empathy and Tangibles. Reliability is defi ned as the ability to deliver the promised service dependably and accurately. Responsiveness is described as the willingness to help customers and provide prompt service. Assurance is the service quality that focuses on the ability to inspire trust and confi dence. Empathy is described as the service aspect that stresses the treatment of customers as individuals. Finally, Tangibles focus on the elements that represent the service physically.

Words of Mouth of Communications Customers' Needs
In application area, assessing service quality is yet a hot subject for recent researches. For example, it is widely applied to different areas as: • discount and department stores (Finn and Lamb 1991;Daholbkar et al. 1996;Stank et al. 1999;Miguel et al. 2004;Siu and Cheung 2001), • hotel industry (Lewis 1987;Nash 1988;Barsky 1992;Tsang and Qu 2000;Wilkins et al. 2007), • hospital industry and healthcare (Babakus and Mangold 1992;Youseff et al. 1996;Pagouni 1997;Sewell 1997; Camilleri and O'Callaghan 1998), • education and university (Hill 1995;Galloway 1998;Orwig and Jauch 1999;Waugh 2002 In spite of high validity and reliability of SERVQUAL instrument, some researchers suggest that in some service fi rms it needs a considerable adaptation (Dabholkar et al. 1996). However, it still seems as the best alternative for cross-sectional research and industry benchmarking (Fitzsimmons, J. A. and Fitzsimmons, M. J. 1994).
Some researchers applied SERVQUAL concepts to measure internal service quality. They named this as INTERSERVQUAL. (Frost and Kumar 2000;Kang et al. 2002).
Although the classical multi-dimensional service quality measurement methods have been widely used in several service industries, they have also been widely criticized (Asubonteng et al. 1996;Buttle 1996;Zeithaml et al. 1996). For instance, the validity and the reliability of the difference between expectations and performance have been questioned. Several authors have also suggested that perception scores alone offer a better indication of service quality (Cronin and Taylor 1992;Teas 1993aTeas , 1993bOrwig et al. 1997). One of the other critiques explained by GroÈnroos (1993) is that it is required to take into account the role of expectations from a dynamic perspective. In addition, there are some critiques on the simple additive relationships between service quality dimensions (Cronin and Taylor 1992;Teas 1993aTeas , 1993b. Zeithaml et al. (1996) have explicitly addressed several of these critiques.
Pakdil and O'zlem (2007) measure airline service quality based on data collected from a Turkish airline using SERVQUAL scores weighted by loadings derived from factor analysis. Their study shows that "responsiveness" dimension is the most important, while "availability" is the least important element of quality. They also concluded that passengers' educational level affects their expectations and perceptions.
Wen-Bao (2007) provides a nonlinear fuzzy neutral network model of customer satisfaction. He concluded that the interpersonal-based service encounter (IBSE) is better than the technology-based service encounter (TBSE) in functional quality, while the TBSE is better than the IBSE in technical quality. The study shows that the functional quality has a positive and significant effect on customer satisfaction; the service quality has a positive signifi cant effect on service value; the service value has a positive and signifi cant effect on customer satisfaction. The service encounter has a positive and signifi cant effect on relationship involvement and the relationship involvement has a positive and signifi cant effect on customer satisfaction. Papassapa and Miller (2007) provide a picture of how relationship quality can infl uence customer loyalty in the business-to-business (BIB) context. They addressed three main following questions in Australian small to medium-sized enterprises: 1) Does relationship quality infl uence both aspects of customer loyalty? 2) Which relationship quality dimensions infl uence each of the components of customer loyalty?, and 3)Which level of relationship quality (employee level versus organizational level) has more infl uence on customer loyalty? Results of their study indicate that only the organiza-tional level of relationship quality infl uences customer loyalty and the employee level of relationship quality does not play a signifi cant role in infl uencing BIB customer loyalty.
Equipped with the literature, in the next section, we will provide our research methodology and the results of an empirical investigation in one of leading and largest Iranian banks.

Research questions and hypotheses
As mentioned earlier, this research aims to answer the following questions: Q1: What factors are affecting bank service quality? (Factor determination step); Q2: What are the relative importance weights of each factor from viewpoints of customers and employees? (Factors' weights determination step); Q3: How do customers and employees score bank service quality? (Comparing bank service quality measurement step); Q4: What about the signifi cant difference between customers and employees' viewpoints of the quality of bank services? (Vertical or comparative gap analysis step); Q5: What lessons do bank managers learn from understanding the gaps? (Improvement and development of action plan design step).
To answer these fi ve questions, the following fi ve-step process was designed: 1. Infl uence factor determination step. 2. Factors' relative importance weights determination step. 3. Bank service quality measurement step. 4. Gap analysis (between customers and employees viewpoints step). 5. Improvement in action plans' priority design step.
This research investigates the following four research hypotheses: H1: The relative importance weights of service quality factors are signifi cantly different from viewpoint of bank customers. H2: The relative importance weights of the service quality factors are signifi cantly different from viewpoint of bank employees. H3: There is a signifi cant difference between the sets of relative importance weights of the service quality factors determined by customers and that of employees.
H4: There is a signifi cant difference between the sets of bank improvement in action plans' priority determined by the customers and that of employees.

The questionnaire
In order to test the research hypotheses and measure Bank-e-Refax service quality level, an adjusted SERV-QUAL questionnaire was developed (See Appendix 1). The questionnaire included eight dimensions with 32 quality factors. The dimensions and their related question numbers are as follows: 1. To measure the reliability of the questionnaire, Chronbach Alpha was calculated. Chronbach Alpha value for the questionnaires was 0.91. Since in this research two statistical populations should be considered (customers and employees), using clustering random sampling method, 385 questionnaires were distributed among bank customers and 305 questionnaires among bank employees.

Quality measurement and weights determination method
In order to measure bank services quality, we applied the following four well-known models: where SQ, Pj and Ej denote service quality, performance, and expectations, respectively.
In order to determine the relative importance weight of jth influence factor ( ; :1, 2, ..., 32) w w w w as the weights of service quality factors determined by the customers and employees, respectively. In addition, to test research hypotheses, statistical Paired Test was applied.

Results of empirical investigation
To answer the questions and test the research hypotheses, a fi eld research has been conducted to measure bank service quality in one of leading and largest Iranian banks, Bank-e-Refah (Anvary Rostamy et al. 2005).
The fi rst research question is 'What factors are affecting bank service quality?' The answer is provided in column 1, Table 1.
The second research question is 'How do customers and employees evaluate the relative importance weight of each infl uence factor?' The answer is provided in columns 4 and 5, Table 1. In other words, column 4 and 5 provide the relative importance weights of service quality factors from viewpoints of the customers, λ jc , and employees, λ je , respectively.
The third research question is 'How do customers and employees score bank service quality?' Tables 2, 3, 4, 5 show the results.
The fourth research question (related to the fi rst and second research hypotheses) is 'Is there a signifi cant difference between customers and employees' viewpoints in terms of the weights of infl uence factors?' Using the data reported in columns 4 and 5, the fi rst and the second hypotheses are statistically confi rmed at 99% confi dence level.
The fi fth research question, which is related to the third and the fourth research hypotheses, is "What lessons do bank managers learn from these discrepancies and gaps?" Result of the statistical test at 99% confi dence level confi rms the third research hypothesis (existing signifi cant difference). The fourth hypothesis implies that statistically there is a signifi cant difference between the sets of action plans' priorities ranks defi ned by customers and that of employees. A key question is, how the action plans' priority ranks have been determined? We answer this question by defi ning a new measure P j = w′ (9 -μ j ), where P j , w′ and μ j denote the value of indicator in terms of j th quality factor, the relative importance weight of the jth quality factor, and the average of actual performance score for jth quality factor, respectively. A higher value of P j translates to a higher priority for an action plan. In turn, a higher priority denotes a smaller rank number. Number "9" is the highest value for a given quality factor in an ideal position. Then, we calculated P j values and sorted them in an increasing order. Columns 8 and 9 in Table  1 show the ranks of 32 service quality factors from viewpoints of customers and employees, respectively. Using data reported in columns 8 and 9, the statistical results confi rm a signifi cant difference between two sets of priority ranks defi ned by customers and employees at 99% confi dence level. In summary, we concluded that: • Both customers and employees believe that the average relative importance weights of 32 different service quality factors are signifi cantly different. • Statistically, there is a signifi cant difference between the sets of relative importance weights of the service quality factors defi ned by customers and that of employees. • Statistically, there is a signifi cant difference between the sets of ranks of action plans defi ned by customers and that of employees.

Conclusions and fi nal remarks
This research conducted a fi ve-step procedure to answer the following fi ve important questions: Q1: What factors are affecting bank service quality? (Factor determination step); Q2: What are the relative importance weights of each factor from viewpoints of customers and employees? (Factors' weights determination step); Q3: How do customers and employees assess bank service quality? (Comparing bank service quality measurement step); Q4: What about the signifi cance of difference between customers and what are employees' viewpoints on the quality of bank services? (Vertical or comparative gap analysis step); Q5: What lessons bank do managers learn from understanding the gaps? (Improvement and development of action plan design step).
The fi rst question was answered by a brief literature review. To answer the second and the third questions, an adjusted SERVQUAL questionnaire with 8 quality dimensions and 32 quality factors was developed and distributed among 385 customers and 305 employees. To answer the fourth question, four service quality methods (SERVQUAL, weighted SERVQUAL, SERVPERF and weighted SERVPERF) were applied. Moreover, in order to determine the relative importance weights of factors, Shannon Entropy Method was used. Finally, the fi fth question was answered using Paired Test.
In summary, we found that: • In all quality measurement models, both customers and employees scored bank service quality higher than average. • In all models, customers' average scores were signifi cantly higher than employees' average scores. Table 1. Bank service quality factors, their relative importance weights and the priority rank of each factor from viewpoints of customers and employees    Since bank customers' preference structures and expectations may not be stable over the time, bank managers should try to have dynamic understanding of customers' needs and expectations, determine and analyse continuously the Gaps and their causes in order to develop more effective customer-oriented action plans and improve bank service quality.