EMPLOYEE EMPOWERMENT ON CUSTOMER SATISFACTION IN BANKING SECTOR OF PAKISTAN

Employee empowerment and customer satisfaction is one of those terms that everyone thinks they understand, but few really do. Ask a dozen different people and you’ll get a dozen different answers to the question, “What is employee empowerment?” In fact,

research a dozen organizational theorists and you’ll get as many answers to the same

question. Some writers indicate that empowerment consists of sharing power and

authority. Others say that empowerment occurs when the organization’s processes are

set-up to allow for it. If you keep in mind the secondary dictionary definition of “to give

faculties or abilities to: enable” (Grove, 1971, p.744), with all that this word implies, then

you will be on the right track for the purposes.

Employee empowerment is a key feature of the modern management style. Empowered

employees are expected to perform more effectively as compared to those working in

traditional or authoritarian organizational cultures. Empowered employees are more

motivated as compared to those who just follow the given lines. Employee

empowerment creates sense of belongingness and ownership towards the parent

organization. Empowered employee feel more confident and try to give their best to

their employers, as a result, service quality improves. Improved product or service

quality generally results into higher level of customer satisfaction. Higher level of

customer satisfaction results into a bigger sales volume resulting into an improved

profitability. Every business aims at earning profits; however profits and customer value

go hand in hand. In order to give maximum value to a customer, the service provider is

required to develop a sound understanding of the customer expectations.

In the first part of this thesis, the authors will present the background to the problem,

which will then be specified in the second part. Further, the delimitations of this study

will be stated. After reading this first part, the reader will have gained a better

understanding of the research subject which leads to purpose and related research

questions guiding this study.

1.1 BACKGROUND

Global markets have built a competitive environment in business. If the organizations

want to remain in the market, they must be inventive in lowering costs and value to

customers. So it is essential for an organization to utilize the full potential of its people.

But the employees need power and control to make decisions to fulfill the customer’s

needs.

According to (Cook, 1992) studies shown that people work with full energy when they

feel happy, even they are ready to sacrifice for organizations and give their blood to the

company. But when they feel valued and important. They show their involvement in the

business.

(R Maxwell, 2005) Employees in a service organization and particularly, those who have

frequent contacts with the customer usually serve as representatives of both the

Organization and their products or services to the customer at contact point. The quality

of the service and the satisfaction the customer may derive will be an assessment of the

entire service experience. Employees who are empowered in an organization can either

portray a positive or negative picture to the customers.

1.2 PURPOSE STATEMENT

The purpose of this survey based quantitative research is to determine and identify the

perception of employees about the employee empowerment in banking sector of

Pakistan. At what extent these organizations are practicing employee empowerment,

and how much this empowerment has impact on service quality and customer

satisfaction.

In matters concerning financial commitments, investments and spending customers, not

only need reassurance that their finances are safe, but also that they are valued for

committing their stakes with a particular financial institution. Customers of a bank rely

on the services delivered to them by the bank whether they are saving’ depositing,

taking loans, cashing cheques or buying funds, they count on the employees

responsible for handling issues relating to them, to deliver high service quality in other

to increase their satisfaction.

1.3 SIGNIFICANCE OF THE STUDY

This research will provide a deep view to the implications of employee

empowerment to employees, government, employers, students and the general

public who have an interest in the study.

The readers will be able to understand new relations between different variables

and conceptual understanding of these variables. They will read new concepts in

the context of banking sector e.g. organizational image, effectiveness and

efficiency and building trust.

This research is targeted at the management of organizations within the banking

industry, and industries producing highly intangible-dominant services, as

suggestion regarding employee empowerment, which when practiced can

enhance customer satisfaction and create a good customer- perceived service

quality.

1.4 OBJECTIVES

Main objectives of the study is to determine the impact of employee empowerment on

customer satisfaction in banking sector of Pakistan.

General objectives:

To determine the impact of employee empowerment on effectiveness and

efficiency.

To determine the impact of employee empowerment on service quality.

To determine the impact of employee empowerment on organizational image.

1.5 RESEARCH QUESTION

What is the impact of employee empowerment on customer satisfaction in banking

sector of Pakistan?

CHAPTER TWO

LITRATURE REVIEW

2.0 INTRODUCTION

Inside of today’s unstable public and private sectors, external pressures from political,

environmental, social and technological sources require management to seek out,

evaluate and embrace, new planning, organizational and operating techniques to

remain on track in pursuit of their association’s mission and long-term goals. Among

the myriad of proposed theories, models and plans submitted in the past decade to the

managerial community for possible acceptance and implementation is the concept of

employee empowerment. Within the spectrum of discussion on employee

empowerment, rhetoric inevitably mentions the relevant success or failure of

empowerment as a viable tool to upper management.

According to (Kirkman, 1989) empowerment of employees is continuously growing

today in Europe. Multinationals have a great concern on empowerment of employees.

Empowerment increase employee motivation and positive orientation towards his work

role and finally results in higher productivity.(Watson,2003)over the past few years,

traditional management has gone and new democratic approaches has takes its place.

Employee empowerment, which came up in 1990s, is known as one of the new

management concepts. (Hanold, 1997) However, when the relevant literature is

analyzed, this concept is understood to have a longer history than previously thought

with its roots Human Rights Movement of 1950 and 1960s, empowerment has rather

closely related to the various concepts and techniques designed to democratize the

work-place.

2.1 EFFECTIVENESS & EFFICIENCY

(Conger, Kanangu, 1988) management researchers and practitioners have keen

interest in concept of empowerment and related management practices. This interest is

due to several reasons. First studies on leadership and managerial skills suggest that

the practice of empowering subordinate is a principal component of managerial and

organizational effectiveness. Second analyses of power and control within organization

reveals that the total productive form of organizational power and effectiveness grow

with superior sharing of power and control with subordinates. (Mayers, 1987)

employees are effective performers when they are empowered. Because it is the fact

that the employees who have authority to take decisions perform better. And utilize the

resources of the organization efficiently.

2.2 SERVICE QUALITY

In banking organizations, the general offering in a particular industry is averagely

similar, even though they may engage in different approaches to achieving a

differentiation from the others, to be able to gain more market share and customers in

the industry. According to (Gooronos, 2001), “that almost any retailing bank can provide

an individual with retailing services, but not every bank manages to treat customers in a

way that they are pleased with.” Service providers therefore seek to differentiate

themselves from their rivals by offering customers higher quality of services than their

competitors’, which makes the basis of their competition to be defined by their services.

(K.Sen, 2008)The nature of services as being intangible, heterogeneous, perishable,

produced, and consumed at same time makes it peculiar to deliver, and challenging to

organizations to achieve a differentiation from the others.

2.3 CUSTOMER SATISFACTION

(Spetz, Butler; 2008)In the past years the competition in the banking sector is

increasing. There is more choice for the customers and thereby the banks have to work

harder to attract customers. (Peter, Waterman, 1982) focused that good organizations

align their strategies and goals to the requirement s of their customers’ .One way is to

care employees and empower them. (George 1992)There exists an interaction between

the desired results and customer satisfaction, customer loyalty and customer retention.

CHAPTER THREE

RESEARCH METHADOLOGY

3.0 INTRODUCTION

EMPLOYEE EMPOWERMENT ON CUSTOMER SATISFACTION IN BANKING SECTOR OF PAKISTAN

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