One of the most frequently discussed topics in contemporary management literature is the notion of employee empowerment. Empowerment is generally taken to mean the delegation of decision-making authority and responsibility to lower-level employees in a process of directed authority. However, this traditional top-down approach to empowerment is no longer viable, as the shift to a knowledge service economy in the United States, as elsewhere, gives rise to the growing transformation of twenty-first-century workplaces. Emerging knowledge services, such as business-to-business services, high-tech, medical/ health care, advertising/marketing/public relations, accounting/financial services, engineering services, management consulting, legal services, educational services, and the like constitute the most rapidly expanding segment of the labor force. The movement to knowledge services has had a profound impact on the nature of work and the people who work within these organizations. In a very real way, the shift to a knowledge service economy has given rise to the “professionalization” of workplace and the structural empowerment of people who work within these organizations. Structural empowerment, unlike traditional approaches to empowerment, is customer- and client-centered empowerment in which the decision-making prerogative of employees, along with the discretion to act on their own, is market driven.
The fundamental unit of production in knowledge service organizations is the direct relationship between service employees and their customers or clients through which a product or service is delivered. This is called the customer alliance, a partnership or collaboration between knowledge-intensive organizations and their customers for generating problem solutions and mutual gain. Customers have important roles to play in these organizations and have long been recognized as “partial” employees. The notion of worker empowerment is at the core of customer alliances in knowledge-based services because it makes it possible for the organization to more effectively utilize the customer’s contribution and thus increase the quality of services produced.
There is an ongoing dialogue in both academic and popular press concerning the so-called empowerment of employees. This issue is particularly important in knowledge-based services, in which employees in direct encounter with customers are often required to perform as independent decision units in the generation of responses or solutions to customer priorities. The delegation of structural empowerment has traditionally been used to provide frontline employees with the authority for spontaneous, creative activities that are often required in high-involvement customer relationships. Much is known about this type of formal employee empowerment in organizations. There is increasing recent attention, however, to the nature of empowerment in customer alliances that emerge outside the formal authority structure and how knowledge service employees actually empower themselves to more effectively render quality problem solutions to customers and contribute to organizational effectiveness.
The Nature of Customer Alliances
The output of knowledge services emerges from transactions or exchanges between customers and service employees, often referred to as engagement personnel. These relationships are coordinated efforts by both parties in the exchange of resources to generate solutions to customer problems or strategic priorities. For the customer, an adequate, or better, exchange would include satisfaction with the solutions rendered; for the knowledge worker, a satisfactory exchange might include direct payment, a sense of accomplishment, or the generation of new knowledge to the organization. Since valued resources are being exchanged and allocated between the knowledge worker and the customer for mutual gain, the exchange is anchored in a market context.
Implicit in the exchange of resources between knowledge workers or engagement personnel and customers is a social and psychological contract, which consists of a set of mutual expectations involving the rights and obligations of the participants. From this perspective, customer alliances in knowledge-based services can be meaningfully explored through what are generally called agency relationships; that is, customers of knowledge service organizations engage workers in performing deeds on their behalf and also give the workers the right or authority to act on the customers’ behalf.
Knowledge Worker Empowerment
It has long been acknowledged that customers perform salient roles in service operations. In recognition of the important task activities performed by customers in knowledge services, it has been argued that these participants should be included within the boundaries of organizations as “partial” or temporary employees. Such an inclusion within the boundaries of the organization, however, renders customers’ roles essential but subordinate to the knowledge workers or engagement personnel with whom they directly interact in the alliance.
The customer’s subordinate position is primarily based on customer alliances being viewed, as previously noted, as agency relationships, in which clients delegate some decision-making authority to knowledge service workers or engagement personnel. This kind of relationship is a germane and unique feature of knowledge service organizations. Fundamentally, the customer in knowledge-based services hires the service worker or engagement personnel and delegates to the engagement personnel the responsibility for gathering and processing information for generating solutions to customer problems or needs. In so doing, the customer surrenders a delimited set of rights to the knowledge service employee. This process is an important form of employee empowerment because it is thought to provide a framework that encourages employees to exercise initiative, spontaneity, and imagination. Consequently, within knowledge service customer alliances, there is a disparity in status between the customer and the knowledge service employee or engagement personnel based largely on the greater legitimate power or right to make decisions bestowed on the employee by the customer. Further disparity in status may also emerge from the unique body of expertise or knowledge possessed by the empowered worker.
It seems clear that engagement personnel in customer alliances not only are boundary spanners for the firm but also, more important, represent first-line managers for the organization, assisting in the coordination and control of customer activities. Thus, customers enter into the service boundaries as “temporary” members of these organizations and become the responsibility of knowledge service employees.
It is also recognized that knowledge service employees are empowered by an employment contract when they join work organizations. This empowerment is tied to the formal authority structure that would entail, among others things, the governance of customers. As partial members of the organization, however, customers cannot be completely under the jurisdiction of the firm or its representative, the engagement personnel. Exclusive reliance on traditional structural empowerment would restrict the employee’s ability to manage customers effectively, because the empowerment of an employee emerging from the employment contract may often be at odds with the “market-based” empowerment provided by the customer. Market- or customer-based authority is a primary source of employee empowerment in knowledge-based service organizations. The paramount issue for engagement personnel in these services is managing the customer alliance within a market authority: an empowerment structure that is customer provided and thus outside the traditional empowerment structure inherent in the employment contract.
Essentials of Market-Based Empowerment
To a significant degree, knowledge workers in customer alliances are “mini-factories” because they are in a unique position to simultaneously produce and deliver their problem solutions to customers. Engagement personnel in knowledge-based service organizations are thus in possession of resources simply because they occupy formal and informal positions within these organizations. Whereas the traditional structural empowerment in organizations is widely viewed as top-down delegation of decisional power to employees, market- or customer-based empowerment is a bottom-up approach to worker empowerment. In customer-driven empowerment, employees accumulate resources and rights to act in the customer’s best interest. In consultation with the customer, employees jointly create services or solutions to problems in order to add value to the organization. Customer-empowered workers, unlike traditionally empowered employees, generally make claims over a unique body of expertise, knowledge, and skills that confers on them the right to develop solutions to problems. Equipped with empowerment from the customer alliance, engagement personnel are capable of interpreting knowledge and rules, as opposed to merely applying them. This is essential for generating creative solutions for customer needs in knowledge-based service organizations. Furthermore, customer-driven empowerment makes it possible for workers to engage in continuous learning and development in service organizations, with specific features for service excellence.
An important component of customer-driven employee empowerment in knowledge services is the potential for workers to engage in liberality. Liberality means the lateral interests of the customer, entailing the various aspects of the customer as a total product that have to be addressed by engagement personnel in order to render quality services. For example, teachers may have to take into account students’ emotional states and their physical, environmental, and financial situations because these factors might affect the learning process; brokers in a financial planning organization might need to consider not only the customer’s financial status but also factors such as the client’s physical health condition, familial situation, desires, consumption patterns, and personal relationships because these factors may affect the quality and effectiveness of long-term investments, insurance, or other services.
As the knowledge service worker’s liberality in the customer increases, a greater variety of alternative solutions will be possible. Empowerment bestowed on the employee by the customer suggests that the employee in these services is capable of determining the activities that can be performed legitimately in acting in the customer’s interest and modifying the rules when necessary. Worker empowerment within this context represents the acquisition of resources, mainly knowledge, and opportunities required or desired by employees in rendering solutions to customers.
To a great extent, market-based or customer-driven empowerment is a loose understanding of or psychological contract around a set of rights that is bestowed by the customer on engagement personnel in customer alliances. In knowledge-based service organizations, customers are sometimes unable to establish the quality and quantity of solutions. This may lead to reducing contract specificity and providing knowledge service workers with a relatively open contract. The existence of customer authority, as a dimension of customer alliances, transforms engagement personnel activities to sanctioned efforts that are undertaken in the interest of the customer. Customer authority of this kind, therefore, gives rise to empowerment and creates the potential for control gained by the knowledge service worker in a boundary-spanning role. Thus, by right and by the resources possessed, engagement personnel in customer alliances occupy an elevated empowered position in role and in stature relative to other employees in knowledge service organizations.
Customer- or market-based employee empowerment arises out of uncertainty surrounding the generation of solutions to customer needs. Customers’ central role in the uncertainty issue of worker empowerment occurs in response to their difficulties in measuring performance outcomes. While empowered knowledge employees may be certain about the appropriateness of their actions in addressing a customer’s needs, they may be uncertain as to how that customer will value their performance. In knowledge-based services, customers might have difficulty evaluating the worth of activities performed by engagement personnel. Under these circumstances, both the employee and the customers implement mechanisms to understand and gauge the effort and performance of others and their intent in the generation of solutions. Customers may invoke their authority, inherent in their hiring rights, to align the interests of empowered workers and reduce potential opportunism in customer alliances. Thus, customer- or market-based authority focuses on the effects of empowerment, not the causes.
Controlling Employee Empowerment
In customer-based empowerment, knowledge service employees are advantaged as to the potential opportunities and threats in achieving the optimum solutions to customers’ priorities. Empowered employees may be certain about efficiency or the appropriateness of their performance or efforts, but they may be uncertain as to how the customer values such performance. An important question is “What control mechanisms are there to maintain the stability of a customer alliance?”
The misuse of empowerment can be tempered by mutual agreement between the participants on certain solutions or outcomes. Clients, for example, may base the effectiveness of their lawyers on contingent arrangements, in which lawyers receive bonuses if the litigation is successful. The lawyer has a vested interest in the outcome and all the consequences ensuing directly or indirectly from the compliance with the client. Given the emphasis on examining the effects of empowerment in customer alliances, this approach of contracting on the outcome establishes a framework for reducing goal incongruence while fostering the accumulation of resources for both the customer and the knowledge service employee. Within this context, both parties would be empowered. By sharing in the outcome, the employee will be motivated because the outcome creates an incentive to be efficient on activities he or she can most efficiently control. Thus, by having a vested interest in the outcome, empowered employees will be less motivated to exploit their advantages.
Several other mechanisms are employed by knowledge services that may serve to temper risks in potential market- or customer-based empowerment: monitoring, bonding, and the normative system. Monitoring activities are undertaken by customers to reduce the loss of utility. They entail costs as customers attempt to gather and process information about employees’ abilities to adhere to expected contractual agreements. As an example, students often seek information on instructors before signing up for a class.
Bonding activities are undertaken by empowered service workers to assure customers of some minimum level of performance and reduce the perception that they are taking advantage of their position. Bonding activities supplant the need for the customer to engage in monitoring engagement personnel. Typical bonding activities include those associated with obtaining credentials (e.g., certification for completing training programs, awards for outstanding performance, advanced degrees) and guarantees. The reputation of the knowledge worker emerges as an important credibility factor and serves as a bonding mechanism. It gives customers some idea of how to evaluate the potential performance of employees and the amount of probable risk that they are assuming.
A third important mechanism that serves to temper customer- or market-based empowerment is the organization’s constitution. This is the value system within the organization consisting of a set of rules, which, over time, evolves into an ethical code of acceptable or unacceptable behavior. The organization’s constitution serves to monitor and guarantee the integrity of customer alliances.
Traditionally, there has been an overemphasis on empowering service employees through formal organization authority. The organization gives the frontline employee in direct encounter with customers a voice in how they believe activities should be performed. Although such formal mechanisms may provide knowledge service workers the autonomy to make decisions that may influence organizational direction and performance, such organizational mechanisms present only a partial or truncated perspective on knowledge service employee empowerment.
This article has addressed the issue of empowerment of first-line engagement personnel in knowledge-based service organizations from the perspective of how employees empower themselves. A fundamental assumption of the discussion is that an alliance between customers and engagement personnel is crucial to the generation of solutions in knowledge service organizations. Customer alliances exist to facilitate the exchange and distribution of resources necessary for the development of solutions to customer needs and strategic priorities. Rather than focusing on the empowerment of employees through the delegation of authority from the organization, this analysis has concentrated on the effects of empowerment that emerge from the customer’s authority and are outside the formal organization authority structure.
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