World Class Faculty & Research / April 13, 2017

United and the Case for Less Productivity

SMITH BRAIN TRUST — Recent backlash against United Airlines following an incident at Chicago’s O’Hare International Airport does not surprise Roland Rust, the Distinguished University Professor and David Bruce Smith Chair in Marketing at the University of Maryland’s Robert H. Smith School of Business. Rust had his own run-in with United in 2016 — although nobody dragged him down the aisle of a plane with a bloodied head like the wailing passenger in the smartphone videos captured on April 9, 2017.

Instead, Rust and his wife were stranded in Europe without luggage or assurances of return passage following a series of blunders by United. Ironically, the couple’s intended destination was the Frontiers in Service Conference in Norway, an event that Rust founded 25 years ago to advance the study of customer service.

Rust sent a complaint letter directly to United CEO Oscar Muñoz, but the reply came from a midlevel customer service agent. “Their customer service department is a shock absorber,” Rust says. “Their job is to keep customers from getting to the top management.” As a result, he says, senior leaders at many companies remain insulated. “I'm sure top managers don't spend 10 seconds of their time thinking about customers,” Rust says. “They never have access to anybody. All they have access to are the financial numbers and productivity numbers.”

Rust turned his ordeal into a case on United complaint management, which he teaches in his classes today. He’s also written several books and journal articles about the tension between productivity and service, and he is the founder and executive director of the Smith School’s Center for Excellence in Service.

Rust says that finding the right balance between productivity and customer satisfaction can be tricky, especially for companies like United that deal with thousands of customers daily. “Productivity and satisfaction do have a tradeoff in service,” he says. “In manufacturing, not so much.” 

His research shows companies how to find the right mix. “There is an optimal productivity level — a sweet spot,” he says. “But the optimal productivity level is not set in stone.”

As technology advances, for example, the optimal productivity level increases. Companies must also consider market factors such as profit margins, labor costs and the number of competitors operating in the same space. Rust and co-author Ming-Hui Huang outline a model for finding the sweet spot in a 2014 MIT Sloan Management Review article, Should Your Business Be Less Productive?

Regardless of a company's individual circumstances, Rust says finding the sweet spot requires long-term thinking — something difficult for corporate leaders focused on quarterly returns. “The impact of customer service is not really intangible,” he says. “It plays out in terms of revenue. But the problem is that that revenue plays out over time.”

As a result, Rust says, most big companies are too productive for their own good. Some CEOs might call that heresy, but the United fallout tells a different story. “The belief that productivity increases are always good for any business is a fallacy that is hard to kill,” Rust says.



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About the University of Maryland's Robert H. Smith School of Business

The Robert H. Smith School of Business is an internationally recognized leader in management education and research. One of 12 colleges and schools at the University of Maryland, College Park, the Smith School offers undergraduate, full-time and part-time MBA, executive MBA, online MBA, specialty master's, PhD and executive education programs, as well as outreach services to the corporate community. The school offers its degree, custom and certification programs in learning locations in North America and Asia.

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