This study tests the argument that human resource management in hotels enhances service-recovery performance and job satisfaction through empowering front-line employees to respond to service failures. After an initial phase of qualitative interviewing, dyadic data were gathered through a large-scale survey in thirty hotels in Sri Lanka. The results of structural equation modelling show that the HR practices and management styles adopted in this context help to develop job competence, which is then related to service-recovery performance and job satisfaction. However, they show that service recovery is carefully stage-managed and ‘staircased’ in this hotel context with empowerment strongly related to hierarchical level. Empowerment to address service failures is important in these hotels but it is deliberately graduated according to rank. While employee training shows benefits for both parties, greater job autonomy would enhance the well-being of these service workers.

Introduction

It is well known that service encounters contain intangible aspects, including how customers are treated by service staff, contributing to variation in quality (e.g., Zeithaml et al., 1985). This reality has led to a longstanding interest in the causes of ‘service failure’ and how firms might repair the damage through ‘service recovery’ strategies (e.g., Gronroos, 1988). Even though service failure generates dissatisfied customers, the argument is that effective service recovery can address this dissatisfaction and potentially enhance customer relationships (e.g., Sajtos et al., 2010). According to Michel (2001, p. 20), ‘service failures are inevitable, but dissatisfied customers are not’. A common argument in the services marketing literature is that management should foster the empowerment of front-line service workers so that they are enabled and incentivised to respond to service failures (e.g., Ashill et al., 2008; Babakus et al., 2003). However, we have a very limited understanding of the extent to which this general prescription is endorsed by management in specific service industries and how, in reality, it is implemented. Our goal in this study is to provide the first quantitative assessment in the hotel sector of how human resource management (HRM) connects to service-recovery performance (SRP) through the medium of employee empowerment. We use a sample of Sri Lankan three-to-five star hotels and incorporate job satisfaction in our analytical model to throw light on how management could improve the mutuality of employment relationships in these hotels (Boxall, 2013; Peccei et al., 2013). The paper is structured in a conventional manner. We begin with the literature and our hypotheses, then explain our research methods and results, and finish with our discussion, limitations and conclusions.