Uncertainty Reduction Approaches, Uncertainty Coping Approaches, and Process Performance in Financial Services

In: Decision sciences, Volume 37, Issue 2, p. 149-175

Abstract

ABSTRACTDeveloping a better understanding of the impact of uncertainty on process performance has been recognized as an important research opportunity in service design (Hill, et al., 2002). Within this general research stream, our study focuses on the question of what managers can do to most effectively address operational uncertainty and mitigate its negative effects. To begin to address this question, we report on an exploratory study using a sample of professionals in the financial‐services industry who acted as informants on 108 financial‐services processes. These professionals were sampled from a population of graduates of a university in the northeastern region of the United States who were employed in the financial‐services industry. Based on these processes, we empirically examine the relationship between responses to operational uncertainty and process performance after controlling for customer mix, other uncertainty sources, and process type characteristics. Our findings suggest that process improvement—an uncertainty reduction approach related to the internal functioning of the process—as well as several uncertainty coping approaches are associated with better performing processes. However, uncertainty reduction approaches related to customer involvement with, and demands on, the process are not associated with better performing processes. We discuss the implications of our findings for determining what actions managers can take to reduce the negative performance effects of operational uncertainty and how managers can decide which of these actions to take. We conclude with a discussion of the limitations of our study.