As competition intensifies, the quality of customer service is increasingly becoming one of the few sustainable competitive advantages. In service design, we are good at describing the ideal service: identifying key elements of the experience, uncovering barriers, removing irritants. All of this looks convincing in diagrams and is supported by research.

But at the organizational level, in reality, competitive advantage is created not by diagrams, but by management decisions.

Business is not a set of slides. It works only when a delicate balance between dozens of parameters is maintained. In today’s economic environment, a difference of just 1–2% in margin can determine the fate of a business model. That is why, most of the time, the work is not about breakthroughs, but about fine-tuning and about choosing which parameters we actually decide to control.

One of those parameters is the relationship between the cost of service and the value it creates.

The simple idea that high service quality requires investment seems obvious. In practice, however, a different problem appears far more often. The misalignment of management metrics.

I encountered this directly when I was leading service design, research, and customer service functions in a large European retail chain of 32,500 brick-and-mortar stores.

A quick analysis revealed an interesting pattern.

Sales leadership reported to the board on revenue growth and was rewarded accordingly. At the same time, employees at store level, those who directly interacted with customers, were evaluated almost exclusively based on loss metrics.

In grocery retail, “losses” include damaged goods, theft, and expired products. From a management perspective, the logic appeared flawless: if employees are incentivized to reduce expired goods, they will sell products faster. In theory, this would simultaneously stimulate sales and reduce operational costs.

In meeting rooms, this sounded convincing.

On the shop floor, it looked very different.

When employees are evaluated only on losses, their behavior inevitably shifts toward minimizing those losses. Without tools to increase sales, they focus on preventing theft. This often leads to conflicts with customers and increased tension in the store environment. At the same time, informal practices begin to emerge aimed not at improving service, but at improving reports. For example, teams may collectively purchase expired products themselves to avoid recording them as losses.

Such practices affect not only customer experience, but also team dynamics. Employee satisfaction declines, turnover increases, and absenteeism rises. In the end, the very parameters the business intended to improve begin to deteriorate.

This example illustrates a simple management principle:

People do what is clear to them — why it matters, how it is measured, and how it is rewarded.

If an organization measures losses, employees will fight losses.

If it wants growth in service and sales, it must measure and reward the actions that actually lead to those outcomes.

Improving service levels cannot be achieved through training or new standards alone. Behavior at customer touchpoints is shaped not by instructions, but by systems of priorities and rewards. These priorities must be aligned across all levels from operational to strategic.

And there is always a trade-off.

The higher the level of service a business wants to deliver, the more resources it must invest in processes, tools, and people. This may involve increased labor costs when shortening SLA timelines, introducing additional operational roles, or investing in the development of service culture.

But money alone does not create service.

Service is created by people.

And people are able to create value for customers only when they have the internal and external resources to do so: time, tools, support, and clear priorities.

Only under these conditions does the so-called “service mindset” emerge, something many organizations talk about, but few build systematically. It cannot be created through training sessions or slogans alone. It is the result of deliberate adjustments to processes, metrics, and management decisions.

The real question is not whether high-quality service is important.

The real question is whether the business is willing to pay for the behaviors that create it.

This is where the true balance between losses and sales emerges, not in reports, but in people’s behavior and in the management decisions that shape that behavior.