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(1)Faculty of Management Department of Economics, Finance and Environmental Management. PhD DISSERTATION. Management of a firm’s business-to-business debt collection process. mgr Małgorzata Wejer-Kudełko. Supervised by dr hab. Monika Łada, prof. AGH. Cracow, 2017.

(2) Preface Working on this dissertation has evoked sometimes contradictory feelings. On the one hand, it was enjoyable but, on the other hand, quite exhausting. This dissertation originates from my professional experiences and my curiosity for knowledge. It has been written to fulfill the research gap and to satisfy my ambition. Given the broad scope of debt collection, this dissertation takes an integrative approach, drawing on its new model, from three various perspectives: law, economics and psychosociology.. Acknowledgements I am particularly grateful to my supervisor Professor Monika Łada for her support in conducting research, her guidance and sharing her extensive knowledge and wisdom with me. Furthermore, I would like to thank everyone who contributed to my research including the respondents to the questionnaire, interviewees, and others who provided me with valuable research data. I am also extremely grateful to my dearest husband Mariusz for his patience and computer assistance. I would like to thank my mother, too, who provided invaluable assistance along the way to my dissertation. I would also like to express my appreciation to Adam Marczak, the President of the Polish Corporate Treasurers Association (PCTA), for so generously providing me with research facilities. Other people, who I would like to thank, include: Artur Nowak, Jacek Ruciński, Joanna Lipowczan, Agnieszka Kelma-Kaczorowska, Maciej Lipiński, Grzegorz Ochędzan. All of them provided varying degrees of support and care, which greatly assisted me with different aspects of my research efforts. I would also like to take this opportunity to thank everyone else who has helped me with other aspects of the dissertation, including my fellow students and the librarians at AGH University for their professional care.. 2.

(3) TABLE OF CONTENTS Introduction ................................................................................................................................ 1 Chapter 1 Management perspectives on a debt collection process .......................................... 8 1.1. Business relationship management ......................................................................................8. 1.2. Process management ..........................................................................................................18. 1.3. Efficiency and effectiveness ..............................................................................................26. 1.4. Multiperspective approach to debt collection management ...............................................32. Chapter 2 Legal perspectives of a debt collection process in Poland .................................... 44 2.1. Pre-court debt collection stage ...........................................................................................44. 2.2. Court debt collection stage ................................................................................................52. 2.3. Enforcement debt collection stage .....................................................................................60. 2.4. Legal options in a debt collection process .........................................................................67. Chapter 3 Economic perspectives of a debt collection process ............................................. 76 3.1. Pre-court debt collection stage ...........................................................................................76. 3.2. Court debt collection stage ................................................................................................85. 3.3. Enforcement debt collection stage .....................................................................................91. 3.4. Direct and indirect factors influencing the efficiency of a debt collection process ...........98. Chapter 4 Psychosociological perspectives of a debt collection process ............................. 107 4.1. Pre-court debt collection stage .........................................................................................107. 4.2. Court debt collection stage ..............................................................................................115. 4.3. Enforcement debt collection stage ...................................................................................121. 4.4. Psychosociological factors affecting the stakeholders’ relationships ..............................127. Chapter 5 Determinants of a debt collection process management in Poland – empirical research ................................................................................................................ 134 5.1. Research method ..............................................................................................................134. 5.2. Determinants of a debt collection process .......................................................................138. 5.3. Examining relationships and differences .........................................................................159. 5.4. Success factors and barriers to the effective debt collection process – research results ..170. 5.5. Research results – discussion and conclusions ................................................................175. Chapter 6 The model of a B2B debt collection process ....................................................... 183 6.1. The procedure of building the model ...............................................................................183. 6.2. The initial concept of the model ......................................................................................187. 6.3. Verification of the model .................................................................................................194 6.3.1. An analysis of the content of the interviews ................................................... 195. 6.3.2. Suggested changes in the model and directions for further development ....... 202. 6.3.3. Conclusions from the interviews and the changes in the model ...................... 204. 3.

(4) 6.4. The final concept of the model ........................................................................................207. Conclusions and directions for further research ..................................................................... 224 References: ............................................................................................................................. 235 Legal Acts: ............................................................................................................................. 246 List of tables ........................................................................................................................... 248 List of figures ......................................................................................................................... 249 Appendices ............................................................................................................................. 250. 4.

(5) Introduction This dissertation examines the phenomenon of a firm’s business-to-business (B2B) debt collection process. A debt collection process is a set of procedures used in order to recover overdue claims from the debtor. This paper studies management of debt collection from a creditor’s point of view. For the purpose of this dissertation, debt collection is embedded in the concepts of relationship management, process management and the effectiveness. Relationship management is a philosophy of doing business which aim is to retain the customers rather than attract the new ones (Zeithmal et al. 2006, in Kleinaltenkamp et al. 2011, p.176). Business relationships emerge among various entities, i.e. stakeholders which directly or indirectly influence each other (Cole 1994, pp.14-15). Moreover, efficient and effective relationship management with all stakeholders may lead to gaining competitive advantage in the long-term perspective (Hunt 1997, p.432). Regarding process management it refers to planning, organizing, controlling and motivating the stakeholders in order to reach the company’s target (Skrzypek and Hofman 2010, pp.29-30; Brilman 2002, p.293). Furthermore, in the short-term perspective the effective process is the one that reaches the previously planned target (Kieżun 1997, pp.18-19). In the literature much is written on debt collection mainly from financial and legal perspectives. From financial side the emphasis is put on economic ratios and the consequences for a company’s financial standing (Michalski 2013, p.174; Grabowska 2012, p. 95; Sierpińska and Wędzki 1997, p.129). From a legal perspective a debt collection process means obeying a set of legal procedures in order to recover the claim (Podel 2014, p.25; Świeca 2010, p.4; Gęsicki 1997, p.328). However, a debt collection process is an interdisciplinary domain that juxtaposes wide range of scientific disciplines, such as law, economics and psychosociology. Together these aspects account for multiperspective approach to a debt collection process. Having critically reviewed the literature, it turned out that legal, economic and psychosociological aspects of a debt collection are described but separately. Taking these aspects together can bring a distinctive contribution to the development of knowledge in a discipline of management. Legal aspect refers to the procedures and consequences for the company resulting from the overdue receivables (Kreczmańska-Gigol 2015, p.40; Barowicz 2009 p.177). The procedures and consequences are included in the Polish Civil and Proceedings Codes. From economic point of view the overdue receivables have a great impact on working capital and the overall financial condition of the company (Celczyńska 2012, p.6; Filipoviča 1.

(6) 2009, p. 78). Regarding psychosociological aspect it includes negotiations, a debt collector’s traits of character and the overall perception of the process in the eyes of other market players (Matela 2011, p.183; Griffith 2010, p.429). Debt collection can be discussed from management field of studies due to the following reasons. A debt collection process has a multiperspective approach which comprises the set of tasks from legal, economic and psychosociological disciplines. The problem of debt collection is not only the knowledge of legal provisions or financial ratios. It is about managing all the tasks effectively. The effective management of debt collection is understood in twofold: from short-term and long-term perspective. Short-term perspective refers to managing the process of debt collection whereas long-term perspective is about managing business relationships with stakeholders. Previous research has just mentioned that a debt collection comprises many aspects without particularizing the issue. Therefore, the pivotal importance is to combine the three aspects into a single study or into an integrative model with a special attention to relationship management and process management. Managing business relationships with the stakeholders contributes to the effective debt collection in a long-term perspective (Żarnowski 2016, p.122; Gramckow 2014, p.57; Ziętek-Kwaśniewska 2014, p.329; Kubickova and Soucek 2013, p.98; Drozdowska 2011, p.162; Hill 1994, p.29). There are different stakeholders that appear at every stage of debt collection. However, it is of paramount importance to establish positive business relationships with all of them as it leads to the successful recovery (Stach 2014, p.76; Matela 2011, p.205; Miazga 2011, p.382; Griffin 2010, p.431). Management of a debt collection process comprises a set of activities at the pre-court, court and enforcement stages which include legal, economic and psychosociological aspects (Kreczmańska-Gigol 2011, p.32). As far as a pre-court stage is concerned it includes all activities which goal is to make a debtor pay off the debts without judicial recourse. The standard process of a debt recovery at this stage comprises making phone calls, organizing meetings, coordinating and monitoring the payment schedule, sending dunning letters or any other text messages. The second stage includes the activities undertaken by the creditor which aim is to collect the overdue receivables by the use of third party, namely court. These activities include gathering the documents about the debt and bringing a suit against the debtor in accordance with the procedures of action or writ proceedings. Finally, the third stage, namely enforcement refers to these activities done by an execution state officer, a bailiff, who works on behalf of the creditor.. 2.

(7) From practical point of view this multiperspective approach can help the practitioners to increase the effectiveness of a debt collection by implementing it into their businesses. The problem of debt collection exists in all businesses and have a remarkable effect on a businesses’ economic situation. According to European Payment Report 2016 (p. 37) about 36% of the companies operating in Poland in business-to-business transactions (B2B) agreed that late payments have medium to high consequences to the survival of the business. Moreover, it turned out that nearly 50% of Polish companies were forced to accept the longer term of payment even though they did not feel comfortable with this. Furthermore, the reasons for payment delays appear due to various circumstances. One of them is the intentional late payments that increased from 28% in 2015 to 62% in 2016. The other crucial reason is the lack of financial liquidity among the debtors. The respondents also mentioned the increasing number of disputes resulting from business transactions. Finally, 48% businesses declared that the late payments occur because of the administrative inefficiency of their customers. In essence, the overdue payments in B2B is a common and current problem. In this situation management of a firm’s debt collection process is of a paramount importance since the uncollected claims have a tremendous effect on the overall functioning of every business. In the dissertation, the author focuses on finding an answer to the following research question: what aspects should be taken into account to make the process of debt collection effective? Consequently, the main research objective is to build a multiperspective approach to debt collection (theoretic and cognitive objective) on the basis of the application model of debt collection (application objective). Taking into consideration the objective of this dissertation, the author tries to prove the truth of the following thesis and sub-thesis. Thesis: the multiperspective approach increases the effectiveness of debt collection. Sub-thesis 1: the main determinants in debt collection are the provisions of law. Sub-thesis 2: economic effectiveness of the debt collection process includes both direct costs and benefits emerging during such debt collection process and the indirect consequences which influence future relations with the market players. Sub-thesis 3: psychosociological aspects have an impact on an economic effectiveness of the debt collection process. In essence, the purpose of this dissertation is twofold: (1) to find the determinants which influence an effective debt collection process and (2) to create a model of an effective debt 3.

(8) collection process which would combine three perspectives: the legal, economic and psychosociological one. The former purpose must be viewed from both a short- and long-term perspective. From the short-term perspective, effective debt collection is embedded in process management and involves quick collection whereas from the long-term perspective it means positive relationships that will increase future benefits. Thus, to effectively collect a debt is to collect the money in such a way that the customer is retained. The latter purpose is to construct a model which will incorporate the previously defined determinants as well as the suggestions from the experts who have been interviewed. This dissertation aims at addressing a gap in the literature on a multiperspective approach to the debt collection process. Research methods include a critical literature review and empirical research. The whole process of conducting the research is presented in Figure 1. Figure 1. Steps of research process. Literature review. Questionnaire. Initial concept of the model. Verification of the model via interviews. Coding and analyzing responses. Rebuilding the model. Source: own research. At first, the author studied Polish and international literature on debt collection and categorized it according into legal, economic and psychosociological aspects. The literature organized in this way helped to systematize these aspects according to the stages of debt collection, into the pre-court, court and enforcement stage. Then, on the basis of conducted literature review, the questionnaire has been prepared. The answers from the questionnaire have revealed the determinants which lead to effective debt collection. Then on the basis of the findings from the literature and the survey, the initial concept of the debt collection model was built. In order to verify the correctness of the model, the author conducted 7 semi-structured interviews with the experts from the debt collection field of study. Consequently, the recorded interviews were firstly coded and then analyzed in the context of: the model’s correctness, legal, economic and psychosociological perspectives, suggested changes as well as the directions for further development. Finally, on the basis of literature review and research methods applied in this dissertation, a new model of a firm’s debt collection process has been introduced. The dissertation consists of four theory-based chapters and two empirical chapters as follows. The first chapter presents the theoretical underpinning for this research, including the 4.

(9) concept of business relationships management, process management as well as the terms of efficiency and effectiveness. The following three chapters are organized in the same manner according to the collection stages: by a pre-court, court and enforcement stage. Such structure helps to appreciate the legal, economic and psychosociological aspects at every stage of debt recovery. In the fifth chapter, the author presents the methodology together with the results yielded by the questionnaire. The objective of the survey was to get acquainted with the determinants that influence the effectiveness of debt collection and to introduce them into the initial version of the model. Both the literature review and the questionnaire enabled the author to draft a model of a firm’s debt collection process. The sixth chapter concludes the dissertation and presents the final model arrived at, which combines the questionnaire results and the propositions gathered during the interviews with the professionals. Finally, the directions for future research in the area of debt collection are indicated. The individual chapters in the dissertation discuss as follows: Chapter I provides an overall description of a multiperspective approach to a debt collection process. It seeks to clarify basic terms and concepts by presenting a theoretical foundation for relationship management, process management and effectiveness in the light of the debt collection process. In other words, the theoretical discussion is organized from long-term to short-term perspective. At the outset attention has been paid to the subject of stakeholder relationship management which is a pivotal issue in the long-term perspective. Then, the concept of process management is presented. Moreover, the terms effectiveness and efficiency have been clarified in the context of business relationship and process management. The chapter ends with the proposition of a multiperspective approach to the debt collection process within the theory of relationship and process management that comprises all the previously mentioned factors affecting the effectiveness of the debt collection process. Chapter II includes principles concerning recovering the debt from a legal perspective which constitute one of the aspects of the proposed multiperspective approach to debt collection. It begins with the presentation of possible ways of recovering overdue receivables at the pre-court debt collection stage in the context of applicable laws for B2B transactions. Then the advantages and disadvantages of the available court proceedings are outlined with a special attention to the consequences for both the creditor and the debtor. Next, all the actions and applicable costs within the enforcement stage are discussed. The attention is also focused on the bailiff’s duties. Finally, the arguments for following the collection procedures defined by 5.

(10) the legislator are presented. This part constitutes a base for understanding a legal side of the debt collection process. Chapter III puts forward a firm’s debt collection process from economic perspective in B2B transactions. This is the second approach that is included in the suggested model of a debt collection. It commences with the explanation of key definitions which provide a foothold for further understanding of the economic perspective to a debt collection process. This part also includes tax issues and financial ratios describing the effectiveness of debt collection. Much of this chapter is devoted to the subject of obligations and court costs incurred by the creditor during the process of debt collection. It also comprises the steps undertaken by the creditor required to initiate the enforcement as well as the model for total collection of costs. This part ends up with a presentation of direct and indirect consequences of an effective debt collection process from a creditor’s point of view. Chapter IV raises the issue of a debt collection perceived from psychosociological point of view which is the last component of a multiperspective approach. The psychosociological perspective includes stakeholders relationships, negotiations, debt collector’s qualifications and communication. This part primarily presents the typology of debtors as well as debt collectors. Then the issue of skills and abilities of a debt collector as well as verbal and non-verbal communication are discussed. It also comprises the psychosociological factors affecting the effectiveness of a court debt collection stage. Furthermore, the attention is focused on the active communication between a creditor and a bailiff, the public perception of a bailiff and the foreign practices at the enforcement stage. Finally, the influence of stakeholder relationships on the effectiveness of debt collection is investigated. CHAPTER V renders conclusions from the study research. This part commences with a general introduction to the applied research method. Moreover, the detailed process of conducting the research is presented. Then the attention is focused on the analysis of the responses from the questionnaire by providing the descriptive statistics. The results from the questionnaire have been studied according to four sections: respondents’ characteristics, precourt debt collection, court debt collection and enforcement. As a result of the survey the determinants of a debt collection process are outlined. Furthermore, on the basis of the results from the research the main variables of relationships and discrepancies are presented. This part also includes the list of success factors and barriers to an effective debt collection process resulting from the survey. The success factors and the barriers describe the legal, economic and 6.

(11) psychosociological approach to a debt collection process. Finally, the chapter ends up with the discussion of the research results. CHAPTER VI describes the application model of a debt collection process based on a critical literature review and the empirical research, namely questionnaire and interviews. This chapter describes the process of creating the final concept of a debt collection model. It begins with presenting the initial concept of the model based on the findings from the literature and the determinants affecting the debt collection resulted from the questionnaire. Then this part includes the analysis of the interviews with the experts, suggested changes and the directions for further development of the model. As a result of conducted survey the final version of the model is presented which characterizes a multiperspective approach to debt collection. With reference to the technical side of the dissertation, it starts with the main body of the text and ends up with the references. The list of tables, the list of figures and the list of abbreviations is enclosed after the references. All the appendices are put at the end of the dissertation.. 7.

(12) Chapter 1. Management perspectives on a debt collection process. This chapter provides an introduction to a multiperspective approach to a debt collection process. It is organized in a following sequence: it starts with a discussion of theoretical background which is later applied to the debt collection process. The order of the discussed subjects is also organized from a strategical and long-term to operational and short-term perspective. This chapter includes four subchapters. Subchapter 1.1. presents the subject of business relationship management as well as the role and importance of internal and external stakeholders. Relationship management refers to strategical long-term issues. Subchapter 1.2. presents process management together with its main features. This subject refers to short-term or operational matters. Subchapter 1.3. comprises a critical analysis of literature in the field of effectiveness and efficiency in the context of a business relationship and process management. The final subchapter 1.4. describes the issue of a debt collection process in the context of the previously discussed concepts: stakeholder relationship management, process management, effectiveness and efficiency with special attention to legal, economic and psychosociological aspects. This juxtaposition underpins the multiperspective approach to debt collection.. 1.1 Business relationship management According to the Oxford dictionary a relationship is “the way in which two or more people or things are connected, or the state of being connected”. A relationship also exists when the parties move from one state of independence to dependence or interdependence (Heath and Bryant 2000, p. 28). In the literature the term relationship is juxtaposed with the term transaction (Światowiec 2006, p. 12). Peńa and Fernández de Arroyabe (2002, p.12) quote Willamson who outlines the main features of a single transaction, such as uncertainty, the specificity of the assets exchanged and the frequency of these transactions. Uncertainty refers to the constantly changing market environment where every business transaction must be considered separately, therefore incurring extra cost and time, whereas the specificity of the assets exchanged describes varying information in reference to a single order. Finally, the frequency of the transactions has a direct impact on the cost of the goods or services. Table 1 provides an overview of the main differences between a single transaction and a relationship.. 8.

(13) Table 1. Relationship vs. Transaction Criterion Marketing objective Approach Perspective Time horizon Fundamental strategy. Relationship Maintain relations Interaction Evolutionary, dynamic Long-term Creating customer value. Solving the conflicts Intensity of contacts Degree of interdependence Customer satisfaction measurements Dominant quality dimension Information exchange (communication) Quality Specific investments in relations Price. Proactive and prevention High High Direct approach – customer database management Interaction Interpersonal communication All aspects considered Moderate to high. Profits and costs deployment Costs of changing buyer/ supplier Role of internal marketing Production. Single transaction Sell goods Single action Static Short-term Constantly attracting new customers Reactive and post factum Low Low Indirect approach – monitoring the market share Results Mass communication Production oriented Lack or very low. Determined by negotiations and common decision making Faded deployment; convergence of objectives High. Determined by competitive market factors. Strategic Individualized. No or limited Mass. Clear deployment Low. Source: (Światowiec 2006, p.14). As stated in Table 1, these two terms differ significantly in many areas. The aim of a relationship is to maintain active and dynamic trading bonds over a long-term perspective. The company’s strategy is directed at creating customer value by adopting a proactive attitude in the case of business communication. As far as the financial side of the business is concerned, relationships are based on mutual agreements and negotiations whereas a one-off transaction focuses on a single and short-period relation with a customer. The greatest interest lies in the volume of customers and the market share of the company. Communication between business partners is not individualized and there are no investments in maintaining or developing their relations. In this dissertation the aim is to concentrate on relationships that exist between business partners in the context of debt collection. However, in order to build relationships between business partners (a creditor and a debtor), all of the internal stakeholders should participate actively in it, ranging from the owners and the board of directors to mere employees.. 9.

(14) A similar approach to the term relationship is presented in the context of a buyersupplier relationship that can be either adversarial or collaborative (Gules and Burgess, 1998). The researchers emphasize that the organizational trend is moving away from the adversarial type of a relationship to a more collaborative model. In Table 2 the main characteristics of the buyer-supplier relationship are presented. Table 2. Adversarial and collaborative buyer-supplier relationship Duration Communication Transferability Management support Attitude Visibility Planning and goals Benefits and risks Problem solving. Adversarial Short-term Very little, just enough for the transaction Completely transferable. Collaborative Long-term Complex, two-way sharing. Low. Extremely difficult to transfer Extensive, sincere. Solely profit focus Low Individual, short term Individual, short- term Power driven. Open, trusting, cooperative High Joint, long-term Shared, mutual Mutual, judicious. Source: (Nagle et al. 2006, p. 3). The adversarial model includes all of the activities that are short-term oriented and takes into consideration just the basic communication based on profit matters. In contrast, collaborative relationships include characteristics such as cooperation, mutual benefit and trust. These two types of relationships can be applied in the context of a debt collection process. A relationship between business partners is difficult to define since it comprises different approaches resulting from a wide range of possible interlinked factors that affect each other. It could be described as a long-term agreement between companies that connects some aspects of their activities but which does not lead to a merger or an acquisition (Porter and Fuller 1986). Thus, it is a relation between companies that have the same objective and operate in the same sector. The second type is a relationship that emerges between the buyer and the supplier, which can be defined as pure cooperative business relationship that leads to strong and extensive bonds on the social and economic field (Hutt and Speh 1997, p.116). This kind of a relationship used to describe relations between a creditor and a debtor. There has been a surge of interest in cooperative business relationships between supplier firms and customer firms in business transactions. This interest has been manifested in marketing, organization, accounting, and economics (Holm et al. 1996). In all of the mentioned fields of science, 10.

(15) cooperative business relationships between suppliers and customers have been considered as crucial. Olczak and Urbaniak (2006, pp. 48-50) posit that such relationships are created inside and outside the organization. The internal relationships are formed by employees who try to build and maintain positive bonds with customers. The external relations mainly refer to other market players, such as suppliers, customers, financial institutions, competitors and the government. The goal of these relationships is to create a positive brand perception. The groups or individuals who externally or internally affect the organization are called stakeholders (Griffin 2003, pp. 75-89). The external group includes a general and task environment. The general environment is composed of different dimensions and factors which surround and affect the organization. The task environment is important as it describes the outside stakeholders, such as competitors, customers, suppliers, regulators, and strategic partners (Griffin 2012, pp. 33-39). In the case of internal environment of an organization, there are owners, boards of directors, employees and a physical work environment. Cole (1994, pp. 14- 15) proposes two kinds of stakeholders: direct and indirect ones. The term direct stakeholders defines those engaged directly in a company’s transactions, such as customers, shareholders, taxpayers, creditors, employees and suppliers whereas indirect stakeholders comprise all of those who are not directly engaged in business activities but may affect them, for example, the community, competitors, stock markets, the government and supra-national bodies. Freeman (1984) first introduced the theory of stakeholder in his work Strategic Management. A Stakeholder Approach which has been an underpinning theory for further research. Since then, there has been a surge of interest in the stakeholder theory in the management literature, both academic and professional (e.g. Frooman 1999; Clarkson 1995; Donaldson and Preston 1995). Freeman’s (1984, p.46) definition of a stakeholder describes “any group or individual who can affect or is affected by the achievement of the organization’s objectives”. Changing organizational environment forced the managers as well as the researchers to take into consideration all of the groups or individuals that may have an influence on the company (Paliwoda – Matiolańska 2009, p. 52). Furthermore, Nowak (2015, pp. 374-376) highlights the role and importance of stakeholders in every company. The term stakeholders originates from an American term stake which defines something that is important to a person, a business or operations (Łada and Kozarkiewicz 2007, p. 43). Another definition specifies a stakeholder as “a sub- group of an organization, made up of people who have a common interest in a project or activity” (Adam 1989, p. 476). Patterson (2002, p. 422) asserts that stakeholders are all the organizations or 11.

(16) persons that have a direct (i.e. shareholders) and indirect (i.e. employees, customers, suppliers, etc.) economic interest in a business. Stakeholders have been classified in a different ways in the management field of study. Some researchers differentiate between two definitions for stakeholders (Freeman and Reed 1983, in Miragaia et al. 2014, p. 648). The first one applies to any group or individual that influences or is influenced by the results of an enterprise leading to reaching its goals. The second one concentrates on individuals or groups who create dependence in an organization and therefore become irreplaceable for its existence. For the purpose of this dissertation, the first approach seems to be more appropriate as it refers to customers, employees, suppliers, shareholders, banks and the government. The term stakeholder appears also in the context of corporate governance where the relationships among different stakeholders are mutually connected (Mesjasz 2006). Another definition of a stakeholder has been proposed by Slack et al. (2007, p. 501) who posit that these are “the people and groups of people who have an interest in the operation and who may be influenced by, or influence, the operation’s activities”. According to this theory, all of the organizations should take into consideration the circumstances and the requirements of various business entities that surround the organization. Thus, stakeholders are those business entities that affect the process of reaching a company’s objective or is affected by its consequences (Łada 2011,p. 25). The subject of business relationships among various stakeholders has quite recently been introduced into management literature (Mitchell et al. 1997, p. 853). In particular, Hakansson and Solberg (2001) delineate that “in business relationships, parties may or may not adopt their products or services, may build mutual trust, may or may not use routines but the raison d’être of a business relationship is the value creation for both”. In order to fully understand the issue of stakeholder relationships, Morgan and Hunt (1994, p. 21) have created an application model of all relationships that emerge in a business environment (Figure 2).. 12.

(17) Figure 2. Forms of relationship marketing. 1. 2. 3. 10. 4. 9. 5 8 7. 6. Source: (Morgan and Hunt 1994, p. 21). In the above presented figure, the researchers delineate ten forms of relationships, categorized into four groups, called partnerships: (1) partnering involved in relational exchanges between manufacturers and their suppliers of goods, (2) relational exchanges involving service providers, (3) strategic alliances between firms and their competitors, (4) alliances between a firm and nonprofit organizations, (5) partnerships for joint research and development, (6) long-term exchanges between firms and ultimate customers, (7) relational exchanges of working partnerships, (8) relational exchanges involving functional departments, (9) relational exchanges between a firm and its employees, (10) within-firm relational exchanges (Morgan and Hunt 1994). Grönroos (1994, p. 11) points out that the aim of relationship marketing is to create and enhance relationships with all stakeholders with a mutual fulfillment of promises. Moreover, relationship management among stakeholders is perceived as a multifaced, multiobjective and complex phenomenon (Harrison and Freeman 1999, p. 484). Donaldson and Preston (1995, p. 69), on the other hand, present another approach to stakeholder relationship as they believe that all of the individuals or groups have interests in an enterprise to obtain benefits without any priority of one set of benefits over another. That is why in the model the arrows between the company and its stakeholders are the same size and run in both directions (Figure 3). From the stakeholder model it can be concluded that all of the groups or 13.

(18) individuals may influence the organization with the same power and that is why all of them should be taken into account. Figure 3. The Stakeholder Model. Source: (Donaldson and Preston 1995, p. 69).. The analysis of the relationships between stakeholders leads to a better understanding of an organization’s management (Freeman 1984, p.25). At present, business relationship management is pivotal to increasing a shareholder value by providing added value in the long run to every stakeholder (Mandjak and Wimmer 2003 in Phillips 2006, p. 35). Also Sloan (2009, p. 27). It points to the importance of stakeholder relationship management because it can contribute to the improvement of financial, social and environmental sustainability. There has been a surge of interest in a relatively new approach - relationship management from both researchers and practitioners (Zou et al., 2014). In the literature, these two terms have been used interchangeably: relationship management and relationship marketing. For example, Zeithaml et al. (2006, in Kleinaltenkamp et al. 2011 p.176) explains that relationship management (relationship marketing) is “a philosophy of doing business, a strategic orientation that focuses on keeping and improving relationships with current customers rather than on acquiring new customers”. Meintjes and Grobler (2014, p. 164) outlined the main characteristics of stakeholder relationship management (Table 3).. 14.

(19) Table 3. Analysis of Stakeholder Relationship Management (SRM) Stakeholder relationship management (SRM) Definition Building long-term relationships with key stakeholders Purpose To build long-term relationships with key stakeholders six elements are vital:  rightful power to influence;  trust;  satisfaction with the relationship;  commitment;  exchange; and  communal relationships. Focus Stakeholder inclusion through dialog-based empowered relationships; Two-way communication; Outcomes Continued support and participation of stakeholders; Enhanced means for competitive advantage to create long-term value; Sustainability; High performing organizations; Approaches Inactivity, reactivity, pro-activity and interactivity Requirements Stakeholder inclusion should be the norm; Alignment of values. Source: (Meintjes and Grobler 2014, p. 164). As Table 3 well illustrates, building a long-term relationship is a key feature of stakeholder relationship management. In particular, it has been argued that six elements characterize a long-term relationship with stakeholders and bring mutual benefits. Moreover, the authors explore the subject of dialog-based communication among the stakeholders. A longterm stakeholder relationship management can result in. continuous support, active. participation, joint value creation, effort-reward balance and well developing organizations. The researchers also depict different kinds of approaches that characterize stakeholders. Finally, stakeholder relationship management requires stakeholder commitment and equalization of values. The final issue that is investigated in this section relates to building and maintaining relationships between a customer and a company. As it has been stated above, many stakeholders are involved in different business relationships. Internal stakeholders, as described above, comprise an organization which then enters into relations with external stakeholders. The most active relationships arise between an organization and a customer. The same relates to relationships in a debt collection process between a creditor and a debtor. Therefore, the greatest attention should be directed to this subject. Customer Relationship Management (CRM) is an important philosophy that companies should embrace in order to build profitable and stable relationships with their customers (Magro and Goy 2012, p.1). CRM, originating 15.

(20) from the study of marketing, has been used across a wide variety of academic and professional disciplines to explain the importance of relationships between business entities. In order to understand the philosophy of Customer Relationship Management (CRM) it is necessary to delineate its beginnings in brief, as it will help to understand the customer oriented approach in the context of debt collection. In the 19th and early 20th century the market was so absorptive that the manufactures were only production oriented without concentrating on customers’ needs (Mruk et al. 2007, p. 17). A breakthrough occurred in the early 50s in the USA when the first trial of market segmentation took place and mass marketing was introduced (Otto 2001, p.30). Continuing the change from production to selling orientation, in the 60s a business environment faced a new term marketing mix which was “the set of controllable, tactical marketing tools – product, price, place, and promotion - that the firm blends to produce the response that it wants in the target market” (Kotler and Armstrong 2001, p. 67). On the basis of the marketing mix, businesses developed an awareness that not all of the customers represent the same needs and wants. As a result of an energy crisis in the late 70s, the majority of companies decided to intensify their actions towards very specific segments of the market. This led to the introduction of target marketing which helped to select and prioritize those segments to which the company would market (Dalrymple et al. 2001, p. 47). The beginnings of the 1980s are characterized by the innovations of enterprises which aimed at fulfilling the customers’ distinguished and diversified tastes (Deszczyński 2011, p. 17). In the late 90s there was a switch from mass to individualized offers as well as an emphasis on maintaining business relationships over the long term perspective (Gordon 2001, pp. 123-124) and from that moment the principles of Customer Relationship Management came into play. Customer Relationship Management defines the infrastructure that allows for defining and increasing customers’ value by using the exact tools which help to motivate the best customers to become loyal (Dyche 2002, p. 22). Hence, it is assumed that relationships between a business and a customer constitute an investment which is based on mutual gain (Rytko 2009, p. 27). On the one hand, a mutual gain means that a business is interested in a customer’s welfare until it receives the payment. On the other hand, a customer is concerned with the product or service that is offered. This interdependence seems to be crucial in the process of debt collection: it’s about not only collecting the receivables effectively but also managing and building long-term relationships.. 16.

(21) As far as relations with customers are concerned, it is important to distinguish different kinds of customers, ranging from public organizations, individual customers to business entities. In order to fully understand business relations the juxtaposing of the possible combinations is crucial. As business transactions may exist among three different kinds of entities: enterprises, governments and consumers, they may enter various relationships (Frąckiewicz 2006, p.65; Sznajder 2002, p. 183), such as B2B (between enterprises: Businessto-Business), B2C (between an enterprise and consumers: Business-to-Customers), C2C (between consumers: Consumer-to-Consumers), C2B (Consumer-to-Business), B2A (between an enterprise and the governmental administration (Business-to-Administration), B2G (Business-to-Government). The main difference between the B2C and B2B market is that the former offers goods that are ready for consumption, called final goods, whereas the latter prepares goods which are eventually used for the production of final goods (Heryszek 2012, p. 11). Chaffey (2007) believes that B2B refers to any commercial transactions between an organization and other organizations.. Consumer Business (organization) Government. To: Consumer of content/ service. Table 4. Summary of transaction alternatives between businesses, consumers and governmental organizations From: Supplier of content/ service Consumer Business (organization) Consumer-to-Consumer Business-to-Consumer (C2C) (B2C) - peer-to-peer (Skype) - relationship building - blogs and communities - brand building - product recommendations - social networks. Consumer-to-Business (C2B) - consumer feedback, communities or campaigns. Consumer-to-Government (C2G) - feedback to government through a pressure group or individual sites. Government Government-toConsumer (G2C) - national government transactional - national government information - local government services Business-to-Business Government-to(B2B) Business(G2B) - relationship building - government - B2B market places services and transactions - legal regulations Business-to-Government Government-to(B2G) Government (G2G) - feedback to government - inter- government businesses and nonservices governmental -exchange of organizations information. Source: (Chaffey 2007, p. 12). 17.

(22) Table 4 summarizes interactions between consumers, businesses and the government which appeal to different kinds of audiences. It is significant to note that even though all of the abbreviations are usually used in the case of e-commerce, they may also refer to the traditional form of commerce (e.g. The Economist 2000, pp. 6-12). For the purpose of this dissertation, the author uses the term B2B in the context of every business transaction that emerges between two business entities. The studies distinguish between various business partners because the characteristics of trading in each of the previously mentioned relationships are different in terms of the defined strategy and marketing techniques. For the purpose of this dissertation, the relationships between two enterprises, B2B, have been analyzed. However, other relationships are just as important. According to David Lucking- Reiley and Spulber (2001), B2B relations comprise a wide range of intercompany transactions, such as wholesale trade, company’s purchases of services, resources, technology, manufactured parts and components, and capital equipment. Moreover, Mitręga (2009, p. 464) believes that the main characteristic feature of B2B relations is a long-term partnership based on mutual trust and dependence. Building long-term relationships among entities is one of the most effective sources of risk and uncertainty limitation (Hamerska 2009, p. 44). Additionally, according to Hutt and Speh (1997, p. 98), the B2B market refers to building relationships between two entities which involve not only the interchange of goods or services but also sharing information, dealing with difficulties, conducting negotiations, feeling trust and forming friendships, and making payments. Furthermore, Tarczydło (2012, p.178) states that the B2B market needs not only exchanging pure goods or services but also a set of values between two organizations. In particular, the constantly changing business environment requires an approach that concentrates a lot on building relations, especially in B2B transactions. It has been established that selling a product to a new customer costs a company six times more than to a regular one (Dyche 2002, p. 22). Consequently, the efforts should be directed at maximizing the building and maintaining of relationships with the already attracted customers.. 1.2 Process management The term ‘process’ is derived from the Latin processus – a going forward, advance, progress (Kopaliński 1996, p. 656). According to the Oxford dictionary, a process is “a series of actions or steps taken in order to achieve a particular end”. A process is a completely closed, timely and logical sequence of activities which are required to work on a process-oriented 18.

(23) business objective. Nowadays the study points to an extreme importance of focusing on a company’s processes (Biazzo and Bernardi 2003, p. 150). Therefore, a process provides a consolidated understanding of how the work is done within a company rather than of what is done (Davenport 1993, p. 11). The significance of a business process was firstly mentioned in 1960 by Levitt (1960, p.55) in the context of reaching customer satisfaction. Subsequently, Hammer and Champy (1993, cited in Aguilar-Saven, 2004, p. 130) defined a process as a set of activities that require a specific input contribution and then give an output in the form of the creation of value for a customer. Brilman (2002, p. 302) believes that a process is the whole set of activities which lead to reaching the previously defined goals. A similar theoretical proposal is presented by Trocki (2004, p. 45) who understands a process as sets of cause and effect successive actions which lead to a specific goal and are carried out by a group of people. Davenport (1993, p. 11) describes a process as a set of well-organized activities that lead to getting a previously defined output. Chang (2005, p.3) points out that a process is a coordinated and standardized flow that requires people or machines in order to generate value for internal or external customers. Coordinated and standardized flow means that all the activities that are included into a process are reusable, therefore generating lower costs in comparison to unstandardized approaches. Moreover, this standardization also affects the constant improvement of a process’s quality. For Prasad (1996, p. 166), a process is a set of talents, tasks, teams, techniques, technology, time and tools (7Ts) organized in such a manner that all inputs are transformed into outputs (goods or services). Martin et al. (1995, pp. 84-89) put forward a thesis that a process consists of how the companies complete ordinary duties and how the teams use the resources. Every process has a set of characteristics which have been gathered and presented in Table 5.. 19.

(24) Table 5. Characteristics of a process Features of a process Purposefulness Customer-orientation Holistic nature Set of activities Sequence of activities Common goal Methods for doing the job Skilled and aware workforce. Characteristics The final result is of utmost importance, the resources used are not considered. A process is dedicated to meet customers’ needs and wants, thereby producing value for its customers. All the activities that are realized within a process must exceed the functions of organizational units. Every process comprises a set of activities that include operations, which put together constitute a process. The activities must be organized in the correct order. Different groups of people who take part in a process should be focused on one goal. Business entities opt for high repeatability of a sequence of actions. Thinking in a process-oriented way produces better results.. Source: (Bitkowska 2013, pp. 31-32). Table 5 presents the basic characteristics of a process such as purposefulness, customer– orientation, its holistic nature, activities’ collectivity, the order of activities, its main goal, repeatability and process orientation. It can be concluded that a process focuses on customer satisfaction and requires everyone’s commitment while performing the sequence of activities. Another set of a process’s attributes is presented by Blockey (2010, p.191) who has arrived at six simple questions that characterize every process: what, who, when, why, where and how. In Figure 4 the researcher on the basis of these six questions outlines the factors that influence ‘doing a process’.. 20.

(25) Figure 4. Attributes of a process. Source: (Blockey 2010, p. 191). The answers to ‘what’ questions give all the information that may influence the result of a process. The ‘who’ questions refer to all the stakeholders engaged in a process. The ‘when’ questions define the exact period of time of a process. The ‘why’ questions depend on the purpose and targets of a process. The ‘where’ questions give the definition of a place as well as the context of a process. The ‘how’ questions include methods that transform an input into an output. According to Adair and Murray (2002, p. 31), there is an immense difference between a single task and a process. As evidence, the authors give examples of tasks: a secretary who rewrites business letters, a junior accountant who puts the documents into envelopes, etc. Such activities constitute tasks since they are just a part of the whole process. In Table 6 there are four examples of various processes and tasks which show the differences.. 21.

(26) Table 6. Comparison of tasks and processes Processes Preparing profit and loss accounts on a monthly basis Receiving orders. Drugs production Granting a credit. Tasks Summarizing sale results, registering changes in an inventory, implementing corrections, printing out statements Receiving telephone calls, receiving emails, introducing data to the computer system, transferring orders to a production department Mixing, milling, forming tablets, drying, coating Accepting a credit application, requesting a credit report, processing the application, conducting a credit report analysis, making recommendations for the credit committee. Source: (Adair and Murray 2002, p.31). There is also a misleading definition strictly related to a process and a task, called a function. The researchers Hammer and Champy (1993, cited in Aguilar-Saven, 2004, p. 130) explain that the difference between a task and a process is like the difference between a part and a whole. Hence, a task is just a piece of work or an activity done by a single person whereas a process is an interlinked set of tasks whose result constitutes customer value. A similar explanation is presented by Rutka et al. (2001, p. 267) who stresses that tasks are outlined in a regulatory and statutory documents for each position individually, and therefore tasks define the scope of activities for every employee or department. Regarding the classification of processes, there are three kinds of them: operational, supporting and management ones (Durlik 2002, p. 61; DeToro and McCabe 1997, p.56; Davenport 1993, p.8). Their main characteristics together with examples of each of them are presented in Table 7.. 22.

(27) Table 7. Processes classification Classification Operational processes. Supporting processes. Management processes. Characteristics Any business processes that produce outputs for customers and have a high impact on customer satisfaction. Examples: production time, order fulfillment, customer service, product development, manufacturing, post-sales service, integrated logistics. The processes that are strategically significant for reaching business targets and are necessary for the company’s overall functioning. Examples: legal services, financial services, management systems, strategic planning, information services. The processes by which the business process management effort will be launched, supervised, founded, reviewed, assessed. They maintain operational and supporting processes. Examples: total quality management, policy deployment, operations’ reviews, performance monitoring, asset management, planning and resource allocation, controlling.. Source: own research on the basis of: (Durlik 2002, p.61); (DeToro and McCabe 1997, p.56); (Davenport 1993, p.8). In order to successfully introduce a process in a company, the operational processes have to be described and understood. The next step is to determine which processes support the core activities of the business. Every business has its own processes’ classification, since for one company a particular process may be described as an operational one whereas for the other it could be just a supporting one (Bitkowska 2009, p. 58). Another form of processes’ classification within a business entity has been proposed by Skowroński (2002, p. 14), as follows: . processes connected with business development, e.g. market research, forecasting, promotion activities;. . product improvement processes, e.g. customer needs’ analysis, product development, launching a new product;. . customer service processes, e.g. customers’ questioning, consulting services;. . processes of product delivery, e.g. invoicing, debt collection, distribution; 23.

(28) . processes of financial management, e.g. budgeting, cash flow management, financial reports;. . processes of human resource management (HRM);. . management and administration processes, e.g. managing information, strategic management. From an organization’s perspective, a process is strictly related to the term ‘process. management’ (Chang 2005, p.3). For Grajewski (2007, p. 56), process management refers to the optimization of a process’s components directed at the creation of added value for the whole organization. Skrzypek and Hofman (2010, pp. 29-30) point out that process management is based on planning, organizing, controlling and motivating all the individuals who participate in a process realization whereas Brilman (2002, p. 293) cherishes a belief that process management is based on systematic evaluation of a process’s results and implementation of a correction plan if these results differ from what was planned. Biazzo and Bernardi (2003, p. 154) propose a conceptual framework that includes the key components of process management (Figure 5). Figure 5. Key components of process management. Source: (Biazzo and Bernardi 2003, p. 154). Process management commences with process architecture which means describing and managing all of the activities in a holistic manner within a definite period of time. Process visibility is considered in two dimensions: a visible structure and visible operations. The visible structure refers to individuals or groups whose task is to control and improve a process whereas visible operations are defined as processes that are truly work. Another component monitoring mechanism boils down to continuous control and evaluation process performance. The last 24.

(29) element is an improvement mechanism which describes all of the mechanisms that lead to a systemic and systematic upgrading of a process. Regarding the main characteristics of process management, they encompass: process architecture, responsibility, team work and stages (Romanowska and Trocki 2004, p. 137; Biazzo and Bernardi 2003, pp. 154-156,). Process architecture is defined as an identification of all processes and a structure of interrelated processes. By responsibility the authors mean a selection of a leader who is in charge of the realization of a process. Team work has a considerable influence on the effectiveness of process management. Finally, every process consists of the following stages: planning (identification and analysis), organizing together with managing (implementation and constant improvement) and controlling. In the literature, there are different ideas concerning the stages of process management. According to Grudowski (2007, p. 194), process management commences with the creation, implementation, controlling and improvement of a process. A similar theoretical proposal has been presented by Jung et al. (2007, p. 22), who outline the following phases: creation, modelling, preliminary analysis, final analysis, management and improvement. Bitkowska (2013, p. 67) classifies the basic stages of process management as: processes identification, modelling, implementation, controlling and processes’ improvement whereas Sinclair and Zair (1995, p. 51) put forward the following stages of process management: . identification of customers and suppliers,. . definition of process performance measurements,. . definition of process performance targets,. . assignation of responsibilities,. . developing action plans,. . deployment of measures, plans, targets and responsibilities,. . operation of processes,. . measurement of performances and comparison with targets,. . continuous improvement of activities. This section includes an explanation of the term ‘process’ together with its main. characteristics. Two similar terms have been juxtaposed and explained under scrutiny, outlining the main differences between them. Furthermore, the processes’ classifications has been presented together with a wide range of examples. Additionally, this part includes the. 25.

(30) presentation of the main theories underpinning process management. This section concludes with a presentation of process management stages and their characteristics.. 1.3 Efficiency and effectiveness The terms ‘efficiency’ and ‘effectiveness’ are frequently misunderstood and misapplied. In order to delineate the difference it is helpful to refer to Drucker (2001, p.192) who states that efficiency is doing the things in the right manner whereas effectiveness is just doing the right things. Griffin (2010, p.431) argues that “by efficient, we mean using resources wisely and in a cost-effective way and by effective, we mean making the right decision and successfully implementing them”. The origin of the word ‘effective’ stems from the Latin word effectīvus, which means productive or creative (Holstein-Beck 1987, p.3). According to the Longman Dictionary, effective means successful and working in the way that was intended whereas efficient refers to doing work without wasting time, money or energy. Moreover, efficiency is “the positive feature of actions generating an assessed positive result, either intended or not intended” (Pszczołowski 1978, p. 60). Efficiency may be used to assess actions of the entire company or particular processes. For Chaffey (2002, p. 228), efficiency is the minimum of resources or time used in order to complete a process, whereas effectiveness is just meeting process objectives by delivering inputs and outputs. The difference between efficiency and effectiveness is explained by Helms (2006, p. 211), who emphasizes that “efficiency refers to doing things in the appropriate way and effectiveness to doing the proper things”. Niculescu and Iovanas (2012, pp. 149-150) define effectiveness as the relation of achieved goals to those intended, and efficiency as the relation of achieved goals to the resources used. The co-founder of scientific management as well as the author of “The Twelve Principles of Efficiency” (1913) Emerson proposes the definition of efficiency as the right thing done in the right manner. Effectiveness as well as efficiency are deemed to be relevant terms in assessing and measuring the performance of a business entity (Mouzas 2006, p. 1124). According to Czekaj (2009, p. 196), the main method of assessing the efficiency of a process is comparing outputs with inputs (Figure 6).. 26.

(31) Figure 6. The efficiency of a business process Input (A). Transformation Processing. Output (B). P PROCESSING Efficiency (E) E = B/A Source: (Czekaj 2009, p. 196). Regarding Figure 6, the assessment of a business process’s efficiency is based on the input, which includes all of the preliminary resources of a process and the transformation of these resources, and the output, comprising preliminary resources increased by the value added during a transformation. Other definitions of efficiency have been discussed by Matwiejczuk (2000, p.27) who points to mutual relationships between input and output based on the following statements: . efficiency as a difference between the output and the input;. . efficiency as an output to input ratio;. . efficiency as a return on investment (difference between output and input divided by input). Efficiency is about minimizing costs and increasing operational margins rather than a. measure of a company’s success (Mouzas 2006, p. 1125). In the literature, much has been written on efficiency measurements which refer to the ratio analysis. This approach is simple and involves arriving at the exact ratio based on the relationship between different values (Sierpińska and Jachna 2004, pp. 144-145). The subject of a process’s effectiveness and efficiency is also interpreted from the type of process. Reviewing the literature on this subject, there are four types of processes: core, operational, supporting and management ones (DeToro and McCabe 1997 p.56). A core process includes activities that provide outcomes to customers and may reflect on strategic goals for the whole organization. The examples of operational processes are order fulfillment or customer service, so these are the processes that generate customer satisfaction. In contrast, supporting processes refer to the internal processes that are crucial for achieving business objectives, such as legal, financial, human resource, administrative, IT objectives, etc. Finally, management processes concern governing the launch, supervision and assessment of the process. As the authors argue that the goal of 27.

(32) maximizing the effectiveness and efficiency of business process management is to systematically improve all the processes. For Kieżun (1997, pp. 18-19), there are different degrees of effectiveness which describe to what extent an action or a task was fulfilled. The action is effective when the target was reached successfully. If the desired goal was almost reached, it is called a partially effective action. When all of the actions fail to lead the company to the target, they are described as ineffective. There is a possibility that our action may be described as counter-effective, moving away from the target. The action may also be neutral according to the degree of effectiveness, which means the action is neither effective nor counter-effective. In the literature, there is a correlation matrix that describes effectiveness and efficiency of a process (Table 8). The term ‘effectiveness of a process’ refers to the degree to which the objectives have been achievement, whereas ‘efficiency’ stands for the measurement of a relation between the input and the output. Table 8. Correlation matrix describing the effectiveness and efficiency matrix Effectiveness/ efficiency Effective process. Ineffective process. Efficient process The process reaches the target and the output exceeds the input. The process does not reach the target, but the output exceeds the input.. Inefficient process The process reaches the target but the input exceeds the output. The process does not reach the target and the input exceeds the output.. Source: (Kasprzak (ed.) 2005, p. 68). Table 8 summarizes the main issues that characterize every process in the context of efficiency and effectiveness. In particular, it has been argued that the terms of inefficiency and ineffectiveness are also worth considering. Other combinations give different results presenting the degree to which the target has been reached and measuring the ratio of input to output. Skrzypek and Hofman (2010, pp. 29-30) argue that the effectiveness and efficiency of process management depend heavily on the personnel’s commitment and the managers’ creativity in searching for the optimization of processes. Kunasz (2011, p.40) lists the basic characteristics that describe the evaluation of a completed process’s efficiency: . organising a team process;. . the performance accomplishment according to a previously planned process;. . evaluating customer satisfaction; 28.

(33) . listing the processes that require correction and improvement;. . identifying new processes;. . making appropriate modifications – remapping the processes. A similar theoretical proposal has been presented by Bitkowska (2009, p. 66) who lists. the main attributes that influence the effectiveness and efficiency of process management within a company (Table 9). Table 9. Attributes of a process affecting efficiency and effectiveness Attributes Duration. Flexibility Quality Cost Punctuality Importance for the organization Importance for the customer. Characteristics The average time needed for the accomplishment of a process. This information gives a clue about the organization of a process, implemented procedures and employees’ qualifications. The ability to change, improve, reorganize, combine activities within a process, etc. Created by a company and evaluated by a final customer. This is a holistic evaluation of a process expressed by customer satisfaction. It comprises the costs connected with creating a process. The ability to meet the deadlines. It includes benefits resulting from a process; it specifies a relationship between a process and a customer. It measures customer satisfaction based on a process’ effects.. Source: (Bitkowska 2009, p. 66). The importance of the above mentioned attributes is different as every business entity has unique goals. One attribute may prevail over the other, but the target remains the same: gaining customer satisfaction. Furthermore, regarding the effectiveness and efficiency of a process, there are two points of view: an internal one, which refers to the internal processes of an organization and the external ones, which are based on customers’ and business partners’ feedback (Łobaziewicz 2013, p.182). Thus, efficiency and effectiveness of a process are evaluated by internal and external stakeholders. In order to precisely define the term ‘efficiency’, it is necessary to consider the perspective from which it is considered. As stated above, there are various kinds of stakeholders that affect the overall functioning of the company. Although each of these groups have different criteria for their efficiency, they still have the same goal which is the success of the company. In Table 10, all the criteria for efficiency in the context of stakeholders are listed.. 29.

(34) Table 10. Criteria for the efficiency of the company in the context of stakeholders Stakeholders Owners Employees Customers Suppliers Creditors Local communities Government authorities. Efficiency criteria Return on capital, price per share Salary, work satisfaction, working conditions Quality of goods and services, price Terms and conditions in contracts, payments Timely payments, future increase Employment, environment protection Taxes, obeying law. Source: (Bielski 2004, pp. 64-66). From the owners’ perspective, efficiency actions undertaken within the company reflect on the return on capital or price per share which is directly connected with the increase in the value of the company. For employees the most reliable measure of efficiency is salary received, satisfaction from work as well as the conditions for conducting daily operations. From the customers’ point of view, price and quality of the services or goods delivered are important. Suppliers will expect reasonable payment terms and well-drafted agreements. Creditors expect the payments to be made on time and their future increase. Employment and environment protection are the important for the efficiency of the company from the local communities’ perspective. Last but not least, from the government’s point of view, the most important issues are taxes paid and compliance with the law. A firm can boost its efficiency and effectiveness by focusing on process management improvement as well as developing and maintaining business relationships (Sheth and Parvatiyar 1995, p. 264). Process management within an organization helps in building positive market relationships which have a direct impact on a company’s success (Grajewski 2007, pp. 54-62). The businesses that focus on enhancing efficiency of a process should take into consideration various relationships (DeToro and McCabe 1997, p. 56). It must be emphasized that relationship management and relationship marketing are used interchangeably (Zeithaml et al. 2006, in Kleinaltenkamp et al. 2011, p.176). Researchers have created a theory of efficient management of relationships with different stakeholders (Morgan and Hunt 1994). For this purpose, various key factors that affect efficiency of relationship management have been gathered. These include: power, conflict, uncertainty, opportunism, benefits, termination costs, emotion, interdependence, adaptation, interaction, cooperation, mutual goals, social bonds, shared values, promises, trust, commitment, communication, attraction (Wilson 1995; Morgan and Hunt 1994; Grönroos 1994; Hakansson 1982). However, only trust and commitment have been proven to be the most significant constructs. On the basis thereof, Morgan and Hunt (1994) 30.

(35) have developed the commitment-trust theory which made a significant contribution to the way successful relationship management is understood. It is believed that their KMV model (Key Mediating Variables) provides “the foundations of a marketing relationship that can lead to customer retention” (Veloutsou et al. 2002, p. 437). Figure 7. The Key Mediating Variables Model of Relationship Marketing. Source: (Morgan and Hunt 1994, p. 22). In Figure 7 the model highlights the fact that both commitment and trust need to be present in order to produce outcomes that enhance efficiency, productivity and effectiveness of relationship marketing. As far as commitment to the relationship is concerned, it is understood as an “enduring desire to maintain valued relationship” (Moorman et al. 1992, p. 316) whereas the word ‘trust’ involves one party having confidence in or depending on another party to accomplish its obligations (Morgan and Hunt 1994, p. 23). Among other previous variables, there is relationship termination costs which comprise the costs connected with establishing a relationship with a new partner. The next term ‘relationship benefits’ are described as the benefits that can bring the two parties an economic benefit. When engaged parties share values, they create mutual and positive new values. Communication is described as a form of exchanging information and it is a key indicator for a thriving partnership (Mohr and Spekman 1994, p. 138). Opportunistic behavior has a negative arrow because it is believed to decrease the level of trust and commitment since its basic assumption lies in deception. Acquiescence 31.