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The service sector of the American economy is expanding very rapidly at a greater than 6 per cent annual growth rate during the 1984‐88 period. The extraordinary growth of the service sector in the last two decades has focused attention on the challenges of effective management of service organizations and operations, vastly different from those faced in classical manufacturing settings. However, while services play an increasingly significant role in society, the productivity of services is much less than that of manufacturing. Determines and describes operations‐related practices and assesses skills development requirements faced by service firms operating in a real‐life environment. Findings of the study include the degree of awareness of the importance of operations‐related tasks and of their impact or organizational performance in services, the performance drivers and allocation of responsibilities for operational decisions, and the significance of operational gaps and misalignments that need correcting to enhance the effectiveness of service firms.