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This study examined perceptual similarities and differences between customers and employees in terms of critical service incidents. Specifically we explored the extent to which customers and employees were similar or different in summary perceptions of service failures and recovery, the attributions made by the two perspectives in terms of causes for failures and recovery efforts, and whether each perspective believed that age, gender or race contributed to service failures or recovery. The critical incidents technique was used to collect 1,512 customer‐reported incidents and 390 employee‐reported incidents. Results revealed that customers and employees had both similar and different views depending on the ultimate outcome of the encounter. Overall, customers and employees were fairly similar in their perceptions regarding failures that ultimately resulted in a good recovery effort. However, the two perspectives differed in their views of service failures that accompanied a poor recovery effort. Conclusions and implications for practice are also provided.