Resuscitating a failing company is one of the supreme challenges in any business. Nowhere is this more true than in the service sector. If we compare Fortune’s "Most Admired" service companies of ten years ago with today’s list, we see that virtually every company near the bottom a decade ago has stayed there, gone bankrupt, or been acquired.

Why are service turnarounds so tough? One reason may be that the front line at a service company is the product. A manufacturer’s customers can’t usually tell when workers at its production plant are unhappy. At a service company, on the other hand, any dip in morale is painfully obvious.

Another reason is that frontline staff control communication with customers. One of their jobs is to keep customers informed when things go wrong. In the mid-1980s, when Continental Airlines was experiencing service problems, one of us was told by a gate agent, "If you didn’t want your flight canceled, you should have picked another airline"—hardly an inducement to repurchase. By contrast, manufacturing companies can manage customer communication much more directly through their head office and salesforce.

Since most management thinking about turnarounds is based on manufacturing companies, the strategies usually advocated...