This study investigates the role of the positive organizational behavior (POB) concept of emotional competence for the effective management of participants' affect in service encounters and customers' assessments about the encounter. We developed and tested a two-level model in which service employees' emotional competence is related to both service employees' and customers' state positive affect. Customers' positive affect, in turn, is related to customers' specific and general evaluations of the service rendered. A total of 394 service encounters involving 53 financial consultants of a bank were assessed. Data were analyzed by a combination of path analysis and hierarchical linear modeling (HLM), and the results support large parts of the model. More specifically, employees' emotional competence was related to customer evaluations through their own positive affective state during the encounter as well as through a direct link to the customer evaluations of the encounter. Copyright © 2008 John Wiley & Sons, Ltd.