High Performing Contract - March 2011
March 2011 – Issue #90
This e-newsletter is dedicated to supporting High-Performing Contractors and all contractors working to become one. Written by Dennis Sowards
This short article discusses the relationship of quality to customer loyalty. Consider its implications to your customers. Quality is not just in the install work, but includes quality of invoices, status reports and even internal services such as detailing, purchase orders and paychecks.
“Many companies today still sadly follow a tactical approach to quality. They react to unsatisfied customers or frequent defects. Some do so better than others -- in many cases the find-and-fix methodologies developed over decades have become both refined and successful.
“We examined what would happen if the company drastically reduced customer quality defects. The results: Warranty and recall costs were expected to drop by nearly half. But even more significantly, the relationship between quality and repurchase behavior indicated that the quality improvement would drive a sales increase of 12% over the next few years.
“We derived two distinct lessons from this experience. First, it's worth investing in quality. Second, not all quality investments are the same. If you simply pour more money into find-and-fix, you reach a point of diminishing returns. But if you reconceptualize your quality function to proactively engage with customers with a strategic cross-enterprise focus and a rejuvenated quality culture, you can reap far-reaching benefits.
“The best-quality product is the one that most fully, continuously, and ethically meets a customer's needs. So when you think about quality improvement, the voice of the customer (VOC) should be paramount. .
“However, many companies fail to robustly collect and analyze customers' genuine expectations of quality -- and even those that do gain this information often fail to share it across the organization on a regular basis, much less use it to drive other internal processes. First, companies must engage customers both before and after the sale through more than one mechanism.”
“Deliver Unparalleled Service Experience
Successful quality organizations know that quality problems need not harm customer relationships if great customer service outweighs a one-time defect. A company must provide outstanding customer service and communicate with customers experiencing quality concerns because service gives a company the opportunity to recover from quality issues. Failure to properly address customer complaints, government inquiries, or even negative media exposure represents a severe risk to future repeat sales and brand image.
Thus, best-in-class organizations actively focus on key metrics such as ‘fixed first visit’ or ‘fixed first time’ for a customer's first interaction with a service center. Historical data has shown that the ability to resolve customer concerns the first time significantly improves customer satisfaction and long-term loyalty, sometimes having an even stronger influence on satisfaction than no repair at all. Successful companies facilitate a superior customer service experience by managing product or service requirements, proactively managing service center performance, equipping service centers with state-of-the art communication and diagnostic capabilities, facilitating exchange of lessons learned and improvement ideas across service centers, and coordinating across geographic areas. Best-in-class organizations translate excellent service experience to drive incremental sales.”
Source: Rebalancing Quality Priorities by Joachim Ebert, IndustryWeek, Wednesday, August 18, 2010 (Italics added for emphasis)
Quality done right the first time is achieved by doing root cause analysis and implementing countermeasures to prevents or minimize the root cause of the quality problems. How are you preventing your quality problems? If you need root cause training contact me
A dichotomy with this challenging economy is that many employees are less engaged in their work because they are more worried about keeping their job. A high-performing contracting company depends on ideas from its employees to continuously improve. Here are some steps to help re-engage employees:
- Make sure your manager and supervisors, especially your senior managers, understand the need to engage employees. If they don’t walk-the-talk of being open to new ideas -it will not happen.
- Encourage employees to question the status quo. Don't just pay lip service. Demonstrate that you want employee feedback by constantly asking for it and LISTENING.
- Hold meetings specifically for challenging the way things are. One company held “Why Ask Why” meetings. During the sessions, employees were encouraged to questions why policies, processes or methods were done the way they were.
- Recognize employees for their ideas. Say “Thank you” for every idea shared regardless of how useful it may really be. Give special recognition when the ideas are implemented. Make a big deal about it and make sure everyone knows which individual or team was responsible for the improvement. Don’t give money as a reward for ideas, that changes the nature of the motivation and will lead to unwanted issues.
Your employees are the only resource your competition cannot duplicate (or clone). If they are not engaged in your company they are a higher risk of being lured away to your competition. The economy may keep them with you today, but as it improves how will you keep your best employees?
Keeping Score – Open the Books
“In today’s tough climate, when you need to be operating at full throttle, wouldn’t it be a good idea to encourage employees to give their all—to make frequent, constructive suggestions that help boost the bottom line?
“That’s what open book management is all about. It involves showing employees the numbers—key financials, from sales to overhead—helping them to understand what the metrics mean and providing a forum for them to suggest how to address problems revealed by the numbers. As a result, you not only hear insights you might never have thought of on your own, but you also build a more committed workforce. The upshot, says Richard Armstrong, president of The Great Game of Business, a consulting firm that specializes in open book management, is ‘a more productive successful company.’
But opening up the books to employees so they understand the significance of the numbers and also feel free to make suggestions—that’s easier said than done. Here’s how to get started.
“Set up a regular meeting system and a standard set of metrics. Best is to hold weekly meetings during which you distribute the numbers and discuss them. Along with important metrics, that should include a forecast of where you think you’ll be at the end of the month. You don’t have to include every number, either. In fact, according to Ellen Rohr, CEO of Bare Bones Biz, which helps companies put open book management systems in place, it’s most effective to produce a one pager with a handful of metrics. 'You want the numbers that really drive the business' she says. She suggests including sales, labor and the cost of materials as a percentage of sales, profits and cash flow. But you can also include other measures, from customer satisfaction levels to return on assets.
“Practice learning by doing. Keeping the numbers to a minimum and the meeting short—no more than half an hour—will also help you in your efforts to educate employees about just what the metrics mean. In fact, the best way to provide those lessons is through your weekly discussions. By continually going over the same numbers and ratios, you’ll have an easier time teaching the basics—not just what the metrics mean, but how they relate to your business.
“It won’t happen overnight. But after perhaps six months or so, you’re bound to have what Rohr calls an “ah hah moment.” She points to the owner of a 20-employee Midwestern roofing company who made labor as a percent of sales a regular part of open book meetings about a year ago. At one discussion several months later, an employee asked why the number had spiked since the previous conversation. Turned out, they’d had a spate of bad weather and hadn’t been able to go out on many jobs. As a result, sales had dropped. With that bit of information, the employees began to understand the real implications of the metric—and started suggesting new potential revenue sources, like signing annual maintenance agreements or starting a new division to sell window and door replacements. The company is putting the ideas in place now.
“Provide opportunities for further discussion. If your metrics point to weak results, encourage employees to discuss ways to address the problem outside the regular meeting. Armstrong points to a 60-employee manufacturing company that recently had a sudden drop in sales and profits when a major customer had to change an order. After the owners shared the information at their regular open book meeting, department heads met separately with their employees to brainstorm ways to cut costs over the next quarter. Thanks to the suggestions that came out of those discussions, the company was able to reduce the $50,000 drop in profits in half.”
Source: Solve Problems By the Numbers -American Express OPEN Forum 10/05/10
You may be interested in attending one of these training seminars by Dennis Sowards:
Mar. 24, 2011 - Eliminating Treasure Hunts – Applying the 5S’s for Lean Construction - Sponsor – P.I.P.I. & 469 JAC – Phoenix, AZ - contact Cathy Mayeux at email@example.com for details.
Apr. 28, 2011 - Job Planning That Really Works - Sponsor – P.I.P.I. & 469 JAC – Phoenix, AZ - contact Cathy Mayeux at firstname.lastname@example.org for details.
May 19, 2011 - High Performance Leadership for the 21st Century - Sponsor – P.I.P.I. & 469 JAC – Phoenix, AZ - contact Cathy Mayeux at email@example.com for details.
Sept. 22, 2011 - Getting to the Root Cause: Real Problem Solving - Sponsor – P.I.P.I. & 469 JAC – Phoenix, AZ - contact Cathy Mayeux at firstname.lastname@example.org for details.
Oct. 20, 2011 - Designing and Achieving World-Class Performance in Construction- Sponsor – P.I.P.I. & 469 JAC – Phoenix, AZ - contact Cathy Mayeux at email@example.com for details.
Contact Dennis if you are interested in having a customized workshop specific to your company’s needs.
Thought for the day
Some people strengthen the society just by being the kind of people they are.
- John W. Gardner
For more information about the High-Performing Contractor assessment process contact Dennis Sowards at 480-835-1185 or at dennis@YourQSS.com (see www.YourQSS.com )
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