High Performing Contract - January 2010

Customer Focused

Some food for thought as you consider your customer service efforts. Customer complaints are down nationally. This is according to TARP – the Technical Assistance Research Program that is part of the White House Office of Consumer Affairs. Their research found that consumers are submitting less complaints even for serious problems – NOT because they feel they are getting better service, but because of what they call “trained helplessness.” Customers feel their complaints do little good – nobody listens or acts. Where does your company stand on customer complaints? Do you have a way to record them? Do you have a system to assure each complaint receives a quick and fair response? How do you know it is working?


While word of mouth is still the best way to get loyal customers, word of mouth is a way to lose potential customers. Dissatisfied customers are turning to the Internet to post their complaints. While customers are twice as likely to voice complaints by word of mouth than to give complements, TARP found that angry customers are four times as likely to post comments on the Internet. How to avoid this negative publicity? Deliver good service consistently.

The TRAP survey, which was given to 10,000 customers of various industries, found what delights customers and cause them to give the “top box” rating is a lot of little things done right. This includes keeping the customer informed on products & services, having a friendly 90 second (moment of truth) staff interaction, and delivering consistently good service. Relating this to construction – do you keep the customer regularly informed on job progress or only tell them when asked or when a major delay has occurred?

TARP research found that about 20% of customer dissatisfaction was caused by the employees doing something wrong or having a bad attitude. The research showed that between 40 to 60% of all problems that resulted in a complaint were caused by a defective process. Employees often have a bad attitude because they have to work with a broken process. Focus on fixing the process, not the people.

I have yet to meet a contractor that doesn’t claim to do quality work. Yet, customer satisfaction ratings from research for the HVAC and sheet metal industry showed that customers feel there is room for improvement. For any contractor that feels they do quality work I would ask – “How do you know?” The absence of complaints does not demonstrate you are doing things right? Maybe they have stopped complaining and are starting to look elsewhere or they are complaining to your potential customers in another way! How do you know?

Source: Quality Progress, Feb. 2006.

Employee Focus

The Conference Board has been doing employee satisfaction surveys since 1987 and the 2009 results are the lowest ever. Only 45% of the people surveyed were satisfied with their jobs. Employees with low satisfaction are less likely to be innovative or to work as team player and share important information. While the survey covers all industries, the construction industry is experiencing the same challenges. Some people feel that lower wages growth in 2009 is the main contributor to lower satisfaction, but the major cause is that employees do not find their job interesting. To keep good employees, some contractors try incentives. The following provides an excellent discussion about incentives pay.

“Has your company implemented an incentive, rewards program to help motivate employees, boost morale, increase productivity and/or strengthen loyalty? If your company has not received the intended results from such initiatives, the reason could be the program itself. Many experts agree that pay-for-performance programs can actually hinder company goals by creating an ‘every-man-for-himself’ atmosphere rather than encouraging teamwork and working toward company goals.

“Pay-for-performance programs are often implemented in hopes of increasing employee production, recruiting, and retention rates. The idea is that employees will work harder if they are motivated by rewards and/or monetary gain. The pay-for-performance ideology is nothing new to the sales world, but many companies across various industry segments have implemented pay-for-performance programs in the form of incentives, commissions, and non-monetary rewards—ranging from plaques to vacations. Initially, the idea sounds quite logical—but when considering whether to implement a pay-for-performance program, there are underlying factors that should be taken into account that may adversely affect the impact of the program.

“While there are supporters of the pay-for-performance philosophy, many experts agree that such practices do not work because they simply do not coincide with what actually motivates people to work and reach goals in the long run. In fact, there is no statistical proof that these programs work at all.

“Alfie Kohn, author of Punished by Rewards, No Contest: The Case Against Competition, and several other books and articles examining human behavior and the work place, believes ‘rewards programs can't work because they're based on an inadequate understanding of human motivation.’ Kohn goes on to state that the more one is rewarded for a certain action, the more the individual tends to lose interest in whatever was accomplished to earn the reward. The central focus becomes monetary gain or the trip to Alaska, rather than increasing productivity or reaching other goals set by the company. This shift in focus negatively affects quality in the long run. Motivation through rewards is possible, but companies must be aware of what they are motivating employees to do: strive toward personal short-term goals, or work toward the long-term interest of the company.

“When true human motivators are ignored, adverse affects can result. For example, rather than increasing employee morale, competition may create dissension among employees. Many experts also agree that employees will be less apt to exercise creativity and innovation, or to take risks due to fear of unmet quotas. Rather than communicating company commitment to employees, such programs can emphasize power stratification within the company—those receiving awards, and those distributing awards. Rewards programs may also make it difficult for management to identify issues that may affect performance. For instance, if all focus is placed on a sales team meeting a certain quota, if the team does not perform, the manager is less inclined to look at factors outside of individual performance that may have affected the team's sales, such as pricing issues.

“Monetary gain is considered to be a fairly weak motivator in the long run, especially in the case of pay-for-performance programs, where payment is not guaranteed. Rather than incentives and bonuses, workers are typically more motivated when they feel they are doing something to better themselves, their company, or their community through service. Psychologist and business management theorist, Frederick Herzberg, once said, ‘If you want people motivated to do a good job, give them a good job to do.’ Create a company atmosphere of loyalty and belonging, and employees will naturally develop a strong sense of pride in their work. This will have a greater impact on productivity, employee commitment, and retention rates in the long run, as opposed to a month-to-month incentive program. Positive reinforcement, such as a “good job” from management, may be viewed as more personal and sincere and can also be more effective than monetary rewards.

“If you think a pay-for-performance program is right for your company, consider the following:

• Make sure the program conveys and enforces company goals rather than individual employee short-term goals.
  
• Effectively communicate company philosophy and strategy. Make sure employees are aware of how the program is in line with the company mission and vision, and how it will help reach company goals.
  
• Include a quality assurance aspect in the program to ensure that product quality stays consistent as production levels increase.
  
• Incentive programs take a considerable amount of planning time and must be restructured periodically as employees meet and/or exceed goals.
  
• Consider how the effectiveness of the program will be evaluated prior to its implementation.
  
• Pilot the program before implementing it.

“Of course, all incentive programs are not destructive or ineffective; and ridding your company of such programs does not automatically mean that production levels will go through the roof. If you feel pay-for-performance is right for your company, the most important thing to remember is to try to strike a balance between incentives and creating a work environment conducive to high achievement and loyalty.”

Sources: AZ MEP Bottom Line solutions newsletter – Feb. 17, 2009 and The Arizona Republic, Jan. 5, 2010 – “Job Satisfaction Lowest in 22 Years”

Learning Opportunities

You may be interested in attending one of these training seminars by Dennis Sowards:

• Lean Works in Construction – How it can work for you - Jan 28, 2010 – Phoenix, AZ
  
  Sponsor: PIPE & 469 JAC, contact Cathy Mayeux at 480.966.0377 or CMayeux@pipetrust.org
• Eliminating Treasure Hunts – Applying the 5S’s
  
  Feb. 11, 2010 – Tucson, AZ & Feb. 25, 2010 – Phoenix, AZ
  
  Sponsor: PIPE & 469 JAC, contact Cathy Mayeux at 480.966.0377 or CMayeux@pipetrust.org
• Job Planning that Really Works – The Last Planner not the First Planner system March 4, 2010 – Tucson, AZ
  
  March 25, 2010 – Phoenix, AZ
  
  Sponsor: PIPE & 469 JAC, contact Cathy Mayeux at 480.966.0377 or CMayeux@pipetrust.org
• March 10, 2009 – Lean works in Construction – sponsored by Mid Atlantic SMACNA Chapter. Contact them at (301) 446-0002 or info@smacnaatl.org for details. Must be a SMACNA Member or affiliate to attend.
• Lean Applied to Service
  
  April 8, 2010 – Tucson, AZ & April 22, 2010 – Phoenix, AZ
  
  Sponsor: PIPE & 469 JAC, contact Cathy Mayeux at 480.966.0377 or CMayeux@pipetrust.org
• Getting to the Root Cause by Analysis not Luck
  
  May 6, 2010 – Tucson, AZ & May 20, 2010 - Phoenix, AZ
  
  Sponsor: PIPE & 469 JAC, contact Cathy Mayeux at 480.966.0377 or CMayeux@pipetrust.org

Thought for the day

The genius of communication is the ability to be totally honest and totally kind at the same time. – John Powell

For more information about the High-Performing Contractor assessment process contact Dennis Sowards at 480-835-1185 or at dennis@YourQSS.com

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