High-Performing Contractor - NEWSLETTER May 08

The Three "Ds" of Customer Focus

High-performing contractors are focused on their customers and make great efforts to listen to their voice. James Allen, Frederick F. Reichheld, and Barney Hamilton suggest, in their article, that world-class companies apply the three “Ds” to continuously improve their customer services and keep loyal customers. They are are:

“Design the right offers and experiences for the right customers.

Deliver these offerings by focusing the entire company on them with an emphasis on cross-functional collaboration.

Develop their capabilities to please customers again and again”

“A recent Bain & Company survey reveals just how commonly companies misread the market. We surveyed 362 firms and found that 80 percent believed they delivered a ‘superior experience’ to their customers. But when we asked customers about their own perceptions, we found that they rated only 8 percent of companies as truly delivering a superior experience. Clearly, it's easy for leading companies to assume they're keeping customers happy; it's quite another thing to achieve that kind of customer devotion.

“So what sets the elite 8 percent apart? We found that they take a distinctively broad view of the customer experience. Unlike most companies, which reflexively turn to product or service design to improve customer satisfaction, the leaders pursue three imperatives simultaneously.”

Designing the right offers and experiences for the right customers.
Most contractors segment their customers by type of work: government, commercial, residential, etc. The authors of the 3Ds suggest looking at unique ways to segment the market. They say segment by profit margin and by the customer’s tendency to promote your company to others in need of your services. The goal is to shift more customers into the high-profit, high-advocacy category. These are the truly loyal customers.

We can measure profit but what about advocacy? The net promoter score is a good measure of how willing a customer is to promote your company. It is calculated as the percentage of customers who would willingly recommend your company minus the percentage that would not. This is a simple straightforward metric and can easily be explained to all employees. It has also been shown to be a great predictor of the ability of a company to grow its market. It does have one key requirement – you have to ask the customers the question and quantify it. That means you have to survey the customer in a non-bias way.

Measuring profit and even the promoter score is relatively easy, the challenge is how to turn customers into excited advocates? This means one must understand the customers and his or her expectations. In construction, I believe, this means researching the customers (the owners) to determine how they intend to use the facility we build for them. One project spent much time looking at a hospital patient’s room. They did full size Styrofoam mock-ups and had patients, nurses and doctors all test the room for usefulness.

Subcontractors will really need to understand the general contractors, architects and design engineers and how they function. This would mean spending time in their world, studying how they make decisions, how they process designs and how they direct the work. Why do most general contactors favor certain project managers or foreman of subcontractors? It is usually because that PM or foreman has learned how to work in a collaborative way with the GC. However, we don’t often have the luxury to always assign the requested personnel to projects. We can’t wait for a collaborative relationship to build naturally either because it takes too long. Partnering sessions are one way to accelerate relationship building. This technique has developed some negative baggage and fewer contractors are willing to try it.

Another way to develop a working relationship with the GC is to work together to do phase planning. Since most master schedules are usually out of date within days after starting the project, contractors doing Lean will get all the key players involved in planning phases of the project. When the GC and subs work together to create a meaningful phase schedule, it builds a more committed and trusting relationship.

As a company better understands the type of customers they have, they can then design the product or service offerings to better fit the customers. The authors of the 3 D’s suggest looking at the touchpoints where the customers interact with the company, design new service offerings for specific segments, and focus on the entire customer experience. Customers interact with different parts of the company across a number of touchpoints, including bidding, contact negotiations, submittals, detail design, installation, billing, change orders, commissioning, service and support, and so on. They feel, “A company can't turn its customers into satisfied, loyal advocates unless it takes their experiences at all these touchpoints into account. Design is thus closely tied to the delivery.” Designing how the process touchpoints work to meet the customer’s needs and expectations is part of the first D.

Delivering value to the customer
“The most brilliantly designed and insightful customer offerings can be rendered impotent by poor execution.” In construction, this means keeping your promises. To perform as promised, contractors need to have engaged employees. That is - employees who are committed to making the company successful by meeting the customers needs. Engaged employees have a trusting relationship with management. They are well trained in the work they need to do, and they company’s support processes and planning work well so that the employees have the material, tools and equipment they need. Their opinions and ideas are valued by supervision. These employees understand the purpose of the company and how they are helping to achieve it. Finally the employees have the right recognitions and incentives to provide excellent service. Employees will never treat customers better than they are treated! When one has employees with their needs satisfied, they will better serve the customer and deliver value to the customer.

Customer measures are also part of delivering value. “They allow companies to be sure their delivery continues to meet the needs of the target segments. But traditional metrics, focused on the performance of individual functions, aren't enough; measures have to be crafted to inspire cross-functional collaboration.” We need to measure how well we are keeping our promises to our customers. One homebuilder promised that they delivered the houses clean, free of punchlist items and on time. When asked how they were doing in this regard, they had no measures of any of these promises. Instead, they measured costs and crew productivity. Measures must follow strategy; delivering value to the customer can be measured,

Developing the capabilities to do it again and again
Companies do this by revamping the planning process, training employees in how to create new customer services, and establishing direct accountability for the customer experience.

“Customer value propositions can never be static; they must be subject to regular innovation. It's the same with delivery—every company must improve its performance quarter after quarter, year after year.” Leaders are responsible to ensure systems exist to provide flawless execution every time. They also need to set the priorities and maintain the course. It starts with being clear about who the customers are and putting the customers at the top of the company's strategic priorities. It continues by using “customer-based metrics and closed feedback loops that establish accountability.” Evaluating individual and branches or divisions based on customer satisfaction is another way to do this.

“Top-performing companies create processes that seek direct, immediate customer feedback—not simply to ensure that things are going well but also to build in methods of systematic innovation and improvement.” Some contractors do an annual customer satisfaction survey but, especially for long projects, this may be too late to really capture customer concerns about the earlier phases of the project. For example feedback on how well the company mobilized for the job may be forgotten or lost at the end of the job. Some contractors survey as major phases are completed. By asking why a customer would or would not recommend the supplier to a peer, information can be gained about what the customer is expecting service to be. This question “why” is asked in conjunction with the question about being willing to recommend the supplier to a peer.

High-performing contractors also develop ways to hold employees accountable for customer service is another way to ensure that the service quality is delivered consistently. This means there must be valid and timely performance measures of customer service. The authors suggest using the Net Promoter Score since it is an easy measure to capture and explain to employees. It offers an effective way to give quick feedback to employees following a service interaction.

To better gain and keep loyal customers, companies must do more than business as usual. The 3D’s offer a path to continuously improve service. Like any path, one must follow it to get to the desired destination.

Source: "Tuning In to the Voice of Your Customer," by James Allen, Frederick F. Reichheld, and Barney Hamilton, Harvard Management Update, Vol. 10, No. 10, October 2005.

Employee Focus - Bored Employees Are More Disgruntled Than Overworked Ones

“Businesses may realize far more negative consequences from bored employees than from those who report having ‘too much work,’ according to research by Sirota Survey Intelligence, specialists in attitude research. Employees who are bored (reporting ‘too little work’) are often doing work for which they are ill-suited, or have jobs that are poorly designed. As a result, they have by far lower job satisfaction, sense of accomplishment, and pride in their employers compared to all other workers, according to the survey of over 1 million employees.

"Feeling overworked -- a condition that could lead to job burnout -- is far more prevalent than feeling bored -- yet both have harmful effects on employees and their companies. Interestingly, being bored has far more serious consequences for an organization than being overworked," said Douglas Klein, president of Sirota Survey Intelligence.

“Employees' perceptions of being overworked spike during their second through fifth years with an employer. 27% of employees with two to five years experience with an employer report being overworked. In general, more employees report feeling overworked (22%) than those who say they are bored (14%).

“Findings of the survey include:

• Adequate support from co-workers: 59% of employees who have "about the right amount of work" feel they receive sufficient support from colleagues, compared to just 35% of those with "too much work"
• Quality suffers: 59% of employees who have "about the right amount of work" feel quality is unaffected by their workload, compared to just 25% of those with "too much work"
• Job stress: 32% of employees with "about the right amount of work" are favorable about their level of job stress and tension, compared with just 14% of those with "too much work"
• Job pressures interfere with personal life: 49% of employees with "about the right amount of work" are positive about their work-life balance, compared to just 28% of those with "too much work"

"The complaints of both overworked and bored employees should be taken seriously," Klein cautioned. "Complaints about being overworked can be an indication of poor quality or work processes, and it can be difficult in certain circumstances to retain employees who feel they are overworked and out of balance with their work life. But bored employees have an even greater negative impact on an organization, lowering morale and productivity, and draining resources."

Source: 02/07/08 IndustryWeek Daily Headlines, - Bored Employees Are More Disgruntled Than Overworked Ones, Compiled By Adrienne Selko

Keeping Score - What can we learn from Healthcare?

Many of us are not aware but a new law is causing a real change in the healthcare industry. Starting Oct. 1, 2008, Medicare will no longer reimburse medical providers for additional care resulting from some medical errors. The law also prevents the medical provider from billing an insurance company or the patient for the error. So, if you make a mistake, as a healthcare provider, you will eat it.

What if this was the case in construction? Yes it is the case for punchlist and other owner discovered mistakes but there is much rework in construction that is never reported. What if this rework could not be billed? Why do most contractors resist measuring rework? Do you measure your rework? How much is actually happening and how can you prevent it? The answer is not about blaming anyone, but in asking why it happens enough times to find the root cause and take the right countermeasures. Do your employees know how to do root cause analysis? Do you? As more work becomes visible to owners, the potential for them to identify and refuse to pay for rework, like what is happening in healthcare, exists. Will you be proactive, or wait for the law to be passed? If you need training in root cause analysis, contact me.

Learning Opportunities

You may be interested in attending one of these training seminars by Dennis Sowards:
May 15, 2008 – Problem Solving Lite: Root Cause Analysis - Phoenix, AZ – Sponsor: PIPE & 469 JAC, contact Cathy at pipetrust@qwest.net
May 21, 2008 - Lean Works in Construction, Portland, OR – Sponsor: Columbia SMACNA Chapter – contact Tom Goodhue at 503.220.2303. Must be a SMACNA member to attend.
June 2, 2008 – Lean Works in Construction, Oakland, CA – Sponsor: Bay Area SMACNA Chapter – contact Audrey Kerns at (510) 635-8212. Must be a SMACNA member to attend.
June 18, 2008 – Gaining Customer Loyalty by Design, Kansas City, MO – Sponsor: SMACNA- KC – Contact Sang 816-421-3360 ext. 112. Must be a SMACNA member to attend.
Nov 10, 2008 - Gaining Customer Loyalty by Design, Oakland, CA – Sponsor: Bay Area SMACNA Chapter – contact Audrey Kerns at (510) 635-8212. Must be a SMACNA member to attend.

To arrange specific training by Dennis Sowards for your company, contact him at dennis@YourQSS.com

Thought for the day

Do what you say you’re going to do -- what you say to others, and what you say to yourself. Offer value. Cultivate relationships. Do it even when you don’t need anything in return.
-Jeffrey Gitomer

For more information about the High-Performing Contractor assessment process contact Dennis Sowards at 480-835-1185 or here