The Garrison Report #2006-6

How to Increase Your Company's Effectiveness and Efficiency

Potentially the most significant benefit for a contractor that's involved in the Best Value concept is increased effectiveness and efficiency. This results in improved performance and increased profitability.

The better the contractor satisfies the client's requirement, the more effective the contractor's performance. In contrast, the higher the contractor's efficiency, the better is its cost effectiveness in operations. In other words, effectiveness is a measurement of the final work product; efficiency is the measurement of how effectively the work product is delivered. To understand how the contractor is doing in these two critical areas, the contractor must measure its performance in both areas. This idea is not new. Edwards Deming started preaching in the 1950s about the importance of measuring performance. His work was the forerunner of the Six Sigma quality process that General Electric made popular. In short, if you want to improve your performance, you must measure the results.

The foundation for the Six Sigma concept is the DMAIC model illustrated in Figure 1. While all five phases of the DMAIC model are important, the first two are the most critical. These are the defining and measurement phases. Both of these phases are required at all times and set the stage for the other phases. The other three phases kick in when something goes wrong or doesn't reach expectations. This report focuses on defining the work, and next month's issue will focus on the measurement phase.

FIGURE 1 - DMAIC

The defining phase must identify both the client's requirements and contractor's internal performance standards. The measurement phase reports how well the contractor does against the established standards. No additional phases are necessary if the desired results are being achieved, but when these measurements indicate that desired levels are not being maintained, the other three phases are implemented. This process has a track record of improving performance and profitability. To start the process, let's examine the defining phase in greater detail.

Define

The defining phase has two critical parts: what the client wants and what the contractor wants. The important thing to understand is that client's wants or needs are the most important because that is why the contractor is there in the first place. After all, it's the contractor's job to provide a specific service to the client. Further, successful systems are built around the client. The reason is simple: to be a high-performing contractor, you must understand what the client wants and deliver it exactly how the client wants it.

What's critical for contractors to accept is that they must raise the bar. Contractors must focus on more than the bricks and mortar of the client's needs. Since most clients are not qualified to grade the contractor's technical performance, they judge the contractor on the softer issues, namely how user friendly the process was.

To get to the heart of a prospect's concerns, the author recommends that the first question you ask is, "What are your concerns about this project?" Then spend the valuable face-to-face time discussing these issues instead of gloating about how great you are. This approach identifies the prospect's major issues and will demonstrate to the prospect that you understand what is important to him or her. In reality, the contractor is performing a risk analysis on the prospect's concerns. This approach allows you to demonstrate you have the prospect's major concerns under control. It's the contractor's role to protect the client, so don't just tell him you will; show him by your actions. In addition to the specific concerns of the individual prospect, research indicates that some issues are universal to all clients.

Dean Kashiwagi, director of the Performance Based Studies Research Group at the Del E. Webb School of Construction at Arizona State University, has determined from 13 years of research that the eight generic concerns of clients consist of the following:

  1. Ability to manage the project cost (minimize change orders)
  2. Ability to maintain project schedule (complete on time or early)
  3. Quality of workmanship
  4. Professionalism and ability to manage (includes responses and prompt payment to suppliers and subcontractors)
  5. Close-out process (no punch list on turnover; warranties, as-builts, operating manuals, tax clearance, etc. submitted promptly)
  6. Communication, explanation of risk and documentation (construction interface completed on time)
  7. Ability to follow the user's rules, regulations, and requirements (housekeeping, safety, etc.)
  8. Overall customer satisfaction and hiring again based on performance (comfort level in hiring contractor again)

 

Every contractor should measure its performance on the above questions; plus it should measure its performance on the specific concerns raised from asking the above initial question. This should be done on every project. Stop making excuses. Just do it! Unless you do, you really don't know how well your company is performing. Often contractors think they are doing a good job. However, when they finally ask the client how they are doing, they are shocked by the response. The good news is even a bad rating allows the contractor an opportunity to improve its effectiveness.

Once the contractor has a process to insure it delivers what the client wants, it must then make sure it delivers this result in the most efficient manner. This requires the contractor to create a process--or identify the current process it uses--to deliver the desired results. Then the contractor must establish what it expects at each step along the way.

In this process you may have internal customers. If the warehouse must deliver supplies to the field, they should deliver them in way that is convenient for the field people, or their internal customer. The accounting office needs to understand it supports the field, so its request for information should be easy for the field to supply.

Typically, field operations are judged based on the time required to perform the work and the quality of that work. Therefore, the contractor must identify what factors are critical so they can be measured; the defining process is about establishing what factors need to be measured. The contractor must determine the appropriate standards for a task. This usually includes how long it will take and what the performance standards (quality) for the task are. Once these standards are established, the contractor has a basis to measure its performance.

Also, the people who are actually doing the work will understand what is expected. When they understand what's expected, the workers can self-monitor performance and adjust as needed. Philip Crosby, quality consultant and author of Quality Is Free, said the cheapest way to do something is to do it right the first time. The first step to doing it right is to define what is expected!

Once you have established the client's requirements and your own expectations of operational tasks, you are ready to measure them. Stay tuned! That's next month's topic.

 

* * * * * THE END * * * * *

Previous: The Garrison Report #2006-5
Next: The Garrison Report #2006-7

original site by jack out of the box designs inc. | © Copyright 2010 Ted Garrison | Site Map