Stuff certainly happens! We’ve all heard this statement, or some variation of it to imply that mistakes are inevitable and we shouldn’t worry too much about them. But as British Petroleum is finding out in the Gulf of Mexico, mistakes can be extremely costly.
While it’s unlikely that any of our kitchen and bath firms could sustain the kind of catastrophe that BP is dealing with, we should not ignore the impact on our profitability that mistakes, even minor ones, can have on our short-term and even long-term business. There is a tendency on all of our parts to dismiss mistakes and errors as simply a part of the cost of doing business and not really focus on the actual cost of them as they pertain to our respective bottom line.
But these are very real costs and, in many cases, they are actually avoidable costs. This month, we will look at some ways to raise our awareness of the errors that infect the design and remodeling business and possible ways to prevent, deal with and/or reduce them altogether.
Before you embark on the process described below, try an experiment of just making a note or log of all of the errors and their attendant costs that occur in your business over the course of one month.
If your business is typical of most of us in the remodeling business, you will be appalled at how much money is slipping through the cracks each month,
let alone over a year!
SHINE THE LIGHT
Actually highlighting the things that go wrong and the mistakes that are made is a tricky area since it often includes an element of placing blame on individuals for mistakes that they have made. Getting around this issue will require a real sales job with your employees and assurance that the process is not intended as a means to weed out poor performers.
Begin the process with an educational session with your entire team to discuss the actual costs that can arise for different types of errors and mistakes.
For instance, issues may arise as to whether a measurement of a kitchen may have been off by nine inches on the width because a measurement was transposed? Or perhaps did your firm fail to account for the cost of putting a new window through a brick veneer wall? Perhaps we ordered the new door with the wrong swing, or did we order the wrong color plumbing fixtures?
All of these things will most certainly have a cost associated with them, sometimes just the time it takes to exchange the fixture, sometimes the cost of the unusable part plus the time it takes to get the correct one to the job.
As step one of this process, focus on one project for each designer on your staff, and keep track of everything that goes wrong on that project and attempt to assign an accurate cost to each error or problem. At the end of this process you should have a pretty graphic demonstration of just how much potential profit is lost to these sorts of errors.
Keep in mind, too, that these results will likely be smaller than what’s typical with a project, since the tracking process is going to make everyone much more careful along the way.
By now, you are probably saying something like: “Are you kidding? My employees will never go along with something like this!”
I mentioned that this will not be an easy sell for sure, but the advantage for everyone involved is that eliminating mistakes will make your company that much more competitive in the marketplace – and will give your firm a great advantage in that regard.
Most importantly, make it clear to all of your employees that this is a long-term process, with the goal of reducing errors throughout your entire business, not a club to beat them with.
ACT ON THE RESULTS
Once you’ve completed the first phase of this process, evaluate the results to see what kinds of problems are occurring. Are there errors that are common to all projects? If this is the case, can some of your procedures for estimating, ordering or execution be changed to correct the cause of the problems, thereby reducing the likelihood of them happening in the future?
Are there areas where more double checking and verification will help? All of these errors result in costs that do nothing to produce income for your company; reducing or eliminating them will certainly bring your overall costs down and make your company more competitive.
Make whatever changes your evaluation has indicated are necessary and then set up a reporting system for each project that will allow you to track these errors and their costs. Again, it is important that everyone looks on this as a team effort so that the tendency to conceal errors doesn’t thwart the process.
It’s also a good idea to try and develop some type of incentive program to go along with this program. For instance, if they reduce the number of errors (or total cost of errors) per dollar volume of sales below a pre-established goal, you then reward the entire team for reaching this goal together.
For everyone involved, the elimination of errors will result in significant, noticeable benefits, as each dollar saved will contribute 100% to company profit, from which salaries and wages (including potential raises) are paid. It should be fairly obvious that there are several options to construct incentive programs around a program such as this.
Once this program has been in place and is proven to be successful, it’s quite possible that it could be used as part of your firm’s marketing program to emphasize with customers that your company is entirely focused on being efficient and productive, thereby eliminating the need to pass along the cost of mistakes to customers.
The fact that your company has a goal of eliminating errors and mistakes should translate in the customers’ minds that their project will go smoothly and be completed in a timely fashion. This is particularly important when one considers that, in this era of efficient use of resources and “green” building materials and processes, elimination of waste has a tremendous amount of value in the marketplace and resonates with many consumers’ sensibilities.
In the end, regardless of what method you might chose for your company, the current market conditions make it much too difficult to ignore the costs associated with making mistakes in the execution of the projects we undertake for our clients.
My recommendation is to do whatever it takes to get your entire team on board with addressing this issue. You and your staff will find that the dividends will be substantial.
Ultimately, in today’s market, it is imperative to look into every corner of your cost structure for opportunities to be more competitive. If you can do this, your business will be one of the winners in the years to come.