Performance measures designed to move associates
toward business goals can be a powerful catalyst for action.
Because "you get what you measure," it is important
to think through how and what you measure so you can achieve
the desired results.
Measuring profitability is enticing because
it goes straight to the heart of every builder’s existence.
In reality, financial measures alone are likely to have exactly
the opposite effect of what the words promise. Examples are easy
to find: Purchasing saves a few dollars by switching to a window
that is prone to leakage. Construction selects the low bid trade
contractor known for poor warranty service. The service department
rewards cutting warranty costs even if it means playing hardball
with the customer. In each of these examples, traditional performance
measures drive each department to minimize their costs –
at a price to the company.
Long term financial performance hinges
on overall quality, value, and customer satisfaction. However,
when individual departments focus solely on maximizing their
own financial performance, the profitability of the whole company
is sub-optimized. A warning from the father of Total Quality
Management, the late Dr. Deming: "Everyone propels himself
forward for his own good, on his own life preserver. The organization
is the looser."
The astute manager understands how a department’s
operating strategies contributes to customer satisfaction and
overall company profitability, then seeks measures that reinforce
high performance strategies. These managers then use performance
measures to guide the actions of their associates.
A key performance strategy for Pulte Illinois
Division is to use the service department to increase customer
satisfaction levels. Customer complaints are considered a gift,
an opportunity to learn about, then remove customer dis-satisfiers
and secure high levels of customer satisfaction. Extended service
hours, a manned service call center, a service warehouse, and
fast response times cost more than traditional approaches. It
is all part of Pulte’s strategic approach that puts customer
satisfaction before warranty costs.
Some builders use a single performance
measure drive a high performance operating strategy for the whole
company. Cycle time reduction is the key business strategy at
Zaring Homes, Cincinnati. A focus on measuring cycle time reduction
has galvanized the organization to streamline operations and
"do it right the first time." Zaring views higher return
on assets and lower operating costs as natural by-products.
Still other builders find that a balance
of factors produces the results they desire. K. Hovnanian, a
1997 NHQ winner uses a balanced scorecard for field associates.
Overall performance is a weighting of customer satisfaction survey
results (30%), build cycle time (20%), budget (20%), zero defect
walkthrough (20%), safety and teamwork (10%).
Performance measures of profitable builders
are as varied as their business strategies. A good place to start
is examine your own business goals and tune-up your measures
at the company level. Then proceed to create department measures
that align with company goals. Your organization will be the
winner.