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Continuing the theme of “RESOLUTION” that we began last month, the letter “E” represents three concepts—efficiency, effectiveness and excellence. Each electrical contractor integrates these concepts into their operations differently because they reflect individual vision and business strategy.
Efficiency is the easiest to measure because there are established ratios to track progress. If you want to improve installation efficiency, you could divide annual sales revenue by the average number of field installers to find the average billable dollars per person. If that number increases from year to year, your installation staff is becoming more efficient—if the quality standard is being maintained. Or, you might track the number of staff hours it takes to process accounts receivable or the amount of wasted or unused materials for each year.
Turnover ratios are also measures of efficiency. Your average collection period measures the efficiency of your accounts receivable billing and collection process, in the same way that materials cycle through the business from vendor to finished installation.
Effectiveness is sometimes confused with efficiency. However, while efficiency compares input to output, or amount of work to quantity of product or results, effectiveness measures whether the work achieves the expected goal or standard. A process or team may not be optimally efficient but may achieve impeccable quality. In my own contracting business, the best installer was also the slowest. But his quality standard was never compromised, and he was the person assigned to the riskiest jobs and most demanding clients. By allocating his expertise effectively, we also made a profit on his work.
It is more difficult to measure effectiveness numerically, but attitude surveys can be designed to measure how well customer expectations have been satisfied. The design of questions may influence the responses; ask whether your customers received the value they expected or the quality they desired. Also give them the chance to include comments. Surveys that limit responses to “excellent,” “fair” or “poor” will not elicit the specific feedback that help you provide value for their investment.
Ensure you use results to align your performance to your own priorities as a company. For example, are you most concerned with high quality, impeccable service or meeting the customer’s budget?
In his bestseller, “In Search of Excellence,” Tom Peters studied the quest for excellence in companies from a variety of industries. You may believe that all of your competitors are working toward the same standard, but the standard of excellence varies with management’s vision. Cheapest Electrical Co. may use low price as its standard of excellence, while 24/7 Electric might define it as fast response time. You must deliberately define what you want to do better than anyone else in your market, or you will never know if you have achieved excellence.
The lesson of Clark Street
During a frantic last-minute shopping trip for some additions to a traditional holiday meal, I saw the three “Es” in action. At the bakery, I took a number. Anticipating a two-hour wait, I wandered down the street to a family-owned grocery and deli where my number placed me behind only 20 other customers. In this small store, the two women behind the counters produced handwritten sales tickets, rang totals on the ancient cash register, and accepted only cash or checks. They gave each customer personal attention, and the conversations seemed to take hours.
Inefficient? Completely. Effective? Unbelievably. Although a few were frustrated, most customers chatted, texted or listened in on other transactions to glean information for their own decisions. They received advice on how to cook the products, how the ingredients varied, and what to include in a traditional Swedish smorgasbord.
Meanwhile, the larger bakery was staffed with a dozen employees, using two number systems—one for preorders and one for walk-ins, all of whom were jammed solidly into the store. I watched anxiously as the bread inventory shrank, and was grateful to acquire my second-choice flavor, using my credit card. More efficient? Yes, but the young man serving me did not have the same experience or expertise, and while the visit was shorter, it was less satisfying.
In one frantic shopping experience, the lessons emerged clearly. Efficiency may enable a business to process more products and earn a higher profit, but the less efficient operation may provide an effective way to provide a valuable experience built on a fruitful relationship. Above all, excellence may be measured in a variety of ways, and there are clients who will pay dearly for quality when it matters.
NORBERG-JOHNSON is a former subcontractor and past president of two national construction associations. She may be reached at [email protected].