Smart Business: Mistakes Can Kill Your Business
The craft work you do requires paying attention to hundreds of little details. Nobody’s perfect, but competent contracting companies make relatively few mistakes when it comes to working with the tools of their trade. What’s more likely to go are communication breakdowns that lead to problems in the field.
These may originate in the office or on the jobsite. The problems may even stem from your vendors, suppliers or someone else downstream, although that doesn’t let you off the hook. Customers like listening to excuses about as much as they like paying for work done wrong. Looked at through their eyes, anything that delays a job, increases its cost or results in sloppy workmanship is your fault, no matter where the snafu originated.
HOW TO KILL PROFITABILITYMistakes are to profitability what a plane crash is to on-time arrival. Few business expenses are more costly. Troubleshooting and rework are almost certain to eat up whatever profit you’ve factored into a job.
A well-known saying in the construction industry goes: “Measure twice, cut once.” It takes very little extra effort to measure twice. However, it’s very costly in material and labor to cut something to the wrong length and have to do it all over again. Measuring twice has its counterpart when it comes to business communications as well.
A manufacturing company in the plumbing industry did a study several years ago of its order fulfillment procedures, and discovered that it took an average of seven phone calls to correct every mistake made in the ordering process. Seven!
Think of your own experience trying to straighten out goof-ups in your everyday business or personal transactions. Seven phone calls doesn’t sound out of the ordinary, does it?
It is a drain on productivity to chase around like that, and this just pertains to office staff wasting their time. Sometimes the mistake results in jobsite downtime and having to return something purchased. Also factor in lost opportunity cost. That is, the time and effort your people put into correcting a mistake is not available for doing more productive work that relates to attracting new business or servicing customers.
Last, but far from least, is the incalculable price paid in customer annoyance. This can run into tens of thousands of dollars or more if it leads to the loss of business from a good customer.
Here are some of the places mistakes originate.
It’s been said only half in jest that when it comes to bidding construction jobs, if you lose the job it means you bid too high, and if you win it, you bid too low. Estimating is filled with peril. Once you submit a quote to a customer, it’s very difficult to come back later and say, “Oops, I forgot to include something. I hope you don’t mind if I bump up the price we agreed upon.”
Many contractors use computerized estimating programs, which should include factoring in all the variables that might arise. Be sure it includes things like jobsite conditions and accessibility, weather, safety requirements, interaction with other trades and various other factors that can impact your labor or materials budget. If you still use “scratch pad” estimating, good luck. At least try to include these things on a checklist.
Veteran estimators who’ve submitted thousands of bids are inclined to think they know it all and don’t need all the prompts. Explain to them that airline pilots with thousands of hours of flying time can pretty much do it all in their sleep, but the FAA still requires them to adhere to a checklist before taking off.
Ordering can go wrong in so many places. The estimate could be off, or the estimate could be right but the takeoff wrong. Or, the person doing the ordering might transpose some of those tiny numbers in the catalog, or get the numbers right, but the product turns out to be the wrong item for the job. Or, all that information might be correct, but the person’s handwriting is abysmal. Or he faxes it to someone whose fax machine is low on toner, making 8s look like 3s. Or something said in a phone conversation gets garbled.
Or, you think you have certain things on hand and don’t need to order them, but nobody really checks to make sure. So it comes time to start the job and you find out everything is not at hand. It’s a universal law that this always occurs at the same time as a snowstorm, machinery breakdown or one of a thousand other things that can occur to extend delivery lead times.
These things happen every day in every way. Mistakes made in material or equipment ordering are among the most painful, because they will follow the order at every step from beginning to end. It won’t get noticed until your field worker tries to push the square peg into a round hole. Then everyone from the bookkeeper to the delivery driver to the field worker has to do their jobs all over again to get it right.
Shipping & receiving
By some miracle the entire ordering process gets done accurately, but the guy picking the order in the supplier’s warehouse is thinking about his Friday night date and picks the wrong part. Or he loses track of the count and picks the wrong quantity.
Or the guy in the shipping department doesn’t notice the special instructions to deliver these items to Jobsite A and sends them to your office billing address instead. Nobody there knows what the heck this stuff is for, so they either tell the delivery person to take it back, or accept it, but leave it to sit around the office until someone appears out of nowhere to identify it. Maybe they meant to ask the boss about it, but he’s out and they went back to burying their heads in paperwork while the shipment sits in a corner, out of sight and mind. People on the jobsite wonder where the heck is the stuff they ordered weeks ago and need now, but nobody thinks to ask the office, because, “Why would it be there?”
Oh, and while the guy in the warehouse was contemplating a steamy conclusion to his Friday night date, he inadvertently slapped Label A on Product B.
Just to add to the fun, the delivery driver didn’t notice that this shipment calls for 11 boxes, but #11 got bounced around and mixed with a different order, so he lost count and only delivered 10 boxes to your office.
Maybe none of this happened. Maybe the guys working in the warehouse and shipping dock did everything right. So the right items in the right quantity with the right labels got sent to the right place. Except the driver got lost and spent hours trying to find Jobsite A. Your crew lost a day’s worth of productivity as a result.
Errors in any of the previous categories will almost always lead to hectic times in the billing department. But sometimes the billing staff figures out creative ways to make mistakes of their own. They can invoice the wrong parts or the wrong quantity, or send the invoice to the wrong place. Back-ordered parts get charged twice or not at all. Or their invoices don’t match the packing slips.
Ounces of preventionSo many things can go wrong, the wonder is not that mistakes get made, but that anything in the business world ever gets done right!
As another famous saying goes, an ounce of prevention is worth a pound of cure. Communication breakdowns usually result from a lack of attention to detail.
Paperwork accuracy can be obtained by double-checking, i.e., “measuring twice” before submitting anything. Follow these guidelines:
Repetition: When discussing an order or quote, get in the habit of repeating all of the order numbers, product descriptions, work specifications, scope, quantities and prices. Then double-check all of the information you have entered in your computer or on your paperwork before submitting it. If you are handwriting an order, make sure your handwriting is legible.
“Smell” Test: Do things “smell” right to you? Does it make sense to suddenly see an order for 10 items that you normally order one at a time? Is that tool larger than anything your company has ever ordered before?
Verification: You have control over your own activities, but the mistakes that bite you can just as easily be caused by sloppiness of other people both inside and outside of your company. Don’t assume that just because you’ve checked and double-checked everything on your end, the information will get transmitted and absorbed accurately. Repeat verbally things you see on paperwork and ask the other party to verify that all the information is correct. Where appropriate, ask them to acknowledge receipt of important messages. E-mail makes this easy to do by simply hitting the reply button.
Red flag alert: One aspect of the verification process that always raises a red flag with me is when the other party says, “I think that’s right ... I’m pretty sure about that … As far as I know …”. My response is always, “Do you THINK that’s right, or do you KNOW it’s right?” Put the onus on them to double-check. I’ve nipped quite a few errors in the bud using this tactic.
Send to the right person and place: Every week I get mail that comes to me via our corporate headquarters 300 miles away. Occasionally I get a call from someone trying to reach me at a location we moved from five years ago. Databases are filled with old addresses and contact names. Also keep in mind that delivery and billing addresses are frequently different. If you can target delivery to a specific person rather than just a company, it increases the chance of it landing in the right place. The Internet makes it simple to verify information.
Accountability: Hold people responsible for avoiding mistakes. Document whenever it happens and make it a part of their performance review. Better yet, set up a bonus program for mistake-free performance. Positive incentives generally get better results than punishments.
All of these steps become routine after awhile, yet that’s precisely the reason mistakes so often are made. The more often you do something the easier it is to become careless. As workloads increase, you go faster and faster. You try to multi-task and perform too many functions at once-such as processing paperwork from one customer while speaking to another on the phone. The busier you get, the more tempting it is to take such shortcuts.
And the more mistakes get made.