March 25, 2004
Want big profits? Make yours a high-trust company
By RORY WOOLSEY
The Wool-Zee Company
American businesses are in transition. They now operate and will continue to operate in an environment of global competition, rapidly changing technology, and in a marketplace of more demanding consumers.
In the scramble to be more competitive, businesses are reengineering, reorganizing, downsizing and outsourcing. The question is: How are contractors impacted by these changes and what actions can they take to be more competitive?
Low bid not always best
In recent years, I have found that facility managers, engineers and architects are outsourcing more of the buildings' maintenance, additions and new construction to private sector contractors rather than maintaining the overhead of an in-house workforce.
A common complaint about outsourcing is that management's hands are tied by acquisition regulations that require awarding projects to the lowest bidding contractor. Too often, the low bid winner proves to be the contractor that has made the most mistakes in its bid. Or the project is awarded to the contractor that is most aware of the flaws in the project design and can best capitalize on them with change orders.
It is true; a selection process that ignores contractor past performance and awards only on the basis of low bid is flawed. Low bid is not necessarily best bid.
Things are changing. Today, contractors are being evaluated with a greater consideration of their past performance.
Past performance records of quality, safety, integrity, on-time delivery, and team resumes are being critiqued and quantified for fair evaluation. This is most welcomed in public sector markets where low bid/change-order games have been played for years.
This being the trend, I would argue that without a doubt the most valuable asset a contractor can have is its reputation of positive past performances. This is true for any business in the current marketplace. It is all about building a high-trust relationship with customers through a proven track record ... this is essential. The single best strategy a contractor can employ to improve business volume and profitability is to invest in the competence and character of the organization.
Building high trust
How do you go about building a high-trust business? You can say that you're trustworthy and even profess it on the company letterhead. The fact is it is not enough to say it and read it; you have to be it and do it. Trust outside the company is the result of being internally trustworthy.
Trust is the result of the competence and character of and within the organization. This is a simple premise that can have a powerful impact on business bottom line.
Management cannot mandate the building of high trust. It is evolutionary and requires a daily conscious effort. In low-trust organizations, operations bog down with bureaucratic rules, regulations, policies and procedures that are inefficient. An organization of high-trust reduces the social friction and encourages creativity, ideas and knowledge sharing. Investing in the competence and character of the individuals that make up an organization is an investment in trust.
Investing in competence
Investing in “competence” in an organization is a key component to building high trust. Competence is an individual's level of qualifications, skill and ability to function at a task or job. Certainly a workforce lacking competence would not foster trust with peers, subordinates, or the customer. Would you trust an inexperienced brain surgeon to operate on a loved one? Certainly not; trust would be limited.
There is much to be said for in-house training programs that keep the communication open on the latest technologies, methods, systems and practices. Investing in education with the rank and file is investing in the organization's competence in the marketplace!
Investing in the organization's human resource systems for screening and hiring is also an investment in competence. Hiring practices have a huge impact on the organization. Continuing to populate the workforce with marginally competent people will never nurture a high-trust culture.
An effective hiring system is one that has the checks and balances to weed out those that do not have the skill level or will not fit into the culture. Managers, welders, carpenters, bookkeepers, estimators and schedulers should have to demonstrate their level of knowledge and expertise through checks of past performance, interviews, demonstration and other screening techniques. The system and process of hiring should be continuously invested in. Competence should be viewed as an asset of the organization and it should be maintained and upgraded continuously.
Investing in character
Character is equally important to building trust in organizations, although it is more difficult to quantify. An individual's character and the collective character of the organization are eventually revealed given time and trials in the workplace.
At one time or another, we have all experienced people and organizations with low-trust characteristics such as impatience, ingratitude, dishonesty, and self-centeredness and hate. These are the opposites of the characteristics that should be invested in, such as patience, honesty, integrity, perseverance, compassion, forgiveness, courage, empathy, gratitude, giving, love, fortitude and contribution. It is here that high trust is built.
Investing in an organization's character happens at the front door, in the investing in systems for hiring AND firing. Just as an individual should be screened for competence, character screening is possible and should be an integral part of human resources.
Beyond the front door, an organization's management and leadership should set the example of daily decision making based on these characteristics. The rank and file will follow if it is clear that these values are not to be compromised. The characteristics should be invested in at the core of the organization and over time they will become an obvious part of the culture.
An organization's workforce is its most valuable asset for its health and profitability. Social friction in an organization results from a culture of low trust amongst its members. High trust minimizes this friction and improves the overall efficiency and effectiveness of systems and processes.
Contractors can see marked improvements in work volume and profitability by investing in the competence and character of the company, which will lead to the building of a high-trust organization!
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