July 1, 2010
Just say yes
Next to price and product quality, customer service is the key for contractors who purchase aggregates. Nearly two in three say that it is very important in their procurement decisions.
By Therese Dunphy, Editor-in-Chief
Three simple words underlie the success of Watsonville, Calif.-based Graniterock: Yes, we will. More than a slogan, ‘Yes, we will’ is the company’s commitment to do whatever it takes to serve the needs of its customers.
The philosophy was born in the ’80s after Bruce Woolpert, grandson of the company founder, A.R. Wilson, returned to the family business. “‘Yes, we will’ means that we listen to what a customer wants, we understand what they want, and we will figure out how to do it,” says Woolpert, who serves as Graniterock’s president and CEO. “It’s up to us. We don’t make it our customer’s problem.”
Building in quality
During a 10-year tenure as an executive with Hewlett Packard (HP), Woolpert learned firsthand the importance of understanding and fulfilling customer needs. In its effort to build defect-free computer products, HP told the manufacturers of its integrated circuits that if they produced units with more than three defects per million, the company would discontinue doing business with them. One of the U.S. manufacturers was unable to meet that quality standard and lost all of its business with HP, which opted to buy Japanese integrated circuits for its products. “HP was one of the first well-known American companies to do that,” Woolpert says. The decision, he adds, was made purely on the basis of product quality even though the previous supplier met the industry standards for quality in the United States.
Not long after that experience, Woolpert returned to the family business and began to scrutinize the use of industry standards within the construction market. “I think the term ‘industry standard’ undermines competitiveness,” he explains. “It basically creates an excuse to do something the same old way.” For example, the then-current industry standard for integrated circuits would have left HP with enough defective products to fill whole repair shops, thus the standard became unacceptable.
“When I got to the construction industry, the so-called industry standard was very heavily used,” Woolpert says. “There are industry standard hours of operation, industry standard this, industry standard that. I think the term is used even when there is no standard. It’s basically used — I think — to shut down conversations with customers. That’s dangerous. Every time we use the term industry standard, it basically says, ‘I’ve made up my mind, and we’re good enough.’ You stop caring why, from customers’ perepectives, you aren’t good enough.”
The theory was driven home when, shortly after taking over the reins at Graniterock, Woolpert attended a California Department of Transportation (Caltrans) event where reliance on an outdated industry standard caused long-term consequences for contractors throughout the state. At the time, Caltrans announced that it planned to repave Highway 101 at night. “In 1985, that was shocking to the industry,” Woolpert says. DOT officials said that voters were tired of having road construction and repair exacerbate traffic congestion. They explained that Caltrans could voluntarily begin to repave roads at night or the state legislature could pass a bill dictating that. “I remember sitting there and thinking that if the voter wants it that way, why would we want the legislature telling us how to run the business?” Woolpert says.
But while he was thinking about how to satisfy the public, other contractors in the audience spent the next several hours wrestling with how to stop Caltrans from wanting to change the industry standard of daytime road construction. Caltrans persevered and the roadway was paved at night, which is commonplace now. But, within a couple of years, that standard changed when the state Assembly passed a bill that outlawed daytime road work in California. “Sometimes, that’s absolutely necessary,” Woolpert says of the need for daytime paving. “(The legislation) eliminates the discretion that intelligent people working for Caltrans and our industry should be able to have.” If contractors had met the agency’s need voluntarily, such measures may have never been taken.
Although Graniterock was a solid business when Woolpert took over, good was not good enough to carry the family business into its second century. Its ‘Yes, we will’ philosophy elevated the importance of fulfilling customer needs and transformed the way the business operates. As a result, the company has not only expanded its product line, but also has greatly enhanced interaction with customers.
On the road-building side of the business, Woolpert says that one example of the philosophy is how it led to the development of rapid-set concrete. A customer told the company that, for one of its projects, it needed to be able to allow traffic in a work zone after only a few hours. A special mix design that sets up in three hours was developed to meet that need. While no longer new, this requirement is an example of how responding to a customer request led to a new product.
In the construction materials area, the range of product offerings has been expanded to meet the needs of numerous new market niches. “Ten years ago, we had maybe 10 products in our quarry,” Woolpert says. “Now, we have 200 because of different mix formulations, different sizes, and aggregate products support a broader range of needs.”
Throughout the private sector, the company has seen a big shift as more building owners ask for green buildings. “We have customers who call us and ask to meet for the purpose of brainstorming ideas,” Woolpert says. “They want a smart looking and smart acting building, and they don’t want to pay that much more for it. They don’t want to build a standard building; they want to do something good for the environment.” Graniterock’s ability to meet that goal has paid dividends. While all state buildings have to be built green, Woolpert says that the private sector green building market has grown from about 5 percent of northern California construction two years ago to 20 percent today.
To succeed in the growing green build market, adhering to industry standards would not work. “That basically denies the fact that we have any creative ways of being more green in 2010 than we did two years ago,” Woolpert says. “That’s just not real. We could see the world was changing, and to be more open to customers, we developed ‘Yes, we will” so that we could respond with a yes and then figure out how to do it… We’ve done some unbelievable stuff.”
Keeping customers satisfied
Customer care doesn’t end when a truck leaves the gates at Graniterock. It continues throughout the company’s relationship with each customer. To make sure its customers are satisfied after their purchase, the company instituted a short-pay guarantee. The back of each invoice includes a statement that says that if the customer is not happy with the product or service it received, it should draw a line through the unsatisfactory item on the invoice, subtract it from the total, and pay the difference.
“Pay us what we earned. Don’t pay us for what we didn’t earn,” Woolpert says. In fact, when the program was introduced, he wrote letters to customers explaining the program and encouraging them to use it. “We only ask that we have an opportunity to come out and talk to them so we can find out how we disappointed them. Our goal is to learn from a customer how we disappointed them so we’ll never do that again.”
In an industry where margins are notoriously thin, offering customers an ‘out’ on their invoice might seem counterintuitive. The long-term rewards, however, outweigh the short-term risks — as long as a company follows through on resolving its problems. During the first year of the program’s existence, 2 percent of Graniterock sales were held up by the short-pay guarantee. “Today, it is less than 1/10 of a percent because we’ve learned where our problems are,” Woolpert says. “Our whole design was to take the problems and eliminate them.”
The concept, he says, was based on Phil Crosby’s book, Quality is Free. In the book, Crosby asserts that 25 percent of all Americans are employed to fix other people’s mistakes. The book was required reading when Woolpert worked at HP, which employed 80,000. “I thought, if that’s true, 20,000 people at HP don’t contribute anything to revenue, don’t contribute anything to customer satisfaction in terms of new transactions,” he says. “All they’re doing is running around cleaning up behind the elephant, so to speak.”
After reading the book, Woolpert says he couldn’t immediately identify that 25 percent of the workforce at HP, or later, at Graniterock. But, he did begin to observe it in other businesses. For example, he attended a building construction seminar with a friend. A structural engineer talking at the conference said that he had a set of drawings he was ready to hand to a building owner in the audience. He said he could guarantee the drawings contained no structural or design defects and no errors that would cause a delay in construction. Woolpert says his friend called the engineer’s claim impossible, so Woolpert encouraged him to ask how the engineering firm accomplished such a feat. The engineer said the firm put its best and brightest to work in a design defect department to review drawings. “Aha,” says Woolpert. “I had just found their 25 percent.”
He encountered another example after asking a former classmate, who worked at Delta Airlines, why one of its red coat agents meets every flight. He learned that the airline’s connection system did not always work and the airline employees met each flight to assist customers who deplaned angry and worried about having missed a connection.
Finally, he talked to the president of Ritz Carlton when both companies won the prestigious Malcolm Baldrige National Quality Award (which recognizes U.S. organizations in the business for performance excellence) in 1992. Woolpert asked his peer about the company’s cost structure, noting that its charge per night was more than its competitors. Rather than having a higher cost than other high-end hotel chains, the company president told Woolpert that its cost was actually lower because of efficiencies in areas such as housekeeping. He explained that many chains have a staff of housekeeping supervisors who report to a housekeeping manager and asked if Woolpert had ever been in his room when such a manager knocked on the door to see if the room was clean. “He said, ‘That’s the housekeeping police. They’re coming by to see if the housekeepers are doing their work,’” Woolpert recalls. “I said, ‘Oh my gosh, that’s part of their 25 percent.’”
Output = How hard you work + How much you know
By developing and implementing the short-pay system, Graniterock was able to identify its 25 percent of inefficiencies and redirect its employees into more value-added roles. “You save a customer relationship by working on those problems, and you also stop investing resources in people who are basically there to fix other people’s mistakes,” Woolpert says. “Those jobs are thankless.”
Because the short-pay system was implemented during a period of growth for Graniterock, no one lost a job as a result of the system. “Basically, everyone who was in a position of solving customer problems moved over into working with new customers, identifying new customers, and opening new businesses,” Woolpert says.
Instead of identifying and resolving problems, he notes that many companies and managers rely on heroic measures to “save” customer relationships that are in jeopardy. As both an executive at HP and early in his tenure at Graniterock, Woolpert handled such crisis situations with customers. “I remember thinking at the time, ‘I guess that’s why there is a president of a company, so they can go out and turn these situations around,’” he says. Later on, he realized that it was simply waste; he was brought in to resolve problems that had not been addressed by the rest of the company.
“I’m sure that among your readers, you have managers who put on their Superman capes and go out to save a customer relationship,” he says. “That is waste. We have to do it, but what we ought to be doing is eliminating the problems, not running around like Superman trying to turn customer situations around.”
Maintaining strong communications
Although Graniterock implemented many of its customer-based initiatives when the California construction market was strong, Woolpert says that customer service is every bit as important in economically challenging times. “Focus on customer satisfaction and doing it right the first time is essential, because there is no fat,” he says.
“I’m sure among your readers, you have managers who put on their Superman capes and go out to save a customer relationship,” Woolpert says. “That is waste. We have to do it, but what we ought to be doing is eliminating the problems.”
“There was a period of time through the fall of last year where a lot of contractors in California were bidding below cost just to have something for their people to do,” Woolpert says. “In that kind of environment, you just can’t have mistakes. There is no safety margin in anybody’s numbers.”
While both the market and profit margins have improved somewhat, they continue to fall short of historic levels, he says. Being able to offer technical consultation and a wide product range gives savvy producers an edge in that environment, but the essential element is the ability to listen and respond to customer needs. “What I call ‘insulation from the customer truth’ is deadly, and it’s going on everywhere in America,” Woolpert says. “It’s going on in our industry, and it’s going on in every industry. That’s why businesses cycle. It’s why a successful business today is not a successful business five years from now. They become arrogant, think too much of themselves, and stop listening.”
Through tools such as ‘Yes, we will’ and a short-pay guarantee, Graniterock has created a system that makes such isolation from customers difficult, if not impossible. “If you put the short-pay policy on the back of an invoice, you’re going to get calls from customers,” Woolpert says. “It’s not written in invisible ink. It’s in real ink, in big type, and it goes out with every invoice.” AM