Everyone in business performs some type of service for their clients. Some are good at it and some really stink. Some make or sell products that customers stand in line to buy; while others have warehouses or showrooms full of products that no one really wants to buy. This lesson was inspired by last week's announcement that Ford Motor Company posted a record 12.7 billion dollar loss in 2006. It's almost inconceivable that any company can lose that much money in one single year and still keep opening their doors for business. They have a new CEO and a new strategy for 2007 and are hoping for the best. My question is: is it too late for this ailing company to make a comeback? Sure they are cutting costs rather drastically. They are closing plants and cutting jobs by buying workers out of their benefits in the tens of thousands as I write this lesson. However a very simple analogy of their problem can be explained by the following observation: they're like an over the hill boxer who has been overweight and sluggish for a long time; and now they are eating a magic diet to get slim, healthy and back in shape so that they can jump back into the ring and fight again.
While this 12.7 billion dollar catastrophe is playing out at Ford, the reigning champ named Toyota made 13 billion dollars during the same period. While Ford's gross margin was 4.48%; Toyota's was 19.8%. So Ford can't cry foul play and blame Toyota for dumping cheap cars in the market. Ford has 300,000 employees; while Toyota has 286,000. Not much of a difference there. The stock market values Ford at a $15 billion market cap; while they value Toyota at $212 billion. That's huge! However the biggest difference between the two companies is that the out of shape Ford didn't listen to their customers and dealers and distributors enough over the years. While Toyota listened; was innovative; worked at efficiency; and gave their customers exactly what they wanted to buy.
Many years ago I read some words of wisdom in a business publication, entitled "A Sound Business Philosophy." It stated as follows:
"In order to be successful, we must sell our goods at a profit and still satisfy the customer."
"If we satisfy the customer, but fail to get the profit, we will soon be out of business."
"If we get the profit, but fail to satisfy the customer, we will soon be out of customers."
"The secret of doing both lies in the word SERVICE. Service means doing something so valuable for the customer, that he or she is glad to pay a price that allows us to make a profit."
This is a powerful philosophy to use when managing a business. It's the exact philosophy being used by Toyota and has been ignored for years by Ford. I can speak from first hand knowledge, since I was a distributor of Ford/Motorcraft aftermarket auto parts for many years. I also distributed General Motors/AC Delco products at the same time. Thus it is no surprise for me to see both of these companies gasping for air – since they now have formidable competitors like Toyota to fight it out with in the marketplace.
For decades Motorcraft and AC-Delco were KING and had their way as kings normally do. Their management believed they walked on water and could dictate their wishes to their distributors. They demanded which products they wanted you to sell and to whom they thought you should sell to. They dished out sales quotas to distributors that often bordered on the ridiculous and would cut you off in a minute if you stood up and complained. Both Ford and GM wasted money like the federal government, because they made enough to waste for decades. They were inefficient at most levels of operation and their order fill rate was horrible most of the time. Their field reps were like puppets who could not make any decisions without five layers of management approving a request and they were the epitome of a disaster waiting to happen like it did in 2006.
If my analysis sounds harsh, it's only because it's an opinion based on years of personal experiences. I feel for all the workers who have lost good paying jobs and never prepared themselves for this inevitable blood letting. However it proves that capitalism really works. And near monopolies are bad for everyone but the upper management who lives high and contributes little compared to their compensation packages.
Service is not a favor that you perform occasionally to impress someone. It is instead a strong value that each and every employee in an organization must believe in every hour of the business day. It must be consistent over a long period of time. The company must be efficient and get BETTER every year. They must strive to exceed the expectations of those willing to pay for their products and services. Service is a total commitment to Excellence. I wish Ford the best in 2007 - for their loyal employee's sake!