Switch the Focus to Performance

Copyright 2021

Employee performance objectives are sometimes based on output. But that setup can reward the wrong behaviors. It encourages quantity over quality, which fosters a mindset of letting the little defects slide just to get the work done faster. That, in turn, can result in increasing customer rejections rates that can hurt your company's reputation and send customers elsewhere.

Eye on Quality

A Stellar Success

In five years, one manufacturer slashed its annual customer rejection rates from a range of 250-500 parts per million to just three. The company attributes a big part of this stellar improvement to an incentive program that shifted from rewarding quantity to rewarding quality and customer satisfaction.

After the plant adopted Six Sigma data-driven process controls, employees found that setup was often the source of defects. They analyzed the process and arrived at a solution. Now, setup on one line is double-checked by an employee from another line who signs off on it.

For many manufacturers, the rejection rate is a far better measure for evaluating performance. Bringing it down can motivate everyone to concentrate on customer satisfaction.

Here are five basic steps for reducing rejection rates and driving up sales:

1. Measure rejection. To make improvements, you must know what you are dealing with. So track your company's rejection rates carefully. Which customers are rejecting? What are they rejecting? Why and how often?

2. Set goals. Start with a long-range goal; say a 25% reduction in one year. The goal should be challenging, yet attainable. Then, break it down into monthly and weekly increments. Over time, it may become apparent that goals need to be adjusted. Of course, productivity remains important, but emphasize that output is not more important than quality.

3. Reward success. Vary and increase goals to sustain motivation. For example, meeting a weekly goal might be rewarded with pizza, while meeting a six month goal might result in a day off. Reaching a one-year goal is significant and you might reward employees with cash bonuses.

4. Provide resources. Perhaps it's time to do training, upgrade equipment or add another quality control person. Consider setting up or updating a quality management program, such as Total Quality Management (TQM) or Six Sigma.

5. Chart progress. Post a colorful bar graph to show weekly goals and results, as well as progress toward the one-year target.

Think Outside the Box

Making a commitment to reducing customer rejection rates requires a new way of thinking about work and the role of employees. Once teams buy in, they examine their own behavior and production processes to put into effect methods that improve quality, maintain output and lower rejection rates. Contact your CPA to help implement a quality-driven reward system.