Graniterock Comes Out Ahead with Short Pay
Imagine that every invoice you issued carried the following message:
If you are not satisfied with any item on this bill for any reason,don't pay us for it. Simply scratch out the item, write a brief noteabout the problem, and return a copy of this invoice along with yourcheck for the balance.
Many business owners would envision a landslide into bankruptcy. Butnot Graniterock, a 100-year-old company in Watsonville, Calif., thatsells crushed concrete, sand, asphalt, and gravel. Twelve years ago,brothers and copresidents Bruce and Stephen Woolpert adopted just sucha policy in order to achieve an ambitious goal: They wanted their firmto match Nordstrom, the upscale department store, in total customer satisfaction.
Jim Collins, coauthor of the best-selling book Built to Last, writes inthe July/August Harvard Business Review that Graniterock's short-paypolicy can be a "catalytic mechanism" for realizing a company's largergoals. How? "It serves as a warning system, providing hard-to-ignorefeedback about the quality of service and products. It impels managersto relentlessly track down the root causes of problems in order toprevent repeated short payments."
The policy seems to work. With only 610 employees, the company hasconsistently gained market share in a business dominated by behemoths,all while charging a 6% price premium. Graniterock won theprestigious Malcolm Baldrige National Quality Award in 1992.
Copyright 1999 Family Business Publishing Co. All rights reserved.