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How're We Doing?

One company's use of an annual report card from customers to measure competitive performance.

Granite Rock Co.'s annual report card from customers, and what's done with the grades

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Granite Rock Co., of Watsonville, Calif., is a 100-year-old family-owned company with operations in a dozen locations between San Francisco and Monterey. The company quarries granite and produces concrete, asphalt, sand, and gravel. It also buys and resells such materials as brick, cinder block, and drywall, as well as masonry tools. With 1990 sales of $90 million, it is one of the smaller construction-materials companies around. But it is an industry leader, attracting a steady stream of international visitors interested in learning more about what it does.

Granite Rock's fame is based largely on its reputation as the high-end producer in an industry that all but defines the term commodity business. Construction-materials companies habitually compete on price. Customers are conditioned to seize the low bid, assuming -- wrongly -- that if you've seen one load of stone, you've seen them all. But Granite Rock has always opted to turn out high-quality rock and back it up with high-quality customer service. On average, Granite Rock customers pay up to 6% more than they would be charged by the competition. "Our competitors tend to see price as the main wedge," says Wes Clark, division general manager of the company's three northern concrete plants. "We are not low price, but we are high value."

But charging a premium and touting itself as providing the best value in a commodity-based business puts an obvious burden on Granite Rock. It must work hard to prove to customers that its products and services are worth the extra cost -- which means making sure that employees strive to provide the kind of value customers are willing to pay for. How can the company accomplish this? First, it must understand clearly how its customers define quality and service. Second, it must regularly monitor customers' opinions about Granite Rock's performance relative to that of its competitors. Third, it must communicate all this information to its work force.

Granite Rock handles the first step of the process in the traditional manner. Every three or four years, each division conducts an extensive survey of its customers, probing their wants and needs as they relate to each of the company's product lines. Among other things, the survey asks customers to rank the most important factors in choosing a supplier. Clark's division conducted such a survey in 1987. Another is being done this spring.

It is in the second and third steps that Granite Rock breaks new ground. To compare its own performance with that of its competitors, every year the company conducts an opinion survey that amounts to an annual report card from the customers. All customers receive a short survey form on which they are asked to grade their top three suppliers in terms of product quality and customer service.

Granite Rock then combines the long-survey data on customer priorities with the short-survey data on competitive performance to produce graphs that are posted on bulletin boards around the company. The graphs show employees at each plant how they measure up in the eyes of their customers.

The key word here is measure. "We have a strong belief that if something is worth doing, it's probably worth measuring," says Dave Franceschi of Granite Rock's quality-planning and -management department. The annual report card, in fact, is just one of about 40 different ways Granite Rock tracks its various operations. Is all the paper shuffling and number plotting really worth it? Franceschi thinks so. "This is a way for us to sound an alarm if something's not right," he says.

"We believe that you don't stress a negative -- you chart it," adds Wes Clark. "Our people are competitive. They will look at that negative and want to do something about it."


Ready Mix Concrete
Opinion Survey

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Please write in the names of the three suppliers you use most often for concrete. Then evaluate each company's performance using this scale:

A = The Best

B = Above Average

C = Average, Same As Their Competition

D = Needs Improvement

F = Terrible

N = No Opinion

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Overall Product Quality:
Concrete Workability

Concrete Pumpability

Concrete Consistency

Concrete Slump Continuity

Concrete Strength

Concrete Finishability

Concrete Set Time

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Overall Customer Service:
Dependable, On Time Delivery

Salesperson Product Knowledge

Driver Courtesy and Skill

Dispatcher Eager to Help

Ordering Convenience

Responsive to Special Needs

Resolves Mistakes Quickly


Billing Accuracy

Credit Terms

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The Annual Report Card
Once a year, each of Granite Rock's 12 plants sends out forms like the one above to all its customers. The specific questions vary slightly from plant to plant, each of which is responsible for a different product, but the format is the same. Some divisions use color-coded survey forms to distinguish between types of contractors. (Blue forms go to landscapers. Masons receive orange forms.) All the completed forms are addressed to the divisional headquarters, where the results are compiled and forwarded to the rest of the division.

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The Grading System
The form asks the customer to grade its top three suppliers -- one of which is presumably Granite Rock -- on their performance in terms of product quality and customer service. Although there are six grades in the scale, the company bases its charts on the total number of A's and B's a supplier gets in a given category. "A C is neutral," says Wes Clark. "If they give you a C, they feel there's no difference between you and everybody else. If they give you a D or an F, they are just punishing you." But A's and B's amount to fairly uniform positive votes, he reasons. An A is for a job well done. A B is a similar response from a tougher grader.

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The Customer Service Graph
Each of Granite Rock's 12 operations generates about six of these graphs a year, one for each competitor. The idea is to show employees how the operation stacks up against the competitor on the matters of greatest importance to the customers. Triangles [will] indicate Granite Rock's performance rating -- that is, its total of A's and B's on the issue in question -- plotted against the degree of importance customers have assigned that particular issue. Circles [will] designate the performance of the competitor on the issues.

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F ******* ******* A+

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The Importance Axis
The graph's vertical axis is derived from the extensive customer survey conducted by the divisions. One section of the survey asks customers to rank the most important factors in choosing a supplier. Granite Rock concluded that those factors were, in descending order of importance: on-time delivery, product quality, scheduling (ability to deliver products on short notice), problem resolution, price, credit terms, and personnel's selling skills.

It came as little surprise that customers put on-time delivery at the top of the list. Granite Rock's typical customer is a general contractor engaged in coordinating complex construction projects involving many suppliers. A delay in one step of the project can throw the whole schedule off. What was a surprise -- and a pleasant one -- was the relative unimportance of price. It affirmed the company's strategy of emphasizing quality and customer service.

This April Wes Clark's division of Granite Rock is again sending out the long customer survey to probe for shifts in the market. "We do this every three or four years, or if there's a significant market change," says Clark. "We're in a recession now. Does that mean customers are suddenly going to be more price sensitive?"

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The Performance Axis
The results of the opinion survey -- the annual report card -- are plotted along the graph's horizontal axis. The grades on the axis are determined by adding up the number of A's and B's that the Granite Rock operation or its competitor has received from customers in any given category. An A+ indicates all A's and B's; an F means none. In addition, Granite Rock calculates the group norm, that is, the average number of A's and B's received by companies mentioned in a particular product survey. The goal of each Granite Rock operation is to outperform the group average (that is, garner more A's and B's) by at least 33%. Last year, for instance, customers rated Granite Rock's San Jose concrete operation 59% above the norm for on-time delivery, 69% better for quality, and 76% better for scheduling.

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The Quadrants
The intersecting axes create four quadrants, which provide a rough guide to the results. A marker in the upper-right quadrant, for example, indicates that the company (whether Granite Rock or the competitor) performs well in an area of importance to the customers. A marker in the upper-left quadrant means the company has a vulnerability: it has scored relatively poorly on one of the customers' priority issues. A Granite Rock vulnerability is clearly of greater concern than a "No One Cares" (poor performance on a relatively unimportant issue) or a "Nice to Have" (good performance on same).

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The Lessons of the Graph
Granite Rock places greatest emphasis on the distance between its markers and those of the competitor. A Granite Rock triangle in the upper-right corner of the graph is something to celebrate only if it is safely removed from the competitor's circle. "No matter how well we're doing," notes Wes Clark, "if they're close to us, it's a cause for concern. What it says is, Here's a service that customers really want, and they can't differentiate us from a competitor."

The graphs thus serve to remind everyone -- managers as well as employees -- of the areas in which the company can improve. Notes Granite Rock president Bruce W. Woolpert: "Our customer surveys reveal a 100% correlation between quality service and the employees' ability to understand our products and services. That tells us the only thing stopping us from providing excellence is lack of knowledge."

But the surveys and the graphs do more than show the company how it's doing and where it should focus its energies. They also point to issues that ought to be explored in customer focus groups, and they serve as tools for the sales staff as well. "We never use the surveys to go in and make a hard sell. We don't believe in downgrading the competition," says sales manager Russ Crider. "Rather, we utilize them to distill in our minds, and in our own words, the difference we think we can make to a contractor."

Last updated: May 1, 1991

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