GPI 139 – Get outside bids on work you do to see just how ‘fat’ you are.

Get outside bids for the work your company does to keep your estimating people in line and up to market standards.  Regularly obtain outside bids on parts you plan to make yourself in order to apply market pressure to your internal estimators.  Why are you more expensive?

Send your parts out to compare costs and quality.  You may even need to send parts out occasionally to demonstrate the need to keep costs in line to get business.  This may take work away from your own employees, but you have to train your people about what the market is like in order to compete aggressively.

Tell employees when other competitors are cheaper; get them involved.  You have no choice but to tell your organization that it is behind on cost and possibly quality.  If you disclose this, you die a slow death.  Comparing your cost structure to the guy down the street helps you sit up and realize you have problems to address.  If you do not take action, that competitor will likely take your current business away.

Sometimes your own employees are your worst enemies.  Your own employees sabotage your competitiveness with estimates that contain too much fat (too much leeway).  This inattention to detail will cause your company to lose market share, cut staff, try desperately to reduce costs and finally be forced to close the doors.  When you no longer feel pressure from the marketplace, you tend to grow fat, lazy and inattentive to a changing customer base.  Your firm loses touch.  The market changes and one day you are no longer profitable.

Your employees need to feel the pressure of the market in order to be innovative.  They need to constantly concern themselves with trimming costs, tightening bids and responding to a changing market in order to grow.  Incentive programs help to accomplish this when you give a minimum gross profit goal to sales personnel and tie the bonuses of production personnel to the absolute bottom line to make them think first before spending any money that may impact their paycheck.