Case Study: The Blake Company/Mutschler Kitchens



Sample Case Study: The Blake Company/Mutschler Kitchens

Background:

The Blake Company is a residential building company outside of Detroit, Michigan. Originally the organization focused on purchasing old estates in the upscale suburb of Grosse Pointe, subdividing the property into smaller lots, and building homes on the lots. As the supply of large estates dwindled, the owner of the company branched into major renovations of existing homes. Within this context he frequently worked with a well-established kitchen company in the area, Mutschler Kitchens.

After several years, the owner of The Blake Company purchased Mutschler Kitchens in an attempt to gain economies of scale in his business. However, shortly after purchasing the business, the new owner realized that there were some serious performance issues within the newly acquired organization. This was the impetus for the owner to begin a systematic examination of the organization. A review of the financial data indicated that the margins were lower than they needed to be for the organization to make a profit. Jobs were not being closed out due to minor details that were not getting finished in a timely manner. There were rumors in the community that customer satisfaction levels were dropping

Analysis

Over the course of the next year, the owner embarked on a performance improvement journey. He began by analyzing every aspect of the Mutschler Kitchens organization. He interviewed the employees, the suppliers, the subcontractors, and the customers.. He reviewed all of the company’s processes, policies, and forms. He visited successful competitors to see how they did business. He analyzed the work flow and the procedures that the kitchen designers followed while they attempted to make a sale. He visited construction sites to watch the process in action.

Gap Analysis: Based on this review, the owner developed three goals: (1) to increase customer satisfaction, (2) to increase the profit margins for each job, and (3) to decrease the uncertainty and number of crises at the construction sites.

Cause Analysis: To accomplish these goals, the owner took a close look at the causes of the problems that existed. He determined that the biggest problem for all of the stakeholders was that the kitchen remodeling jobs were being sold with too many undefined issues on the table (knowledge and data). The result was that customers did not clearly understand what they were buying, kitchen designers did not understand what they were selling, and subcontractors did not clearly understand what they were building. This caused high levels of on-the-job stress, crises, and frequent job stoppages due to unanticipated shortages and required decisions. Budgets were difficult to create and adhere to, resulting in lower than desired profit margins.

Intervention Selection: Work Design

The owner developed the following design and sales process to address this issue. The kitchen designer holds a series of selection meetings with the customer to discern their needs. The designer develops a preliminary plan that includes a ballpark cost estimate. The customer and the designer collaborate to modify the plan until everyone is satisfied with it. When the customer is happy with the plan, he/she signs a design agreement and makes a deposit. This allows the organization to get a commitment from the customer before the organization spends a prohibitive amount of time and money doing detailed specifications. After the design agreement is signed, the designer works with the customer to plan every detail of the new kitchen. Specifications and working drawings are created. Next, the potential subcontractors walk through the job with the detailed specifications. This ensures that the owner can compare bids between competing subcontractors. If the customer wants to make a change to the plans, a change order is created and the plans and specifications are updated. This ensures that the specifications match the construction drawings, which reduces crises at the job site.

Alignment with CPT Standards

Critical Business Issue

What is: Remodeling jobs were being sold with too many undefined issues so that customers did not clearly understand what they were getting, resulting in low levels of customer satisfaction. Designers and subcontractors did not have detailed plans to work from, resulting in high levels of on-the-job stress, crises, and frequent job stoppages due to unanticipated decision points. Budgets were difficult to create and adhere to, resulting in lower than desired profit margins.

What should be: All elements of the job should be defined at the time of the sale, so that the job can be produced on budget with high customer satisfaction rates and low levels of on-the-job crises.

Focus on Outcomes or Results:

The owner had three desired outcomes: (1) an increase in customer satisfaction, (2) an increase in profit margins for each job, and (3) a decrease in uncertainty and crisis at the construction sites.

Focus on Systems View:

Inputs: The inputs for any construction project include accurate, detailed construction plans, drawings and specifications. In order to create these documents, customers need to make numerous selection decisions, including their choices of cabinets, appliances, tile, light fixtures, floor coverings, as well as the placement of plugs, racks, etc. Based on these selections, the kitchen designers can give customers accurate cost estimates.

Process: Customers participate in a series of design meetings with the kitchen designer. Once a general design plan is agreed upon, but before detailed construction drawings are developed, customers sign a design agreement and make a non-refundable deposit. After the design agreement has been signed, detailed specifications are developed. Potential subcontractors are invited to perform a “walk-through” of the job using the detailed specifications so that they can develop accurate bids.

Output: The output from the process described above is a complete set of job specifications that matches the construction drawings. This reduces uncertainty for all of the stakeholders. For example, the buyer knows what type of faucet they are getting and where the outlets will be placed in the kitchen island. The electricians know where to run the wiring and where to place the light fixtures.

Constraints: This process reduces uncertainty at the point of construction, but requires tremendous effort before the sale is complete. It is often difficult to get customers to make decisions before construction has begun. Construction subcontractors are a notoriously independent group of people, so it is challenging to get them to complete their job bids based on the detailed specifications provided to them. The kitchen designers at the organization had approximately twenty-five years of experience without a structured environment, so they were initially resistant to the development of a design process.

Focus on Value:

By implementing this design process, the business owner is trying to bring value to the customer in several ways. First, the customer will receive a realistic estimate of the cost of the project before they commit to it, so that they can determine whether or not they can afford to do the renovation. Second, the detailed specifications will reduce uncertainty in the construction process and eliminate the need for clients to make decisions on the job site. Third, the specifications will allow the construction team to order cabinets, appliances and fixtures in a timely manner, which eliminates construction delays. Fourth, the project manager can schedule subcontractors efficiently, which will streamline the construction process and get the job done quickly. This is particularly important if the buyer continues to live in the house during the renovation.

Focus on Establishing Partnerships:

The process of completing the drawings and specifications helps the kitchen designer discern the clients’ needs and wants. As the client is increasingly able to articulate what they are looking for, the kitchen designer is able to focus on a design that is aesthetically pleasing, functional, and affordable.

The owner must also establish partnerships with a group of subcontractors. This relationship has an inherently adversarial element to it because the subcontractor wants to charge as much as possible, while the business owner wants to pay as little as possible.

Be Systematic in Assessment of Need, Opportunity, or Challenge:

The owner approached the performance issue from every angle within the organization. He considered the perspective of each stakeholder: the buyer, the designer, the project manager, the suppliers, the construction team, as well as his own interest.

By talking with people in the community the owner got an understanding of the frustrations that most people have when they deal with a home renovation. It is very disruptive to have a house under construction and to have normal routines disrupted. It became clear that it is important to get a job done quickly and neatly, and to keep the owner informed of the progress on a daily basis.

The owner had a gut feeling that many potential customers came to Mutschler Kitchens to get ideas about a new kitchen design, and then had someone else do the construction for them. The owner saw an opportunity to get more construction jobs by asking customers to sign a design agreement and pay a deposit after they received preliminary drawings. This would have the added benefit of saving him money in terms of the hours that the kitchen designers spent drawing detailed plans and giving them to customers who then failed to return for the construction process.

Under its previous ownership, Mutschler Kitchens had not followed costs on a job by job basis. The new owner wanted to know how much each job cost so that he could develop a sense of where costs could be reduced and profits maximized.

Be Systematic in the Analysis of Work, Worker, Workplace, and Worldview to Identify the Causes or Factors That Limit Performance

The owner asked each stakeholder to describe their roles and the challenges that they face as part of their job. The business owner concluded that the organization needed a comprehensive set of procedures to guide the design and build process. He met with staff members to discuss ideas. Initially, employees were reluctant to give opinions, but the owner found that as he included people in the planning process, they began to contribute ideas in a meaningful way.

The owner learned from the kitchen designers that they were reluctant to ask potential customers to make selection decisions early in the process.

The owner could also see that potential subcontractors were reluctant to give detailed bids for jobs based on vague construction drawings and specifications.

Be Systematic in the Design of the Solution:

The business owner understood that in order to be successful he needed buy-in from the stakeholders within the organization. He engaged employees in the design of the processes that would guide future jobs.

Initially, some of the kitchen designers were understandably resistant to the idea of designing a structured process for sales. It is easier to sell a job if the conversation deals in generalities. It is harder if you sell a job if you ask the customer to make detailed decisions early in the process.

The owner also read current trade magazines, talked to other business owners, and shopped at competing kitchen companies. Since the industry publications did not address the design and development of a systematic process, the owner had to rely on his own organizational resources to design the solution.

The owner decided to transfer the Mutschler Kitchens division to the same construction accounting program that he used in the new construction portion of his business. This allowed him to begin to track costs for each job in great detail.

Be Systematic in the Development of the Solution:

The owner worked collaboratively with the employees to develop a detailed process manual. In addition, he created a one page performance support tool to illustrate the sequential steps that employees should follow through the sales process.

Over the course of the next year, the manual was edited four or five times as processes were refined.

In addition, the owner developed a one-page explanation of the new process that was given to potential customers early in the design process.

Be Systematic in the Implementation of the Solution:

The implementation of the new processes was challenging for all of the stakeholders. The kitchen designers had been working without written processes for many years, and occasionally needed to be reminded to follow the procedures that had been established.

Some of the customers were resistant to making decisions early in the process. The owner worked with the designers to educate the customers about the benefits of the new process. By pointing out to the customers that they would get a better result at a lower cost and in less time, the owner was able to get buy-in from the vast majority of customers.

Be Systematic in the Evaluation of the Process and the Results:

The owner developed a customer satisfaction survey in order to get systematic feedback on the new processes. The results have been overwhelmingly positive, with all of the customers in the past five years indicating that they were extremely satisfied with their experience.

The cost accounting program provided the owner with detailed information about profit margins for each job. They were able to accurately predict gross profit within 2 percent.

With the implementation of the design agreement process, the owner saw an immediate decrease in his costs to develop kitchen designs for customers who were not really serious about following through with the process.

The owner immediately began to see a decrease in change orders, which resulted in less administrative costs and more certainty for the client, since they did not inadvertently add costs to the project which would result in a decrease in their level of satisfaction when they received the bill.

Lessons Learned From the Case:

1.   Involving all internal and external stakeholders provides buy-in, collaboration, and partnership as well as establishing an atmosphere of trust and mutual cooperation.

2.   Initially performance improvement can be a long, tedious, trial and error experience.  However, with systematic processes in place, targeted accountability mechanisms identified, and a genuine desire to do the right thing in an ethical manner, an organization will reap the benefits associated with success.

3.   Work with vendors to encourage pride in their deliverables.  Work with clients by providing value in quality and service.

4.   Be patient in implementing planned and systematic change and monitor the process.

Anne M. Blake, PhD is Director of Strategic Planning for The Blake Company, Grosse Pointe Farms, Michigan. She is a graduate of Wayne State University’s Instructional Technology Program with an emphasis in human performance improvement.  She and The Blake Company can be reached at (313) 881-6100 or ablake@.

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