(This editorial first published October 2005)
The threat of rock-bottom labor costs and rising quality in products from China have a lot of companies worried. Take this recent email for example: We found your information from the Internet. We are one of the main enterprise (sic) specializing in electrical heating resistance alloy wires and stainless steel wires in China. Our products are welcome inland and world markets. (sic) Our main products are 0Cr21Al6Nb (11 more materials follow) wires and ribbons with high quality and low price. Best regards, David, Changshu Xinguang Alloy Material Co. Ltd.
David’s email carries the message that low-cost producers are savvy about using the Internet to do what good capitalists should do: grow their businesses by looking for new customers.
Of course, David may want your customers. One way to counter his offer is to keep your customers happy. For instance, how would one calling your support line be treated? It’s easy to find out. Call your offices next time you’re out of town with a slightly non-conventional but reasonable request. If you are bounced to more than three different people for an answer, your company loses a gold star. Bouncing a caller sends the message, “We don’t know what to do with you. Maybe you should find a company that does.”
Another overlooked business tactic: reward those who perform well. This sounds obvious, but many companies blow it. A colleague related this experience with a previous employer. After a year of building up his territory, a genius manager “rewarded” him with a pay cut. How was that supposed to motivate him? Actually it did -- to get a job with a competitor. Now he’s doing what he does naturally and well, much to the chagrin of his former boss.
Another way to counter tough competition and grow the business comes from a manufacturer of pneumatic components. Pneumadyne president William Nugent was unsatisfied with quality and delivery times from his outsourced manufacturing. Convinced he could do better, he bought the company's first NC tool, a two-axis Swiss-style turning machine. He and another guy took training and mastered its operations. Then he bought a multiaxis machine and mastered it as well. Nugent’s rule is to buy only the most cutting edge technology that can run with the lights out, 24/7. “China may have low labor costs, but we have none on nights and weekends,” he says.
“We also have a culture that rewards performance,” he adds. For instance, Pneumadyne operations manager Scott Neinast was trying to set up a particularly difficult part. It was an oddball little design with a chamfered base and two different-sized tubes 90° apart. A machine-tool rep claimed it couldn’t be done. Nugent says that Neinast was unsatisfied with the “expert’s” response, tried a few things, and eventually figured a way to make the part. Nugent encourages that kind of moxie company wide and plans to reward it. “If we have profits over a certain mark, we’ll award bonuses,” he says.
For its efforts, the company has nearly filled the space it just moved into and has already taken an option on the rest of the building. If Nugent’s attitude ever catches on, the Chinese could be worried.