Milliken makes money.

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Precis from Integrating Financial & Non-Financial Measures of Performance for Sustainable, Profitable Growth, Clive Jeanes, Milliken.

Companies which win the Malcolm Baldrige Award and the European Quality award deserve respect. The internationally known manufacturing company, Milliken, achieved these accolades in 1989 and 1993 respectively and, rather than rest on its laurels, continues to drive quality standards ever higher. The reason? High quality leads to higher profits.

The journey started in 1981 with Philip Crosby's ideas and has developed through the experiences and thoughts of other gurus to the present understanding of quality. There is no snappy one-liner that fits nicely on a poster. The company believes that unless everything is done with the purpose of satisfying the customers it is not deploying total quality.

Jack Welch of General Electric in the USA said that there are only three things which need to be measured in any business:

1. employee satisfaction;
2. customer satisfaction;
3. cash flow.

But how you measure is as important as what you measure. It is relatively simple for someone to achieve 100 per cent on-time delivery by setting the safety margin too wide. A better measure would be 100 per cent on-time delivery and a 5 per cent reduction in lead times each year. Then there is no hiding. The only way to achieve the goal is to sort out the problems.

Milliken took Tom Peters' advice in 1985 and started to ask its customers if it was doing the right things and how well it was doing. The replies were suprising and could be misunderstood if it was just a snapshot of one year's performance. However, Milliken now has nine years of data and is able to discern six clear trends:

1. The things that matter to the customer are not always what the company expected.
2. Customers are becoming more demanding over the years.
3. The competition is not standing still and that means extra effort is needed to maintain the performance gap.
4. It does not matter how good you are; it is how good your customer thinks you are that matters.
5. If you improve something be sure you communicate this to your customer, otherwise he will think you are still doing things as you used to.
6. Price is never the most important factor for customers.

Figure i shows the difference in rating between Milliken and its competitors, positive differences being favourable. The one negative is price, i.e. Milliken is more expensive, but the overall rating is still favourable.

In 1985 the second most important problem, slightly below that of product quality, was ontime delivery, and this had never been measured. The first result of analysing deliveries in the industrial business showed the performance was 77 per cent; one in four shipments going out late. Alarmed at this figure, it was rapidly improved to the low 90s by the end of 1986 and now figures below 99 per cent are seen as failure. One plant in France has not had a late shipment in six years!

However, customer perception was not as high as could be expected. Talking to the customer found the real problem. Milliken's measurement compared its promised shipment date to the actual shipment date. However, a customer is only interested in when the order arrives at the loading dock. When the customer is just down the road this is no problem. When it is on the other side of the world there are other delays which affect the customer's perception of the manufacturer.

The second problem was based on exactly when the customer wanted the product. When placing his/her order, the promised delivery date may have been subject to a degree of negotiation and although he/she accepted a later date he/she really wanted the product earlier. Thus a "perfect order" is one which is delivered exactly when the customer wants it. Milliken's performance on this measure was 89 per cent in 1994. Not perfect by any means, but the understanding of customer need is now better, so further improvements are bound to follow.

There are a number of methods Milliken uses to ascertain employee satisfaction. First, it conducts annual conduct surveys and constructs a morale index. Definite improvements have been achieved but there is still some way to go.

Other measurements include such things as turnover and absenteeism rates and the degree of involvement each employee has with the company. Its version of the suggestion scheme, "opportunities for improvement" (or OFI) covers quality, cost, safety, housekeeping, the environment, and customer service. Everything, in fact, except terms and conditions of employment. Over the last four years it has averaged 25 OFIs per employee and achieved a 99 per cent participation in Europe. Involvement in voluntary team activities is also running at 60 per cent, giving employees opportunities for involvement and participation in company improvement.

Milliken believes that financial results will follow higher levels of customer and employee satisfaction, and has the evidence to prove correlation between customer survey results and profitability. So work on your customers and your employees and the rest will follow.

Handling late deliveries                         0.9
Product quality                                  0.2
Emergency responsiveness                         0.5
Handling enquiries                               0.5
Listening                                        0
Technical support                                0.5
On Time shipment                                 0.6
Paperwork                                        0.2
Value for money                                  0.2
Attitude                                         0.3
New product development                          0
Sales representation                             0.7
Cost reduction                                   0.3
Lead time                                        0.4
Price                                           -0.1
Sample delivery                                  0.4
Claims settlement                                0.3
Order minimums                                   0.5
Environment needs                                0.2
Environment commitment                           0.8
Credit department                                0.2
EDI                                              0.8
Overall                                          0.7