As Marian DeVoe looked at her financials at Chardon Rubber Co., she knew there was a problem.
“In the rubber industry, we’ve been in a very challenging environment, both cost-wise and with pressure from our customers over the last several years,” says DeVoe, president and chief operating officer of the company that designs and manufactures engineered rubber and plastic component systems. “We got so focused on just growing the top line that we lost track of where we were really getting value from that growth.”
DeVoe discovered that about 15 percent of the company’s customers were contributing 90 percent of its sales dollars.
“We had a huge amount of customers that were really not contributing, and, in fact, might be taking us down with the type of products we were trying to make,” DeVoe says.
In hopes of fixing the problem, DeVoe and about a dozen other Chardon Rubber employees attended a SOAR to Strategic Excellence event. SOAR — invented by Larry Goddard, founder and president of The Parkland Group — is designed to measure business health and help achieve improved profitability.
“Going through the SOAR process, we were able to understand that we were trying to be all things to all people rather than focusing on our company strengths,” DeVoe says. “We put in a new pricing strategy. We realized that our standard costing system did not accurately represent the true cost of servicing our customers. Once we could understand we were spreading ourselves too thinly and we were not appropriately allocating the costs, we made a determination to change our pricing structure.”
When the company first considered the change, DeVoe says some employees were apprehensive. But with clear communication to both the company’s employees and its customers, fears eased quickly.
“You coach them along, and you try to understand why they are apprehensive and what they feel they have to lose by making the change,” DeVoe says.
The company, which has 130 employees at its Chardon plant, held meetings at various levels but often relied on supervisors to have conversations with their employees.
“The supervisor at that level is the one the employees have the most confidence in and the person they deal with day in and day out,” DeVoe says.
The company also had to communicate the change to customers. DeVoe says the key to keeping customers happy is to be direct, but you also have be clear about the value you bring them with the service you provide.
“If you’re convinced you’re on the right course, stay the course,” DeVoe says. “We did open up dialogue with customers that may not have existed if we hadn’t taken this approach, and it enabled us to offer some alternative ways of doing things that helped.”
When looking at changes in the way you make sales, DeVoe says it becomes critical to know your customer.
“You have to know who your ideal customer is and focus on them,” DeVoe says. “A lot of analysis, a lot of evaluating costs and the potential for growth with that customer. We found that customers that require the most technical support also offered, in many cases, the most growth potential.”
By being clear about the changes, DeVoe says Chardon Rubber lost very few customers as it made the transition.
“We attempted to define for our customers what we thought the value was that we were bringing to them,” DeVoe says.
HOW TO REACH: Chardon Rubber Co., (440) 285-2161 or www.chardonrubber.com
Go beneath the surface
While financial statements can give an indication of a business’s health at a given moment, they don’t tell you much about the future, says Larry Goddard.
“Are you making money or not making money?” Goddard says. “That’s not a very good indicator of the health of a business over the long term. We wanted to develop a process that could dig beneath the surface and identify the strengths and weaknesses of a business but be able to do it very quickly.”
Goddard, founder and president of The Parkland Group in Cleveland, invented SOAR to Strategic Excellence to do just that. The program is designed to measure business health and help a company determine in one day the steps it needs to take to achieve significant improvement in profitability.
At a SOAR event, businesspeople answer more than 300 questions about their business. The answers are put into a database, analyzed and turned into recommendations for improvement.
“People get a tremendous amount of introspective knowledge in eight hours, and they get it in a color-coded format that essentially tells them where to focus on,” he says.
When Chardon Rubber Co. President and COO Marian DeVoe attended a session, she learned that all sales are not good sales, Goddard says.
“Before you go and pursue growth, you want to make sure that your existing base of business is appropriate for you,” Goddard says. “They focused on better quality of sales before they focused on growth of sales. Once you focus on better quality of sales, you know which customers to pursue in the future.”
HOW TO REACH: The Parkland Group, (216) 621-1985 or www.parkland.com