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Cost Competitiveness in Exceptional Companies Published: Sunday, June 23, 2002 By: Dr. Manuel Ángel Morales

When an organization does a good job of building human and production values it is naturally rewarded with financial value. Then it is an imperative that all of its members understand this three-step value path. If production costs go down, sales go up, customers return time and again, margins improve, market share grows, and returns on assets and equity will improve. In the long run the company and its dream teams will prosper more consistently than the rest of the industry and the competition.

The reason for the long-term prosperity of an exceptional company is that they have a value foundation and extraordinary cost competitiveness consciousness that carries it through the rough times that fall on every organization sooner or later, making it to prevail in a protagonist manner.

The value that an exceptional company is capable of creating can be measured through a combination of fine indices of change: (1) costs, (2) time, (3) quantity, (4) error rate, (5) and human behavior. These can be applied to the three value types, which can be condensed into service, quality, and productivity.

Typically, the cost dimension is a productivity measure: cost per unit of production or service. It can also be used in quality: cost of non conformances involving re-work or customer complaints. The time factor is used by the quality people: cycle time of any process. Volume is a productivity measure: ratio of inputs to outputs. Error rate is obviously a reflection of the quality of human behavior and is always a clear and evident measure of service, as it is the case of everything employees do to delight the internal and external customer, which constitute a behavior set that translates itself in customer satisfaction or employee and organizational moral.

Once these value improvements have been identified they must pass though the organization’s filter so they can acquire the voice of the customer. Here is where a kind of consideration or a pre-audit venture should take place for assuring a qualitative difference in this undertaking. It is the customers who rule on value. If they say they are satisfied, the company and its employees are in the route of achieving good margins and a competitive advantage. When employees contribute to this cost competitiveness agenda in the long run they will be rewarded with the financial performance of the company, condition that creates a better scenario for the distribution of wealth.

Copyright 2002 QBS, Inc.
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