Sunday, September 05, 2010

Sun Tzu - War On Business Part 12 (Diploma)

We have come to Episode 12 of the Sun Tzu series, which brings us to Suzhou, China. James visits a company called Diploma which provides cleaning and logistics services (yes, it is a rather strange name to be associated with cleaning, as cleaning is generally a menial, blue-collar task which is not associated with educated graduates, but oh well). Diploma provides essential services to various industries and has a rather complex business model as it provides a myriad of services, of which cleaning and meal catering are but two of them.

Diploma is a 12-year old company which services about 100 clients, most of which are Fortune 500 companies which have set up operations in China. Diploma can be referred to as a “logistics outsourcing company”, and its main focus these days is on food as it has a major event coming up – the Shanghai Expo. This is a new market and represents a good opportunity for Diploma to showcase its talent; however to handle such a mega-event requires expertise and skilled personnel, both of which are somewhat lacking at the company.

The company is experience fast business growth but unfortunately there is no proper structured staff training and so there is no reflection on their growth path as so far no mistakes have been made and documented. They had a large plant with two sizeable buildings, hence there would be ample room for expansion. There is also a lot of empty office space which was originally reserved for expansion purposes. The central kitchen was built with funds gathered from 2007 and it generated 50% of Diploma’s total revenue in just the last 2 years.

Regarding their biggest contract at Shanghai Expo, the company is running a 300-seater café that can take 6,000 diners daily. They have developed a speedy and efficient system (though still untested) which will be used to support the logistics of the massive café and so far everything looks to run like clockwork. However, a point was made by James that the lack of staff training could be Diploma’s downfall, as the service staff were not good with food arrangement when James put them to the test. At Diploma’s training school, staff were rote-learning on how best to serve customers; but in a service industry where good and personalized service is paramount, this method of instruction may not be suitable at all. Even the HR manager mentioned that it was a daunting task involved in training all the staff properly.

James once again invited his resident China expert, Mr. Cha Li, to look at Diploma’s business and comment on it. Cha Li observed the renovation area at the Shanghai Expo and commented that the café will be opened 14 hours a day and serve about 6,000 diners at any one time; hence service quality needs to be very high or else it would leave a bad taste (no pun intended) in customers’ mouths.

Yvonne is also mulling over the problem of service quality and how to improve it, as right now Diploma is staffed with a lot of unskilled labour. But if Diploma’s aim was to raise their quality and service levels, then this had to change as they envisioned that their future customer base would focus more on quality and taste of food. Therefore, efforts needed to go towards ensuring their catered food was up to standards and their service delivery on par with international standards.

The problem was that cleaning, laundry and cooking were viewed as being more inferior compared to say jobs in the Information Technology (IT) and Logistics line; hence it was difficult to recruit competent staff as there was a disincentive to join Diploma. This also meant that additional “perks” needed to be incorporated into the remuneration structure to entice potential candidates to apply for jobs within Diploma and raise the overall skill level of the labour force there. Recruiting and training costs would also have to go up substantially to ensure an appropriate level of service was delivered which could stand the Company is good stead amongst customers. How was Diploma to add value-added services? Cha Li gave some suggestions such as adding a television set within the café as well as newspaper racks.

The key is to not just focus on customers as their own employees also form the backbone of the company (and contribute to its eventual success, much the same as a previous episode on Meru Cabs). Better working conditions and being a “better brand” in terms of visibility would indirectly attract people to join, constituting a “pull” factor in human resource recruitment. All these factors would serve to boost employee morale, allowing for word-of-mouth transmission of the Company’s merits and providing a positive feedback loop to attracting even more capable and talented people.

Over to the training side, a suggestion would be to set up a practice café to provide practical hands-on training for staff. Another suggestion was to work with high schools and colleges to develop first-time managers, in order to give staff more platform and more development in their careers (i.e. career planning). Yvonne then hit upon the brilliant idea of organizing team building events for the staff to enable them to bond and establish a sense of identity within Diploma, and to make the overall environment more cohesive and conducive for work. Eventually, James was confident that with the revamped training style and schedule and the team-building events, Diploma would be able to fulfil its role at the Shanghai Expo and get the exposure it needed.

Lessons to be learnt from this episode are:-

1) A company should always have a structured growth path, and everything should be clearly documented – This is an important aspect for any company as it needs to know what are its critical success factors. If there is no documentation, then one will not know what went wrong and how to rectify it and avoid the same mistake(s) in future.

2) Staff Training is important – As witnessed in the previous episode on Skoda Cars, appropriate training is integral to the success of a company. Diploma’s staff were mostly new and not trained, so the tendency to fumble and be ignorant of what to do was much higher.

3) Rote Learning is not applicable for certain types of jobs – Another important lesson here is that rote learning is the wrong method to use when it comes to the service industry. It’s quite useless to get staff to intone words which represent good service when their attitude and actions do not demonstrate this; it becomes somewhat of a robotic gesture! Thus, it is important to have on the job training in a dynamic situation to teach staff how to adapt to changing circumstances and to react to the situation appropriately.

4) Motivation factors are important for attracting and retaining talent – This episode highlighted the importance of building good morale for staff through corporate image branding and also through team-building activities. Bonding amongst colleagues is an important aspect of morale and will significantly boost productivity and efficiency at the workplace, and also create a more conducive environment for learning and developing.

5) Service Quality is a critical aspect of a service-oriented business – For Diploma’s case, service quality was a very critical success factor for them to gain visibility and grow their business; hence Yvonne could not afford to compromise on that. Recognizing what’s important to an organization can help steer strategic initiatives in the right direction and maintain proper focus. However, this requires brainstorming on the part of Management and BOD, and they may also consider enlisting the assistance of “consultants” (though this could be costly). But the long-term benefits should outweigh the short-term costs.

For the final episode of this series, James visits Malaysia and gets to meet the owner of a cafe cum pub (Palate Palette) called Wong Su-Ann, and he offers her advice on how to improve her business and her customer base.

Unfortunately, I have not been able to locate the website for Diploma despite repeated searches on the Internet. It could be that they have not set up a website or my search string is wrong. If anyone has any info on the website, kindly forward me the URL, thanks!

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