November 28, 2011

The ability to maintain your business’s standards is one of the best indicators of long-term success. Business owners can be under pressure to lower their standards for two main reasons: when conditions are abnormally bad or when they're abnormally good. If revenues and profits are down, some business owners can’t resist the temptation to lower their standards. They believe that things will soon turn around, and they should do whatever they can in the meantime to survive—including lower the quality of their offering. The opposite is also true. If there is a sudden and sustained influx of orders, many business owners don’t want to turn away the additional business. So they cut corners to fulfill the new orders.

This reduction in quality takes shape in many ways, like:

• Purchasing raw material of inferior quality
• Cutting corners on your production methods
• Lowering the quality of your customer service through personnel reductions
• Hiring less experienced workers to save on labor costs
• Changing your traditional terms of sale

While your short-term performance may improve from lowering your standards, the long-term damage to your business could be fatal.

Sabatiello’s restaurant in Stamford, Conn., was faced with a difficult choice. The owner, Sammy Settembre, had previously owned a successful pizza parlor before deciding to trade up and start an upscale restaurant. Despite initial success, the restaurant soon began to experience significant reductions in revenues. Unsure of why his business was suffering, the owner made the decision to begin lowering the quality of meat purchased for the menu. He also began to sell food that was frozen or previously prepared, instead of food that was made fresh daily. In effect, he lowered his standards to save money in the short-term. This became a slippery slope, and soon corners were being cut across many areas of the business. It led to the restaurant's demise a short while later.

While lowering your standards can in most instances produce a short-term boost to cash flow, it’s only a matter of time before customers start to feel the effects of cheaper products and worsening service.

WCI Communities is a developer of luxury properties headquartered in Bonita Springs, Fla. The company experienced tremendous growth during the real estate boom, achieving peak revenues of $2.6 billion and profits of $186 million as demand for their condominiums soared. During this period the company, like many others, faced a shortage of basic building materials like drywall. Rather than scale back production, the company lowered its standards and began working with subcontractors that sourced their drywall from China.

WCI communities then went on to overbuild using lower quality materials, and they now admit that at least 200 of their customers are victims of the infamous Chinese drywall controversy. The company filed for bankruptcy.

Lowering your standards sends a powerful message to your competitors, customers and employees—one that says you don’t want to fight anymore. Whether made consciously or subconsciously, you are admitting that you can’t produce at the same level as before and that you are willing to make concessions. Businesses that focus on survival instead of success are doomed to fail sooner or later. If your business is struggling then you must fight until your business turns towards profitability or until you truly can’t continue operations any more. If instead you are faced with new orders that you can’t service at the same level of quality then you must be strong enough to say no.

It doesn't make sense to lower your standards. It will indefinitely prolong an eventual death or prevent you from achieving the success you seek. Either way, it’s a losing proposition.

Join the conversation ( 2 )

• Patrick Pawling 2 months ago

  

  Let me give you an example of a dilemma in my business: copywriting and marketing. Company A has a limited budget and works me for a better price. Company B has a better budget and pays me a fairer price. Should they get the same quality work?
  Answer: Yes. But Company A might just have to wait in line behind Company B. That's how I handle it, but believe me, I have been tempted to say, "If Company A doesn't want to pay for top-shelf work it shouldn't get top-shelf work." The other challenge is Company A will always want a discount - moving them up to a better price can be tricky. Bottom line, I don't want to get used to providing anything less than top shelf work.

• Julie Rains 2 months ago

  

  Excellent point that businesses should resist the temptation to lower standards in bad times and good. In addition to maintaining high standards in areas like purchasing, customer service, and production, successful businesses also focus on a high integrity in terms of projects they pursue and customers they serve.