In the following article, Remodeling columnist Paul Winans discusses the difference between companies who have tons of work and turn profits and those companies that always seem to be busy but cannot turn regular profits. Check out his tips for spotting potential issues in your own company.
In my work with remodeling contractors I sometimes hear about two remodelers working in the same town. One is always frantic and busy, but has irregular profits. The other makes difficult decisions all the time and keeps moving forward. This second company is usually busy and has good profits.
What are the differences between these companies’ respective circumstances? In a nutshell, it's ...
Activity vs. Results
Remember Pigpen in the comic strip Charlie Brown? A cloud of dust but…
That is what happens with a lot of remodelers. “I am so busy” is heard in an activity-oriented company. But “Doing what?” is never really addressed.
Often the owner is a micromanager who is nervous about delegating. Such a person keeps very busy checking, over and over, on the status of numerous activities, often interfering in the work that employees are supposed to be doing.
A results-oriented company has a few key metrics that all in the company are aware of. These might be actual to projected completion dates, actual to budgeted gross profit per project, and client satisfaction ratings above a certain grade. It almost does not matter which metrics are chosen, as long as they are consistent with the results the company wants to achieve.
The owner preaches effective delegation and practices it. The underlying principle is “We are going to talk about it a task to be done right. Which is more fun: To talk about it after the task done poorly because we didn’t take the time to lay it out correctly, OR to talk about it before the task is done, taking the time needed to make sure everyone involved understands the desired results and how to achieve them?”
Slowing down to go fast makes the company money.
Reactive vs. Proactive
A reactive company sees itself as a victim of circumstances. The company’s payables are aged, sometimes over 90 days, because the company does not have enough work.
To get more work the company feels it needs to cut its margins Now that company needs to do more work to earn the same amount of money.
The company can’t take the time to prepare complete job packages because the jobs need to start to keep cash flowing. So virtually every project has slippage, not generating the gross profit dollars hoped for.
A proactive company knows that there are certain things that must be done for success to occur.
Only certain prospects are worth pursuing. And how does the company know this? By learning from its past experiences and avoiding having to learn the same lessons over and over.
The company has a process that is does not deviate from. The initial call to the company by a prospect is handled the same way, often by the same person, every single time. If the job package is not complete, the project can’t start.
The company is being proactive by doing what it knows must be done to be successful. The odd thing is that a lot of reactive companies know what must be done. They just don’t do it.
Excuses vs. Learning Experiences
An excuse-oriented company generally has lots of reasons why things are not being done the way they are supposed to or why the company is not responsible for its lack of success.
“After all, what can you do?” is the default mindset.
Don’t get me wrong--the people in that company care. But they have been taught that they are not responsible for results. As long as they are trying, they are doing a “good job.”
When a learning-oriented company doesn't achieve the desired result, those involved work to figure out what needs to be done differently in the future. The learning experiences are regarded as opportunities, and no one there wants to repeat the same learning experience over and over.
The lessons learned become embedded in the company standard operating procedures. The focus on continuous improvement, all driven by clarity about the desired results, creates more success over time.
People vs. PosItions
A people-oriented company often has some really nice people who are not the best fit for the positions they are in. Sometimes these are folks who joined the company years ago and now the company is different, but those people have not grown with the company.
“But they are such good people! How can we let them go?” is often heard.
A position-oriented company has an organization chart with the names of all the positions on it first and the employees’ names second.
Such a company is clear about the relationship it has with its employees. Results matter. Clearly laying the results desired out and making decisions, at least annually, about the people who hold the positions still being the best fit, is part of what the company does as standard operating procedure.
It is not being mean. It is not being callous. It is thinking like a business.
Aimless vs. Driven
An aimless company lacks a clear sense of direction. It is being led by circumstances. “How come this is happening to us?” is often heard.
A driven company has a true leader. This person works with key employees to craft a compelling vision of success, which often has some measurable result targets included.
That vision is used by all in the company to make decisions on a daily basis. It allows for everyone to be set up for success, even with the smallest tasks. Effective delegation, not abdication, is practiced routinely.
What Kind of Company Do You Have?
Who is going to be successful and who is going to be wondering why they are not? The answer isn't very complicated.
The challenge is staying on course.
As a team, as a company, sit down and get clear about what the frickin’ point is. Simply getting on the same page will unleash the energy and focus needed to take all your activity and direct to achieving the results wanted and needed. Consequently, working in the company becomes more fun and fulfilling for everyone.
You CAN do this.