The first big development step for many remodeling company owners is a transition from tradesperson to businessperson. They begin, as author Michael Gerber says, to work on their business not simply in it.
The next significant step is a shift in management style and structure, from entrepreneurial to departmental. With entrepreneurial management everything revolves around the strengths and weaknesses of the owner. The organizational chart may have boxes labeled production manager, sales manager, business manager, etc., but these managers function more as assistants with all real decisions made by the owner.
In a departmental management system, responsibilities and authority are delegated to a team of managers. Sharing authority can be difficult for an entrepreneur who has succeeded thus far through personal instincts and spontaneity. But growth requires accepting that the practices that created success in the past are not necessarily the same ones that will create future success. Business development sometimes stalls at this point, as an owner contemplates the risks and rewards of departmental management.
Owners who emerge from this assessment with a commitment to building a departmental team will face challenges and see potential benefits. Among the challenges are recruiting, training and employing capable managers, providing day-to-day leadership, delegating without abdicating, and submitting to working in a team context. Potential benefits include tapping into a deeper stream of energy than any one person can provide, better business decisions, greater stability and sustainability, and increased freedom for the owner.
Implementing this system starts with identifying key metrics in every aspect of your business. In the absence of metrics, decisions are based on intuition. And as a company grows, intuition becomes an increasingly unreliable basis for good decisions. Metrics provide reliable, objective data.
Goals and Measures
Each department manager should use the defined metrics to help set measurable goals and track progress toward reaching them. The managers can use metrics data for making day-to-day decisions and to assemble reports for review with the general manager (usually the owner). When metrics are well designed, they enable the GM to discern current conditions in every department. Has the company met target gross margins on all jobs completed since the last production meeting? Are all open production files on schedule? When should the next job move to production to maintain maximum efficiency — and does that date match the sales department’s projection for the next signed contract?
Reports based on metrics provide information needed for managing the day-to-day activities of each department. For example, a report of leads by source has information that is essential for making effective marketing decisions.
Departmental management meetings are usually conducted once a week. The GM must honor the preset schedule and established time limit for the meeting so that both parties can plan their time effectively; this reduces impulsive and inefficient drive-by meetings. The department manager facilitates the meetings, and the GM must be careful not to hijack them.
In addition to the weekly department meetings, the team should have monthly meetings, facilitated by the GM, that include all department managers. They provide the opportunity for information to be shared between departments. Since the management team has, individually and as a group, participated in setting measurable goals, they understand the relevance of the metrics and are able to see the progress (or lack thereof) toward achieving goals. The team now has accurate information for brainstorming solutions to problems and proposing ways to capitalize upon opportunities.
Implementing a departmental management system is not simple, but for remodelers who want to grow their businesses to a point of independence and sustainability, it is worth the effort. With continued growth, departments can be subdivided and managers added, each with their own goals, metrics, and reporting data. The size of the management team may increase over time but the basic management structure will never have to change.
Richard Steven is president of Fulcra Consulting, which advises remodeling companies on management plans; www.fulcraconsulting.com.