Does your company sell projects expecting to make a certain amount of profit beyond the cost of the labor, materials, subcontractors and miscellaneous other costs directly attributable to the project (i.e., the cost of goods sold, or COGS)? Of course! Otherwise, why would you be in business? In fact, if you did not plan on making any profit (gross profit, to be more precise, which includes overhead and net profit) you would basically have an expensive hobby instead of a business.
Do you and your team find that the actual COGS come in costing more than estimated, resulting in a reduction in the gross profit that the company planned on making? That is called “slippage.”
How can slippage be managed or, better yet, reduced to zero so that the company makes what it planned on making?
Do Job Completion Reviews
The absolute best way to reduce slippage is to do a job completion review after each project is completed. (One of the other names for this practice is “job autopsy,” but I feel that has negative connotations. After all, who wants to go to an autopsy? Not many people! Who would like to celebrate completing a job and learning the lessons from having done the job? Most people.)
Who should attend a job completion review? It is best to have the salesperson, the estimator, the production manager and the lead carpenter in the room. Depending on the company that might mean there are two actual people in the room. Regardless, have the job completion review.
What Should Get Talked About During a Review
- Actual COGS compared to estimated COGS, broken down by item of work, such as rough carpentry, finish carpentry, doors, and windows.
- Actual completion date compared to scheduled completion date.
- Performance of the different subcontractors and vendors. Is there anyone you should kick off the team?
- What went really well with the project and how can we do that with future projects?
- What went badly and how can we avoid that in the future?
- What in-house labor item(s) need to have more or less time allowed for in future estimates?
It is important to set a tone
of positive change as a group working together instead of focusing on blame. Everyone
at the table is an equal during this discussion, with nothing but future
success for the company in mind.
How can a company find the time to do job completion reviews? Pick a repeating date, say the third Thursday of the month, at a certain time and block it out for every month. Do the reviews then.
Why bother? To take on all the risk that doing a remodeling project entails and then never look back at what could have been done better dooms the company to repeat the same “learning experiences” (aka mistakes) over and over again. The result is less profit than you and your company deserve.
After all, who goes into business with the goal of losing money?