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 which created success in the past are not always the same ones which will create success in the future. Business growth sometimes stalls at this point, as the 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 themselves to working within 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 a few key metrics in every aspect of your business. Without 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.
Setting departmental benchmarks
Department managers use the defined metrics for their area to set meaningful, measurable goals and track progress toward reaching them. Managers use metrics data for making day-to-day decisions and to assemble status reports for review with the general manager (usually the owner). Key metrics, when thoughtfully identified and accurately tracked, 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 must the next job move to production in order to maintain maximum efficiency — and does that date align with the sales department’s projection for the next signed contract?
Summary reports based on metrics provide valuable information for managing the day-to-day activities of each department. For example, a report of inquiries by source contains essential information for making effective marketing decisions.
Managing the team
Departmental management meetings are conducted weekly or bi-weekly. It is essential that the GM honor the preset meeting schedule and established time limit so both parties can plan effectively; this reduces impulsive and inefficient hallway drive-by meetings. The department managers (not the GM) facilitate these meetings, and the GM must be careful not to hijack them.
In addition to individual department meetings, there should be regular monthly meetings, facilitated by the GM, which include all department managers. These meetings provide opportunity for communication and sharing of information between departments. Since the management team has, individually and as a group, participated in setting company goals, they understand the relevance of the metrics being reviewed and can see the progress (or lack thereof) toward achieving the goals. The team now has accurate information for brainstorming solutions to problems and proposing ways to capitalize on opportunities.
Implementing a departmental management structure is not simple, but for remodelers who want to grow their business to greater independence and sustainability, the benefit 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 need to change.
Initially published in Upscale Remodeling
Tags: management metrics