Smart Business: The Micromanagement Pit
Now you’re the boss. And if you’re like a lot of trade contractors, you’re now that “my way or the highway” guy!
It’s hard for tradespeople to resist being a micromanager. For one thing, most of you start out with tiny operations where the owner has no choice but to take charge of every little detail. For another, managing jobs in the field usually is what you’re really good at. Most tradespeople would just as soon have someone else handle all the “office” work (frequently spouses), while they concentrate on making money where the proverbial rubber hits the road.
This may be a necessary way of life when you’re small, but as a business grows the time comes when you need to step aside and let other people worry about the grunt work while you focus on the bigger picture of running your business.
What’s that bigger picture consist of? There are three main areas of focus, in this order:
When To Cut The Cord?I put people first, even ahead of money, because if you hire the right people they’ll help you make money. Conversely, a bad staff will put the financial hurt on even a strong business.
Frank Blau is a good friend of mine who started a plumbing business in Milwaukee a half-century ago as a one-man operation, and grew it into the largest plumbing firm in the area with dozens of service trucks covering the city and suburbs. Blau is retired from the business, which is now owned and operated by his sons, but he remains in my mind one of the smartest and most successful trade contractors I’ve ever met. (He has also worked as an independent consultant for many different trades besides plumbing, so it’s possible some of you may have had the good fortune of attending one of Blau’s seminars.)
One time I asked Blau how big a plumbing business needs to be before the owner puts down the tools and focuses full-time on running the business. His answer: As soon as an owner hires the first trade worker, he needs to start stepping aside. With only one other employee, the owner may still need to work in the field half the time, Blau told me, but he should be spending the other half managing the money and marketing the business. According to him, when there’s enough work to hire a second tradesman, then it’s time for the owner to put the tools away altogether and become a full-time contractor.
This advice surprised me. I figured a company needed to be a lot bigger before an owner could afford to step away from the grunt work. That’s because most contractors I’ve known throughout my career tend to work with the tools or directly supervise jobs longer than they should, mainly because that’s what they like to do and are good at. Maybe that’s why most of them have not been as successful as Blau.
In that long ago conversation, Blau explained to me that most new contractors don’t have a clue about what it takes to run a business. They tend to be so focused on job site issues that they don’t have time to adequately tend to the duties that ultimately determine whether a business succeeds or fails.
The Right PeopleAs already noted, it begins with selecting the right people to work for you. That takes more time than most busy contractors are willing to devote to the task. It’s not enough to stick an ad in the paper and hire the first warm body that shows up with requisite experience. Interviews, background checks, skills testing, etc., are a time-consuming part of the process but no place to take shortcuts.
As soon as you hire your first employee, your primary job becomes managing that employee, not looking over his or her shoulder at every task. It means defining precisely the duties and goals of that position, and holding the person accountable for good performance.
Next comes the money part. This involves keeping an eagle-eye on regular financial statements that evaluate revenues, expenses and profit margins. It requires shopping around and negotiating with vendors to buy the right tools, equipment and materials at the right price. It includes examining all operating procedures at both jobsites and in the office with an eye toward maximizing efficiency. A business owner needs to question every aspect of operations and ask, how can we do this better and at lower cost?
The final component of management, marketing, is the one that most trade contractors are least capable of grasping. In good times when jobs are falling into your lap, you might be able to get by ignoring this facet of the business. But that’s a shortsighted attitude that is bound to haunt you when business slows down but the bills keep coming full steam ahead.
Trade MarketingMarketing in your business consists of bidding jobs and, preferably, negotiating for work with trusted GCs and property owners. Bidding might seem straightforward, except the best contractors don’t go bidding everything in sight. For one thing, it costs time and money just to put together a bid. For another, there are a lot of jobs out there where you win by losing, i.e., there’s no way to be the low bidder unless you made a mistake that costs you money.
A lot of trade marketing falls into the category of “relationship marketing,” which means networking at business and social functions and paying visits to influential clients. You probably don’t think of it as such, but what I just described is a form of selling. You need to sell yourself and your organization to people in a position to hire you.
Managing people, money and marketing is time consuming. There are not enough hours in the week to do it well if you spend most of your time hammering studs or supervising those who do.
None of this is to say you can afford to ignore everything happening in the field or in the office. You must hold your job site supervisors accountable for performing to your high standards, and you need to inspect their work to assure that happens. With office staff, you have to keep a close eye out on the receivables and payables in particular. As I’ve written about previously, small businesses are prime targets for embezzlement by bookkeepers who love to work for companies where the owner is disengaged. But it’s one thing to inspect and monitor operations, another to spend most of your day sticking your nose into tasks lower level employees are fully capable of performing.
Delegation is as much an art as a science. In running any business, it’s hard to know precisely how much slack to give employees, and much depends on their skills and how much you trust them. In general, this ought to serve as a guideline: try to have each task performed by the lowest paid person capable of performing that task flawlessly.
Owners and foremen are never the lowest paid employees. (Well, sometimes owners are, but that’s another story.) If someone lower in your company hierarchy can do some of the work you now do, delegate it. Then get out of the way, except to monitor and inspect.