BUILDING AN ORGANIZATION
By Ron Pestone
Whether you are an owner-operator, partnership or corporation as you bid and successfully sign contracts you need to start thinking about building an organization that can successfully manage your work load.
When you are at the beginning of forming an organization you need to keep in mind that overhead can quickly get out of hand. In many cases it is the sleeping dragon in the unsuspecting contractor’s basement that eventually devoured the business. For some unknown reason it seems to grow in leaps and bounds eventually taking on a life of its own. One of the hardest things a contractor has to do when his volume slows down is to cut overhead. Overhead comes in two categories: one with a face, meaning people and the other nonfaced, such as rent, telephone, insurance, etc. Trying to reduce nonfaced overhead is difficult enough, like moving to smaller quarters, limiting the amount of computers or phones, etc. but the real heart breaker is cutting overhead with a face. You know everybody who works for you, probably their family, illnesses they have had, personal problems, their loves and fears. They are real people with real feelings not figures on a page. The first time you have lay off an individual who has worked for you for years, is an excellent worker, never says no and gives a full week you will know what true misery is. I know, I have done it many times in my career and it was always hard, but long ago I put my faith in the numbers and if the numbers told me I had to reduce manpower to keep the company healthy, I did it. Personally I never liked it but my primary allegiance was to the company and its survival. As unpleasant as it is, sometimes it is necessary to let a few go so that the many can survive. Choosing the ones to go is really difficult and if they are good loyal employees it is pure hell, but believe me you must do it.
So, to insure you will only have to do this unpleasant task a minimum amount of times build your organization slowly. If you need two additional people, hire only one. You will be forced to hire more productive people. They might have to work a few hours overtime to get it all done. It’s a lot better than paying two salaries continually and it’s always easier to hire that second person later. My grandfather had a saying, “Eat slow I’m in a rush”. That surely applies here.
Before we go into the actual organization we need to spend a little time discussing interviewing. No matter what the size of your company is you are going to wind up interviewing candidates for a position you are trying to fill. There is a lot to know about interviewing and individuals have devoted their careers to it. They are the human resource people. I am not one of them. As a public servant and subcontractor I have interviewed hundreds of people in my career and have had my success as well as my failures; with that said I offer these observations.
- Anyone who shows up for an interview who looks like he spent the night on the park bench, pass him up.
- If at all possible do not hire family or friends.
- Ask a question and sit and wait for the answer. Many times the candidate will talk his way out of the job.
- When the candidate is only concerned with what he or she is going to make and what the benefits are, pass them up.
- If the candidate claims to know everything about everything, pass him up.
- Some individuals have great skills but are poor communications. It is your job to extract enough information from them to see if they are qualified for the job. I have hired more than one snake oil salesman in my day and have been sorry for it. On the other hand sometimes it is a great blessing when the individual is a minimalist when it comes to talking. They don’t talk they just work. You need to put them at ease in the interview and if you can get them to talk about their expertise they can tell you a lot without even knowing it. Sometimes it is a language barrier where English is their second language and in those cases you need to remember language is language and work is work and you are interviewing for work.
- Do not hire individuals solely because they think and talk like you or might even look a little like you. It takes all kinds to make a successful company. A candidate might have a talent you might not have and while his style might be different than yours but that difference could make a more effective and efficient organization. I knew a construction executive who was a real bulldog and would only hire bulldogs. The end results were not pretty. Funny thing he never changed, found lots of excuses, did a lot of firing, but in the end never changed.
- Once again, if at all possible do not hire family or friends and build the organization slowly.
When it comes to building an organization everyone has a different opinion about how it should be done and there are numerous business models to choose from. As a subcontractor who has been involved in building subcontractor organizations I have always thought of it as key positions and the order on how I was going to fill those key positions. Think of it like a building, you wouldn’t put the roof on before you had the foundation in and the walls up. For me the first position to fill is the keeper of the books. To my way of thinking bookkeeper, accountant or controller are all keepers of the books. It’s just the size of the organization. In this day and age you need to find someone who is familiar with accounting software packages. If at all possible you want to start your accounting in this manner. As many of you know I like Timberline and as a subcontractor I think it’s a great program. If you have another software package in mind look at my previous articles I have written about software packages or read my books coming out in the fall, COMMON SENSE SUBCONTRACTING WITH ELM JOB COSTINE & MORE and if the system you ultimately pick can deliver the requirements I talked about you will be ok.
From day one nothing other than installing the work is more important than keeping your books up to the minute. It tells you if you are paying your suppliers timely. What your labor costs are what you collected and the list goes on and on.
My opinion is that when you are hiring an individual for this key position they need to be loyal, closed mouth and accurate; they need to be strong enough to sound the alarm when they see danger. Even if you hire them part time in the beginning try to find someone who will be able to take the position full time eventually and has the qualifications to move from bookkeeper, to accountant and eventually when your company has really grown controller. Never forget that this individual is going to know more about your business than your spouse so be very careful in filling this position. When they are on board spend the time with them so that you grow together as your company grows. You want to see and become comfortable with how the company looks on paper. The books are your friends you need to treat them that way and the keeper of the books needs to be your most trusted employee who is a stickler for keeping proper record.. In short, no surprises.
Part two next week.