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Don’t let your business become stagnant

Monroe Porter

By Monroe Porter

I describe the seasons in the life of a business as Wonder (just starting with owner making wages), Blunder (lots of work but little control and money), Thunder (very profitable and driving the market) and Plunder (aging with old systems and management).

In many ways the Plunder phase of business is the hardest to turn around. Many plunder phase businesses are organizations of people who are a little too fat and happy. Often there is cash in the business and credit with the bank. Having no cash pain can postpone necessary changes.

Since the business is capitalized with many long-term employees, change involves pain which the organization is not used to dealing with. I am not a slash and burn MBA-type and value longevity and loyalty, but I do believe in holding people accountable and staying competitive.

Introduce some youth
Start by introducing some youth into the organization. There’s nothing like an enthusiastic fire breather who is too dumb to know better. An aging company I worked with in a different industry hired one such person, a bright young man with no trade experience.

A large Fortune 500 company headquartered in the area called wanting an estimate. And, since the company didn’t get any work from them, they sent “the kid.” Being his first sales call he hurriedly went out and was awarded a very small job. He took lots of pictures and the senior estimator reluctantly helped him put a winning $1,200 quote together.

The Fortune 500 company called back for a $2,800 job and the youthful salesperson followed the same winning process. A few months later, “the kid” gets another call and has lunch with the facilities manager of this huge plant during which they socially chit chatted. After lunch they are walking through this massive plant and the facility manager asks, “What would it cost to do the entire place?”

Stunned, the youthful salesperson replies, “I’m not sure but with 30 years’ experience in our company, we can certainly put together a comprehensive plan for you.” Now he had to beg and plead with the senior estimator to help him. The senior estimator said he was just lucky on those small jobs. They would be wasting their time going after a sizeable project when they were never able to get anything like that before.

They did the estimate and the company was awarded a $350,000 contract because “the kid” was too dumb to know better. Youthful energy can sometimes run amuck, but energy creates more energy. Stagnation creates more stagnation.

Re-evaluate what you’re good at
Develop a new estimating and target market strategy. Mature companies frequently are doing certain types of work because they have always done so. I was doing an in-house business strategy workshop for a large contractor that was struggling.

I questioned whether bidding schools still a winning strategy. The 70-year-old owner banged his fist on the table and said, “We cut our teeth on school work.” Maybe so but when we looked at the facts, we found they were bidding 3 or 4 schools each year but hadn’t been awarded a school contract in 14 years.

Tabulate your job costing and profits from low to high. Sort by putting all your winning jobs at the top and less profitable ones at the bottom. What are the common traits of losing jobs? What are the common traits of winning jobs? Sort job costs by type or work, customer, foreman, estimator, etc. Sometimes we are so busy working that we fail to identify where we need to change behavior.

Move forward
Junk old equipment; throw away leftover material and other outdated stuff. It often costs more to find it, store it, and insure it than it is worth. Paint and carpet the building and offices. Cleaning the place up sends the message your business is a going concern. Let everybody see changes.

Figure out who the successors and leaders of tomorrow will be and get them to stand up. The problem in being vice president is no one remembers your name. Who were Teddy Roosevelt and George Washington’s vice presidents? Don’t cheat. Think about it and I bet you don’t know their names. They were Charles Fairbanks and Aaron Burr.

You need to identify the next generation of leadership in the company and give them more visibility and responsibility. See if they are going to earn respect within the company and have the ability to move forward.

Corral the dinosaurs
Make sure senior people are doing their job and not impeding the progress. You can exercise a little loyalty to cut long-term employees some slack, but they must be held to company standards, and they can’t be allowed to get in the way of progress.

Too many of the long-term “sacred cow” employees are never held accountable due to their seniority and connection to the founders. Years of poor accountability leads to mediocrity. It can be tough to teach an old dog new tricks, but even if they are slow to change, you can’t let them growl and bite you.

Forbes magazine reports that only 50% of family businesses make it to 2nd generation and only 50% of those make it to third. Don’t let your business become one of these statistics.

Monroe Porter and PROOF Management offer business consulting through industry networking groups and he can be reached at (804) 267-1688.