1. Not Holding Your People Accountable

Know what accountability means. In very basic terms, accountability means that every critical employee knows specifically, the minimum that is expected of them each day; that their job performance is relative to the profit and sales of the company, is measurable and therefore objective to results; that the measurement is communicated to them regularly; and that their ability to exceed the company standards will impact how much they earn each year or, if performance is a standard, that they may lose their job. Standards and measurements can be developed when revenue is planned and controlled, when a plan of sales, gross profit, labor productivity, schedule, material controls, general conditions, overhead and profit is linked to what employees actually do every day, week, month and year.

Know what accountability means to sales and profit. The process of lead generation, selling, estimating, pre-construction, buy-out of materials, labor scheduling, labor productivity, project management, dispatching, parts, tools, vehicle, materials usage, job costing, punch list, post job completion reviews and marketing is linked to the selling and profit making process. It does not matter whether the standard of performance is specific to a sold job directly or to an office support function. If employees are clear about their job expectations and the measurement of their performance, and they accept that they can do the job defined for them at the standard of performance required, then accountability can and will exist when routinely managed.

Learn to manage accountability to attain it. Managers are accountable to the results of their managed processes and to those who report to them. Managers must communicate with their employees, support their achievement of planned results and get out of their way of doing their jobs. Also, the employee standards linked to the profit and sales plan of the company must be clear to the reporting employee. Managers become a resource to their employer and to the people they manage, as long as they have critical measurements available in a timely and accurate process with proactive communications of great work, problems, or potential problems provided to the company. Standards and results make the company work. Attaining “accountability” does not mean there are no problems. In construction, there are potential problems every day. Accountability mitigates problems and their effect on profit and sales. Accountability creates an open process of preventing the same mistake being made over and over again. Accountability saves the cost of those problems due to someone not knowing, not being sure sure, or not wanting to say that the problem was a problem.

The word “succession” is broken into two pieces, “success” and “ion”. It literally means the “passing on” or “transition”of success. Succession planning is a critically important “rite of passage” of a business from one generation of ownership and management to another, most often drawing on the resources of family members who are willing and able to carry on the business. While it is an important adjunct in the overall estate plan of the business owner, it doesn’t have to be complicated and should occur before probate. The four steps to succession planning describe the important considerations in choosing the proper and most appropriate team and process for changing out the leadership of the business.

FOUR STEPS TO SUCCESSION PLANNING

1. Determine who is involved
2. Develop a strong business plan with new accountabilities
3. Determine when the plan needs to go into effect
4. Determine how the plan is to be executed

Depending on the family dynamics, each family member involved in the transition of wealth understands the difference between fair and equal. Additionally, relationships between the siblings, the role of in-laws in the business, the ownership split, the influence of owners and spouses and the respect that the various family members have garnered among the employees and key customers, all provide fodder for the potential arguments that could arise as to what is the best succession plan to achieve a transition for the business, for the employees and for the family. In some cases, the customers have a stake in the outcome as well.

(more…)

Each of our last three clients had issues that could be traced back to their previous family members’ ownership. All too often the preceding owner is a strong person, respected in the community, respected within the business, and they are the “CONTROL”. The problem is that since a “person” is the control, he or she determines what “good” is for the organization. Thus, problems can be covered over by them saying, “I’m already successful and I must be doing it right”, and the successor family member begins to learn a dangerous method of management.

Each of our clients were historically “successful”. Each experienced frustration with the successor family member. Either “they just weren’t up to it” or “they aren’t doing what we did”, therefore leaving hundreds of thousands or millions of dollars “on the table”. Upon review, the structures and individual employee accountability to “minimum acceptable standards” of action, results, and reporting were never established. Information was generally wrong or incomplete or unfocused in form to the real problems and controls of the company. Without correct information, the successor was “flying blind”, and more importantly and disastrously, was attempting to rapidly expand the business. The concept was not wrong. However, without accountable structures in place, the company simply lost more profit while revenues increased. The attitude of, “We’re making money, so it must be good” and “It is just a matter of more revenue to be great”, is just a rehash of the old style of management which the successor believed did not work.

Prior to turning over your business via buy-out or gift, get a formal analysis of the operations and personnel including the current ownership and the planned successor by a qualified outside resource. Understand your strengths and weaknesses. Once defined and agreed upon, implement the corrections prior to the business transfer. The investment in yourself and the future will almost always yield multiples of the cost shown by new profit every successive year. Formulate a plan for the next generation to be well-prepared to move the company to even greater heights.