Don't underestimate the importance of personnel to your business. During the past year, I've written several Contractor Cents columns about management issues. Here is what I feel is critical for owners and managers: Every company owner has three things that he or she must give managers: Responsibility, authority and accountability to do their jobs and produce the results.

Responsibility and accountability are easy. The difficult part sometimes is letting go of the authority to do the job. This means that you clearly define the role of the manager, tell him or her what you expect, let him do his job, don't try to manage the people who report to him, and track the results. Feedback is critical...both positive and negative. Sometimes employees try to do an end run around their manager and come to you. You can't let this happen. You have to send the employee back to his manager.

If you are doing this, give yourself two pats on the back. If you are not, then make a commitment to yourself to do this.

Look at productivity. There are several benchmarks in the industry. Remember, these are maximums that you try to achieve. The really good companies blow these away. To do this you must departmentalize your financial statement and allocate overhead to each of the departments. Your service department's percentage compensation (total payroll plus payroll taxes divided by sales) should be less than 35%. Your new-construction department percentage compensation should be less than 20% and your replacement department should be less than 25%-30%. Remember that these numbers also include the office salaries (and officer salaries) overhead allocations.

Asking questions

If your departments aren't producing these percentages, ask these questions: How many jobs come in on budgeted hours? Do you have the right people doing the jobs? Do you have a training need? What mistakes are the field labor making over and over again? What is the warranty percentage? What is the call-back percentage?

How many hours per day are employees actually producing work, rather than waiting for deliveries, running to the parts house, traveling, etc.?

The answers may surprise you. They should give you the activities and goals that you need to get the productivity percentages in line.

Next look at your office staff. Are they being productive? Look at their overtime hours. If one of your employees is constantly spending more than 40 hours per week on the job, then find out why. This may be a sign that he or she needs help. Or, it may be a sign that he or she is not fully using her time on the job productively.

If rapid growth in sales is one of your goals, you probably will need to hire additional personnel. This is the time and place to plan for it. Do you need additional technicians? Additional installation crews? How about additional office personnel? Plan when you are going to hire these addedl employees and figure out how you are going to get them. Good people rarely just appear. You have to recruit them. Put the plan in place to do it.

The last area that you have to look at in this section of planning is your succession plan. If you were hit by a truck tomorrow and couldn't work anymore, would your business survive? If not, put a plan in place to groom employees to handle key roles so that the business can survive without you.

And please find some hobbies outside the business if you don't already have them. When everything starts running smoothly some owners get bored without the challenges. I've watched some owners screw up the business again (probably subconsciously) so that the challenge was there again. DON'T DO THIS!

Copyright 2002, Ruth King.

All rights reserved.

Ruth King's American Contractor


1650 Oakbrook Drive, Suite 405

Norcross, GA 30093

(800) 511-6844

(770) 729-8028 (fax)