Three Rules for Monitoring Your Business and Avoiding the Systems Myth
Technology has developed new myths of management. Computers used to come with strange languages and buttons that the computer salesperson understood but you could not get to function when you took the computer home. Then Bill Gates and the Microsoft gang came along and today computers are almost a commodity product. Fax machines, e-mail, the Internet, cell phones and enhanced software were all supposed to allow us to run our business easier and at a lower cost. Some of us mistakenly thought that these devices would give us more freedom but now it seems like folks can't function without their cell phone glued to their ear.
One of the more popular management books for small business is the E-Myth. It is a great book that talks about how a lady baking cookies lets her business grow beyond her ability to manage it and how systems brought control. Improved systems are a great management tool. They bring discipline to the chaos of running a small business. However, systems are not meant to take the place of common sense and good management decisions. Several doomsday movies have been produced where the systems take over and nuclear holocaust blows up the world. Well, systems will not blow up your business but falsely thinking such systems are taking the place of good management and accountability is just as dangerous.
I visit many contractors who have great systems, wonderful information, and modern technology, but they rarely look at or use that information to hold people accountable and make strategic decisions. So here are Monroe Porter's rules for using systems and technology to run your business:
Rule 1: If you don't use it, lose it.With modern software, you can generate lots of paper and lots of reports but who really looks at them? Remember, the more bells and whistles the software company puts into the system, the more they can sell it for. Decide what data you need to manage your company and look at it accordingly.
Rule 2: Manage tech expenses, especially cell phones.Technology can be a never-ending financial money pit, but like any other expense, technology must be monitored and budgeted. Many business owners mistakenly think technology expenses are a one-time investment. In reality, technology functions more like a vehicle expense but rather than wear out, it just becomes obsolete. Failure to build an on-going plan will leave your business dated and in a financial hole. On the other hand, buying bells and whistles you do not need is a waste of money.
Cell phone and field communication expenses are another issue and one of my pet peeves. Time is money and you cannot talk on the cell phone without taking up production or sales time. Give a cell phone to a control freak and everyone in the company calls Mr. IAM THEMAN before doing anything. Review how many hours you and each of your field supervisors are on the cell phone each day. If you are consistently on the cell phone, you may not be doing your job, if necessary, have it shut off, except for key times.
If employees call with a question about a task they should know how to perform, reply with, "What do you think you should do?" rather than provide the answer. Use the cell phone as a training tool rather than an umbilical cord. Force employees to be accountable and to use their own knowledge and abilities. If not, the stress is always on you and you might as well do the work yourself.
Let employees know what times of the day you are going to check in with them. For example, tell them that you, the office or the project manager will call all crews between 1:00 pm and 2:00 pm everyday to check and see what materials they might need for the next day, any change orders that are necessary, status reports, etc.
Remember that selling field labor at $30 an hour equates to 50 cents a minute, so the cell provider's costs are nothing when compared to lost productivity. You should also establish a policy regarding field employee's use of personal cell phones. I have known several cases where foreman are running side business by cell phone while on the boss's clock. What is the company policy regarding personal phone use? Possibly, you need to draft such a policy and send it home. If there is an emergency, encourage all family members to call the office so that employees may be contacted.
Rule 3: Stop, look and listen.Stop, look and listen before crossing the road. Remember how grade school children are taught to use such discipline when they cross the street? Well, you need to establish this same discipline in your company. Every month you must stop to review all financial, production and sales data. This review should include financial statements, income and balance sheets, accounts receivable and payables, any incomplete jobs or collection issues. Job costs should be reviewed monthly with year-to-date results and input on recent job completions. You also should be reviewing sales and marketing data to track closing ratios and marketing effectiveness. What good are the systems unless you take time to stop and look at the data?
Our networking participants are required to send annual data regarding the previous year's performance. We are in the process of receiving that information. I know there will be several established and wise business owners who will have shocking results. Why? Well, they are not as active as they once were and not on top of daily business operations. They have put systems in place to track costs but are not taking time to stop and look at this information.