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ColumnsRoofing Safety

Six Symptoms of a Declining Business

By Monroe Porter
typewriter
Monroe Porter
Monroe Porter is president of PROOF Management Consultants

typewriter
Monroe Porter
March 6, 2013
For years I have talked about the four stages of business organizations: wonder, blunder, thunder and plunder. Wonder is the first stage, when the business is first starting out. Blunder is when the business has work but has little profit because the business has outgrown its systems. Thunder describes a successful business that is driving the market and is profitable. The fourth stage is plunder — when the business has reached its maturity, peaked and is no longer changing with the times. This article is dedicated to that plunder stage.

First, understand that it is human nature to want to slow down and become more comfortable with our lot in life. An understanding of our mortality begins to set in and we want to work on our bucket list and make sure we enjoy the fruits of our years of labor. Unfortunately, business is not forgiving and there is no divine right of passage. The following are six symptoms of plunder and my advice on how to cope with the situation.

1. A maturing management team: As consultants, we have frequently been asked to help mature companies do strategic planning and prepare for the next phase of business. It is not uncommon to find a business with a son or daughter who is in the 30s and the heir apparent, surrounded by estimators, superintendents and project managers in their late 50s who do not think their retirement or developing successors is an issue. To make matters worse, many of these organizations are behind from a technology, product, equipment and business systems point of view. The senior management team just did not see such things as a priority.

Understand that it can take two to five years to replace an owner or key management person. The transition needs to start early and it takes planning to develop a second tier of managers. Most senior managers and owners are very poor at training successors. They have never done this before, plus it forces folks to face their own mortality. By the way, we are not talking about age discrimination. If someone is competent and wants to work until 70 or 80, there is no problem with that. However, such a manager must be willing to embrace change and continue to be a productive employee. Also, the law of averages tell us, the older we get, the more likely we are going to have a health issue or the grim reaper will come a-calling. Most of us males envision ourselves dying at 108 at the hands of a jealous husband. It looks good on paper but rarely works out that way.

2. Outdated technology:As a business owner, computers and automation can be frustrating, but you have to stay up to date. It always seems to take twice as long and cost twice as much as we are told it would cost. I can remember when secretaries loved the IBM ball typewriters and fought computerization; now try to get someone to type a letter on one. Letters — heck, they don’t even exist; everything is e-mail.

Before all you software salespeople call me, understand I do not endorse anyone. It is not my line of work or my area of expertise. I am only talking the global big picture. Technology is moving very rapidly. Residential contractors can easily put a laptop in their truck and print on the spot. Commercial contractors can cost jobs efficiently, take photos of repairs or change orders and even have smart phones replace time cards. Make sure your organization does not stick its head in the sand and has a process for staying current.

3. Family employees:Most small businesses are family businesses, and lack of accountability can be an issue. Just like other employees, some family members are great employees and some are not. The problem is the ones who are not performing but are allowed to keep their job. If a senior family member is not pulling his or her weight, you obviously have the cost of employing that person. It also is not fair to the family member. Just because your son, daughter or nephew cannot run the business, does not mean they are a failure. However, not correcting the situation almost guarantees failure down the road. If someone is not performing at 30, you are not doing them a favor by keeping them employed because the new owner will terminate them. It is unfair that the person may be 45 or 50 looking for a job. Give non-performing family members a chance to succeed by terminating their employment or putting them in a position where they can and are held accountable to succeed.

4. Employee departures:Thirty years ago, employees expected to work a lifetime at one place; no more. Good people are much harder to keep. If your young, bright employees leave, you are entering plunder. One reason I believe corporate America struggles when they buy a company is the good people leave and go somewhere else. If I am an upwardly mobile employee of 30 and have a non-progressive, semi-retired boss of 55, I doubt I am going to wait around another 10 years until that boss officially retires. Look closely at youthful departures and determine the root cause. Don’t lose your future.

5. Customer demise:I have written this column for years. Every winter I start to receive phone calls from residential contractors in their 50s and 60s complaining about the government, the economy, the president, etc., because they have no work. They brag to me that they always won work by referrals and word of mouth and never needed to advertize. As we talk, I ask them, “When you were 45, were many of your customers 10-20 years older than you?” They reply yes. I then ask them, “How old are your customers today and where are they?” Suddenly they realize they are all dead or in nursing homes. Don’t bring in new customers and the old ones eventually fade away. This is also true of commercial accounts because the people who were your buddies may have been promoted or retired.

6. Owner isolation:Many owners who have had mature businesses are not active in the day-to-day operations. This is not a bad thing and should be expected as part of delegation. However, show me an owner who never visits jobs and I will show you a company where people may think the boss is made of money. People tend to steal from companies, not people. Non-active owners need a system to keep in touch and extend their leadership net. It is also interesting to note how hard it is to get owners to return phone calls. On a half a dozen occasions, I or the contractor I was working for tried to call owners with extremely sensitive information regarding company theft or a bankruptcy. In most cases, they did not return our calls. We did not want to leave such a message with the receptionists and were not going to kill ourselves getting a message to someone who would not talk with us. Remember, information can be free but so valuable.

Potential plunder is a reality. Whether you are a business, football team, or social club, sometimes it is easier to get to the top than it is to stay there. 

KEYWORDS: business management employee relations family business

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Monroeporter
Monroe Porter is the president of PROOF Management Consultants. He can be reached at 804-267-1688.

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