The construction industry isn’t alone in issues such as staff and skills shortages. An issue faced by all businesses is trying to get more done with fewer resources.
One of the key drivers in a service-based business is personnel productivity — ie, getting the most income earning capacity from production staff/labour hire.
One way to improve the situation is to do less work but ensure it is more of the profitable or desirable work.
You may have heard of the Pareto Principle, which is the 80/20 rule. An example of which is that 20% of customers produce 80% of sales and profit.
The Pareto Principle has proven valid since the late 1800s when it was discovered by Vilfredo Pareto who was an economist.
It follows then that we should concentrate on the 20% of customers, jobs, services and staff that are producing 80% of the results.
In order to know who the 20% are we need systems in place for tracking results and who/what is achieving them. If you could do this then you would probably need fewer resources to achieve better results.
As a business owner/manager it can be hard to extricate yourself from the business for enough time to spend working on the business rather than in it.
If you can be disciplined enough to do this, it can pay big dividends, in terms of improved efficiency, personal satisfaction and lifestyle for the business owner, as well as better profit and cashflow. What you need to achieve these benefits are systems.
In order to set up systems you must get the knowledge out of your head and into a format that staff can understand and follow.
You need to identify what are the most critical actions in your business, who is responsible for them and how they should be done.
Once you know these things, you can share this information with others and begin to do less of them yourself.
Obviously, staff need to be trained and monitored in these actions, but a little time invested in this area could pay big dividends down the track.
Staff who have systems to follow feel much more secure in their work and create fewer distractions for themselves and others.
Businesses with good systems and happy staff become the employers of choice.
Who wants to work in a business run by crisis management where everyone is stressed and unhappy? Any human resources expert will tell you money often comes way down on the list of motivators for staff.
An example of critical actions in a service-based business is the fulfilment and management of jobs. If you have a good job management system you have access to:
• information required for staff to do the job,
• information about job profitability for the business owner,
• information about hours paid to staff compared to those sold to customers to make improvements to margins, and
• information about work in progress, speeding up invoicing of jobs and improving cashflow.
Systems make it much easier to manage a business, as the manager doesn’t have to think of everything all the time — they simply point staff to the system.
This leaves the business owner free to work on the business rather than in it.
Documented systems also create an environment for improvement. It gives staff the opportunity to contribute new ideas and see them incorporated into the system — another motivator and retainer of good staff.
Systems can take many forms — eg, manuals or a web-based method. Web-based methods for many business processes are popular today. They enable owners to run a business remotely when necessary — eg, when on holidays or even just from home.
If a staff member has a question you don’t have to scurry back to the office to explain the answer. You can simply direct them over the phone to the relevant information and talk them through it.
These types of systems are not as expensive as you might think. What price do you put on your own sanity and health?
Any type of system must include a reporting function. This enables the business owner to see the results in order to take corrective action quickly and make constant improvements.
Another benefit of having systems in place is in added value to your business. If you wish to one day sell your business and retire or exit, having systems is much more attractive to a buyer than a business that runs from inside the owner’s head.
• CAD Partners is a team of financial controllers who can review your accounting systems and advise on how you can improve your cash position and profitability.
Go to www.cadpartners.biz.