Custom builders are project-oriented thinkers. And well they should be, since their primary task is moving a series of projects from start to finish. The one continuous aspect of the job is building and running the business itself. But even in this, custom builders tend to divide their work into discrete missions. So when we asked a handful of our readers to describe their highest-priority management project for the upcoming year, they knew just what we were talking about. As we expected, the projects that occupy their respective front burners reflect to some degree the size and type of their companies. What surprised us was how many could be filed under the same heading: Balance.
For Drew Maran, who runs a relatively small custom building company based in California’s Silicon Valley, the issue is balancing project management between the field and the office. With a total staff of 10, Maran employs three foremen and three project superintendents. On the large, detailed projects that are the company’s specialty, this relatively administration-heavy arrangement has worked well. But a continuing recession in the local high-tech sector has spurred Maran to expand his territory to include San Francisco and other Bay-area markets. In the process, Maran says, he is adjusting to—and learning from—a whole new set of competitors. On some projects the company recently bid, he says, “We’ve been told we were lower on construction costs and higher on administrative and management costs.” Partly in response to such feedback, Maran is shifting the mix of management tasks between the field and the office. “We’re looking for foremen to take on more [administrative tasks] and getting superintendents to take on more than one project.” Maran says his staff supports the change, which he hopes will also lighten foremen’s loads by shifting the management of subcontractors to the office. “We look for that sweet spot,” Maran says, “where we can really monitor our projects, but not be so overhead-intensive that we price ourselves out of the marketplace.”
Maran is still shaping a relatively young company. Mark Richardson, president of Case Design/Remodeling, runs a company that is nearly as old as he is. Founded in the early 1960s, when high-end remodeling was something of a novelty, Case later launched separate divisions to handle kitchen-and-bath remodeling and handyman projects. More recently, Richardson established a national franchise network of Case handyman companies. So when asked about his top-priority business initiative, Richardson might well ask, “Which business?” For his core business the goal is simply to keep the ball rolling. “Top priority with design/build—and this is not anything hugely sexy—is maintaining our momentum,” Richardson says. With systems refined over some four decades, “You tend to be more focused on maintaining momentum and not necessarily reinventing yourself. We’re expecting 10 to 15 percent growth in 2005.”
Richardson will devote his energy instead to fine-tuning the balance between his divisions. Case’s local handyman division, he notes, does more than diversify the company. “It builds client base.” From that steady flow of small projects, “You’re going to get a certain number of large-scale projects that flow across.” In order to generate a sufficient number of leads to keep the design/build remodeling division growing, though, “We need to have a high level of growth in handyman. The ultimate goal is to grow, but we watch how we grow very carefully in regard to the blend.” Managing the blend takes a keen eye for market conditions, and experience helps there too, Richardson says. “When a business becomes more mature, you’re more adept at predicting things. It’s sort of like the weather.”
Peter Taggart’s top priority is balancing in-house labor with work done by subcontractors. Until recently, the Freeport, Maine, custom builder favored doing as much work as possible with his own staff. Taggart Construction, a $3.75 million company, employs 30 people, 20 of whom are carpenters. “Having employees is a better way to control quality,” says Taggart. It makes projects run more predictably, too, “Because they’re going to show up.” The problem is, Taggart says, “It’s just so damn expensive. My worker’s comp bill this year is $85,000.” Subcontractors bring their own set of challenges, Taggart admits, but when their job is done, “They’re gone. Your costs are zero the next day. It’s easier to fix your cost if it’s subcontracted.” A tight local labor market also works against the employee-based model. “There are fewer and fewer young people coming into the trades,” Taggart says. His current pet management project addresses both of these problems by shifting to a different model: “Supporting, retaining, and growing middle management,” which will form the backbone of a leaner field operation. Rather than with a full crew, Taggart will staff sites with “a super, a couple of really good guys, and a laborer,” hiring subs for carpentry jobs such as hanging doors and building stairs.
The balance Greg Graham is working to improve is between the hours his people work and the revenue his company earns—productivity, in other words—and he is doing it by tightening up his scheduling. Graham’s focus on the calendar grows out of a shift in his perspective on profitability. “We are transitioning from looking at return as a percentage of gross or a percentage of cost to looking at return as a percentage of a pivotal resource, and our pivotal resource is lead carpenter/supervisors. We have seven of them. If we take our annual overhead in dollars per week, we can come up with a figure for how much each one needs to produce to cover our overhead.” Measuring his revenue stream in this way, Graham has come to realize two important things: “Every job that runs a little long is a stinker. And it’s an industry standard that every job goes a little long.” The slippage can begin even before the project breaks ground. “The corollary to Murphy’s law says that in the week before that date there will be a flurry of activity”—more than can be handled in that short span of time—“so every job gets off on the wrong foot.” Graham has set for his company the goal of having jobs “signed, decided, and in the can a month or two months before we start … and that really goes against human nature.” If he can prevail, however, his crews will have ample time for permitting, ordering long-lead items, and scheduling subcontractors. After getting jobs off to a clean start, Graham will keep the pressure on his superintendents with a scheduling spreadsheet he designed, “making it a matter of religion that it gets gone over and adjusted each week.”
Four builders, four businesses, four diverse projects to achieve balance in the coming year. Chances are, you have a similar project or two of your own under way. If not, take a look at your company and ask yourself how it could be better balanced. It may be difficult to find time between the projects you build for clients to conduct one of your own, but it is well worth the effort. And now is a perfect time to break ground.
What is your highest management priority? What other questions would you like to see probed in this department? The editors of CUSTOM HOME would like to hear your thoughts. Send your comments to Bruce Snider at bsnider@hanleywood.com.
