We’re in business to generate value while making money. We all play a role in building revenue that exceeds our expenses. Look for ways to increase our sales, develop new clients, and control our expenses.
What is profit and where does it come from?
The goal of a business is to make profit. Profit is the fuel that allows us to serve our customers well, to pay our staff, and to grow. The more value we add for our customers, the more profit we can generate. Since profit is the difference between our revenue and our expenses, the only way to increase profit is to increase revenue and/or decrease expenses. Every one of us has an impact on profit and every one of us plays a role in contributing to that profit. Some contribute to profit more directly–crews building the work on schedule and within a specified budget, for example. For others, it’s less direct but just as vital. The more efficiently we do our jobs, the less it costs and the greater our profit. When we do high quality work and beat the schedule, that adds value for our customers. It makes them more likely to do business with us again, thereby increasing our revenue.
Profit is made or lost out in the field where the work is being built. Foreman and superintendents oversee all of our work; its management’s responsibility to get the foreman and superintendents the people, equipment, materials and tools so that the work can be completed in the most efficient manner. It is the responsibility of the field managers to educate their crew on what the expectation of the day, the week, the month, and the company is and what their individual role is in that expectation so that the work can be done as efficiently as possible. When people understand how they contribute, they are more likely to take ownership of their responsibilities.
Plan the work, work the plan!
The old saying of Plan the Work, then Work the Plan is at the heart of the success of any project. The core concepts go like this:
- Having a clear idea in our minds of what “DONE” looks like. This way we will surely know when it arrives.
- Definitive units of measure for tracking progress.
- Units of measure which are meaningful to all participants (especially the customer).
- Keep an eye on the original plan so that when changes happen, we can see how it affects our plan.
What does “DONE” look like?
This phrase has been utilized at CA Murren since 2002. First used by Ron Burkhalter, the beloved Field Operations Manager for the company at that time, its a reminder that we need to develop a definitive description of what the finished product looks like so that we can determine what needs to be done and in what order it should be performed.
The description of “DONE” a the highest level (What does “DONE DONE” look like, another RB phrase) is usually some capability needed by the customer to fulfill the business plan or assigned mission.
What gets measured gets done.
By measuring something repeatedly, we can no longer ignore it. We must take it seriously. Regular measurement and reporting keeps you focused, because you use that information to make decisions to improve your results.
Measuring productivity is important to profitability. It’s intrinsic in all people to know that what they are doing today is actually paying off. The only way we can achieve this kind of insight and transparency is to avidly measure our daily tasks. Once we place a direct value on our productivity, we can shift and change based on the result. When you measure your crew’s productivity and discuss your findings with them, you’re letting them know that you expect them to care about their work, perform it as well as they can, and work toward achieving individual goals that are aligned with company goals.
In addition to revealing how individual employees are performing, these measurements can also reveal where the work flow gets slowed down or stopped due to equipment breakdowns, inefficient processes, poor job training, or lack of communication, among other problems.
Expect Excellence, Contribute to Profit
Do you tolerate poor performance? As a manager, do not tolerate it from your people. As a team member, do not tolerate it from a coworker.
If we expect excellence from ourselves and our team mates every day, and we measure our progress every day, we WILL improve. We WILL satisfy our customers, and we WILL make a profit!
Sounds simple! And it is. There are so many little things that can contribute to profit. It’s the 1% rule that we talk about often with regard to the fundamentals. Just do 1% more than you think you can do, or than you want to do, and you’ll make improvements beyond what you thought you were capable of.