July 27, 2009
Editor’s Note: We are fortunate to be able to speak with Steve Subcontractor whose company has experienced tremendous growth and profitability over the last 10 years.
Miller Clapperton Blog (MCB) – Steve, how did your company become so successful over the last ten years?
As you may remember, although it now seems a distant memory to me, ten years ago we were in the middle of the worst recession since the great depression of the 1930’s. While many businesses just cut their staff drastically in a knee jerk reaction to a loss of business, we acted more calmly and did some self examination both within our company and the markets we served. This is what positioned us for the dramatic growth we have achieved over the last ten years.
This examination led us to our successful operational strategy. It was a combination of what we stopped doing, what we started doing and with whom we did it.
MCB – That sounds interesting but you need to tell me more. What did you stop doing?
We used to bid every Project that we uncovered without determining if it was our type of Project or not.
We priced all of our work the same way, not knowing that we were actually more efficient at some types of work than other types of work. It finally dawned on us that if you price everything the same way, you are automatically going to get more of the type of work that you are least prepared to do and less of the work that you are best prepared to do.
Our hiring and recruiting used to be done through headhunters, web-based career sites and classified ads. We learned that it was more effective to keep the industry informed about what we were doing, through: social networking, public relations, blogging, etc. When great people saw that we were doing interesting work, they reached out to us. That has made a great deal of difference in the capability and drive of the employee candidates we have to consider.
MCB – So, those are several interesting things that you stopped doing, what did you start doing that added to your success?
I alluded to some of the things that we started doing when I explained what we stopped doing, after all, every action has a reaction, but there were other things that we specifically started beyond those.
One thing was that we became more structured in our planning. For example; in the past we just kept bidding without regard to our current backlog. We took the approach that we could never have too many bookings and that if we had more projects than we could staff, then we would just work harder and handle the over capacity that we had booked. We decided that this was not a good approach.
In the past, we offered a very narrow range of products and services so we felt that we had to bid everything that came along in case we hit a period when our limited product and service offering was not utilized on many projects. So, we were always chasing the market.
In order to have some control over our ability to balance staff, finances and bookings, we expanded our product and service offering so that we would have the ability to bid until we were full and then slow down, or at least be more selective, with the confidence that we could go get more work when we needed it, because there would be more projects to bid upon because of our expanded offering.
For example: Let us say your firm was a very specialized Glazing Contractor that did Blast Resistant Curtainwalls. There might be a time when there were very few Blast Resistant Curtainwalls. However, when that occurs you could bid normal Curtainwalls or Glazing in general.
Our firm had a very specialized product offering that could have gaps in the number of projects that utilized this type of specialized product. We expanded our product offering and services so that we could expand into more “normal” work if we projected a slow period so that we could at least “break even” for a few months until our major bookings came to fruition and that way we could productively employ our trained personnel during these gaps.
We also sought out additional opportunities in areas where, as a small business, we felt we had an insight. For example; we had a good subcontract Information Technology (IT) technician in years past, but due to mergers and acquisitions we became separated. So, for a period of time we received lousy service from several other IT firms.
This led us to hire the good IT technician as an employee, and since at the time we did not need a fulltime technician, we started an IT business to address the needs of other small businesses. Over time, this business has become larger and more profitable and has kept us at the forefront of IT and that has enhanced our core business in many ways and made us more efficient and powerful with fewer people. It has given us the confidence to automate many processes and made the people we do have more productive.
We also expanded our E-Commerce business. We determined that there were many people and firms that found buying custom construction products to be very inefficient, frustrating and just generally a bad experience. We invested heavily to make our E-Commerce site adaptable for a wide variety of construction materials. And over time, many companies have enlisted our help to sell their products. We took our model from Amazon.com. Their business began as an online book seller but as you now know they have become the 21st Century Department Store.
MCB – You mentioned earlier that one of your Keys to Success was “with whom you did it”, what did you mean by that?
Way back in 2001, Jim Collins wrote a book called, Good To Great. One of the essential elements of that book was that the companies that went from Good to Great embraced a concept of “First Who … Then What”. This meant that if you had the right people in a company; people who were internally driven, willing to work for the good of the organization, even if it meant they would need to sacrifice personally, you could accomplish more. This was due, in part, because these people did not require a great deal of personal management, they grabbed a hold of an assignment and completed it with great zeal and quality of output.
We taught this book within the company and it became a shared vocabulary for our entire staff.
Also, we made it clear to our managers that we expected them to become expert in something that would be beneficial to the company over time. It was not good enough for them to be competent at their assigned positions. The owners of the company expected the managers of the company to be “out and about” within the industries that we served. It was a requirement of the job to become and be perceived to be expert in their field, through; being active in industry associations, speaking at events, consistent blogging, etc.
You will notice that I said the owners of the company expected this, the key word was “owners”, the entire company was comprised of owners because we became an Employee Stock Ownership Plan (ESOP) owned company. This has enabled many of our employees to retire with more than a $1,000,000 in retirement benefits when they sold their shares of the company back to the ESOP Trust, when they retired. The tax benefits that have accumulated over the ten years has also enabled the company to build up reserves so that we are not now as dependent upon bank financing as we were ten years ago.
We have also, become better at researching the firms with which we do business. All companies are not created equal and do not pay as promptly or treat other companies equitably.
In summary, our success is centered on the things we stopped doing, the things we started doing and the people with whom we did these things.
MCB – Steve, thanks for sharing these Keys to Success with our fellow bloggers. I bet everyone wishes they could look ahead at the next ten years and make similar decisions that would lead to similar successes.
Add your thoughts by commenting on this Blog.
Thanks,
Ted S. Miller