There is a negative side to great culture?
In all the books that I have read, all the articles on line and in the media tell us that the companies that succeed are the ones that take care of their culture first and foremost. The importance of having everyone within the business singing off the same song sheet and having them all truly aligned is the key. Personally I think this is right but as with everything else in life if culture is at the expense of all else the business may find itself in trouble, let me explain.
Bob (not his real name) is a builder (that bit is true!) and has strived for years to develop a health family orientated culture where his employees actively help each other, they love their clients and will do anything for them too. Over the years the company had also built a great reputation for being a brilliant company to have build your building, they were easy to deal with and flexible in their approach, if you wanted changes done throughout the project it was never a problem, they pretty much did whatever the customer asked of them to keep them happy and they also got the customer into their building on time and here lay the problem.
The problems started when their bottom line wasn’t looking as healthy as it should have been but no one in the business initially had the answers as to why. They looked at certain key areas in the business that directly impact on the bottom line; they checked their quoting to make sure they were charging enough – they were, they checked their cost of materials to ensure they were still getting the same margins – they were and they checked their man hours on the job to ensure their labour was not blowing out unfortunately this is where they found the real problem. Almost everyone on site held the company culture, doing what you can for the customer and make sure they are in on time but the company found that some of their processes around recording extra work (what they called variations) was not robust enough and had no set practice around these to record them. There was profit leakage on an inconsistent basis going on throughout the company, the foremen that were more systematic in their approach had their own ways of recording variations but those that did not have this approach more often than not failed to record enough information to charge the customer and there lay the problem.
Know Your Numbers
The outcome to this problem was to have two sets of metrics:
- Introduce the Net Promoter System to understand how happy the clients were with the build and the project management around it.
- Introduce a weekly building project report that covered off the percentage of the job complete until the move in date, percentage of man hours used versus the budgeted amount and the number of variations identified and added to the total project hours.
This two pronged approach meant that Bill had continuous data on how happy his clients were and he was also able to make key decisions around allocating his staff across all his projects to ensure they were not blowing the bottom line, the outcome of which added 8% on to his bottom line in the next financial year.
It’s great to have a healthy culture, in fact it is the only way to grow your business but you must make sure you have a handful of metrics that you fanatically focus on to ensure other parts of the business stay just as healthy as your culture.