A construction company lays a foundation for increased productivity and profitability.

Specialty construction company had grown to $3 million-plus in sales, but had no control over operations, material costs, and general and administrative expenses—resulting in yearly losses of $400,000.
Company’s owner worked in a control mode without leading, resulting in chaotic, reactive approach to sales and zero accountability.
Focus on quality and service was unsupported by value-based pricing, with lack of detailed job costing, inadequate project management and poor morale costing the company approximately 5% of revenues on a yearly basis.
Insights & Opportunities identified owner’s lack of management and leadership, and how these deficits drove organizational and operational problems.
Owner and employees accepted AMS findings, implemented recommendations and have laid a strong foundation for increased productivity and profitability.

Overview

The business, a specialty construction company, had grown to over $3 million in sales, but without establishing financial controls for estimating, tasks, material costs, quality control, or general or administrative expenses— resulting in average yearly losses exceeding $400,000. Most sales came from referrals, with no clear definition or accountability for profits within the sales function. Faced with the prospect of mounting losses and no clear path forward, the owner retained AMS to help save the company. Our Insights & Opportunities report found the following:

The estimating process lacked clarity and detail—customers typically bought with the expectation of receiving “x” in price and service, but received “y,” with a higher price and less service.
Although the company focused primarily on quality and service, it failed to place sufficient value on either, consistently losing profit.
Task applications lacked accountability, so there were no consequences for overruns, poor execution or waste, resulting in runaway COGS.
Lack of detailed job costing, inadequate project management and an overall indifference to quality cost the company an average of 5% of sales annually.
In many cases, management and office personnel had overlapping responsibilities and tasks, resulting in duplication of effort and making it difficult to identify problems.
Poor workmanship frequently delayed project completion and affected revenues by requiring discounts and additional man-hours to correct problems.
The owner drove the organization, with responsibilities in every department, for overlapping areas of responsibility, redundancy and confusion; meanwhile, the absence of positive reinforcement, constructive criticism and simple leadership eroded morale and a proactive attitude among the employees.

Challenges

Like all small businesses, this company was in no position to stop work while it addressed various life-threatening issues. AMS advisors had to work alongside the company’s owners and employees, swiftly building the trust that would lead to open, honest communications. The owner had to accept our explicit critiques of his deep-seated beliefs and management style, while he and his employees learned to hold themselves accountable for their actions and began to work as a cohesive unit.

Solution

With the Insights & Opportunities process complete, AMS had the buy-in it needed to revamp the company’s processes from start to finish, using a planned, strategic team effort. Over the next six months, AMS advisors drove the following changes:

Created a more detailed estimating process.
Realigned the owner’s focus from supervising internal operations to top-line growth, driving existing sales and developing new sales opportunities.
Streamlined management and office responsibilities, for more accurate monitoring and greater accountability.
Developed cost controls and project management tools—insisting on employee accountability recaptured the 5% ($150,000) in annual sales previously left on the table.
Developed a customer service program for office personnel, to resolve problems quickly and cost-effectively.
Developed a training program to introduce new employees to the company culture, values and quality standards, along with a zero-tolerance approach to poor attitudes, unacceptable workmanship and lack of focus.
Developed an incentive program tied to productivity, rewarding employees for completing work below project cost and encouraging quality.

Results

As previously noted, these changes occurred through a genuine team effort, with the company’s owner and new team leaders making adjustments on a daily basis, with guidance and assistance from AMS advisors. The company became profitable within three months and has built an accountable management structure and a company-wide, solution-driven mindset.

For more detailed information on this case history and its relevance to your business, contact Fred Rappaport, AMS CEO, at 843.422.1610 or email.