Masonry Magazine December 2016 Page. 49
ontractor Tip
I
fthe
I By Damian Lang
Know Your Target and Set Expectations
for Your Team to Hit It
Have you ever searched for some�thing, not knowing what you were look�ing for, and found it? No? Me neither.
That question would seem silly to a lot of people, but it's not sillyto contractors. Unfortunately, most contractors have their team aiming for an unidentified tar�get -expecting them to hit it without first setting clear expectations of what the target is.
How about your team members? Do they know and -better yet -un�derstand the targets you set in order to achieve your goals? Or are you allowing them to just do the best they can?
If it's the latter, you have a problem, but it's a fairly common one.
A contractor recently asked me if I would help him design an incentive plan for his team. I agreed, and the first thing I asked was what his total sales goal for the year was. He answered that it was around $10 million per year. My next question regarded his gross and net profit goals, and he had no clue as to an answer. In fact, his response was, "If I could figure that out, I could tell my peo�ple what I expect. However, I just don't know what I want. What should a con�struction company earn as a net profit?"
That might be the problem, right?
I continued by probing into what his net profit is currently. "We work on real�ly tight margins. I think it's somewhere around 1 percent," he replied. I went on to explain that construction compa�nies doing under $100 million in sales per year average around 2.5 percent net profit, which I don't believe is enough. Then I asked him why any of us would risk everything we have, year in and year out, for that or less.
I could see from his expression that my points were starting to sink in.
I told him I could relate to his situation. In all honesty, his situation sounded a lot like my own several years ago. I would cheer my people on, telling them that we just needed to do the best we can. And guess what? They gave me about 1 per�
cent net profit on average, just like this man was getting now.
Luckily, I hired a consultant back then who asked me some of these kinds of questions. I explained to him that I never knew my net profit goals, but between all of the companies I ran, I generally earned around 1 percent. "Aren't meager earnings okay when you are growing as fast as I am?" I asked in excitement.
The consultant then asked me, "Re�ally? Growth with little to no margins is what you're looking for? Why would you risk everyt_hingyou have, yearin andyear out, for virtually no return?" After think�ing long and hard about it, I decided I would no longer do that.
Later that year, I hired that same con�sultant to facilitate our annual retreat. What I came away with was nothing short of astounding. Instead of setting only total annual sales goals (without taking gross and net profit into the equa�tion), I drew a line in the sand.
I explained to my team that no man�ager in any of our companies would be allowed to set total sales goals without tying them to a minimum 6 percent net profit. The gross profit goal would also be set at the percentage it took to hit the net profit goal. The bottom line, I explained, was that from then on, each of our companies must earn 6 percent net profit per year, or we would have to change management or strongly consid�er shutting the company down.
Sounds easy enough, right? Wrong.
After the retreat, I found that I had frustrated some of the managers with such a high target compared to what we had been used to. In fact, the general manager of one of my companies came to me and asked why I was requiring his division to deliver 6 percent net prof�it, when I had a couple companies that were actually losing money. I told him that all companies were now required to hit 6 percent or face changes, as I could no longer risk everything I have for such narrow margins.
I could sense his continued frustra�tion, but remained true to my recent con�victions. Guess what happened next?
The next year (and for the first time in the five-year history of that division), his company was pushing up against 6 per�cent net profit and has averaged more than that ever since. As for the compa�nies that he was referring to that were losing money? Well, two of them were shut down when they didn't hit the new 6 percent threshold. And the other two companies just got better, both averag�ing over 6 percent net profit over the last few years.
It's amazing what happened psycho�logically to my team when they knew exactly the target they were expected to hit. They changed bidding strategies, they changed delivery methods and they changed their expectations of their own reports in order to hit the desired target. They lived and breathed by the expecta�tions that had been placed upon them.
So, what are your expectations?
Decide, and set yourtarget now! More importantly, ensure that your people know what the target is. With a target to aim for, and expectations set to hit it, you'll be surprised at how much your team can achieve.
Damian Lang owns and operates several companies in Ohio. He is the inventor of the Grout Hog�Grout Delivery System, Mud Hog mortar mixers, Hog Leg wall�bracing system, and several other labor-saving devices used in the construction industry. He is the author of the book called "RACE�Rewarding And Challenging Employees for Profits in Masonry." He writes for Masonry Magazine each month and consults with many of the leading contractors in the country.
I All rights reserved,C 2016 Damian Lang, President of Lang Masonry Contractors, Inc., and EZ Grout Corp. 46 I MASON RY � December 2016 � www.masoncontractors.org The Voice of the Masonry Industry