The Just Rewards plan for us has been a tremendous success and we’re thankful for your guidance in developing and deploying it…
We’re very close to having numbers for next year's plan and would like to engage with you to do the presentation. We have a number of new employees, so the presentation should be similar to last year’s with introduction, definitions, goals, etc. and you did a great job with it, so we’d like you to present the new numbers.
Kevin J. Mauger
President - NCC Automated Systems, Inc.
Babcon Incorporated Electrical Contracting has grown over the last seven years due in a large part to the leadership of Doug Phelps. Management Consulting for Contractors’ unique package of accounting and management tools keep our Company focused and moving forward.
Doug has shown us the value of accurate job costing, adequate billing, and forecasting. Using his approach, Babcon Inc. has made planned growth and become a strong Company.
I would recommend Doug Phelps and Management Consultants for Contractors to all who ask.
Rick Babuka President - Babcon Inc.
There are parts of this business that absolutely suck—like fighting for legitimate change orders. There are times that project designers expect us to read their minds and be the “experts” and that we should know the intent of their drawings. Yet, they won’t attach any value to our acquired expertise and often want it for free. I could say much more, but if you’re a non-residential contractor, you already know what I’m talking about.
Now, there are also parts of this business that I absolutely love. I love watching my management team stretch their abilities and achieve goals that they wouldn’t have believed could be attained two years ago. (Even I didn’t think some of our recent achievements were possible.) I love the fact that the success of my company does not rest solely on my shoulders. Even in today’s tough economic environment in Central Pennsylvania, I have tremendous confidence in our ability to succeed.
I have to admit that I probably would have never taken the effort to do this annual forecast if it had not been for Management Consultants for Contractors’ bonus plan. The goal-driven bonus plan forces us to do this sound business practice. I firmly believe that there is as much value in the business planning that goes into our bonus plan as the bonus plan itself. The bonus plan seed has sprouted a very different company culture. There is better direction. There are more controls. There is a higher sense of urgency. My management team and field employees understand that they are responsible for the successes. It’s a wonderful feeling!
Now, if I could only figure out what to do about incomplete plans and specs...
President - Leer Electric
A Client Story
I have been on an adrenaline rush for the past two months. We have been selected to install the roofing systems on The Smithsonian’s new Air and Space Museum. This is by far the most exciting job we have ever undertaken, and it is one of the most prestigious projects to occur in the Washington, DC area for the past several decades. It is a complicated roofing project, but I am very confident that we can handle it and even make a reasonable profit on it.
I don’t know that I would have had the courage to undertake such a technically complex project three years ago (this building is a giant hangar that is all roof on the exterior). However, a lot of positive things have occurred at Pioneer during the past three years. I felt now was the time to go after this challenging job. I would like to share some of the key things that have happened at Pioneer since 1998.
Three years ago, I felt like we were almost treading water. We began to job cost about a year before that, and we could tell that we kept making similar production mistakes and we were consistently running 10% over on the estimated hours. I thought an incentive program would be the answer so I devised one on my own, but it actually demotivated many of my workers. I dropped it right away, but the message that the field got was that the management team didn’t follow through on things. And then one of my roofing friends from Pennsylvania told me about their bonus program that was designed by a guy named Doug Phelps from Management Consultants for Contractors.
Doug came to our office and described his bonus concept. I liked his ideas right from the start. Doug suggested that he conduct a confidential survey of our employees and after seeing his report of their responses, I decided to hire Management Consultants for Contractors to design a bonus program for us. We had to do things differently.
And different they are. The bonus program is driven by an annual forecast of how much work we can do, how much it costs (direct and indirect costs) us to do it, and the gross profit (which we now call gross margin on Doug’s advice) that is left over when the jobs are complete. We have an annual gross margin goal that the company must reach before we distribute any bonus money. What I like the most is that the gross margin goal protects my profitability and everyone in the company participates at some level if we reach our goals. It’s win-win. As we exceed the goals, the bonus payout grows, but so does my bottomline.
I soon discovered that we got more than just a bonus program.
Doug reformatted our monthly profit and loss statements so that they are more reflective of how we are operating. It is a useful business tool now.
The annual sales and income forecast establishes our goals each and every month. It also enables us to determine the appropriate mark-ups to recover our indirect costs and overhead expenses. We know our break-even price on every bid.
We now monitor our backlog from a financial aspect. In fact, we project out our sales and gross margin backlog each month to get a good picture of how the year is unfolding. I have a pretty good idea of how much profit we will make 3-4 months before the year ends. We have taken more control over our destiny.
My field team feels more a part of the company. We are more open and share a lot of information about the company. We have reached a higher level of trust with each other.
We conduct periodic company wide meetings. We show the results of our combined efforts as well as individual jobs. This gives us an opportunity to recognize our achievements or collectively learn from our mistakes.
Job costing reinforces the value of preplanning. We are becoming more disciplined since the results of our efforts, or lack of, are measured each and every job.
We are more goal driven and try to take corrective action instead of just letting things happen.
This is our fourth year of the bonus program. We raise the bar each year, and it looks like we are going to exceed our goals again this year. Over the past two years, I have paid $250,000 in bonus money to about 40 employees, and I was happy to do it. Oh, by the way, we no longer have that 10% spread between estimated hours and actual hours. We are right on at the end of the year.
The company’s overall environment is just better. While morale ebbs and flows, I think the peaks are higher and the valleys not so deep. As for the adrenaline rush, I hope it never ends.