Contractor Tip of the Month: Cause and Effect of Business Results

"Everything affects everything.” At first, that may sound like something Yogi Berra would have said. But these were actually wise words I heard from a contractor friend. I was explaining to him how some of our companies prospered in 2022, while others performed poorly. That is when he told me “Everything affects everything.” The plans you made in the past reflect where you are today.  

I have pondered that thought for a while, and I am convinced he is right. Every action brings about a reaction. Everything is connected. Every decision we make, every strategy we employ, and even the thoughts we contemplate impact not only ourselves but the world around us. In fact, the statement inspired me to write this tip about our adoption of company retreats and how they have positively impacted our businesses.

 A long time ago, I researched what it was that Bill Gates did to drive the tremendous results at Microsoft. Gates said one thing he initiated that had the biggest impact on growth and profits was holding biannual company planning retreats. So, I implemented mandatory retreats more than 20 years ago. To this day, we continue to hold these retreats for each of our companies religiously.  

Like Gates, I like to call these meetings “Retreats” rather than “Yearly Planning Sessions” because they are our retreats from the year-long war. We fight all year long on the (business) battlefield. In the process, we take on casualties. Some people quit, some people get fired, some have issues that are beyond our control. Now, we must retreat from the battlefield, huddle up and plan on how we are going back into battle this year with a strategy to win the fight with the team that remains in place.   

With 2022 now behind us, we have all had ample time to review our final operational results. Reflecting on what went right, what went wrong, and what can be done to improve results in 2023 and beyond is critical. If you have not put together an action plan for 2023, the time to do it was three months ago. But it is not too late to start now. 

Benjamin Franklin coined the phrase, “When you fail to plan, you plan to fail.” That centuries-old wisdom is incredibly relevant when it comes to running a business. The plans you make now will determine the future results at your company. So, if you are not establishing a strategic plan every year, I recommend you start now. A retreat is a good place to do that. 

Here are the critical elements of a successful retreat:

• Attendees: If your people do not know where your company is going, they will not know how to help you get there. Those who hold management positions as well as your movers and shakers who are most likely to affect the future results of your company should attend the retreat. If you are not sure whether a team member should attend, err on the side of caution and include them. They will be grateful for the insight into the company’s plans and will prove valuable should they shift into a leadership role in the future. 
  
  At our construction companies, we include our Chief Executive Officer, President, Chief Operations Officer, Estimating Team Leaders, Project Managers, General Superintendents, Safety Managers, Human Resource Team Leaders, and our Information Technology Team. For a startup company, you may want to include top management, foremen, and even your lead laborers because they are your future leaders. 

• Location: Get off-site and remove the team from the day-to-day distractions of the office, including their smartphones and other devices as much as possible. You need their undivided attention. We find it effective to rent hotel rooms for everyone and hold two-day retreats in the conference room at the hotel.
  
• Provide Social Time: We all know that not all business is conducted in the boardroom. We schedule dinner and drinks with the group on the first night of the retreat. This gives us the opportunity to have more casual conversations so our teams can reflect on the day’s earlier discussions and make plans on how they want to tackle the following day.
  
• Hire a Professional Facilitator: Holding a retreat is demanding because the stakes are high. I recommend you hire a professional who can develop the itinerary and facilitate the meetings. It is hard to listen closely to your team and think outside the box when you are trying to facilitate the meeting yourself, so I don’t recommend that. The facilitator is responsible for structuring the sessions to drill your goals down to simple tasks that can then be assigned to a person who is given a deadline. This year, we also brought in two coaches to observe and confirm that our 2023 plans were structured properly with targets we can hit. 

Here is what you should accomplish during the retreat:

• Assess last year.
  • What went right?
  • What went wrong?
• Discuss lessons learned.
• Conduct a financial review.
  • For the last year
  • For the annualized last quarter 
• Establish your financial plan.
  • For next year
  • For the next quarter
• Discuss hot topics and leading indicators.

During your retreat, once you establish your goals, I suggest you maintain your focus on leading indicators of what you want to see happen. You do this because lagging indicators are the goal itself. This only tells you what you want to happen. 

Leading indicators are the actions you take to ensure you hit your goals. They are established by reviewing your lagging indicators (sales and profit goals) and breaking them down into tasks and actions. Once in place, assign one person (a champion) to each task with a date on when that part of the plan will be accomplished. This ensures accountability, which is important in the planning process. 

Here is an example of breaking tasks down so you can focus on leading indicators: 

If your sales goal (lagging indicator) is $10 million, first determine your bid hit ratio. If it is 10%, you must bid $100 million worth of work to obtain $10 million. If an estimator can bid $50 million of work in a year, you need two estimators. If you only have one estimator, this is a leading indicator that you will miss your sales goal. In that case, you must hire an additional estimator or outsource $50 million of work to hit the $100 million in estimates going out the door. Now that you know you need a second estimator, determine who is running point on hiring for the position and by what date this person will be onboarded. Assigning that task is the first leading indicator that you will hit your overall sales goal. 

I also encourage you to include a question-and-answer session. You need a well-informed team so they can effectively go back to arm the rest of your troops. Have open conversations and encourage your leaders to be bold in trying new things. Make sure they understand that trying and failing is not a problem. However, doing nothing is unacceptable.

There is a consequence for everything we do because everything is connected. That means everything affects your health, everything affects your relationships, and everything affects your business outcomes. Make planning your highest priority because your future will be the product of the plans you make today! 

About the Author
Damian Lang is CEO at Lang Masonry Contractors, Wolf Creek Construction, Buckeye Construction and Restoration, 3 PLS Labor Services, Malta Dynamics Fall Protection and Safety Company, and EZG Manufacturing. To view the products and equipment his companies created to make job sites safer and more efficient, visit his websites at ezgmfg.com or maltadynamics.com. To receive his free e-newsletters or to speak with Damian on his management systems or products, email dlang@watertownenterprises.com, or call 740-749-3512.