"Metrics for Managers"
TO PREDICT PRODUCTION & PRICING
“I don’t believe in loss leaders,” said Hikel. “I believe in making money on everything we do.” That philosophy requires a lot of measuring. Hikel collects real-time data so he knows the precise cost of each truckload that leaves the plant. Then, he said, “we spend a lot of time and money on getting the report card when that job comes in,” so he can compare actual costs to predicted costs, adjust future bids accordingly, and guide his sales team toward the most profitable products and services.
Holland, too, puts resources into post-production data analysis, ensuring that his job-specific price estimates get better and better over time. However, he emphasized that what you measure depends a lot on your particular operation. For example, he said, “carrying costs are something we don’t measure as carefully as he could.” It’s just not really an issue for him at the moment, so it’s not something that he puts time and effort into tracking closely. That doesn’t mean it falls off the list of things he could track in the future.
“It’s becoming much more important,” Holland acknowledged. As the industry picks up, quick project turnover becomes essential and product storage becomes a bigger and bigger issue. “Profit matters,” Holland said, “but cash flow matters more.” Those are his words of wisdom for those facing the happy challenge of rapid growth.
TO CULTIVATE CUSTOMERS
Another good reason to crunch numbers on every job is to make sure you’re working with the right people. One attendee of Hikel and Holland’s talk shared that his data collection efforts had both boosted his profits and cut his customer list in half—and that was great. Hikel agreed that a smaller, more profitable customer base is best. Any business has three options, he said, when it’s “losing the war” against stagnation and shrinking margins: “lower the cost, raise the price or fire the customer.”
If you’re not ready for the last option but feeling, like one session attendee, “a lot of pain and suffering” due to unreliable shipping schedules, there are interim steps. Barry Dixon, CEO of True House, spoke up from the audience to say that doing his own analysis of builder turnaround data had improved communication. His studies allowed him to call customers and say with confidence, “you’re giving us too much.” He could spot when the shipping dates they requested were unrealistic based on their historical construction schedules. Dixon could also issue warnings as needed, letting customers with slow schedules know “we’re going to sell this capacity,” when it was likely that holding their spot in the production line would mean passing up a faster or more profitable job.
Hikel iterated that reliable data and good information are the basis of a strong customer relationship. Knowing precisely how long it will take his crew to build a customer’s trusses, Hikel said, means he can “have two full-time people calling customers and asking, ‘Do you need them?’ Because if you don’t need them tomorrow, I’m not building them today.” The audience chuckled, but Hikel was serious. The crux of just-in-time production, he says, is knowing who needs what, when. First, measure and analyze your operation. Next, figure out which customers add to your supply of reliable data.
TO EMPOWER EMPLOYEES
Meaningful metrics can improve employee management, too. Still, it’s critical to collect the right data at the right time from the right people. Jason Ward, director of environmental health, safety and security at California TrusFrame (CTF), took the microphone during the Q&A portion of the session to explain how a system of tracking safety incident data never worked as intended. That type of benchmarking encourages underreporting of safety violations. Instead, Ward said, CTF crews submit reports of near misses with the option of anonymity. Management gets the metrics to improve production safety, and employees get the satisfaction of initiating change. “They feel empowered,” Ward says.
Hikel and Holland provided another example from the employee management side of data collection, emphasizing that profit losses are often the result of employees not having the time to do their jobs correctly. Hikel explained: with his team of 14 designers, he could give the same project to each of them and see 14 different designs. “How does my design manager herd the cats and make them design the same all the time? The answer is he can’t,” Hikel said. And he shouldn’t. Different doesn’t mean some are good and others are bad. What it does mean, said Hikel, is that designers have more control over a plant’s profitability than anyone else. For him, it means that designers are the ones to do the estimates, because they’re the ones controlling the margin.
Holland echoed the importance of tracking the numbers that indicate you’re set up for success, even if those aren’t the easy figures to come by, like wages paid or projects designed in a given week. When a single bad decision can cost so much, Holland says, designers’ skill and knowledge is a far more meaningful metric than time spent on a project.