Remember the days when you didn’t have to worry about having enough labor to execute a job?
Proposals were signed, projects were planned, and aside from the occasional need to sub-rent a piece of equipment, you were never short on resources to carry out a job. Operations teams had enough people to plan and execute everything in-house, and when things got too busy, the solution was simple: hire more people.
With a fully staffed warehouse ready to be deployed for any job, planning was a breeze. Both sides of operations worked seamlessly around the clock.
Well… that’s changed.
We no longer have steady demand for the pre-defined projects we used to count on for the bulk of our business. That model is no longer sustainable (and it was never the most profitable).
For operations to be successful today, we need to be intentional about how we structure and use our teams. That starts with understanding the real value our people provide.
We often think the ideal employee is someone who will take initiative and handle whatever needs to be done to complete a job.
While that’s a desirable characteristic, there are times it can go too far.
For example, a client recently told me he had to rush out to a worksite to pull his general manager off a job. When I asked why, he explained that the GM had decided to personally help with setup instead of hiring a stagehand — all in an attempt to save the company money.
The GM’s intentions were innocent and noble, but extremely shortsighted. The owner was understandably frustrated. He had to pull the GM aside and reexplain their business model to him.
I imagine the conversation went something like this:
“I understand you were trying to be helpful and save us money, but can you see what it actually cost us? I need you to optimize the jobs we have lined up for next week and the week after. Or update pricing, or interview more project managers. That will help us make more money than the few dollars you saved today.”
While I wholeheartedly agree with the owner, when we consider how quickly our business climate has changed, the GM’s response isn’t surprising.
Most companies today are operating with leaner teams. They’ve learned it’s impossible to maintain their pre-pandemic staffing levels. It’s no longer required (because of lower demand for traditional services), and the overhead simply isn’t affordable.
They’ve decided to cut back on staff, but they’re struggling with how to use the staff they’ve held onto.
When a job comes up, they’re worried about not having enough resources to execute. Because of this fear, they use their planning resources for execution. But since the team is busy executing, they’re not optimizing their resources and planning ahead.
The truth is, execution is easy. Planning is where the real work happens.
In this example, the limited amount of full-time personnel caused the GM to forget where he provided the most value. He forgot that his real job is to plan the next job — not to execute a job that someone else could easily do.
It’s like the classic solopreneur’s dilemma, where an independent owner spends all their time and energy on marketing and sales. When they finally sell a project, they then shift all their time and energy to fulfilling that particular job.
The problem, of course, is that when the job is finished, no more jobs are in the pipeline. The cycle has to begin again from the start — which drastically limits sales.
Similarly, when our operations teams are smaller, we tend to use our limited resources to handle both the planning and the execution. We expect Ops to carry out the same roles they did when the teams were larger. But that’s unrealistic.
As soon as staff members shift their attention from planning to execution, they’re no longer optimizing, and the efficiency of the entire operation suffers.
Stop Adding Unnecessary Overhead
With the unpredictable nature of jobs in our current business climate, 100% of our overhead should be dedicated to acquiring and planning future business.
Unless you have steady executable business, there is no reason to have anyone on your team whose only job is fulfillment.
In this model, all internal Ops resources — like project managers, lead technicians, SMEs, even your salespeople — are necessary overhead. These are the most valuable roles in your department because these are the people responsible for planning and acquiring business.
For everything that’s not planning and acquiring business (i.e. execution), we turn to outsourcing.
This may be a tough concept to get on board with. And I’m not suggesting you should rush out and fire half your team right now to adopt this model. We love our employees, and every company has unique circumstances that may justify keeping several execution-focused team members on board. (Though I would suggest transitioning them to more of a planning role as soon as possible.)
But at the very least, we should stop adding unnecessary overhead, like hiring full-time positions with unjustifiable salary.
While this is certainly true now, it was also true before the pandemic. The only difference is, it was easier to get away with it then. In those days, sales forecasting was easier, and we could simply look ahead to the busiest month of the year and hire enough staff to get through it.
It was great for those busy months, but for the rest of the year, we were saddled with unnecessary overhead. To afford to pay our bench, we forced ourselves to take lower-margin jobs just to keep everyone busy.
And it was killing us.
Now, we have an opportunity to act differently. We can use our overhead to pay for the positions that hold the most value, like planning and acquisition. When (or if) steady demand returns, we can modify. Until then, staying profitable in our new climate depends on our adopting a new strategy.