It's 10 a.m.
Do You Know Where Your Company Is?
The report recaps the performance figures of the previous day to McGuire and his five managers. Although the report is set up as a spreadsheet, if McGuire and his managers are not in the office, it's transmitted as a text message over their individual cell phones.
“I never felt comfortable not knowing what was going on,” McGuire explains, before he started the daily report. “The office would go quiet, and you'd realize the phone stopped ringing. I had to know what was going on.”
In addition, the daily report is tied into weekly and monthly accounting reports. For McGuire, the frequency of his company's reports not only satisfies his need to know what's going on now, but also frees him to concentrate on the strategic direction of his company.
“Reporting is one vehicle that helps transform my working in this business to working on it,” McGuire says. “I feel obligated to be here, but I also know that stagnates growth. My first step toward freedom was admitting to myself that I wanted to get out more.”
By “out more” McGuire means helping other contractors improve their businesses. The company was a founding member of Contractors 2000 in 1992, and McGuire has been active as a business trainer, teaching at the organization's Boot Camps and speaking at Super Meetings.
“Just knowing the P&L is in order allows me to feel comfortable about leaving the business,” McGuire explains. “You have to want to let go of the operational details. Then you can look at your business from a different point of view and, likely, better your business. Growth will naturally follow.”
McGuire & Sons, founded 26 years ago, serves the Minneapolis-St. Paul area with a 13-truck operation, generating $4 million in annual sales. Growth has been on a fast pace for several years, and that fast pace means that the growth has been a joy and, at times, a white-knuckled bobsled ride.
“Growth adds staff,” McGuire says. “Responsibilities shift and evolve. But I wasn't going to let growth undermine the operational detail we all needed to manage the business.”
The daily report is called the “Red Tie Report.” A red tie has become a company symbol of McGuire & Sons, representing professional service to its market. The dispatcher gathers information from the service techs through the course of the day. The next morning, the dispatcher prepares and delivers the report. It summarizes sales performance, as reported by each technician, the day's billable efficiency, how many techs were working and average drive times.
“We use the information to manage our people and our operations,” McGuire says. “If you have 10 techs and they worked a total of only 60 hours, you need to find out why. Most of the time the answers are: it was slow; one tech went home early; or the weather turned nasty. We are driven to find out what happened. We are always asking ourselves what we could have done to fix or improve a situation.”
The need for more than the traditional monthly reporting system grew evident when the company implemented flat rate pricing. The pricing system is based on assumptions - assumptions have to be checked and monitored for accuracy.
“Monthly reports were spread too far apart to manage operations and monitor our assumptions,” McGuire adds. “I needed daily information. From the beginning, I could see trends in the stream of information. So I started zeroing in on what was important for me and my business. We all slept better at night after that.”
Billable EfficiencyMcGuire's reporting system helped drive the company's billable efficiency consistently into the 70 percent range. The Contractors 2000 average for a company this size is 57 percent.
“Billable efficiency is king here,” McGuire explains. “If my techs' billable efficiency is at 70 percent or above, everything else is going to work. Our selling price is based on 70 percent efficiency. If techs are selling enough hours, our P&L will look great.”
Two factors have helped improve overall efficiency. Dispatchers, for one, play a vital role in keeping billable efficiency high. They must know the talents and capabilities of each technician. Sending the right tech to the right job can make or break billable efficiency.
To this end, McGuire found dispatcher training contributes directly to the company's bottom line. “The dispatcher has to assess the needs of every job and pair it with a tech who can efficiently accomplish the task. The dispatcher also has to be familiar with the city to help techs find the quickest routes from job to job.”
This knowledge becomes all the more critical when the Twin Cities experiences bad weather conditions. “Our efficiency tanks when we get heavy snow, but we try to improve our procedures even under these adverse conditions. We have managed to cut drive times to an average of 20 minutes from job to job.”
Allowing techs latitude in flat rate pricing is another way the company has improved billable efficiency.
“We put a code in our flat rate books that identifies how long each task should take,” McGuire explains. “The tech can assess the time a task should take from our code and if he sees unusual circumstances, he has authority to increase the quote to his customer. So we train our techs how to analyze tasks and correct the flat rate price to fit the job.
“The book is only a guide. If a task is going to take longer, they have to know that. Time-coding our price books helped improve our efficiency. The results of the decisions our techs make show in our reporting systems.”
Verification ReportingIn addition to the daily Red Tie report and regular monthly reporting, McGuire also saw a need for checks and balances.
Last year he asked his staff for a weekly “Jack Stone” report. Jack Stone is a popular children's hero figure, best known for his motto: “Can do. Will do. Done.” The report is generated by the company's controller to provide accounting's interpretation of the past week's numbers.
“The daily Red Tie report is a snapshot of what's happening from the dispatcher's point of view - they are not proven numbers yet,” McGuire says. “The Jack Stone report is the accounting report on everything that happened the past week.”
The two reports run pretty close to one another, but will vary at times from 5 percent to 15 percent.
“We examine these reports to improve and manage operations,” he says. “They have been great coaching tools for all levels of the company. If you see something that needs correction, correct it. The frequency of these reports allows us to respond to situations quicker, often catching small problems before they fester.”
McGuire saw three obstacles he had to overcome for this weekly report to happen. “Sticking to it, being consistent and coaching people that they could do it. At first, I just asked if I could get a report like that. We all agreed the report was needed and could become a weekly routine. We also agreed on Thursday as the day the report would be due. In time, I asked if it could be delivered on Wednesday. We have progressively worked the delivery of the report to 10 a.m. on Mondays. Can do. Will do. Done!”