Finding An Edge

There’s an old saying that what people don’t tell you is more powerful than anything they do tell you. Recent decades have brought us information systems that produce voluminous reports, which unfortunately then sit on shelves or are used only by accountants to file tax returns. What is missing in many companies is a two-way street where information flows between management and employees. Each side withholds from the other critical information that could make both groups and the organization much more effective.

Employees deserve credit

Employees need information to do their jobs. First, they need to see the big picture of the enterprise and how their work contributes to the achievement of company goals. Managers often underestimate employees’ intelligence and their ability to understand the context of their work. They set a deadline for employees without telling them how meeting it impacts the entire project or affects the ability to get repeat business from the same customer. As a result, employees aren’t particularly motivated and may feel like the manager is just picking on them or driving them too hard for no good reason.

Next, employees need to know what’s expected of them in terms of individual and team performance. What rewards can they expect for meeting or exceeding expectations, and what are the consequences of underperformance? In the absence of accurate, candid and timely information, employees speculate or make the wrong decisions based on assumptions. Rumor mills get started because people don’t have the truth on which to form accurate views and take the correct actions. Such misleading information distracts employees from their work and causes morale problems.

When management does not share information, employees reciprocate by withholding information, too. For example, someone makes a mistake or gets behind schedule, but is afraid to tell the supervisor. Then, by the time the problem is discovered, it has become much more difficult to correct. Timelines and budgets are not met, and customers become unhappy.

On the flipside, employees who see an opportunity for cost reduction won’t bring it to management’s attention in an environment that doesn’t encourage information sharing. They think their ideas are unwelcome or fear being perceived as a “corporate do-gooder.”

Either way, the company is missing out on actionable information. Owners and managers don’t know what they need to know right now to stay on track.

The circle of information

Management needs three types of information:

1. Real-time, actionable, accurate, complete information on costs, particularly labor and materials. This is the most critical information required. While good accounting and scorekeeping are indispensable, elaborate accounting systems have limited value if only accountants understand the data and only use it to file tax returns and compliance reports. This problem is exacerbated in large companies whose complex financial accounting systems produce volumes that nobody reads.A typical profit and loss statement, for example, may show a logical pattern for an accountant, but it doesn’t paint a picture for owners or managers so they can run the show. Why is there no money left at the end of the day to put in the bank when the trucks return from the work sites? Don’t look at the profit and loss statements to find the answer. It says nothing about time, cost and materials.
2. Real-time, accurate information on project progress, including immediate intelligence on problems and mistakes. One of the biggest mistakes contractors make is to track their labor with an end-ofthe- week labor report. On Friday, no one can remember what particular tasks they executed on Monday between 8 and 9 a.m. or between 2 and 3 p.m.
3. Information on the external environment so companies can be proactive rather than reactive. External information includes macroeconomic trends as well as trends in customer interest. What do customers really want?External information meets internal information when customers sign up for services. Everything the company does for the customer from here on out begins with the exchange of accurate information between customer and contractor. What does the customer expect and what did the company agree to do? Once that’s established, it has to be translated into clear, actionable information for employees so they can fully understand what’s expected and work accordingly. This loops back around as employees communicate progress on the project each day until the job is complete. Finally, customer satisfaction reports close the circle.

Let’s talk

Communication is essential to the exchange of information and a prerequisite to building a strong team. Poor communication leads to incomplete, inaccurate and misleading information.

Sometimes companies rely heavily on data from information systems and forget personal communication. A healthy daily dialogue has to occur among managers and between management and employees. Talk to employees and tell them what the expectations are for daily or hourly time frames. Weekly expectations are not enough because by the time management knows a weekly target was not met, they’re already out of the ballgame.

Establish a scoring system that immediately shows whether the work is on schedule and budget or off track. If employees don’t complete the scheduled tasks by the end of the day, for example, they need a vehicle to communicate the lack of progress and explain why the target was missed. If management knows expectations were too high or materials arrived damaged, they can be proactive about avoiding those circumstances in the future. If they don’t know what caused the problem, it’s likely to repeat itself on the next job.

In addition to regular, candid communication, an incentive plan also can tell employees that what they do matters. If they complete a job on time and on budget, using only the materials on which the bid was based, reward them. If they exceed expectations, pay a little more. Assuming the bid was prepared properly, estimating the right time and materials, the job should be profitable and therefore the company can afford to reward employees. If workers miss the target even though the bid was realistic, reduce the next incentive. The most effective incentive plans are informed by customer satisfaction ratings. At the very least, expect customers to write a letter of satisfaction at the end of a job. Better yet, have them answer satisfaction questions on a weekly basis.

Play to win

Everyone in the organization needs access to information. It’s the only way for employees to perform effectively and productively, and the only way for management to know if progress is sufficient to meet established budgets and time frames.

To be valuable, information has to be actionable and real-time—hourly or daily, not weekly or monthly. Imagine a world in which sports teams play in secret with no audience and a complete information blackout. A week or so later, fans could visit a team Web site where they would see the final score, but nothing else. Soon there would be no more fans and no more teams!