August 15, 2011
Sales versus operations
By Mark Bradley
This series of articles, published in Horticulture Review for the past two years, follows Dan, a struggling landscape contractor, and his long-time friend and mentor Bill, who has recently introduced Dan and his company to systems.
Dan dragged his boots through the door of the diner where he was meeting Bill for a quick lunch. They had planned a light casual lunch — no shop talk. But one of Dan’s top foremen had just given his notice that he was leaving.
“I won’t find a replacement that good in mid-season,” shrugged Dan. “This one is going to sting.”
“What reason did he offer?” asked Bill
“He got another job,” said Dan, “But he was a different person these past few months. I’d been working him hard, and he kept complaining about getting the worst of the work. He felt his jobs always had too few hours and he was burning out trying to meet the goals.”
“Was he right?” asked Bill directly.
Dan was quick to answer, “More than I’d like to admit. The wet weather set us back this spring. We’re barely keeping pace with our sales goals and our schedule is off by three weeks because of the rain. We’re getting aggressive on our hours to make sure we sell enough work. It’s probably too aggressive, but we lack a systemized approach to estimating. Job hours differ depending on who quotes the job. That is because the person quoting the work has never actually done the work. But sales staff is blaming our crews. They say we can’t sell jobs, because our crews take too long.”
Said Dan, “Honestly, yes. It costs us on some jobs, and I hope we make it up on others. We lack consistency. I have three people here who put prices together, but give us all the same job to price and we’ll come up with three different prices.”
Bill replied, “Sales people are often good with people, but lack experience in the field. Operations people are good in the field, but might not be the right fit for sales. But when you’re estimating a job, you’re straddling both sides of the fence — sales and operations. If they’re out of balance, then so is your business. In reality there is no fence — there is only the customer.”
Dan jumped in, “And nothing good can come out of any mistake on our estimates: When hours are under-estimated, there’s no money in the job. It’s easy to sell, but I burn out my best field crews trying to hit unrealistic deadlines, or they take shortcuts, and I’m back six months later spending three times as much fixing issues. When the hours are over-estimated, we get out-priced. And, even if we do win the work, the crews slow down and use up those extra hours. We rarely finished under-budget.
“So what can I do?”
Bill took a bite of his pie, and then looked up to respond to his worried friend. “Naturally, sales want to keep hours, and therefore prices as low as possible. This will help them sell the job. But your field staff wants as many hours in the bid as possible. This way, they will finish their jobs on time, without feeling burnt out. Would you agree?”
“Exactly,” said Dan. “And neither side is ever happy.”
“No,” said Dan, “they have the opposite goals. Sales wants less hours. Operations wants more hours.”
“They have opposing wants, continued Bill. But they have the same goal.” Your sales staff, would they rather work for a company that’s stable and secure, and can afford to pay them what they are worth, or a company that struggles to meet payroll and could go under with the slightest downturn in the market?”
“The stable company, of course.”
“And would you agree that your field staff feels the same? Do you believe they would like secure jobs where they are paid at the best levels in the industry?”
“Of course,” agreed Dan.
“Then,” continued Bill, “their goals are not different. They want the same thing. In fact, you all want the same thing. Everyone wants to work for a busy, profitable company that can not only offer stable employment, but above-average pay.
“What you need,” Bill continued, “is better communication. What’s stopping you from bringing those two groups together before the estimate goes out the door? How much would it cost you to bring a foreman back half an hour early on a Thursday to review estimates before they are presented to customers? A one-hour discussion will cost you less than $100 and save you thousands. When the people that do the work are involved in planning the work:
“The system works. Foremen cannot stretch the hours, or else sales will suffer and they will be less likely to hit their goals. They’ve also been involved in estimating the hours, so they cannot just blame sales for underestimating jobs. Salespeople will better understand how to reduce hours by designing the job for value and productivity instead of setting unrealistic expectations for the crews. Having foremen help value-engineer estimates can only bring two things: a better price for the customer, or a better profit for the company.
Sometimes, even both.”
“I’ve always wanted to do it,” said Dan, “We just get…”
“...so busy,” said Bill. “I know. But ask yourself, ‘Are you really too busy to take a couple hours a month to review estimates?’ Or, are you too busy because your operations people never had a chance to improve your estimates?”
Mark Bradley is the president of The Beach Gardener and the Landscape Management Network.
This series of articles, published in Horticulture Review for the past two years, follows Dan, a struggling landscape contractor, and his long-time friend and mentor Bill, who has recently introduced Dan and his company to systems.Dan dragged his boots through the door of the diner where he was meeting Bill for a quick lunch. They had planned a light casual lunch — no shop talk. But one of Dan’s top foremen had just given his notice that he was leaving.
“I won’t find a replacement that good in mid-season,” shrugged Dan. “This one is going to sting.”
“What reason did he offer?” asked Bill
“He got another job,” said Dan, “But he was a different person these past few months. I’d been working him hard, and he kept complaining about getting the worst of the work. He felt his jobs always had too few hours and he was burning out trying to meet the goals.”
“Was he right?” asked Bill directly.
Dan was quick to answer, “More than I’d like to admit. The wet weather set us back this spring. We’re barely keeping pace with our sales goals and our schedule is off by three weeks because of the rain. We’re getting aggressive on our hours to make sure we sell enough work. It’s probably too aggressive, but we lack a systemized approach to estimating. Job hours differ depending on who quotes the job. That is because the person quoting the work has never actually done the work. But sales staff is blaming our crews. They say we can’t sell jobs, because our crews take too long.”
Not confident in estimates
Bill kept going, “It sounds like you agree, at least somewhat, with your crews. You’re not confident in your estimates a lot of the time.”Said Dan, “Honestly, yes. It costs us on some jobs, and I hope we make it up on others. We lack consistency. I have three people here who put prices together, but give us all the same job to price and we’ll come up with three different prices.”
Bill replied, “Sales people are often good with people, but lack experience in the field. Operations people are good in the field, but might not be the right fit for sales. But when you’re estimating a job, you’re straddling both sides of the fence — sales and operations. If they’re out of balance, then so is your business. In reality there is no fence — there is only the customer.”
Dan jumped in, “And nothing good can come out of any mistake on our estimates: When hours are under-estimated, there’s no money in the job. It’s easy to sell, but I burn out my best field crews trying to hit unrealistic deadlines, or they take shortcuts, and I’m back six months later spending three times as much fixing issues. When the hours are over-estimated, we get out-priced. And, even if we do win the work, the crews slow down and use up those extra hours. We rarely finished under-budget.
“So what can I do?”
Bill took a bite of his pie, and then looked up to respond to his worried friend. “Naturally, sales want to keep hours, and therefore prices as low as possible. This will help them sell the job. But your field staff wants as many hours in the bid as possible. This way, they will finish their jobs on time, without feeling burnt out. Would you agree?”
“Exactly,” said Dan. “And neither side is ever happy.”
Conflicts between sales and operations
“Every company has the same problem with sales and operations. On the surface, it’s a conflict, but can’t you see they both have the same goal?”“No,” said Dan, “they have the opposite goals. Sales wants less hours. Operations wants more hours.”
“They have opposing wants, continued Bill. But they have the same goal.” Your sales staff, would they rather work for a company that’s stable and secure, and can afford to pay them what they are worth, or a company that struggles to meet payroll and could go under with the slightest downturn in the market?”
“The stable company, of course.”
“And would you agree that your field staff feels the same? Do you believe they would like secure jobs where they are paid at the best levels in the industry?”
“Of course,” agreed Dan.
“Then,” continued Bill, “their goals are not different. They want the same thing. In fact, you all want the same thing. Everyone wants to work for a busy, profitable company that can not only offer stable employment, but above-average pay.
“What you need,” Bill continued, “is better communication. What’s stopping you from bringing those two groups together before the estimate goes out the door? How much would it cost you to bring a foreman back half an hour early on a Thursday to review estimates before they are presented to customers? A one-hour discussion will cost you less than $100 and save you thousands. When the people that do the work are involved in planning the work:
- Hours estimated are more accurate
- They help plan optimal crews and equipment to reduce the costs and time
- They help plan better material use which reduces waste
- They can identify suggestions in the design phase that could save time and increase value to the customer and/or profit
System works for both sides
“The system works. Foremen cannot stretch the hours, or else sales will suffer and they will be less likely to hit their goals. They’ve also been involved in estimating the hours, so they cannot just blame sales for underestimating jobs. Salespeople will better understand how to reduce hours by designing the job for value and productivity instead of setting unrealistic expectations for the crews. Having foremen help value-engineer estimates can only bring two things: a better price for the customer, or a better profit for the company.Sometimes, even both.”
“I’ve always wanted to do it,” said Dan, “We just get…”
“...so busy,” said Bill. “I know. But ask yourself, ‘Are you really too busy to take a couple hours a month to review estimates?’ Or, are you too busy because your operations people never had a chance to improve your estimates?”
Mark Bradley is the president of The Beach Gardener and the Landscape Management Network.