Your business isn’t a democracy

An old post by Bill Hogg raises an interesting idea:

Like The Ritz-Carlton, prior to formal interviews for any role, all candidates (for any position within Pret) must work on the shop floor for a day. The team who works there gets a say on whether the candidate will fit in with the team there or whether they would like the person to work for Pret. If the answer is no, the candidate isn’t hired.

At first I thought that this was a good idea, but as I thought about it more I had some reservations.

It’s fine to involve employees in hiring decisions. After all, if they will be working with the new hire then we would like to be sure there is a good fit. But, to give employees veto power over a hiring decision (or virtually and decision) is to absolve oneself of responsibility. A business should not be a democracy.

A business owner must make firm and final decisions. While it is fine to delegate, the criteria and standards must be clearly stated and explained.

I’m not familiar with the business discussed in the article. Perhaps I am missing some key point and I would agree with what they are doing. But if they are in fact turning hiring decisions into a democratic process, I have some serious problems with the idea.

A bad hiring decision can be expensive and disruptive. Giving employees a voice in hiring can be a very effective policy. However, giving a voice and extending veto power can be just as expensive and disruptive.

Why trying to hit a home run can be dangerous

A lot of painting contractors seem to want to hit a home run. They get an opportunity to bid on a large job and start drooling. The problem with home run hitters is that they often strike out a lot.

This may be fine in baseball. The risk- reward is often worth it. But in business, too many strike outs spell disaster. Too many strike outs mean that you are out of business. But in paint contracting, large projects have a very high risk- reward. Sometimes one strike out puts you out of business.

Don’t get me wrong. I love home runs. I think they are one of the most dramatic plays in sports. But I also appreciate “small ball”—i.e., the team that can put together singles, walks, and stolen bases to score. The goal is to win the game, and you do that by scoring more runs than you opponent.

In paint contracting you win by making a profit. And that often requires a lot of singles and walks, with an occasional double thrown in. Going for singles reduces the risks, and allows the business owner to learn the skills necessary to tackle larger jobs (sorry for using a football term).

On large projects, the man power, management skills, cash management, and much more exceed the skill level of the typical painting contractor. It is a fact that 75% of painting contractors have revenues less than $250,000 per year. Assuming his average job lasts a week, this means his average job is about $5,000. How could he possibly handle a $100,000 job? It is 20 times his average job.

Until a few years ago, my largest job was $25,000. I was asked to bid a job that turned out to be worth about $65,000. I won the job, and I was scared to death. Fortunately, the job consisted of a series of buildings for a private school. The buildings were essentially houses, so I was confident in my bid. I then assigned crews to specific buildings. It was a large step for me, but it wasn’t a complete departure from what we had been doing.

In short, we had been hitting a lot of singles for years. We were prepared for a larger job. I had systems in place—financial systems, estimating systems, production systems, administration systems, etc. We had practiced on smaller projects and refined those systems.

There is nothing wrong with going for a home run. But don’t let the glamour of a large project blind you to the business and financial realities. You might be a hero. Or you might find yourself wondering if that pitch that looked so good really was ball four.

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Change can be good

Painting contractors, like most people, do not easily embrace change. To paraphrase Thomas Jefferson from the Declaration of Independence, most people will hold onto the known even when it is uncomfortable, rather than face the unknown associated with change. But improvement requires change–if we keep doing the same thing we are going to keep getting the same result.

Dan Miller addressed this in a post last year:

Change always presents the good news – bad news options. If you see change as threatening, you will likely see the bad news. If you believe progress always requires change, you will likely see the good news. If you can build your business in a way that embraces change, you will recognize ways to take advantage of change rather than feeling victimized by it. And it doesn’t matter if you are mowing yards, filling teeth, preaching sermons, writing books or building houses.

The fact is, progress does require change. Progress is the process of moving towards a goal, and if we are moving then something is in fact changing.

Business is a dynamic affair. Whether we like it or not, things are constantly changing. I-Pods, Facebook, and Tweeter did not exist just a few years ago. The Internet and email were fantasies when I started my business, and yet today they are a crucial component of many businesses, including painting contractors.

We have three options when it comes to change. We can completely reject it, refusing to do anything differently. The result is that the world will pass us by. We can reluctantly accept it, implementing change only when it becomes absolutely necessary. Or we can embrace it, recognizing that change can be good if it is the right type of change.

Eagerly embracing change may be scary. But if we do not change we cannot improve, we cannot grow our business, we cannot reach our goals. And that is a fact that will not change.

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