Builder's Office Manual, Revised
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Introduction

Most residential and light commercial building in the United States is still done by small to mid-size construction companies. Most of these companies are headed by a highly motivated individual who has learned to handle all the important functions of his company well enough to survive in the construction business. This man's title may be President, Chief Executive Officer, Manager, Director, or, the title we will use here, Builder. But regardless of the title, he runs the show and decides how the company's resources are used. Almost certainly, he is not a school-trained manager. He knows a lot about construction and has learned to handle the other key functions of his business well enough to earn a good living. He probably does not consider himself a "manager" at all. But he does handle the 5 key functions every building organization must perform or delegate to others: Estimating and contracting; Building operations (production); Facilities and equipment control; Marketing; and Administration. In the smallest organization, one man building alone, little management is required. But most builders are forced to become managers. With each additional employee the builder must spend more time supervising and managing business. Less of his time is available for actual building, estimating, marketing, and administration.

Some builders feel they are wasting time spent managing their business. They would rather be on a job working with a crew, bidding some new work, or selling their services. And many builders have developed a successful construction company precisely because they were very good at one or two of these parts of their business. Management and control are easy if there are only 2 or 3 employees working on a single job. But no building business can continue to grow if there is no one to control all parts of the business. A builder with 20 to 25 employees may have to spend about half his time managing, directing, supervising, and controlling his organization. Most important, his time is probably well spent.

But spending more time supervising and managing your business won't necessarily produce better results. Management is a skill like estimating or carpentry - it has to be learned. The builder-manager's first objective is to give the company and every employee the direction needed to get the job done. The second objective is to reduce to a minimum the time spent managing the business. That's the purpose of this book: to guide builder-managers in setting up routines and procedures that make management routine, almost automatic, so the key man or key people can concentrate on work that will produce the best return.

The estimating and contracting functions are at the forefront of income production. Without good estimating procedures, no work can be won competitively. The builder must therefore establish and maintain sound estimating procedures, whether he uses an estimator or does the bidding and estimating himself. This includes designing forms and procedures, obtaining current cost figures, and developing bids and cost estimates in time to meet deadlines.

The production function includes controlling the labor force and supervisors or foremen. Labor is the most important cost item, as it accounts for the largest commitment of cash during a job. It can easily overrun estimated reasonable costs if there are poor labor controls; excessive idle time and inefficient scheduling cost the builder profits every day the men are on the job. The builder must hire and motivate the key people in his organization, control the size of crews, the use of materials, and the variations from job specs, coordinate work with building and planning inspectors, and work with subs. These are examined carefully in Chapters 6 and 7.

The builder's direct involvement in facilities and equipment control means that he must plan for and schedule the company's assets such as trucks and equipment and get maximum use from warehouse and office space; decide whether to buy or lease equipment; plan cash flow based on the equipment purchase schedule; and maintain inventories to prevent outages and shortages. The builder must also keep good records of equipment owned and establish company policies for maintenance, repairs, and depreciation. Chapter 3 covers these subjects.

The builder's marketing function varies with the business and the type of work done. For a residential contractor, this may involve active selling, advertising, or submitting bids. Some builders do most of their work on spec, and their marketing approach is much different than that of the residential remodeling contractor. Some builders depend on word-of-mouth business, newspaper and yellow page ads, or creative marketing programs. See Chapter 4. Each builder must establish his marketing approach and his sales and marketing budget based on realistic assumptions about his geographic area, buyer preferences, his own production and financing capabilities, and his profit expectations.

The builder's administrative function includes overseeing all office tasks-accounting and bookkeeping, file management, office equipment, finance, personnel, space, internal reports, efficient use of office time, taxes, and procedures for billing and collections. The builder must also make sure that proper and adequate records are maintained and that an adequate office system is in use. Much of this manual discusses ways of speeding up and improving administration.

The builder himself is the ultimate source of guidance for all aspects of his business. He must be able to exert varying degrees of control over all five of these areas, balancing his time and resources to get the best results from each. The construction office is the place where most direction and control originates. From the office the builder's guiding hand extends to all areas of the operation. Therefore, this manual concentrates on what happens in the construction office.

The first step in making management routine is understanding the five key areas every builder-manager must handle.

Work in the Office

Builders often assume that the function of the office is to answer and route telephone calls, relay messages, and perform filing and bookkeeping duties. These are necessary, of course, because they are part of the communication and record-keeping functions usually centralized there. But they are only part of the office process.

The primary purpose of a construction office is to provide the builder with a central organizational point for all field activities, project development and control, and coordination of all phases of the business.

The office accumulates and stores data on jobs, sales, and all other operational areas for retrieval and reference. From these files all important documents are created. Chapter 5 discusses data storage and retrieval at length. The office also processes the receipt of money and payment of bills, as discussed in Chapter 18. The records that result from these and other office activities are the basis for growth, planning and financial controls - both first-line organizational functions.

Cost control includes many functions undertaken by the builder and his staff to ensure that costs and expenses remain in line with the budget or plan. This is an ongoing activity and occurs not only during each job but for the life of the business. These plans and budgets are developed from current data sent to and collected in the office.

Costly duplication of effort and missed deadlines can be avoided by office coordination. This function also helps prevent cost overruns, labor force inefficiency, and delivery and distribution problems. This too takes place in the office, based on information compiled there, as shown in Chapter 10.

Staffing the Office

Offices must be expanded at some point in the company's growth, and the staff must also grow. Some builders hire employees simply to “put out fires”. This may start when the builder himself can no longer run his one-man operation without someone to answer calls or estimate new business or do the bookkeeping. But the need for office expansion should be foreseen long before it is needed. As shown in Chapters 6, 7, and 8, office growth should be coordinated with overall company growth.

The rest of this chapter examines briefly the three basic functions someone in every building business must perform: secretarial work, bookkeeping, and job cost estimating.

Secretarial work is an essential part of every building business: someone must handle filing and correspondence, telephone messages, and mail processing while the builder and his construction staff tend to their own duties. The secretary is an internal organizer, helping the builder locate essential records and process written and verbal communications.

A bookkeeper handles all functions related to financial reporting: bank reconciliations, check writing, income recording, billings, and financial statements. The bookkeeper may also be called upon to establish or maintain some of the company's control systems: analysis of job costs or general expenses in comparison with budgets, trend analysis, and labor summaries.

An estimator is necessary when the builder's time and duties do not allow him to research and carefully compile the detailed data good estimating requires. This can be especially true when there is enough building volume to keep an estimator busy full time.

Few builders start out with a full-time employee. It is difficult to keep a full-time employee when building volume is low and cash must be put back into field operations or used to pay off loans.

For this reason, builders in small or one-man operations often forego needed assistance and try to do all administrative tasks on their own. When they can no longer handle office work and field work too, they usually look for an all-around employee. This may be a spouse who knows about construction indirectly, or someone hired as a "trainee" or "apprentice" with hope of higher pay and position when the company expands. This individual is expected to be a secretary/bookkeeper/accountant/assistant to the builder, filling many shoes at once.

This approach can work inexpensively, especially when the builder's demands for time and efficiency are not great. But he will have a higher chance of success if he is willing to provide specialized training and a well-documented set of procedures, anticipating company growth and the hiring of office specialists.

Short of full specialization, a builder can combine tasks and responsibilities and still maintain a high degree of efficiency. In growing low-volume and one-man shops, combining jobs may be a way of justifying a dedicated full-time employee who becomes knowledgeable in more than one set of office duties.

The common dual capacity employee is the secretary-bookkeeper. A competent secretary can be trained to take care of many bookkeeping functions and may provide an excellent alternative to a part-time bookkeeper.

An estimator can be a valuable executive assistant to the builder. With his knowledge of the field, the estimator may double as a superintendent of overall jobs, responsible for overseeing other superintendents and relieving the builder of many time-consuming and repetitive control tasks. This person must be viewed as a valuable employee; much of the builder's responsibility is shifted to his shoulders.

The use of part-time or temporary help is seldom the best solution in the long term. Temporary employees can be referred by agencies, to which the builder must pay a premium above the going market rate for such help.

Recognize that most part-time arrangements are not long-lasting. The person seeking a part-time position is usually motivated by career goals that are different from your own and from those of most of your full-time employees. Their position with the company is usually only a means of support until something better comes along; very few people seek permanent part-time work.

Thus, part-time employees seldom grow with the company; no great efficiency, commitment, or sense of involvement from them can usually be expected. Because of this, and because of high part-time turnover, a builder's overall office efficiency may be much lower than for permanent full-time help-and his field operations may even be affected by office personnel problems.

The Office as a Control Function

The builder must be able to manage all aspects of company activity from a central location. Not only must he stay within budget, but time and effort must be planned in advance. In the field, this means maximizing the use of labor, cutting down on idle time and excessive travel between sites, and assigning the most qualified people to each task.

Of the many functions a well-planned office handles, that of direct labor control is probably most valuable. The builder whose job schedules are planned days and occasionally even weeks ahead of time can maximize his productivity, cut back on idle time, and match the right employee with the right job. Scheduling is thus one of the most important office functions. The builder may want to be involved directly in scheduling, or he may delegate this responsibility to a knowledgeable employee.

The person who does the office and field scheduling should allow for contingencies as a matter of policy. When a job is held up because materials are not delivered on time or because subcontractors fall behind schedule, the scheduler must have some alternate plan for utilizing his labor force. Contingency plans should be worked out between the scheduler and the builder himself, because idle time erodes potential profits.

Clear labor allocation policies, and daily consultations between scheduler and builder, can allow the company to capitalize on unforeseen setbacks. On any given day, be able to shift the labor force from one site to another if deliveries are stalled or materials are dropped on site ahead of time.

The Office and the Company Goal

The builder-manager in a small company must do everything that is required of the chief executive in a large corporation and more. Because he has fewer specialized employees, he must excel in several areas to do as well. He cannot afford the luxury of making mistakes, as he does not have the margin for error enjoyed by large corporations, which can absorb losses by spreading the burden of any loss. Every businessman plans and organizes to some extent. Planning is nothing more than assuming certain things about the future based on current knowledge. For example, the builder who sees an administrative workload piling up knows he will have to hire a secretary. He also knows the limitations of his budget. By bringing these two factors together, he may plan how to accumulate or set aside funds to hire the necessary help.

Successful Control and the Office

There are seven key elements of successful control- all of them take place primarily in the builder's office.

Organization is the first element. The builder must have an organized office in which the basic company functions and routines are assigned and controlled. The right people must handle their work within a predetermined budget and labor structure. The builder must be able to identify and define problems-and devise solutions-in a fast, organized manner. The second element is planning. The builder is the company's planner. To reach his goals, he must plan not only the basic staffing of his company but the financing of his projects and short-term and long-term growth.

Forms and procedures are the third key element in executive control. Too much valuable time is often spent training personnel; too much responsibility rests on individuals rather than on effective systems; and too many methods of operations are nothing more than thought processes. Office procedures should be committed to paper to document vital functions and create a logical basis for procedures updating. A good set of office forms helps increase internal efficiency and control.

Office systems are the fourth key element. With the right procedures work proceeds in an orderly fashion. Systems must be integrated to avoid duplication of effort among employees and to allow for ease of conversion from one system to another. Whether manual or automated, office systems are the first of a builder's ability to control overhead and maximize personnel efficiency.

Internal controls are the fifth vital element in successful corporate control. These include many of the bookkeeping, personnel, scheduling, routing, and secretarial functions that keep the company on a daily course. Internal controls also include those exercised and overseen as part of the each department's standard procedures. The builder should be able to delegate some of this authority, and the close-contact control function may be handled on a supervisory level. This is the most efficient use of control-the builder stays in close touch yet internal controls maintenance stays in the hands of his supervisors.

The working environment is the sixth key control element in any construction office. Without enough space, basic equipment, and employee amenities, it is impossible to keep employees on the job. The builder will be hampered by the cost of turnover and training, distractions and low morale, and a general lack of enthusiasm for the builder's goals.

Seventh, the builder must maintain effective communications systems between himself, his staff, and his employees. Without effective communications systems the builder has little chance of coordinating field and office operations to reach his goals. Such communications systems may include interoffice mail, multiple phone lines and intercoms, daily reports, secretarial or switchboard procedures, and even portable site phones and radio communications units.

Employee Involvement

Any builder who invites and encourages employee involvement in the operation of his business will discover several things. First, employees who are asked to share in the decision-making process are more motivated and take more interest in their work. Second, their ideas can save you money and help you find better ways to get the work done.

Many contractors don't permit much give and take in the office, afraid that they will lose control. But there is a difference between authority and involvement. It's true that allowing a free rein can lead to confusion in the minds of employees - whether you have one or one hundred people on your staff. But good managers know that many employees take real interest in their tasks. They know better than anyone where improvements are possible. Employee ideas can be asked for in a number of ways. The traditional suggestion box is probably the least desirable. It tends to become a forum for complaints instead of constructive solutions. Instead of a suggestion box, make it known that you're interested in hearing about suggestions for improvements, person-to-person, on an informal basis, and at just about any time.

Many builders use a regular five-minute weekly staff meeting. This idea works both in the office and with crews on the job, although the issues are probably much different. On the job, safety and scheduling are big issues. In the office, you can invite employees to make suggestions for improvement, point out problems, or ask questions. Anything that's said during this meeting should be "off the record" as far as you're concerned. Ask for constructive criticism if that's appropriate.

Your response is the key to the success of this idea. You must be able to follow up on good ideas and take criticism well if the weekly meeting idea is to work out.

Participation programs can be either informal (such as through casual conversations or weekly five-minute meetings) or highly formalized. In manufacturing companies these programs use participation teams, quality circles, task groups, or committees to analyze problems and prepare recommendations. Many companies have been very successful with these programs, although they tend to decline in effectiveness if not fully supported by top management.

You can put the same idea into action in your own company, even if you have only two or three employees. It makes no sense to appoint a committee in a very small company, but you can respond to every suggestion by making the employee offering the suggestion responsible for studying it and recommending a solution. This teaches employees to think in terms of solutions instead of problems. Too often, employees complain or point out what's wrong, but don't offer constructive ideas to correct the problems. When that happens, give the employee who raises the issue the task of coming up with a sound solution. Give him or her the assignment and a deadline. Ask the employee to check back with you periodically and report on the progress being made.

Many issues will be dropped when you use this technique. But others will result in money-saving ideas.

Individual work goals can be set for employees. If you take it upon yourself to suggest goals for your own people, you can often inspire them to start thinking in terms of a target.

For many of us, working toward a goal isn't a natural process; it's one that has to be learned. But once you get used to the idea, it becomes instinctive.

For example, assume you hire an employee to organize your office. Give that employee goals: Come up with an efficient method for keeping job cost postings up to date, design reports that summarize the status of every job by Friday of each week, complete the gathering and recording of information so there's no month-end backlog.

Make a short or long term goal part of every assignment. These can be both company goals and personal (career) goals. Help your employees develop job skills, define where they want to go in their careers, and show them how to meet both company and personal goals.

Improved morale is one of the benefits of an employee participation program. Improvements in efficiency or profits are just two of the benefits. Better morale is an inevitable by-product.

Your efforts to control work in the office will be made easier when employees are involved and have a sense of ownership in their area of responsibility. Your staff will be more secure and confident with a better definition of their jobs and their importance in the organization. Control is easier if each employee has a sense of involvement. Once you've developed company goals and included your employees in those goals, their individual participation will benefit them, and you as well. Rather than having to handle a staff of resisting and unwilling employees, you'll be recognized as the person best qualified to help everyone in the company meet their personal goals