The electrical contractor founders started their businesses with nothing more than an idea to work their trade. They created their businesses despite the risk and uncertainty. These entrepreneurs brought their skills and experiences in the electrical construction industry to face the demands and challenges of the electrical markets.

Today the electrical industry is facing new challenges: generation transition, diverse technology markets, sophisticated customers and competitors, and economical and governmental challenges. The electrical contractor needs to become more sophisticated and organized than before to meet these challenges.

The founding fathers started, like most small businesses, as one-person shops. They assumed all the responsibilities and tasks. They did the bids and sold the projects; performed the installation, accounting and administration; and controlled growth. Frank W. Woolworth, an American entrepreneur once said: “I never got very far until I stopped imagining I had to do everything myself.”

As contractor businesses grow, the organizational structure must also adapt to that growth. To manage growth, it is not a matter of adding another person; growth creates complexities and change. Change is dealing with greater expenses, complex problems and your time. If your organization does not change to adjust to the changing environment, your organization will stagnate and problems will develop. To meet the demands of organizations, you must change your structure from a one-man shop to a structure that will accommodate a larger staff, new markets and a changing industry.

Most electrical contractors' organizational structures have evolved over the years and not by design. To develop a new organizational structure, allowing you to handle today's challenges, you must know the two cornerstone words that have guided the direction of all successful businesses: effective and efficient. To be both effective and efficient starts with both long- and short-term planning. Peter Drucker, an American business philosopher and author, was quoted as saying: “Long-range planning does not deal with future decisions, but with future of present decisions.” A survey of electrical contractors revealed some disturbing facts: fewer than 20 percent have a business plan and fewer than 10 percent have a mission statement. For electrical contractors to be competitive, they must be more organized and able to implement a working plan. There are three issues we will discuss here: self evaluation, planning and organizational structure.

Self Evaluation-Understanding Your Organization

To understand your organization, you must learn how to be objective, i.e., being able to analyze without the personal attachments and emotion. This is more difficult than it may seem. Most founders and managers feel a responsibility to protect and care for their employees. The tool for this analysis is “SWOT” or strengths, weaknesses, opportunities and threats. There are two parts to “SWOT” analysis: the function/position and the individual's capabilities. Doing the analysis properly requires separating the name of the individual from the position. Strengths and weaknesses are composed of the capabilities, education, experience and talent level of the individual and the ability of the organization to get the job done. Looking at strengths and weaknesses will help in understanding the proficiency of your employees and also help you in planning upgrades for each individual by training or replacement.

When analyzing your organization's strengths and weaknesses, there are in-house influences to consider, for example, family members in position, age of individuals and education level/expertise. Opportunities and threats depend on outside influences, for example, the economy, government regulations and competition.

Business Planning

After discovering the organization's capabilities, you can now set objectives/goals and plan to achieve those objectives/goals.

The first step in establishing a business plan is to develop a mission statement. The mission statement identifies the purpose of your organization. Usually mission statements are derived from a vision statement, which is the reason why the organization was started in the first place.

There are three sections to a business plan: business, financial and supportive documentation.

Business

This is the most important part of the planning process because it develops the blueprint for how the staff collectively will accomplish the objectives/goals of the organization. The business section includes the history of the organization and electrical industry, the management team expertise, the location of the business, competition and the marketing plan. The marketing plan includes plans for product, marketing, sales and advertising/promotions.

Financial

The section comprises the financial support of the business and includes the budget, income statement, balance sheet, cash flow statement and short- and long-term forecasting.

Supportive Documentation

This section reveals affiliations, agreements, contracts and supportive statements.

Organizational Structure

Most executives (especially founders) and employees put a human element into a company profile. In reality, organizations are nonentities and only demand results daily. Lord Chancellor Edward Thurlow once asked: “Did you ever expect a corporation to have a conscience when it has no soul to be damned and no body to be kicked?” The organization must be looked at as a profit shell not as a living individual with emotions.

Every organization contains five departments or disciplines, and each must integrate with each other. I am not advocating that each small contractors' organization should departmentalize, but should, instead, develop a departmental organizational structure. By doing so, a working structure will be established that can adapt to future needs and growth. The five departments cells are sales and marketing, operation, administration, finance and customer service. Each department has certain disciplines or functions that relate to each other. The electrical contractor's operation, in contrast, is centered on the single position of estimating.

Let me clarify the difference between sales and marketing and customer service. Sales and marketing deals with new business and therefore requires a different sales approach to establish credibility. Customer service works with existing customers, which is handled differently sales-wise due to the already established relationship.

Operation deals with the technology, labor and installation of the projects. Administration manages the organization, develops a direction and coordinates with other departments. Finance tackles all relationships that involve banking and money, including transportation and inventory.

In small businesses, limited staff members and overlapping duties are common. Developing clearly defined responsibilities by department makes it easier to see overlaps and redundancy. By putting responsibilities into departments, we are able to better define accountability, and thereby, create a more effective use of resources. We also become better managers by delegating responsibilities, freeing up our time and boosting our employees' self-esteem.

There is a simple managerial formula that I advocate: Responsibility=Empowerment=Accountability. This formula, when used to manage, helps us develop a competent, accountable staff, lessens the need to micromanage, and creates a result-based accountability. When results are positive, management can give employees instant recognition. Negative results can instantly be adjusted and a timely lesson can be taught to prevent reoccurrence.

Management must develop a structure that will support the staff members' skills and channel their responsibilities in each department. Most electrical contractors use estimators to do the selling, in addition to having the responsibility of estimating, purchasing material and project managing. But if estimators are overloaded, having several bids with short deadlines, other responsibilities can suffer. This is a common occurrence for most electrical contractors who become aware only after a problem occurs or when sales and new business is needed.

By self-evaluation, planning and the development of the proper organizational structure, management can recognize problems early and avoid reoccurrences. When electrical contractors' organizations become more effective and efficient, the contractors are better able to compete and accept the challenges and demands facing today's electrical industry. EC

MARTIN is a business consultant for Alan Martin & Assoc., consultant for SBA, speaker and adjunct instructor with NECA-MEI, based in Morris Plains, N.J. He can be reached at 973.540.1298 or necamartin@aol.com.