The Difficulties of Getting an Entrepreneurial Organization to the Next Level

Speaker A I had talked about my time sort of of awakening and beginning to look through the world through the lens of really Elliot Jocks and requisite organization. And as I looked at this group of companies that we currently have and I see a common thread that I've really seen happen for a lot of small businesses in that the business starts and it often has an extreme loyalty to the people who started it, as it should. And it's perhaps started as a family business and has a loyalty that it's part of the family maturing right along with the organization and as it should. And what I began to see is something that I began to see in a lot of other businesses as well, is that when you get to a certain point now that we need to start looking at formalization of procedures, the development of systems. And it can seem very boring to a company that was built and had a tremendous success on.

Speaker B Just do it. Just do it. Just do it.

Speaker A And now it's like going from where you're maybe finishing off one basement, to use a construction analogy, to now you're doing 1000 basements in three different states and now you got to talk about the systems behind building bases so others can replicate it. And those others might not be the entrepreneur who started it, who's able to have that discipline and knowledge just to do it. So one of the challenges that we begin to face is how do we begin to create those systems? The other challenge is the people that we were very loyal to when we started the company might be at a lower strata and now suddenly they're required to take a look at systems and that becomes very painful part of the organization. It is a serious growing pain when there's somebody that maybe gave 10, 15, 20 years and they're at a certain strata level and now they need to find a new role or maybe if they don't want to find a new role, exit from the company. And that has been a very painful process. As we introduce this concept more beginning to do an analysis of the extant organization and whether it's a formal analysis or not, you begin to see wow, we've got a lot of maybe lower strata people who are being paid well and have been loyal to the company and now we've got to look at making that shift. And that's been very hard. It's also been hard to help sort through what is the family's role going forward and where are they best placed in a way that values them and values a requisite organization at the same time. And ultimately I think that both can be accomplished. But it's a lot of energy to do that and a lot of conversation and tools. And that's been even without formally announcing requisite organization. Those have been some things that we've been working on and now hopefully we can begin to add the concept. Now it's requisite organization, but maybe do some of the difficult things not under the guise of requisite organization that it's the bad one. In looking at the group of companies that we have now, it's 2008 now and basically the years of about 1999 to 2005 were unprecedented growth within the housing sector and housing starts and that greatly influenced our business. And we grew sometimes as much as 15 20% within a year. So that growth occurred. We were growing through all of those years. And 2005 came and the market basically crashed on the residential side. The commercial was still going strong. And at that point then that that often can be just as we were beginning to do that as when I was brought in. And so that slowed and we had to go through some major cutbacks to keep profitability and keep the company alive. And that was a very painful time because the systems were not in place. So instead of being able to make perhaps more rapid cuts where they needed to, we needed to sort of make a cut here and see the impact and then a cut here and see the impact and a cut here, and that's kind of like taking a doll blade over someone's arm, and it's not good and yet was necessary. When you don't have the systems that you need to have in place that you can make cuts, you don't know what effect will this have? Will we be able to redesign? Because we don't have any processes that we can say, well, let's just alter this a little bit or let's alter this or this person. There's very little cross training. So all those years of rapid growth and while those years of rapid growth were happening, if you looked at the group of companies, the profitability was suffering greatly. Even during the times of growth. One of the things we began to do is let's put all the companies together and see what it looks like and make sure we're measuring together. Because one company was making, another one was losing. And so even though the growth was occurring, there were losses. And I guess the good news is we're starting to get to a point now where we're adding a point to the bottom line is our goal each year for the group of companies.

Speaker B Close. Close.