The first from Business Week quoted GE CEO Jeff Immelt who named the new economy the “Reset economy”, saying that people’s expectations are in the process of being ‘reset’ from the past decade.  This reset will impact everything from what’s sold and produced to the prices we pay.

The second, an even more striking article, is from the September 2009 Harvard Business Review.  The article, entitled “Doing Business in a Postgrowth Society”, states quite clearly that “Just as unlimited population expansion is untenable, so is unlimited GDP growth”.

The author, Yale Professor James Gustave Speth, goes on to say “Soon, developed countries will begin the move to a postgrowth world where working life, the natural environment, communities and the public sector will no longer be sacrificed for the sake of mere GDP growth and where the illusory promise of ever more expansion will no longer provide an excuse for ignoring social needs.  A postgrowth society will involve less consumerism and higher prices; quality of life will improve in ways too long neglected.”

Read the entire article at http://hbr.harvardbusiness.org/2009/09/doing-business-in-a-postgrowth-society/ar/1

If you’re interested, review the power point presentation on BRAVE NEW WORLD.Brave New World v4.

And send me feedback on these and other ideas, please.  Thanks … may the dog days of summer reward your patience!

A few nights ago I presented a talk entitled BRAVE NEW WORLD — or is it? to a NARI chapter which included 4 friendly faces, 5  counting the great Pella rep who invited me.  Therefore, I knew a scant 20% of the audience.

Although not quite a disaster, the 45 minute talk was condensed to a fast 30 minutes as we waited for the projector to arrive, the attendees were half what was anticipated as the evening was too beautiful to stay inside for even a moment, and because of time, I never properly introduced myself to indicate why in the world anyone should listen to what I had to say.

And then I delivered a brand new presentation on a subject I had researched for less than a month, although deeply and passionately researched – The Future in Remodeling.

Awful Indeed!

Since then I’ve ruminated on what would have changed the outcome and I realized this morning with blinding clarity the answer:

Do what you know, don’t try anything new or dangerous, stay put and stay safe!

I’ve fallen hard for this subject: the future came upon us as we were living in the present.  Is this the future we envisioned last year, the year before?  I doubt it.

Next year will come upon us based on what we do now …. so in fact the study of the future is as much a study of how effectively we act now on what we want to be then.

And I want to be challenged, I want to be excited about new ideas and prospects, I want to fall and fall awkwardly because I’ve tried something absolutely terrifyingly new.

But part of me wishes that those few days ago I had given a presentation I’d given many times before, on subjects I know inside and out …. and felt competent and graceful.

Or do I?  Can we really be alive and engaged if we only do what we always did?  Do we want to be a ‘one trick pony’, as Paul Simon sang, or do we want more?  If so, we have to be prepared to grow old not gracefully, but awkwardly.

In the meantime, I’ll be thinking it over, hiking on the verges of Mt. Tam, drinking beer on the beach and listening to The Felice Brothers.

You, have a good weekend too!

And if you’d like to read the entire presentation including lots of footnotes and an in-depth bibliography, download it from my website:

www.remodelservices.com.  Go to ‘downloadable files’ and choose BRAVE NEW WORLD!

http://www.futuristspeaker.com/2009/02/when-systems-collapse/

I realized upon reading the article and the previous article even more fascinating entitled “Fourteen Future Trends for Business in 2009 and Beyond” [read it here:  http://www.futuristspeaker.com/2008/12/fourteen-future-trends-for-business-in-2009-and-beyond/] that everything I wanted to say in the presentation had been included in the following comment from John Locke”, a nom-de-plume (nom de guerre) I assume:

“I look at the situation as being near the end of a big cycle, and the start of a new one. We’re in the midst of a period of creative destruction, and the economics of scale have flipped to favor the small instead of the big. So the solution needs to come from the groundswell of people taking action, not imposed as policy from above.

“Life is the opposite of entropy. It’s a constant struggle between vitality and bureaucracy. Entropy tries to even everything out, but pesky little life pops up to make things complicated. It’s really a great time, an exciting time, a nerve-wracking time to be here. The main point is, big corporations are running headlong off a cliff. Today Microsoft is suing a company over Linux–corporations are desperate to keep innovation at bay for their own self-preservation.

“So a call to action is great, but you should be calling everybody to action, to find ways in their own communities to make sure people can stay in their homes, have enough to eat, and reward companies who support their communities. It’s time to recognize the true consequences of the accounting systems that ignore human, natural, and manufactured capital and only account for finance. No central decision-making body can do this for us, we need to do it for ourselves, stop patronizing places that destroy communities by sending jobs overseas, start helping companies who create jobs.”

The next quote from George Soros [Source: Wikipedia:  “Global financier and philanthropist, George Soros is the founder and chairman of a network of foundations that promote, among other things, the creation of open, democratic societies based upon the rule of law, market economies, transparent and accountable governance, freedom of the press, and respect for human rights.’]

“The recession will last a long time. “Look, we are not going back to where we came from. In that sense it’s going to last for ever.”

The ideas in these two quotes combined to make clear that only by identifying the future trends in OUR OWN BACKYARD can we act, rather than react, to promote future wellness in ourselves.

And from this flow, future wellness in our companies, in our communities, in the world.

Howard Gardner, author of, among other seminal works in the field,  “Changing Minds: the Art and Science of Changing Our Own and Other People’s Minds” says “To change minds effectively, leaders make particular use of 2 tools: the stories they tell and the lives that they lead.”

Determine today what you can do, what we can do, to promote that future wellness that protects us, our kids and grandkids.

After my most recent trip I determined that I would reduce the real “garbage” as much as possible, recycling absolutely everything I could.  After three weeks between trips I averaged less than ½ of a grocery bag full of non-recycled garbage — mostly things like shampoo bottles (I checked, not to be recycled), the aluminum tops on some yoghurt containers and a toothpaste tube.  Everything else went to compost, to paper/plastic/glass recycling.  I felt good!

Water was next – although Seattle and the Pacific Northwest tends to have sufficient water for long showers (second in the list of reasons I moved here in 2006 from the San Francisco Bay Area which tended to experience droughts every other month), I’m timing my showers.  I haven’t resorted to the trick of my Oakland friends – put a bucket in the shower to collect water until heated to the proper temperature: they save enough to water their container plants and they’ve got a large container garden.

This is small potatoes, I know.  Next will be driving – I’ve been able to work with most clients via the web and thereby cut down driving, the Prius gets around 38 mpg in city driving but the monthly (or more frequently) plane trips really blow my carbon footprint.

My goal in the next year is to become conversant in the language and technology of healthy homes. I’ve signed up for a class on the subject at the Seattle MBA, an NAHB member.  I’m excited to learn about what changes, both macro and micro that can lead to both safer homes and better companies.

And as the first line of this post indicated, lead us to a better Brave New World!

More on this next week!

The icing on the cake, however, was meeting Mark Richardson, who among other things is an important columnist for Remodeling Magazine.  His conversation at the Pella group was after lunch, typically a difficult time to maintain audience attention.  But he hit the ball out of the ballpark and engaged every member when he talked about how and why we have to treat our clients differently than before, how we had to market differently, how we had to act differently!

Read his column in the June issue of Remodeling Magazine where lays out three important strategies to “create a sense of urgency in today’s market.”

You’ll be glad you did!   Read it here:   [http://www.Remodelingmag.com]

Yesterday I received a periodic e-mail blast from Kraig Kramers, author of CEO Tools – a great book by which to manage – who said [I quote the article in its entirety]:

“Twelve Seasons at mid-year:  it’s a good time to re-evaluate economic trends and what they mean for our businesses.

“What many are seeing is the downturn slowing; some are citing hope as the harbinger.  My own view is that some economic indicators are degrading more slowly, yet there are still so many indicators that overwhelmingly say we’re still sliding into this recession headlong.  And, “hope” is not a good business strategy, so please don’t heed the “hopeful” rhetoric from Government and the parroting by media as hope tries to lull you into running your business as if things are on the mend.  They aren’t (yet), except in a few very rare sectors, geographies and industries.

“Unemployment has become the leading key indicator since it has consumers scared to death and continues to cause curtailment of their spending severely.  Many people who were not going to lose their homes now are, and the commercial real estate sector is now showing strong signs of decline, with deterioration not far behind.

“What this implies to me is that we can only see about three months out right now.  The stimulus packages (trillions of our tax dollars) are not being spent, certainly not coherently, and are going virtually nowhere…at least so far.  Less than $200 million of the original $800 billion has actually been spent.  It’s just not happening…yet…and probably not real soon.  Plus, it’s not aimed at most industries, just some.

“The economy continues downward, and some are saying bankruptcies will be even greater in 2010, while they’re already up in 2009 by 240% over 2006.  Again, we can only see with some certainty about 3 months into the future right now.

“So, my thought would be to set your goals and do your plans only 3 months out, and re-assess each month.  As we’re able to see somewhat clearly further out, then open up your range to 6 months and start implementing your growth and recovery plans.  There are some recovery things you can start to do now, but do continue to deal with the downturn while planning for growth.  The really savvy economists are saying we’ll bottom by the end of this year, but have a slow, very drawn-out sectoral recovery (meaning each industry will start recovery at different times and at different rates of speed).  So, watch carefully, frequently, and adjust accordingly.

“Really hope I’m wrong about the economic observations made above and that it’s much better than it looks.  As always, hope this makes sense for you and your business.” [END QUOTE]

That makes perfect sense to me, plan for the next 3 months at max.  Set monthly goals, weekly to do lists and work on a daily basis to make the plan a reality.

Good luck, to all of us!

We, owners of remodeling companies, employees of remodeling companies and the myriad consultants, groupies and hangers on, of whom I count myself one, might be feeling like that dog right now.  Running, jumping, leaping and navigating tight quarters, often in the dark, to receive a tiny reward, at least tiny compared to two years ago.

Some perspective on the matter, however, might cheer us all:  if you’re still in business, if you’ve got sufficient cash flow, if you count hard working and engaged employees in your group, and among your clients satisfied long-term relationships, if your health is good and your family safe — you’re a lucky person!  And, just like that dog, ready to run the current obstacle course.

So let’s take this one step at a time.  One of the GREAT articles in the current Harvard Business Review is Leadership in a (Permanent) Crisis (page 62). The first paragraph reads:

“It would be profoundly reassuring to view the current economic crisis as simply another rough spell that we need to get through.  Unfortunately, though, today’s mix of urgency, high stakes, and uncertainty will continue as the norm even after the recession ends.”

Further on, it states:

“Crisis leadership has two distinct phases.  First is that emergency phase, when your task is to stabilize the situation and buy time.  Second is the adaptive phase, when you tackle the underlying causes of the crisis and build the capacity to thrive ina new reality.”

I hope by now most of us have stabilized:  gone through the heart-wrenching difficult tasks of letting people go, of changing the rent structure – perhaps even moving the office back into the home – and built a “starvation” company budget for the remainder of 2009.

Now comes phase two, “the adaptive phase”.  In this phase we’ll have to determine our new reality by re-thinking what we sell, to whom and how we sell it and how to best produce great outcome both in terms of customer satisfaction and quality construction.  Efficiencies, both in the production process itself as well as in economics of scale, should be put under the microscope for improvement.

Tackle, as always, the issues with the biggest payback first, leaving less vital considerations to fall off the ‘todo’ list over time.

Start now, prepare for the future by engaging your brain as well as your employee’s brains, ask your customers what they need most immediately and what they hope for down the road.

“Jack be nimble” should be our new mantra.  Starting today!

[Download reprint RO907F from HBR.org]

HBR [page 57] cites 10 trends you have to watch in the July/August 2009 issue.  Only some of these trends relate to remodeling.  I’ve noted the most vital below.  Download the article, Reprint RO907E, at hbr.org.]

“Trust in business running out:  The relationship between business and civil society was showing signs of strain even before the crisis.

“… a low-trust environment makes everything about doing business more difficult.

“The strategic imperative for most companies is to do what they can to regain the trust of stakeholders and to more effectively manage relationships with them.  This starts at the top.

“Regaining trust also means dispensing with the view that the only objective of management is to increase shareholder value.  Broadening the list of key stakeholders to include employees, customers,suppliers, communities, the press, unions, government, and civil society will help companies rebuilt credibility.”

“Shifting consumption patterns: Crisis or not, it was inevitable that the US consumer-spending growth would slow.

“Focus on older consumers:  Within five years, more than half of all consumer spending in the US will be by consumers over 50.”

“Find ways to offer luxuries on a budget.  Tighter household budgets don’t mean lower aspirations.  Our research shows thatt stretched consumers in slow-growing economies will still want to feel that they are living the good life.”

What do these trends mean for remodelers?  For one thing, we’ve all got to get back to executing on a higher level.  Take complete responsibility for the client experience, add personal touch and value to every contact: with clients, employees, vendors, consultants and suppliers.  Reach out into the community as well and be sure that you and your company name is known for commit ed involvement year round, not just when things are slow.

Develop depth in your offerings to older homes and to older homeowners, become CAPS certified, investigate home performance contracting – starting with upgrades to insulation and house envelopes.

Seek out and provide ways to add fun, sparkle, excitement and a sense of ‘luxury’ on even the smallest budgets.

Read everything you can, talk you everyone you meet with the point of view of an investigative report, question past clients, and slowly you’ll develop a plan for dealing with the future.

Trends look forward to the longer term – these are ideas to implement, starting today, which will help your company move forward in the future.

]]> http://remodelservices.wordpress.com/2009/07/04/10-trends-harvard-business-review-julyaugust-2009/feed/ 0 jfmiller http://remodelservices.wordpress.com/2009/06/24/executive-pay-for-gcs-how-does-your-compare/ http://remodelservices.wordpress.com/2009/06/24/executive-pay-for-gcs-how-does-your-compare/#comments Wed, 24 Jun 2009 20:57:16 +0000 jfmiller http://remodelservices.wordpress.com/?p=458 ]]> I recently joined a great organization – Construction Financial Management Association CFMA [www.cfma.org] made up of people who do the work I most love – slice and dice the numbers for construction in multiple ways. Although  the target market for the organization is “construction financial professionals” who tend to work for large accounting firms or as controllers and CFOs of large, multi-million and multi-national, corporations, I’m finding valuable information for use with remodelers.

The March-April 2009 issue of the association magazine, Building Profits, has an interesting article entitled “2009 Contractor Executive Pay.”  I was interested to learn the following facts based on their survey.

“As of February 2009 the annual unemployment rate for construction jumped to 21.6% (the highest rate in the past 26 years).”

“The CPI [consumer price index] ‘for the 12 month period ending December 2008 rose 0.1 percent. “

HOWEVER, the article goes on to say that the CPI for both energy services and grocery store food prices rising 6.6%, “the largest since 1980.”  [Note:  energy services and grocery store food prices are not considered in the standard CPI because they have been considered by the government for over 20 years to be too volatile!]

“Construction pay increases have never been less than the CPI in the past 26 years”

The article continues by defining the average pay for 6 positions at the end of December 2008.  I’ve excerpted liberally from the article to give you an idea of primary job descriptions and salary ranges for executives of large commercial contractors.  Compare these job descriptions and salaries to yours as well as to those in your company.

• Board chair is considered the company’s senior officer responsible for overall business strategy and objectives.  The average base pay was $285,000 plus an average bonus of $295,000 for a total of $580,000
• CEO/President is responsible for day to day operations.  The average base pay was $230,000 with an average bonus of $215,000 for a total of $445,000.
• Executive VP has second in command responsibility for day to day operations at an average base pay of $192,000 with an average bonus of $164,000 for a total compensation package of $356,000.
• Senior VP has responsibility for one or more divisions of the company for an average base pay of $169,000 plus an average bonus of $112,000 for a total of $281,000.
• VP of Operations functions as day to day administrator of a major ‘operational work segment’ such as commercial work.  The base pay was $142,000 with an average variable pay (performance based?) of $104,000 – both totaling $246,000.
• VP of Finance has total responsibility for accounting functions at an average base pay of $148,000 plus an average bonus of $84,000 for a total package of $232,000.

Another interesting portion of the article defines the relationship between levels of pay at various levels of responsibility.   Over 9 years, the average VP of operations, or general manager, has earned a base pay equal to 62% of that of the CEO, while the Senior VP has earned 74%.

Last, but certainly not least in this ‘pay for performance’ economy, bonuses as a percentage of base pay have fluctuated over time, spiking in 2008, to over 57%, up from 42% in the 23 years prior to 2007.

My point in publishing the results of this survey is twofold:

1. To share an interesting concept that there are established heirachies of pay as well as bonuses between different executive job descriptions; and
2. To allow you to compare your pay over the past few years with those in the larger construction world.  I believe that the greater risk taken by remodeling companies justifies greater margins.  Perhaps not 50% or 60% as I saw a year ago, but at least 30% and rising in relationship to customer satisfaction and company maturity.

How does yours compare?

The May/June issue of California Builder has a good article on “Putting Social Media to Work”.  [www.cabuilder.com].

In summary Jim Adams said:

“Social media is still in its infancy.  The audience is already massive. … the fundamentals of social-media communication remain consistent:  keep the message transparent, interactive, and strong.”

How to best accomplish this very good goal?  He mentions Facebook, Twitter and YouTube.  Each of these seems to require a significant investment in time and maybe even money if you out-source it.

But one idea which seems appropriate to the remodeling community is YouTube.  He suggests that producing “real” videos which capture customer/market interest would meet the criteria of transparent and strong.    He says:

“Video is so cheap and easy to do that every sales executive can have their own YouTube account and a Flip HD camera in their pocket and post item after item.  You don’t have to worry that it’s shot in cinema quality; 95 percent of the videos on YouTube are amateur vides, and consumers like that.  It may not be pretty, but it’s transparent and real. Consumers respond to material that doesn’t look corporate.”

For a remodeler, that sounds pretty easy.  You could shoot a quick tour of the rough inspection, for example, explaining in detail the beautiful work you do to keep the structure sound, waterproof, secure and efficient.  This would be educational and to a certain type of client highly interesting.  Another video could explain aging-in-place decisions and remodeling.

Whatever you do, make it short and easy to get up on the web.  Keep your clients entertained and educated.  As Garrison Keillor says at the end of his weekly Writer’s Almanac:  “… and stay in touch.”

How about you?  Did you think last year you were dodging a bullet, that the downturn might be less dramatic and that standard responses to the downturn could pull you through?

How about now?  Do you expect that this summer building season will protect you through the expected downturn late in the year?  Many people have work for this summer but late fall and winter looks bleak.  Now’s the time to put into place significant changes to the business model.

Goltz says:  “if your revenue is off about 10%, that might not sound so bad.  But because of fixed costs such as rent, that 10% decline can easily wip out 100% of your profit.”

Here are some of his suggestions and observations from that article:

“I recently asked one vendor for a discount if I paid on delivery instead of the standard 30 days later.  The salesperson was skeptical but called back after five minutes offering 10%.

“I’ve saved by cutting back on yellow pages advertising … I think new media offers a better return.  But don’t be tempted to gut your advertising.  Companies that continue to advertise come out ahead after a recession.

“That’s another lesson I’ve learned the hard way:  you can survive decreased profits if you have cash flow, but the converse is not true – if cash flow takes a dive, you’re in trouble.  This will happen if you let your receivables … get our of control, which is surprisingly easy.

“Consider laying off someone instead [of cutting hours].  Cutting everyone’s hours might sound fair and reasonable, but it can do more harm than good.  What happens is that everybody suffers and eventually somebody quits.  Too often it’s the best person in the department who walks.”

Now, you, what’s your company’s biggest issue right now?  Cash flow is huge all around the country, track and manage your receivables vs. payables better to control cash better; have you cut hours across the board rather than biting the bullet and letting go the employees who aren’t truly A caliber; are you marketing better or just more?  And just as important – what are your numbers telling you?