It might just be the best buzz anyone can get: After extolling the virtues of a particular practice, you find out someone not only has been listening, but also, unsolicited, offers to share testimony about how well it works.
Whether you are a preacher, a teacher, a coach or a manager, such validation is a pretty gratifying thing. So I am happy indeed to present — at their behest — the story of Mike and Alisen Dopf, co-owners of Ingrained Style Furniture in Calgary, AB, Canada.
“We specialize in custom, solid wood interior woodwork for the commercial, hospitality and residential markets,” Mike says.
“Due to our solid wood differentiation, we are automatically placed in the higher end market. However,” he adds, “we do also possess the skills and machinery to work with p-lam and veneers.”
Ingrained Style does everything from complete lobby or hotel bedroom fit-outs, to restaurants, to residential furniture, to wood doors and millwork. You can see some examples of their work on the company’s Web site, IngrainedStyle.com.
Earlier this year, Alisen wrote me to say that the recent “Management Strategies” series about cost accounting (it began in July 2008 with an article called “Five Easy Pieces”) was just what their shop needed, and she and Mike wanted to tell others why.
“I had been tracking labor and materials for about two years, but had no idea what to do with the data holistically,” Alisen says. “I started with your spreadsheet for tracking time on the floor.”
Readers will recall my warning that employees, told they must begin accurately tracking the time they spend on every project, will continue to move from job to job and task to task just as they always have, then fill in their time sheets before going home, confident they can accurately reconstruct their workday.
The trouble is, they can’t. They will try to make it look like they filled out their time sheets on the fly, but they will always give themselves away by making their total hours add up to exactly eight.
Sure enough, Alisen says, every one of her crews’ time sheets “magically” added up to eight hours per day.
But she wasn’t fooled.
“I switched to a time clock, which works like a charm,” she says. “I made sure everyone knew they wouldn’t get paid properly if they didn’t swipe properly, and that I wasn’t going to double-check employees for a missed swipe.
“Now,” she adds, “I have perfect payroll and cost accounting hours for every job.” What’s more, the timekeeping software that came with the clock downloads right into Quickbooks, so payroll and cost accounting are easier still.
“We saw the results of the costing system the first day,” says Mike, “but it took about a month of running different types of jobs through our workshop before we pinpointed what needed to change.”
Wow. I mean, could it be?...
“I do a very thorough job of estimating, by breaking down how long each manufacturing process should take,” he continues.
...It sure sounds like...
“So when the workshop went over on hours, instead of estimating more, I worked with our guys to find the bottleneck in the process and fix it, not simply give them more time.”
...Yes! Not one, but TWO managers who actually manage!
The best part is, they’re married. Maybe the species can come back, after all.
No Longer a Choice, But Survival
“We have to do this,” Mike explains, “because of the recession and the amount of competition. We simply can’t charge more than our competitors are for the same product, materials and quality. So we better do the job in the best possible time we can achieve.”
Mike’s point is crucial. If there is one dangerous tendency I have noticed in custom shops, it is buying into the idea that because a piece is custom-made, there is no telling how long it will take to produce. This may be a good sales line, but when it comes to being profitable, you practice it at your peril.
Every project, whether completed as a custom operation or on a production line, is the result of repeated, familiar and, therefore, quantifiable tasks. The figure we are after is the time involved — how long it reasonably takes to do the tasks in question until the job is done.
The degree to which any shop is profitable — and I don’t care what it makes — can always be correlated to how well managers know those numbers and how successful they are in holding their people accountable to them. Just ask Mike.
“Our estimated and actual costs are now dovetailing,” Mike says, “due to the work on the manufacturing side to fix the bottlenecks.
“Overall,” he continues, “I think we did raise our prices a bit to account for our ‘real’ overhead costs, instead of our estimated costs. And our quotes are now standardized, because we know each process takes a certain amount of time. We just multiply that by the number of items to be done.
“Pretty cool,” he enthuses, adding the Canadian exclamation mark, “eh?”
Perhaps cooler still is what cost accounting taught the Dopfs.
“We were shocked to find that ‘sure winners’ — jobs we had counted on for years to make us money — were break-even jobs at best,” Mike says. “Also, some of our supposedly ‘low-margin’ work turned out to be our best profit models!”
Costing, he notes, has “completely changed how we market ourselves and which product lines we actively promote.”
“I don’t care how nice your books are,” Alisen adds, “if you don’t have this information, you are operating in the dark.”
Next month we will finish our visit with Mike and Alisen, as they discuss exactly how cost accounting has changed Ingrained Style’s approach to selling work and its effect on their long-range business plan. And they will share one more number no shop should be without.
Anthony Noel writes and works in North Carolina and has written for CWB since 1994. Send e-mail to [email protected].
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