Survival of the Creative, Informed and Pragmatic
Thoughts on Successfully Managing Your Building Products Manufacturing Business in an Economically Challenging and Ever Evolving Commercial Building Environment
By Doug Bevill – Bevill and Associates

Business news has never been as dramatic and confusing as it is today: The potential impact of short and long term strategic decisions made by corporate leaders are more critical to the health and survival of their companies than ever before. From General Motors filing and then emerging from bankruptcy 61% owned by the government to Goldman Sachs paying back $10,000,000,000 in TARP funds and reporting a $3,500,000,000 profit in the most recent quarter, devastating as well as an increasing number of encouraging stories are emerging. General Motors, once the shinning icon of American business prowess and a company that virtually on its own created the American middle class, is now a government controlled entity. Between the necessary corporate restructuring and the closing of forty percent of its dealer network, GM will displace another twenty thousand workers and this number does not include secondary suppliers and their related sad employment statistics. On the other hand Goldman Sachs took advantage of government incentives and in eight months, given creative leadership, have emerged as a shining example of what must be accomplished by business. Having been a business consultant to the construction industry and building product manufacturing executive for the better part of thirty years I have learned one important lesson; in order to survive and ultimately thrive in any market you must: understand and adapt to the changing economic conditions of your market segments; you have to be among the most creative and pragmatic business leaders; and you must have a focused, and closely managed business strategy.
Before Setting a New Course You Must Know Where You Are Compared To Your Goals
This paper is aimed at the building product segment but many of my next few observations could be applied to any industrial manufacturer. As the former Chief Operating Officer for a global building products manufacturer I understand the need to provide strong return for stock holders “it is your job”. However it is imperative that you continue to maintain and grow your market share in order to insure sustainable growth in revenue and operating profit. Over the years it has been my experience that many building product manufacturers did not have accurate and dependable business intelligence models that could tell them with any accuracy:

• The potential for their product or mix of products.

• Their share of the market for each product compared to the competition.

• True profitability for each product, by both percentage and pure margin dollars.

• Whether prices were sufficient to remain profitable.

• Which products make the most significant contribution to the company’s operating margin and which ones are a drag on operating results.

• That your independent demand models are providing you with efficient inventory levels, maintaining satisfactory customer service, without tying up precious excess cash.

If you have not developed a Business Intelligence Platform to provide you with the satisfactory answers to the bullet points above, you are certainly not alone. In reality as C- level executives we should know the answers to these points and behind the answers are many more questions.
Fiscal Responsibility Coupled With Vision

As chief executives a poor economic environment can be very frustrating; especially for creative leaders who are driven as much by the vision of what our company can be vs. our day to day fiscal responsibility which is currently all consuming. The reality is that we must plan that the commercial market place has yet to see the worst of this down turn. As unemployment continues to rise, federal, state and local tax bases will shrink, which will impact the most profitable construction sectors. Namely educational, correctional institutions and more than likely, most infrastructure projects will continue to be scarce as we wait for the Federal Stimulus Package to become more stimulating. With more and more people finding themselves unemployed there will be increasing hotel and office vacancy rates, depleting the need for new square footage. In other words we face a challenge never before experienced by our generation of building product executives.

Here are a few areas that leaders in our industry need to manage closely, especially in times like we are experiencing.

• Market Share – Given that the project universe is only a fraction of what has been over the last few years there are more companies chasing this smaller universe. In times such as these, sales leaders and their teams can become discouraged and distracted, it is important that you work on ways to increase your share and not lose any ground. This means keeping your sales leadership motivated and focused on closely managing field sales activities. Depending on the size and makeup of your company, even one point in share either way could represent millions in precious revenue and margin. Market Intelligence and channel relationships are never more important than in slow economic times.

• Product Specifications – It is important that your company has a solid architectural sales strategy to insure that your products are represented in the building specifications. My experience and research has shown if your product is “specified” it increases your odds of winning the project by roughly seventy-five percent. It also sells at prices as much as sixty percent higher than if you try to “bust the specification”. This is true for both custom and commodity products such as hinges, fiberglass panels, ETC.

Opportunities to lower Operational Costs & Position Your Company For The Future – Given the drastic market contraction that we are experiencing there is considerable pressure to maintain profitability. In the building product and industrial sectors the most expensive item that we have is people and the number of people that we have is the direct result of our respective organizational strategies. In the past, it was sufficient to decrease the work hours of non - exempt employees and a minor reduction in force to somewhat offset lost revenues in a soft market. As mentioned, this is a completely different economic environment: In reality it will be several years before the commercial and residential construction industry reaches its 2006 and 2007 levels, especially given the continuing raw trauma being experienced in the aftermath of the financial meltdown. New Federal Banking Regulations are being created that will bring sanity back to lending, however, in the immediate future and for an indefinite amount of time, lack of lending will constrict the building universe. This combined with the ever changing and more efficient design and specification processes make it an ideal time to rethink your business and organizational strategy. Institutional as well as private building owners and developers have and will continue to demand accelerated turnaround in the project lifecycle. This will apply considerable pressure for dramatic cost reductions in building products and services.

As Dr. Spencer Johnson in his book “Who Moved My Cheese” logically points out: If we just sit around and wait for things to change we stand a better chance of starving, then if we take action now to insure that our enterprise is positioned to thrive in a much different construction universe. Given that you are highly likely to be under pressure to reduce headcount in order to generate satisfactory profit, why not pull your executive group together and discuss how the company should be organized for sustained future success. Change is needed from the front to the back office. If done correctly, your new strategic plan will point to intelligent and productive areas to apply your precious human and financial capital, while at the same time identifying cost and headcount savings. Execute properly and your company can be positioned for future prosperity, making itself ready and able to capitalize on the eminent recovery. With poor execution, your company will fall victim to these most trying times. Results will be at best disappointing.

Important Considerations For Building Product Executives

It has been my observation and personal experience that it does not take much for a C – Level executive to lose touch with critical parts of the business. There are many critical decisions made on a daily basis. Disruptions such as a law suit, the annual budgeting process, a plant shutdown, or an economic crisis and it is easy to lose touch with other critical areas of the business. It seems like we are always putting out fires leaving little time for more enjoyable and constructive pursuits. Do you assume that your departmental leaders are managing in the way you expect?

Have you clearly communicated to them your expectations recently? As Louis Gerstner said in his book “Who Says Elephants Can’t Dance”; “People Do Not Do What You Expect, They Do What You inspect.” Become intimately familiar with your marketplace, the current and future dynamics of the market should be at the center of your business and organizational decisions. Stay contemporary as it relates to new technology that can affect and/or help your business expand and run more efficiently. Example of such technology includes:

• Building Information Modeling (BIM) – This new technology is going to have the most significant impact on the construction industry since the introduction of CAD and web based product content distribution. It is quickly being adopted by architects, engineers and general contractors and will compress the time from design to construction considerably. BIM will elevate the importance of product specifications making product substitution and approval very difficult after the plans have been finalized. Given that most architects are pulling product content from the internet it is important that you insure that your web site content is compatible with the BIM process. Most corporate websites at this point are not.

• Channel Penetration and Customer Relationship Management – It has always been important for a sales organization to work with all applicable channel factors; owners, architects, engineers, general contractors, and suppliers. It is even more critical in today’s environment. In order to empower your sales leadership group, it will be necessary for them to closely manage the activities of the sales force to insure that projects are being followed from planning to award. If you have not done so, your company should invest in a web based customer relationship management platform. These systems will allow your sales force to communicate across territories and to quote projects online. This will provide you with a built in forecast that should be integrated into your organization’s sales and operations planning process. Ideally you’re CRM and ERP framework should be linked for more seamless integration and access to actionable business intelligence.

• Process Costs and Product and Client Profitability – In today’s environment it is imperative to understand how human capital costs are affecting product and client profitability. Without this added dimension of information, business strategies are based on guesses and intuition. Given process costing technology, a company gains an added competitive edge. Human capital strategies are made based on solid input. Your employment decisions are made on facts while your competitors rely on luck.


My name is Doug Bevill. Founder and President of Bevill and Associates; a consulting firm created to help building product manufacturers realize full corporate potential. To discuss in more detail how our firm can help you in the evolution of your strategic direction, please feel free to contact me via email; dbevill@bevillassociates.com, or by phone: 314-422-3177. Also visit us on the web at bevillassociates.com.