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When a company has demand for its product but can't get above a certain level without extreme institutional fatigue and instability, the company ultimately falls back to a comfortable size. That's no way to grow a business.
This article first appeared in the PB January 2014 issue of Pro Builder.

It begins with operational friction that never seems to go away. It affects the growth of your company until you believe you cannot grow beyond a certain volume of units sold and delivered. Sometimes it is so pervasive and yet invisible to you, the owner or manager. What is this insidious condition that can drain the life out of a group of hardworking people? Simply put, it’s the wrong organizational structure coupled with managers who are not capable leaders.

One of the most common signs of flawed organization and leadership is when a company has demand for its product yet cannot get above a certain level without extreme institutional fatigue and instability. The end result is the company falls back to a comfortable size. Often, the company’s leaders will lay the blame on a lack of capital or some other uncontrollable circumstances.
But more frequently the cause is inertia, the tendency to resist change. Can inertia be overcome? Yes, but like everything else on earth, companies must obey the laws of physics, and the force needed to pull away must be greater than the force needed to stay at rest.
The first obstacle is changing the mindset of, “We do it this way because we do it this way.” This attitude is just another way of saying that the leadership has gotten too comfortable and does not want to make the changes that ultimately will benefit the entire organization. But without a doubt, organizational structure forces a direct change in company behavior. Think of it this way: If you have a rocking chair, you can rock. If you do not have a rocker, you’ll just sit there in your stationary chair. In other words, organizational structure gives you the means to leverage various aspects of your company and enhances the ultimate performance of your team. Easy to say but not so easy to do. Sometimes, you need an outsider to help you see your way through the heavy veil of the status quo. This is how I approach it.

Change and Opportunities

One of the first items I address with clients is to take a look at their one- to three-year goals and expected growth of units and revenue. This is the foundational platform that determines how a company should be structured. There are other factors that influence the organizational structure; the most important to me are units built, dollar volume, complexity or simplicity of product, geographic breadth, technological expertise, and process flow management. These are the major factors that contribute to the development of the best organizational design for each company and create the demand for relevant leadership positions.

As you decide on the best way to structure your company, keep in mind that as your volume and geographic reach change so may your optimal organizational structure. In fact, frequent restructuring is a way of life for fast-growing firms. Unfortunately, they often restructure in a reactive rather than a proactive way. So restructure with change in mind. Change is good if you are a growing firm; it means you are realigning your people and processes to find their optimal performance points as your company evolves. You must lead so your team grows accustomed to change, especially if you intend to scale quickly.
As you go about creating an organizational structure that supports growth, take a close look at your management team. It is imperative that members of the team possess the necessary leadership qualities—energy, integrity, courage, and vision—to help their group overcome inertia and to keep them performing well when they are stretched. These qualities are must-haves in addition to the technical expertise and commitment to excellence that you normally look for to help lift the company.
The placement of the right people in key positions is so important that if you place an incompetent leader in such a position, there can be significant harm done to any scaling effort you undertake. An incompetent leader can slow or reverse your efforts at a moment when timely execution is critical.

The Key to a Great Senior Leadership Team

I do not have enough space to say everything that needs to be said on the topic of integrity, but I will emphasize that your senior leadership team must possess stellar personal qualities: qualities that will energize the troops to follow and act as a team. Poor character has no place in a fast-moving firm. Character flaws will reveal themselves fairly soon under stress, but why waste any time at all? You need to quickly Rolodex your way to a great team. Each day without the right team in place harms your company. Use intuition as your guide and, if you are not feeling 100 percent confident about the team, make changes until you have the right team in place.

Raising the Organizational Tent

Let’s get down to cases and work through a real-life example. A builder building 75 homes a year secures a large land parcel that calls for the delivery of over 225 homes in the next 12 to 18 months. The company will be required to perform according to their well-designed and highly accurate financial projections. The homes will be built in four locations: two large sites, each with 75 homes slated to start, and four additional sites with a total of 75 semi-custom homes built within brownfield (infill) communities.

The builder’s team currently consists of enough people to build 75 homes per year of limited complexity (2,750 square feet with two stories). But the company will now be scaling toward more production. The team is nervous, and they know they are understaffed. The first thing to do is reassure the staff, reduce their stress levels, and let them know the company will adapt as needed to produce the desired results.
The next thing to do is restructure your organization for growth. A camping analogy using the new star-type tents can help illustrate how this reorganization can be done. Let’s say the center is held in place by the president and there are other poles holding up the sides. Every organization commingles its work effort to some extent, but for our example let’s outline some standard positions for the tent poles. They are the chief financial officer, vice president of land acquisition, vice president of sales, vice president of product development, vice president of marketing, vice president of internal operations, and vice president of external operations (or production or construction).
When filling those positions, look at the tasks that must be done and determine who can actually perform each task and lead others on the team to do the same. Remember, as with an actual tent, you must attempt to raise the tent poles simultaneously, while also realizing that rain or a big gust of wind can come by at just the wrong moment.
Along with performance, you have to think about how you spend time and money. Team members should be spending all of their time on their own jobs and everyone should be paid what they are worth. Chain of command is very important in this system and is an effective way to get folks moving. But use it judiciously; if you have to step in to coach and provide clarity on the desired results or priorities, that is fine. If you have to step in to lead someone else’s team, your leader just failed. If one team leader’s tent pole is 1-foot off the ground and the rest of the team has lifted theirs 3-feet off the ground, your company is officially experiencing organizational dysfunction.

The Rest of the Team

Finally, at the bottom of each tent pole is a team that anchors the pole and allows it to be raised. If anyone on a team cannot perform or is not a team player, the pole cannot be elevated in synchronization with the other poles. When a big gust comes along, the whole tent collapses.
One example of this involves the internal operations group, which the vice president of internal operations oversees. Its duties include data logic and design, operating systems for communications, costing, design, and operations. There are managers for contracts (or purchasing), estimating, job budgeting, job start control, and a custom option coordinator, along with a permit coordinator. If any member of this team is not in place or performing well, then the group’s entire function is likely to be disrupted. And if the internal operations team is not performing well, the external operations team will be affected along with it.

The bottom line is teamwork and the synchronized elevation of functional performance are essential. The positions must be filled with leaders who can work well together, both within their teams and across other functions. Your company must invest in the right people who can lead and raise the team. Chain of command, if adhered to, forces you to have great leaders in place as it forbids you from crossing the line into another team member’s position.
Ultimately, if you structure the framework of the tent correctly (key leadership positions are filled), allow them to own their positions (coach and guide, but do not interfere), reward fast-paced teamwork and alignment, and allow the team to backfill their bench when you stretch them beyond their highest efficiency (adding people when necessary), you can scale rapidly and effectively. The president of the home-building firm—the center pole—should then be able to focus his or her time on public relations and positioning the company in the business community, product development, land acquisition strategies, funding, organizational strategy, communication, and leadership. Sometimes the glass ceiling that many companies run up against is directly caused by the owners and partners. The reason? Failure to follow the simple guidelines outlined above.

The Result

If your company puts the correct framework, leadership, and teams in place, great things will happen. You will see an aligned team having fun, moving fast, and adapting to whatever circumstances may occur. You may also become more profitable than you imagined possible.
So what’s stopping you? Step in front of the mirror and take a good look at how your company is structured. Don’t be afraid to be introspective; that is when the most amazing things can happen in your business and in your life.
Noelle Tarabulski is CEO of Builder Consulting Group of Lakewood, Colo., a management consulting firm dedicated to builders and developers since 1991. She can be reached at