EP280: From Chaos to Control: Contractors' Guide to Organizational Charts

can do in your business is creating an org chart. Hey, welcome back to the show. I'm your host, Brad. Today we're talking about an organizational chart or org chart for short. And we're going to be talking about why we need org chart, what goes on the org chart and a couple other things. So let's get into this. I was just having a conversation earlier today, a one on one call with one of my clients and he's, he's struggling a little bit with some clarity in his business as far as which direction he needs to go, where does he need to make some changes, where does he need to make some hires, where does he need to, you know, what does he need to do in order to get to where he's going as far as his goals? And one of the easiest things you can do and the most powerful things you can do in your business is creating an org chart. Now most people think this is a complete org waste of time until you've actually done one. And then you see the full power of what an org chart can do for you to help you with clarity and to actually help you with running your business in regards to your employees and, and the positions. So let's dive into this. So most people think that org charts are for big companies, like you know, big corporations. You got to have all. And it's not an org chart is for any business. I don't care if you're a one man show. If you're by yourself right now in the tools, you still need an org chart because it creates a path forward for you. It shows you the actual path forward for you to being able to grow your business. It shows you what the business needs to function. And you know, it doesn't just show you like who's working where. It shows you a lot more information we're going to get into. So a lot of us are working out of memory. When you're small, you maybe have one or two employees, you know, and you're, you're working out of memory. And it's easy to control that because you have very few moving parts. But as you start to scale your business and grow, you have a lot more moving parts. And now it becomes very, very hard to run your business out of your brain. And so the org chart helps to show who's responsible for what. So you know, eventually when you don't have an you're trying to do it out of your brain, it creates chaos. Jobs get missed Customers don't get updated. You know, you didn't email them, let them know you're going to be there next week. Invoices go out late, estimates take too long to, to complete. You kind of lose track of, you know, when it needs to get sent out, like all these things are going on and you turn into the, the professional firefighter putting out fires all day. And that becomes the main point of, like, the frustration in your business. This is the, this is the beginning of the overwhelmed section of your business because you're just trying to run it out of your brain and you eventually become overwhelmed. So the org chart will help this by fixing it. Shows, you know, who owns the sales, who owns the estimating, the production, the scheduling, the customer communication, the job costing, the invoicing, the quality control, the marketing, and so on and so on and so on. The big point here is that if, if, if everyone owns it, then no one owns it. In other words, if, if it's just a, this needs to get done and it's not assigned to a certain person, then nobody owns that responsibility. And then ultimately you own it because you have to pick up the slack in your business for everything that falls through the cracks. So what goes on in org chart? Now, there's a couple different ways and a couple different things you can do that. You can have an internal org chart, which is really what we're talking about here. You can also have an external org chart because it's actually a good hiring aid. If you're trying to hire top talent and you're bringing them in and you say, look, here's our business, here's our org chart. Here's where you are this position, here's all the positions above you that you could potentially move into. It shows a path forward for them. And then on this org chart, you can even have in their salary ranges for those different positions. So if you're hiring for an apprentice and you're only paying them, you know, 20 bucks an hour, now you can show that, you know, a journeyman or a lead guy is making x, he's making 30 to 40 bucks an hour or whatever. Like, it shows them like, oh man, you mean if I get to a foreman, I'm going to make 30, 40 bucks an hour? Yeah. Now it shows them a path forward. So that's the external facing and then the internal facing is going to have a lot more information on there. So let's get into, you know, some different things. So it's not just a list of people, it's also rows and responsibilities in this business. So even if you're again, you're one man show, it doesn't matter. You're going to have your name in every single box. And one other thing I'll mention is that you, you create the org chart for the business that you want, not the one that you currently have. If you have five employees, you don't just have five roles on there, you have the business that you want. You may be thinking I want to, you know, I want to have a $5 million business and I want to have all of these different people and a full time marketing person, the full time sales and blah blah, blah. You put all that in there for the business that you think you want. Now it's probably going to change because you probably don't have enough information to know like what that actually looks like. But you still put on there what you think you need in your business, not what you currently have. So common roles include, you know, owner, slash, CEO, sales estimating, marketing, admin, scheduling, project manager, production manager, lead carpenter, field labor, client communication, purchasing, bookkeeping, job costing, quality control. That's not all of them, that's just some of the most common ones. And each box for these rows that you have should answer four simple questions. Four simple questions. What is this row responsible for? So part of the org chart is not just a row of like who does what, it's also an accountability chart because it helps you hold them accountable to the responsibilities that they have. So it's an accountability and responsibility chart. Right. So what is the role? What, what is the role responsible for? What, what's their job? What they, what are they supposed to do? Are they responsible for getting leads? Are they responsible for doing estimates? What is their role? So you put that in this box. And by the way, this is a visual thing you do. Like you're actually going to create this visually. I mean you can do it with a, you know, you can actually sketch it out, but there's lots of softwares and stuff that you can do as well, which I would recommend. But you're actually creating this as a visual representation, not just a, you know, you don't just write down the bullet points. It is an actual visual thing that you create. So who, what's the role responsible for? Who owns it right now? And this is a powerful one. Who owns it right now is a powerful one also. What result should this role produce? And then what does this position cost? Those are four things you need in there. What is the role responsible for? Who owns it right now? What results should this role produce and what does this position cost? So what is this role responsible for? Again, if you're using, let's say project management, then it's going to be responsible for, you know, scheduling and creating or not schedule creating, scheduling and managing your jobs and getting completion on time, right? Like that's the main function is the, like get the jobs produced. Essentially, that's what it's responsible for. Who owns it. Right now if you're doing project management, your name goes on there. Like you physically put your name on there. I would put Brad on there as project manager if I'm doing that. What result should this row produce? It should result, you know, efficient production schedules. Or it could be quality, you know, to maintain quality assurance with our jobs and complete projects on time. Could be whatever, whatever you think is important. But it should be what's the, what is the result? You know, the result is a happy customer is projects completed on time and, you know, happy customers. Then what does this position cost? That is super powerful because it's going to let you know what it's going to cost to replace you. So if I'm doing the project management and I want to hire a project manager, that position might be, you know, anywhere from like whatever, 60 to $100,000, depending on what it is. So you, you need to know that because if I'm going to replace that position, I have to make sure the company is making that much money to be able to pay for that position, right? So when you put the salary, the pay rate, or the salary range for each position, it helps you stop guessing and start being able to plan financially for what you need. So, for example, an admin assistant might be 40 to 55,000. A project manager could be that 65 to 90,000. Salesperson could be base plus commission, you know, or, you know, base could be anywhere from like 10 to 20,000 plus commission. Lead carpenter might be 30 to 40 bucks an hour. A production manager might be 80 to 110,000 an hour. Those are an hour that'd be a good job per year. Those are just examples of like putting on their salary ranges. And again, if I am a, you know, apprentice and I see this and I see project manager makes, you know, 65 to 90,000 a year, I'm like, how do I get to be a project manager? And then you tell them, well, this, you got to be able to do this, this and this, right? So now you're incentivizing them to want to actually move up. If that's something that's Important to them. Now, it's not just for showing you what the business needs, it's also showing you what the business can afford, essentially based on what the salaries are, right? So it helps you answer questions like how much revenue do we need to support this row? Again, if I want to hire a project manager, I got to pay him a hundred thousand dollars a year, I got to buy a company truck, and benefits, blah, blah, blah, ends up total, you know, total package might cost me 120,000 a year. Do I have enough money right now to be able to, you know, does my. Is my business generating enough revenue to afford that position right now? It's a simple yes or no, right? Some of these positions are going to be revenue generating, I. E. Your labor force. Some of these positions are going to be just straight line expenses, like an admin assistant. Now, there are obviously some benefits to having some of these positions that are. It's hard to actually financially put a number to. Having an admin assistant should make you more productive, which in turn will allow your business to run and operate smoother, which makes you. Allows you to make more money. But you can't say admin assistant. You know, cost me 40,000 a year, but it produces $100,000 a year worth of, you know, increased productivity. Some of those positions are going to be hard to fully, you know, do the math and figure out what it's producing. But you'll know, like if I got to hire a production manager and I'm sorry, project manager, it's going to cost me 120 grand and I'm only making an extra $60,000 profit right now. We got a problem like we can't afford that position just yet. You know, potentially. The org chart will show you that. And this is why this is so important.

If you're a frustrated contractor who's dealing

off the tools once and for all.

So where are we at? Yeah, how much revenue do we need to support this row? How much gross profit do we need before we can hire this position or this person? Is this a full time row, a part time row, subcontracted row or outsourced row? So if you use subs, you still have subs on your, you know, on your org chart. So if you're a full time gc, meaning you sub everything out, you're going to have a project manager row and then you're going to have subs, you know, electrical sub, plumbing, carpentry, whatever. You're going to have all these subs listed underneath the project manager because it's showing the project manager is responsible for managing all these subscribers. Now you know, the sub is going to be whoever, it's not going to be an internal person, but it's still a placeholder for that position and the responsibilities at that, you know, the downline responsibilities for that position. So yeah, can we afford this person right now or do we need to grow into it? And what role would create enough return to pay for itself? Again, some of these positions will pay for themselves. So sales for example, on some of these sales turns qualified leads into profitable jobs. Like that's a result. Project manager delivers jobs on time, on budget and to company standard admin keeps scheduling, communication and paperwork organized. Those are just some examples of like results, you know, and responsibilities of what they do. The org chart is not a people chart, it's a responsibility chart. It's showing you who's responsible for what roles in your business. So one other thing you can add on here, which I don't have on my notes, but you can put on there a percentage. So if you're, you know, if you have a lot, if you're doing a lot of these roles, you're doing the marketing, you're doing those sales, you're doing the project management, you might even be swinging the tools, swinging the hammer. You only have like a hundred percent of your time and so you can go in there and put, if your name is on all these positions, you can put on there like what percentage of your time is spent doing this position. So if you're on the tools, that might be, you know, 75, 80% of your time allotted and Then you know, you may have 10% for project management, you may have whatever, 20% for sales, whatever that is. If you go through and look at how much time you spend on these different roles, you can see the percentage of what you're spending. And it's going to be as plain as day to see like, oh, I'm. The majority of my time is spent doing X and I. That's not where my strong point is. I need to be hiring someone to replace me. And the ultimate goal for an org chart is to completely put yourself out of a job. You might be the owner at the top and that should be the only thing that you have your name on. Every other role should have someone else's name. Right now it's got your name on seven different jobs. But eventually you replace yourself. Just keep replacing yourself up the chart. That's why you want to have that visual representation. So how do we use the org chart to make decisions? Once we build it, the decisions will become crystal clear. I mean it'd be so, it's so crystal clear once you see this, it's such a powerful tool that almost no one does. If you do it and you do it right. So you can look at the chart and ask, you know, where's the owner? Where's the owner's name? Showing up too often. Again, I have five different rows. It's showing up way too much. Which row is clearly not owned? You look at the org chart and you're like, I don't see on air who, who handles the scheduling, who's. Who's ordering the materials, right? Because it's not defined on like what the different responsibilities are. You got to go in and figure that out. Which row is causing the most chaos? Maybe you're terrible at project management, but you do the project management and that's what's causing the most chaos. It's clear that you need to hire someone to do it, to do project management for you because you're not good at it. Which roles are low value work that the owner should be, should not be doing. If you use a VPH, your value per hour and it's like 100, $200 an hour, you can, and you have a, you know, apprentice job on there, 20 to 30 bucks an hour or whatever it is, and you're doing that job, it's clear that you're losing money by doing that job. If your VPH is 150 bucks an hour and you're doing a 20 an hour job, you shouldn't be doing that. So it Shows you the low value work that you should not be doing. Which role, if solved, would create the most freedom or profit. Again, if you're on the tools 70% of the time and then you remove yourself from the tools, boom, instant freedom. You just freed up 70% of your time. So it shows you exactly where that is. It shows you which role the business can actually afford next. You may be able to afford an admin assistant right now, but you can't afford a project manager. That'll show you that because you'll know what that is, what the money is. It also show you which position would give you the biggest return on investment. By hiring this position, you know, if it's a, if it's a revenue producing position, it'll show you that you're going to get your money back quickly, right? Or if it's a value position where it creates value in the business, it's going to show that as well. So that helps you decide. All that information helps you decide whether you need to hire someone, delegate a task, create an sop, train an existing employee, outsource the role, change responsibilities, hold someone accountable, raise prices, increase sales volume, or improve gross profit before hiring. It's going to show you all this different information. That's why again, why it's so powerful. And most importantly, this is probably the most important thing that I would say that the org chart does. It keeps you, it keeps you, the owner, from hiring people emotionally because you're like, man, I'm spending way too much time doing estimates. I need to hire a full time estimator. Maybe not. Maybe you don't need a full time estimator. Maybe if you freed up some other time here, you would have more time available to do estimating. But it's just because you're doing all this other stuff, you don't, you feel like the estimating takes a big chunk of your time so you want to offload it. Maybe, maybe not. Maybe you just need to get rid of doing the project management and now you have an extra, you know, 10 hours a week, 15 hours a week, and now all of a sudden you have lots of time. And doing the estimates doesn't really take that much time because you have more time and then you realize you really don't need an estimator anyways. So it helps answer that question. A lot of contractors hire because they're frustrated. That's a bad place to be in. You know, I need another guy. I need someone to answer the phone, I need someone to run jobs, I need someone to do this. I need someone to help me with this. Because you're trying to solve the problem of overwhelm through an emotional reaction. Instead of having a data driven decision piece of a tool that helps you be able to make decisions based on data, you're just doing it based on reaction. Then you have a bloated overhead with a bloated payroll and you have people that, oh, turns out I only have 10 hours a week for that person to do because I thought my, it took me 30 hours a week because I was actually not very focused. This guy can do it in 10 hours a week. What's he gonna do the other 30 hours? Now I gotta find something else for him to do. So that stuff happens all the time. So when you, when you build this org chart correctly and you list all this stuff out, it'll help you show like what seat is actually broken. What would it cost to fill that seat? Can the business afford it right now? And will that seed help produce more profit? Profit, more time or more consistency? So sometimes the position may not generate revenue, but it may generate consistent outcomes. What's in turn helps with your reputation, which helps, you know, in more leads and more sales and more jobs. So a lot of these things are interconnected. It's not a, you know, here's a direct result of this position. So like I was saying, maybe you don't need to hire another field guy. Maybe you need better scheduling, Maybe you don't need a project manager yet. Maybe you need admin support. Maybe you don't have a production problem, you have a sales estimating or communication problem. So by assigning these responsibilities to these roles, it helps you identify who's responsible for what and where the breakdown is. Or maybe you realize you can't afford that position yet. You know, you need that position, but you can't afford it because you're not pricing correctly. And if you look at your org chart, there's no one else that can do this position yet you can't afford it because you're not making enough money. What does that tell you? I need to raise my prices. It will tell you this. It will show you. So this is why it's so important. So this is the real power of an org chart. It tells you all these things. It helps you have a clear picture of where your business is, where you want your business to go and where it's currently at, all the responsibilities you have, why you have no time, and why you're stressed out all the time because you can see plain as day, my name is in 15 different positions, right? I have one employee who does one task and I do seven other tasks or seven other positions in my business. No wonder I'm overwhelmed. It will show you all that if you do it, you cannot scale a business with unclear ownership of responsibilities. If you want the business to grow, every role needs a seat. Every seat needs an owner. Every owner needs a clear outcome. And every position needs to make financial sense. Don't just hire for the sake of hiring. Don't hire because you're overwhelmed. You may not need that position. So this is, this is all the stuff that can happen with an org chart. And there's, there's software out there you can use. It's like Microsoft stuff. I use Miro M I R O. This episode is not sponsored by them. Miro.com that's what I use. Because you can very easily create org charts. There's other software out there that can do it for you. Like you just say, I want to build an org chart. Heck, even AI can help you build an org chart. It may not do a very good job of creating it's the image, but it can give you all the information. You can just go on AI and say, hey, I want to create an org chart for my business. Here's the things that I want on there. Roles, responsibilities, pay. Help me craft that and it may give you all the information. And then you just gotta go in and visually create the, the actual diagram and then plug that stuff in so it's, it doesn't take very long either. Guys, you can do this in a couple hours easily if you have the information. If you don't have all the information, it may take you a little bit longer. But easily within one or two hours you can have an org chart up and running and have lots of clarity in your business. A lot more clarity of what decisions you need to make in your business. So that's all I got for this episode. It's pretty straightforward. It's super powerful. If you haven't created an org chart yet, make sure you go out and do that. Don't sleep on this. I promise you it's super powerful. Don't sleep on this. It's going to give you a lot more clarity. And once you've know, once you go out and create your org chart, go to the, the podcast website that we have, the new one, the hammer and grain podcast.com and leave me a voicemail, let me know what it did for you. I want, I want to hear that feedback of how that org chart helped you get clarity in your business and what specifically it kind of light bulb moment you had. So do that. Let me know feedback. I appreciate it guys. You know where to find me. You can just search on the Hammer and Grind, search for Hammer Grind podcast on the socials or go to the Show Notes and get information there. But until next time, remember, profit is not a dirty word.