A real-world example

In the following scenario, there is an apt analogy in the remarkable story of a company far afield from the construction industry, LoPresti Speed Merchants, located in Vero Beach, Fla.

Roy LoPresti, a widely acclaimed aircraft design engineer, founded the company in 1991 on the premise that any general aviation aircraft could be made to fly much faster simply by giving meticulous attention to details of its outer envelope—without any modifications to its engine power.

LoPresti Speed Merchants concentrated on correcting imperfections that even the most experienced members of the general aviation community at the time assumed were already optimized. It redesigned and refitted factory-installed exterior components and corrected gaps, misalignments and rough edges. The company fixed anything hiding in plain sight that would produce drag and reduce airspeed, including filing down and smoothing over rivet heads everywhere on the fuselage.

So, without exotic modification or radical design changes, the company increased the average cruising speed of its customers’ planes by double-digit percentages. It reduced significant problems hiding in plain sight that most members of the aviation world had failed to see for decades. Remarkably, the talented and self-motivated craftsmen in the LoPresti organization routinely went right to work on clients’ aircraft without needing aeronautical engineers hovering over them dictating what to do next.

LoPresti Speed Merchants eliminated visible sources of drag before it could have an effect. But when an electrical service and maintenance contractor identifies the source of hidden costs, most likely it’s too late. The key difference lies in timing and approach. LoPresti worked proactively to prevent drag before it could affect performance. Electrical contractors, by contrast, typically discover the effects of hidden costs only after they’ve already diminished profitability on a job. Sadly, many contractors never fully fathom how extra trips to the supply house or repeated callbacks to customers’ sites have eaten away at margins.

Peter F. Drucker, legendary management consultant, professor and author, famously reminded everyone, “What gets measured gets managed.” This principle has guided countless businesses toward data-driven decision-making and quantifiable performance metrics. However, applying this wisdom to hidden costs always presents a fundamental challenge because of the lack of recorded data that can track them.

The larger issue is, if a hidden cost can be quantified, it’s too late. The damage has already been done.

Historically, the business world has treated hidden costs as a type of management issue, often forming a task force, hiring consultants or calling in auditors to uncover root causes and report back. But hidden costs are not a management problem. They are a leadership problem.

Management versus leadership problems

Management problems can be solved with better systems, tighter controls and more rigorous oversight. Leadership problems, however, require a fundamental shift in organizational culture and employee empowerment. When hidden costs persist, it’s not because managers lack the tools to track expenses—it’s because the organizational structure doesn’t empower people at every level to prevent those costs from occurring in the first place.

Regardless of their size, electrical contracting service and maintenance businesses typically have a leader-follower organizational model. Our prescription for reducing hidden costs is to convert an organization to a leader-leader model.

This philosophy is not meant to supplant the chain of command in any company. Nothing needs to change on the company’s organizational chart, although everyone must understand that the leader-leader concept will not work where the company president prefers to hoard financial information and dominates all important decision-making.

The transformation requires transparency and trust. In a leader-­leader organization, information flows freely, enabling everyone to make informed decisions.

Financial data, project performance metrics and operational challenges are shared openly, not guarded at the top. This transparency empowers employees at every level to see the bigger picture and understand how their actions effect the company’s success. Without this foundation of shared knowledge and mutual trust, attempts to implement a leader-leader model will fail.

When it comes to avoiding hidden costs before they are incurred, in a leader-leader organization everyone is always ready to exercise personal initiative to avoid them by first informing their boss with a message beginning with the words, “I plan to …” This simple phrase represents a fundamental shift in workplace dynamics. Rather than asking for permission or simply doing nothing, employees state their intention to act, giving supervisors the opportunity to course-­correct if needed while preserving the employee’s sense of ownership and initiative.

For example, an electrician might say, “I plan to order these extra items for that job because we’ve been running short of them on similar jobs,” or a project manager might announce, “I plan to schedule the inspection for Thursday morning to avoid the kind of delays we experienced last month.”

Converting an organization from a leader-follower mode of thinking and mode of operating cannot be accomplished overnight. However, we would suggest that it could be well on its way to success in three months or less by following a three-step strategy.

1. The initial challenge

Hold an “all-hands” meeting with the maximum number of employees from every part of the organization to roll out the general concept of a leader-leader organization. Explain that in its first stage, the company depends on all its new leaders to nip hidden costs in the bud by simply employing their past experience and gut instinct—in other words, common sense versus financial analysis. When they come across a chance to harvest low-hanging fruit, they should jump on it, most of the time alerting their boss by announcing, “I plan to …” for whatever situation they are about to confront.

2. The next level

Weeks later, after everyone has had the benefit of this kind of guided discovery, in at least three well-planned learning sessions, designated trainers would introduce a basic system for calculating savings from avoiding common forms of hidden costs. What are the savings, for example, from eliminating extra trips to an electrical distributor or a call-back to a customer’s facility because of a simple mistake that might have been prevented by following a checklist? The calculations need not be complex.

3. All-aboarding, an ongoing practice

Everyone has heard about onboarding. We have advocated for “all-aboarding,” a periodic all-hands assembly to engage with everyone in the organization that will bring all the imaginable benefits of team-building and two-way exchanges. (Read more about this concept in ”From Onboarding to All-Aboarding” in the February 2022 issue of ELECTRICAL CONTRACTOR.)

But even more important, company owners and managers must embrace the concept of management-by-walking-around (MBWA). In the face-to-face encounters that MBWA enables, company owners and general managers will be pleasantly surprised by the power of serendipity and the ideas they collect by simply hoofing around their company’s offices, support facilities and, of course, customers’ premises.

One company president retells the story of holding a retirement celebration for a warehouse worker who had been employed there continuously for 35 years. As might be expected, he was known and loved by everyone from every department. Standing in a circle of five or six others, the owner asked the soon-to-be-retired employee for any suggestions on what could be done to make the company even more successful.

Respectfully, this long-time loyal employee responded, “Sir, I’ve been here for 35 years. I’ve never missed a day of work, and I’ve always given it my all. No one from the office has ever asked for a suggestion from me on how to improve what the company was doing. While I appreciate everything the company has done for me over these many years, it’s a little late to be asking for a suggestion from me.”

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