NFIB

Top-Heavy
09/ 29/ 2003

by Peter Provenzano

In a tough economy, small business owners might think one big account could save them. They're right; it could. But you've also got to make smart business decisions along the way so that you can keep those accounts. I learned this lesson during one of the most profitable times at my company, SupplyCore.

In 1998 SupplyCore had 12 associates. In September of that year we were awarded the first of what became a handful of large defense contracts to supply U.S. military bases with facility maintenance, construction and material-handling items. Sales began to grow rapidly, and our systems and staffing needs increased as well. Looking back, it sometimes felt like we were holding on to the wing of a jet airplane at takeoff.

By the end of 2001, sales had grown by more than 5,000 percent from 1998 levels, and the staff had increased to 85 associates. Much of the staff was necessary to support existing business and expansion. In hindsight, however, I now realize that I overstaffed at the senior level, the most expensive level in the organization.

Having too many managers and too many layers impacted everything: culture, service, profits. Most importantly, it affected what I consider to be our greatest asset -- our flexibility and adaptability. Our culture became very hierarchical and communication was cumbersome, which of course makes it hard to get things done.

I lost touch with the business, thinking it would be best to focus on long-term strategy. What I now realize is that you can't get down the road without looking out over the hood at what's directly in front of you. You need to have the proper mix of strategic and current business focus. It's all about balance.

Another major event that occurred during our period of overstaffing was a computer system conversion. I was not involved enough in this most significant process, and I left the entire conversion to our professional management team. Again, a mistake. Changing your back office business systems is a very arduous and tedious process. To do it successfully it's essential that a CEO be involved, especially in small and mid-size businesses, perhaps even in large corporations. Our conversion ultimately resulted in us having to hire even more people, at least 30 percent more than should have been necessary had we properly implemented and structured our processes in the new system.

Today we are leaner, more efficient and more profitable than we have ever been. Still, it took more than 12 months to get the business back on track. But the lessons learned will keep us on the right path for years to come.

Peter Provenzano is CEO of Rockford, Ill.-based SupplyCore, a provider of integrated supply and procurement services.

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This article originally appeared in the October/November 2003 issue of MyBusiness magazine.

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