Self-Taught MBA: Developing Executive Thinking - Fine Homebuilding

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Building Business

Building Business


Self-Taught MBA: Developing Executive Thinking

comments (0) November 1st, 2012 in Blogs
FPR Fernando Pages Ruiz, contributor

Like most builders, I came into the business as a manager, with an intimate knowledge of the trades and a good handle on running a job site. From the beginning, I was fortunate to work for bosses and with partners that had a different set of skills. They had learned to make something out of nothing by using their imagination to see an opportunity, envision how to develop it, and then gather the resources (people and money) to do it.
The most difficult step for any manager moving into leadership is to allow others to manage. Once you have assigned good, skilled people to take over the details as you train your focus on the big picture, you have made the transition from manager to executive. 
Like most builders, I came into the business as a manager, with an intimate knowledge of the trades and a good handle on running a job site. From the beginning, I was fortunate to work for bosses and with partners that had a different set of skills. They had learned to make something out of nothing by using their imagination to see an opportunity, envision how to develop it, and then gather the resources (people and money) to do it.Click To Enlarge

Like most builders, I came into the business as a manager, with an intimate knowledge of the trades and a good handle on running a job site. From the beginning, I was fortunate to work for bosses and with partners that had a different set of skills. They had learned to make something out of nothing by using their imagination to see an opportunity, envision how to develop it, and then gather the resources (people and money) to do it.


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A buddy called to shoot the breeze and tell me about his current job. "I'm framing houses again," he told me, then complained about the hardship of doing physical labor on aging knees and elbows. "But it's work, and I'm glad to have it," he added. Then he confessed that he would rather become a builder than be a carpenter, and he asked me how to make the transition. I told him there were two answers: One was the practical aspect that had to do with things like identifying property to develop, buying it, drawing up preliminary plans, writing a financial pro forma, and taking it to the bank, but these details were easy to work out once you had the fundamentals in place. There's also a fundamental change in your thinking, the subtle but significant difference between thinking like a manager or an executive.

Like most builders, I came to the business as a manager, with an intimate knowledge of the trades and a good handle on running a job site. From the beginning, though, I was fortunate to work for bosses and with partners that had a different set of skills. They had learned to make something out of nothing by using their imagination to see an opportunity, envision how to develop it, and then gather the resources (people and money) to do it.

In recent posts, I profiled several businessmen who embody these entrepreneurial qualities--the ability to see what needs to happen and the ability to make it so. Some of them actually lack an intimate knowledge of the raw materials, tools, and calluses that transform a pile of lumber into a house, but often they do better in business than many of us who work our way up through the ranks. In fact, it's the lack of first-person job-site empathy that helps them to think freely and creatively. Those of us who know the trades well tend to limit our vision to the best we can do rather than the best that can be done.

The manager focuses on doing things right; the executive focuses on the right thing to do. The manager asks how and when; the executive asks what and why. If you have done any reading in business, you recognized my paraphrase as the words of the late Peter Drucker of Harvard University, the father of management sciences to whom we owe the existence of the MBA. The best advice I could give my friend wanting to become a builder and developer was to read Drucker's The Effective Executive (HarperBusiness, 2006), a book that has nothing to do with real estate or construction, but will change your way of thinking about your business and your job.

Not that thinking like a manager is bad--a business needs both managers and executives--but it's important to know the difference, especially if you have ambition but are someone who wants to build the best house or the perfect remodel, like me. We tend to get into business deals that challenge our building skills rather than make good business sense. We feel like we're not working unless there's a tool in our hands and sawdust in the air. We often fail, tripping over the Peter Principle that says each individual has a limitation to his skills and once promoted to a position beyond his ability will stumble.

I don't believe this limitation is innate; it comes from an ingrained way of thinking. As an executive, you have to focus on the landscape of opportunity, asking about what the market needs and whether customers will buy what you are building.

If you think like a manager first and an executive second, you're liable to do what I did at the outset: build the best possible house in exactly the wrong place and at the wrong time. None of us who love craft like to admit this, but there are many examples of successful businessmen that do the exact opposite: build a lousy house in right place and at the right time and do well. You can learn from this example, though, even if you find the notion of building anything but the best house repulsive. You need a little bit of executive thinking to build the best business, and this is important, too. 

Warren Bennis, a distinguished professor of business administration and founding chairman of the Leadership Institute at the University of Southern California, developed a list of differentiating characteristics that he described in terms of the contrast between management and leadership. I don't want to alter Bennis' words--they are too good as is--but you could substitute the word executive for leader and come to the same conclusion:

– The manager administers; the leader innovates.

– The manager maintains; the leader develops.

– The manager focuses on systems and structure; the leader focuses on people.

– The manager asks how and when; the leader asks what and why.

– The manager has his or her eye always on the bottom line; the leader's eye is on the horizon.

– The manager imitates; the leader originates.

– The manager accepts the status quo; the leader challenges it.

– The manager is the classic good soldier; the leader is his or her own person.

Although I agree with Bennis that leadership comes at all levels, including the management level, I also know how important it is to have good managers in a construction company and regard this as a separate job from the executive, as in CEO. I prefer the words manager and executive because they describe two different organizational roles. Whichever concept you prefer, executive or leader, the difference in thinking between a manager and an executive is an important distinction. You don't want to contemplate a business decision with the same criteria as an operational one; in other words, you don't want to think like a manager when performing executive functions.

Getting back to my friend's original question, on how to become a builder or developer rather than an employee or a subcontractor, the answer is in getting to know the community, the real-estate market, and the needs and wants of the people living in your area. Gathering this information is part of an effort to figure out what the market in your area will want in two or three years when you're ready to put whatever you constructed up for sale or rent. This sounds simple enough, but it takes more than switching hats. It entails developing a new aspect to your personality.   

For example, a manager takes a break when he stops for coffee; an executive works at the highest intensity then. He's thinking and listening, looking for hints of opportunity in the casual conversation, taking advantage of the break from operational considerations to work on strategic ones. A manager clocks out when he leaves the job site and heads home; an executive never clocks out, even when on vacation. The manager comes home and works on scheduling, estimates, and bookkeeping. This is why it's important for you not to overwhelm yourself doing accounting and estimating at night; the 24-hour manager is not an executive. The executive must have the time to do executive work, and this work is done first in the office of your imagination. You need time to do research to see if your ideas prove out. Then, through good communication, you inspire others with your vision and gather the resources needed to make it come about. All of this requires time, and the most difficult step for any manager moving into leadership is to allow others to manage. Once you have assigned good, skilled people to take over the details as you train your focus on the big picture, you have made the transition from manager to executive.  

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