If your company isn't growing as fast as your ambitions, it's tempting to blame the economy or bad weather. But you might be surprised to find the problem lies much closer to home. Victoria Madine talks to one owner-manager who invested in his own management skills – with impressive results.
When Peter Howe's refurbishment company turned five years old in 1999, he had plenty to celebrate: his dream had become reality, business at Kent-based Kingswood was busy (turnover had hit £5m) and he was enjoying every minute of it. But there was a problem: the company was growing erratically, with periods of growth followed by periods of stagnation. Was the economy to blame, or the bank, or the bad weather that winter? Unlike most company owner-managers, Howe recognised that the answer was closer to home.

Recent research by accountanting and business advice group BDO Stoy Hayward (see "Growing pains", page 40) suggests that when a business' growth is sluggish, the main cause may be found within the company itself. The research reveals that too many owner-managers blame factors outside their control for slow business growth, and don't consider how their own management practices might be holding their business back.

Howe realised he had to take a critical look at his management style if he wanted to meet his future aspirations. But as a "hands on" manager, who was almost obsessed with the detail of running his business, that was never going to be easy. So, 18 months ago, he contacted BDO's business growth service. But was it able to tell him anything he didn't already know? And considering his 30-year career and experience of running building firms (Kingswood is his second) why did he feel he needed help now?

"I needed to take a step back from the day-to-day concerns of the business, which was difficult because I was so involved in every aspect of it," explains Howe. After founding Kingswood in 1994, he had spent five years building it into a 30-strong firm with a turnover of £5m, and felt that the brand was finally becoming an established name. Keen to take on larger, more prestigious projects, Howe wanted to grow the business. "But if business was going to grow towards £12m to enable us to do all the work we wanted, we needed controlled growth so the quality of our site work wouldn't suffer," he says.

Howe could see that he needed more managers in place to control that quality. So, taking a little time out from actually running the business, he tried to come up with his own strategy for diffusing the decision-making process across the company, rather than keeping it all in his own hands. "I made changes to my management team and promoted two surveyor managers to team leaders, and some of our surveyors to surveyor managers – but it wasn't working," he recalls.

Frustrated, Howe turned to his long-term business adviser, BDO partner David Miles, who put Kingswood through his firm's growth service programme – for a small fee of £5000. It soon became clear that, despite his changes, Howe was still making all the important decisions. Miles explains: "At that point, Peter had 30 staff reporting to him. He was going to fall over because, like a lot of entrepreneurs, he's a control freak – and I don't think he would mind me saying so."

He won’t mind me saying, like a lot of entrepreneurs, Howe is a control freak

David Miles, partner, BDO

According to Miles, this meant there was a lack of strategy behind the firm's development. The company would work flat out getting enquiries for work, work on them, and then, when it had completed jobs, find it had none in the bag – so it would revert back to creating sales. In the meantime, little revenue came in. "Peter needed to be promoting his business, but he was on site sorting out logistical problems," says Miles. BDO persuaded Howe to start delegating by asking his wife to get the message across to him – and gently remind him of the negative effects of stress.

A series of seminars, in which Miles encouraged Kingswood staff to talk about how they felt about the company, proved revealing for Howe. "I realised that people perceived the company as mine, and felt that I made all the key decisions. I needed to find incentives to keep their energy going," he says.

So Howe set about putting into place an infrastructure that gave his staff opportunities to move their careers forward. The revised senior management team gave five employees executive-style responsibilities, with the intention of getting them more involved with business strategy. He promoted more of the company's surveyors, and sent his site managers to college once a week to give them the training they needed to climb the career ladder.

Senior staff also went through a personality profiling exercise to identify their skills, which highlighted the fact that there were no creator/innovator types in the team. Importantly, the company also carried out a series of exercises to benchmark it against its rivals. Howe and his management team then worked out the company's aspirations – and they did it as a team. They decided how big they wanted the company to grow, what kind of bonuses would be offered, what kind of succession plan would suit the business, and so on.

So was it difficult for Howe to let go? "My heart is still in being a builder, and there's not a job I couldn't do in this company," he replies. In fact, Howe fervently believes that a builder, someone whose "soul is in the construction process", should be at the head of all construction management companies – a belief that stems from his traditional training and a strong work ethic.

I realised that people felt I made all the key decisions. I needed to find incentives to keep their energy going

Peter Howe, managing director, Kingswood

The 49-year-old's career began back in his mid-teens when he trained as an apprentice joiner with his father. He later qualified as a building surveyor, subsequently joining Overbury, the contracting business owned by John Morgan, co-founder of building big-hitter Morgan Sindall.

Morgan gave Howe the chance to set up Smithfield, a refurbishment company specialising in heritage work, which he ran for four years until Morgan decided to restructure it. "One night I woke up and I realised this is not fun any more. I've got to feel like I'm enjoying myself. I wasn't fitting in, I had a vision of what I wanted to do; run my own company," remembers Howe. He feels he learned a great deal from Morgan. "John always says cash is king; that was an important lesson for me."

So Howe resigned, cleared his dining room table, put a computer on it and set about creating Kingswood, with the help of "my wife, an accountant – and my four children!" He used his contacts in the industry to spread the word about the company, and started doing the work everyone else shunned – private client work. "The first few years were sheer hard work and the margins were unbelievably tight. But we just kept plugging away. Every single job, no matter how small, had to end well. Every one – to ensure future referrals."

Keeping a close eye on the quality of every nut and bolt served his business well – up to a point. Howe can now see how a manager needs to step back from time to time. The results of the recent restructuring have been dramatic: the company has experienced its first year-on-year growth, with turnover for 2001 hitting £12m. "Before 11 September we were on target for £14m. But to have hit that, we would had to have bought work [by taking on projects on low or non-existent margins]. And we will never do that. You've got to make a profit to invest in your company, or else you are doomed to disaster."

And Howe has plenty to invest in – his ideas for the company's future seem endless. He talks about setting up a database of clients and subcontractors showing how Kingswood rates them. He wants to set up an academy for tradesmen to become master craftsmen. He wants to turn over £30m – and maybe diversify into design-and-build at some stage.

Growing pains: What stunts expansion?

David Miles, partner at accountant BDO Stoy Hayward, isn’t usually a betting man. But he’s willing to bet any entrepreneur in construction £5000 (the price of his detailed advice) that he can reveal why their business is suffering from slow growth. “If you plotted on a graph the expectations and goals of the people responsible for running the business, there would be considerable misalignment.” And Miles is speaking as someone who has done his homework. BDO, with the Cranfield School of Management, has recently published the results of its research into business growth. It interviewed the senior management teams of 50 small and medium-sized companies across all sectors, and compared the characteristics of fast-developing firms (those with a growth rate of more than 10% for two successive years) with their slower counterparts. BDO found that the leaders of slow-growth construction companies were likely to blame the economy, banks, unreasonable customers and the weather for poor performance. But Miles found that the reality was that these firms had no business plan in place for the current year, no longer-term formal business strategy and failed to share their aspirations with the whole workforce. “It’s very important everyone understands a company’s direction. I was very surprised this isn’t considered a priority more often,” says Miles. He says the construction companies he looked at also tended to be over-confident that the right people were in the right place, and a mistaken belief that business growth means simply offering more products or services. For further information, log on to BDO’s website: www.bdo.co.uk.