Entrepreneurial Leadership

Whether you’ve started your own remodeling business, inherited one or purchased a franchise, what is required is the entrepreneurial spirit, the continuing pursuit of new opportunity.

August 31, 2002


Questions to ask yourself

as a leader

To what extent is the company's leadership:
  • energetic, creative versus stately, conservative?
  • participatory, caring versus removed, elitist?
  • listening, coaching and teaching versus supervising and managing?
  • motivating by mission versus motivating by fear?
  • leading by means of personally demonstrated values versus institutionalized policies?

How much time is spent by the company's leadership personally developing and maintaining a culture centered around service to customers and fellow employees?

From "Putting the Service-Profit Chain to Work," Harvard Business Review, March-April 1994.

The entrepreneurial leader does not have to be an entrepreneur. Whether you've started your own remodeling business, inherited one or purchased a franchise, what is required is the entrepreneurial spirit, the continuing pursuit of new opportunity. That doesn't have to mean growing the business, though it often does. It can also mean improving productivity, reallocating resources or providing more training to workers. Ultimately, an entrepreneurial leader in the remodeling industry must concentrate on bettering service -- to both employees and customers.

"Customer loyalty is the ultimate driver of profitability," says Roger Hallowell, a professor in Harvard Business School's Entrepreneurial and Service Management Department. "The goal is to deliver the most value -- as defined by the customer -- with the least cost. Value is the quality you deliver relative to the price you charge. The question is, how do you deliver that value?"

The service-profit chain

Total quality management is an excellent tool for enhancing value in service industries as well as manufacturing, says Hallowell. At Harvard, that concept is expressed as the service-profit chain. These are the links in the chain:

  • High internal service quality -- workplace environment, job structure, hiring and training practices, employee rewards and recognition and the tools employees have to serve customers -- leads to employee satisfaction.
  • Satisfied employees are more productive, capable and loyal, giving customers better results and creating more service value to customers.
  • Increased value leads to more satisfied customers.
  • More satisfied customers, who feel that the service they received was designed and targeted specifically to their needs, are more loyal.
  • Customer loyalty, defined as retention, repeat business and referrals, is the primary stimulus of revenue growth and profitability.

Putting this chain in place requires more leadership, and more effort, than the owner's simply doing everything, the standard practice in the first several years of a remodeling firm's life. Auditing the company's service-profit chain can help the owner or management team determine where to focus new efforts to achieve long-term profitability and sustainability.

Items to measure

  • The ratio of marketing and business development expenses for gaining new customers versus that spent retaining existing customers
  • Customer satisfaction, including the difference between expectations before remodeling and perceptions afterward
  • Employee productivity, in terms of both quality and quantity
  • Employee satisfaction
  • Employee retention
  • How each measure correlates to profit and growth

Questions to ask

  • Do our clients defect? Why? Why do prospects not choose us?
  • Are front-line employees given the authority to address and correct customer problems?
  • Is the importance of quality and service driven home throughout the company with a rewards and recognition program?

If you have questions about how to get started with quality management, call the NAHB Research Center's ToolBase Hotline at 800/898-2842 or e-mail toolbase@nahbrc.org.

To find out more about making the service-profit chain work in remodeling, register for Professional Remodeler's first Benchmark conference, Oct. 11-13 in Boston, online or call Michael Peterman at 630/288-8186. Roger Hallowell will deliver the two-part keynote address, Entrepreneurial Leadership.

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