Managing the Backlog

With many remodeling jobs coming through the pipeline, who's in control, and how do they manage the backlog?

May 31, 2007

Jud Motsenbocker
Contributing Editor

With many jobs coming through the pipeline, who's in control, and how do they manage the backlog?

Jud: Our topic for today is managing the backlog. Jef, describe your process in managing backlog.

Jef: As a lead, a prospect comes into the office, and they are entered into ACT, our contact manager software. As they go through our design process, they're given different stages. That comes out on a report, which I can look at daily within ACT, to see how many clients we have in design, how many in pre-construction and how many we have in construction as well as the number of prospects. I'm trying to always keep certain limits on how many people we have in certain stages.

Jud: You have three stages and you want to keep so many people in each stage?

Jef: Yes.

Jud: Jacob, how do manage the backlog?

Jacob: I meet with the director of architecture weekly to discuss schedules for jobs that are currently in design. We have two design phases: one is design and one is construction documents. We're paid a fee at both of those stages. Talking design as a whole, it can be about 3–6 months depending on the job to move it into construction. Our goal during this weekly meeting is to schedule the design work to allow for control over when these jobs are ready to build. Even at the very early stages of the job, it's very important to us for a number of reasons. One is to prevent multiple jobs starting at the same time, forecast schedules for our project managers to make sure the job and PM are a good fit. Our project managers have different talents and, depending on the nature of the client or the job, we want to select who is going to run it. The other is hiring, as needed, for both architectural studio and production. When we're looking 3–6 months out, it's a very tight market here for hiring, especially for anyone skilled on the production side. Lastly, it's for the cash flow so we can stage these jobs. Everything we design we move into construction or intend to move into construction. In fact, there is a penalty if the client decides to go with someone else.

Jud: Jacob, what is an ideal number for your company to have in what you call "two phases" in this particular case?

Jacob: An ideal number would be about two projects per drafts. We have two draft persons on staff. So, 5–6 jobs would be about how many for our studio to stay productive and not be spread too thin.

Jud: How many would you be running and actually doing in construction?

Jacob: Four to five active jobs, we've noticed cash-flow wise, is what keeps things and business operating most effectively. The guys in the field would probably disagree and say 3–4; I think they feel a little overworked. But that's what we've noticed.

Jud: Jef, what's the ideal number for you?

Jef Forward, Owner
Forward Designers & Builders

Jef: In our design stage, we like anywhere between 4–6 in design and working. Our turnaround for design time seems to be similar, between 3 and 6 months. Our ideal turnaround would be between 2 and 3. We just can't get them to turn around that quickly. In pre-construction, which is where we're doing our construction documents, getting the job ready to start, ideally I would like three. But, right now we have two.

Jud: Jef, you were talking about how many projects you have in the pipeline. You said two and you'd like to have three. What do you do if you're in a situation where things are really popping and falling into place for you and you end up with six? How do you handle that?

Jef: I wouldn't let that happen; I wouldn't want that to happen. I would push people back in terms of their start times. I would be able to forecast that by looking at the progress of the design projects. If I had people coming to me with their projects saying they want to start tomorrow, I would tell them I couldn't do it.

Jud: If you can't stay in your comfort zone, I'm going to call it, then you will tell them they'll have to wait or they'll have to find someone else. Is that a fair statement?

Jef: Yes.

Jud: Do you ever have people who say, "OK, we'll wait on you"?

Jef: Yes.

Jud: And is that largely because you have a reputation?

Jef: Yes, I like to think so. We're definitely working toward that. I also explain to people that in the design process it is very important to go through all the steps and all the decisions. We won't start a project until we've gone through that process. And that process takes time.

Jud: Jacob, the same question. How many do you have in the pipeline now?

Jacob Kirk, Director of Construction
Wentworth Inc.

Jacob: We have six jobs in design and we have three pending design contracts that could, in the next week or two, go into design. Over the next month, we also hope to have two of these go into construction. So, we'll keep six jobs in the pipeline.

Jud: What about a situation where you end up with too many jobs? Would you run seven or eight jobs if if it falls that way?

Jacob: Our volume is steadily increasing. What we do throughout is, again, we're looking at a project and a schedule, and we set milestones throughout the design process. We let our clients know throughout that process where they're at and where we think they'll be. We're trying to manage their expectations through that process. So, if internally we have the need to push them out, we can do that and let them know in advance. For the most part, as long as we let our clients know upfront, it seems to go well. We have some clients who are very anxious to get going, and sometimes we can do that. We can expedite the process a little more and get them into construction.

Jud: Because you want your company to grow, would it be fair to say that you try not to get a backlog because you would just increase the number of employees you have to handle that?

Jacob: Yes. I think a backlog allows us to be in the comfort zone. I think a larger backlog could have a negative effect when you put clients off or ask them to wait too long. So, we try to keep it so we don't have a backlog or at least our backlog is manageable within the design process. By the time we're out of the design process, we never have more that a month or two before we're starting construction. It has a lot to do with keeping a client's enthusiasm going — the excitement for the project and everything else. We want these things to go from design to construction with no more than a month or two at the most lag time. We've managed that process through the design phase. Because the design phase can be up to six months long, it is manageable.

Jud: That's a good point to bring out. You try to keep that enthusiasm in the client going and that's why you don't want that design-to-construction to get too long. What kind of situations disrupt your flow of the project from the pipeline into the construction phase?

Jacob: The two biggest disruptions we have that have a negative impact on the flow of the design to production process are, No. 1, tight budgets with the clients. We do high-end remodeling. There's a lot of money spent in architecture and the design studio to provide drawings with very elaborate details in the high-end remodeling. When we have clients with budgets it really disrupts the process because of numerous repricing, optioning out things, and just the hesitation on their part — "sticker shock" that usually takes a little bit to get over. This creates a hesitation on the client's part which often delays our ability to move forward. Sometimes the design work on a job will stop while the client considers things and looks things over. If this hold up lasts for more than a few weeks, it really disrupts our ability to move the job into production in a timely manner. Even at the point when we present our final price, and are ready to build, they hesitate again wanting to go back and revisit the budget, work in a change and [ask] how can they do that. It takes a lot of revisions, and a lot of revisits by me or the subcontractors to reprice. So, having a tight budget is probably the most disruptive thing to the process. The other would be the permitting process. We work in Virginia, D.C. and Maryland. We have three different systems that we're working with in terms of getting permits, with D.C. being the worst. Once we get into the construction documents stage, we will fast track a set permit that, hopefully, we can get out in two or three weeks to submit the permit. That is never in our control, and sometimes that will push the start of construction out past that month that we ideally want. That also prevents us from having that fixed price, the final price at the end of construction documents. Without having the permit set back and everything else needed, we really can't provide what we tell our clients we'll provide as a fixed price, which is all-inclusive. Those would be the two biggest disruptions. And along the lines of the permitting process is dealing with homeowners' associations and other things. There are a lot of historical districts in D.C. There are zoning waivers and a lot of other things that the architectural studio has to get through to get these projects going.

Jud: Jef, what interrupts your flow of the project through the pipeline?

Jef: I would say meeting times and client availability. We often struggle with getting my schedule to meet with their schedules. It can be a week or two between meetings and feedback meetings. That would be the biggest thing that we struggle with.

Jud: Jacob brought up budget. Does that slow things down at all for you?

Jef: No, it doesn't. In our process, we take people through design and we give solid budgets throughout. In terms of every design meeting, we're talking money as well. If we don't talk it at that meeting, then the next meeting is just about budget. When we get to the end of design, we actually sign our construction contract there. It's a two-stage construction contract and if that's for, say, a large kitchen and interior remodel for $130,000, we'll get them to commit that they're looking at a range between $130,000 and $170,000. Depending on some of the fixtures and materials they select in the pre-construction process, and also from feedback from our trade partners, that will affect the final price. When we get to the end of our construction documents, we will have all the options worked out for them. They typically want to see a couple of different things, so we're presenting it like a menu. We're building our markup into different areas so we can present a number of options. When they sign the bottom line we know we're starting in two weeks.

Jud: Jef, when you first meet the client, at the first or second meeting is there any point in there where you're discussing the schedule, from design through build, so that would help you on your backlog or help you so they know what the schedule is? Does that conversation come up?

Jef: That conversation comes up on the very first phone call. We talk about schedule, what their expectations are, what's realistic, as well as budget.

Jud: Jacob, how about you? Where do you talk about schedule and the length of time the project is going to take?

Jacob: It's always one of the first questions a client has: when can you do this and how long will it take? Just like: how much will it cost? Our salesperson meets with the homeowner, and they also come in for the initial design presentation. Talking budget at that time is vague until we get a good idea of the project and full scope of work. We're not quoting any time at that point; there's just too much and too early. Once we get actual design schemes developed and the job is brought to me, then we'll start talking budget, refining the budget and talking schedule. Usually at that point, we'll also give the client an outline on what to expect through the design and construction process, when we'll look for key meetings throughout the process, and when we can expect to finalize this. Then we'll give it to them. It really helps the client to stay focused when we give that to them in terms of coming back with their selections and the homework they're supposed to do as a client. As we get closer to the end, we'll actually hone in on a date for the start of construction. That's usually pending on permits.

Jud: Depending on what city you're in?

Jacob: Yes.

Jud: Who oversees and controls that so, in your case, you don't have backlog?

Jacob: Kevin Winkler, the Director of Architecture and I. Bruce Wentworth, the owner, is the salesperson. The three of us get together and talk weekly about this. We have company-scheduled meetings every Friday where we talk about jobs that are currently in design or construction and any perspective clients. Kevin and I meet for an hour or two weekly — we call it the design/build meeting. We're looking at these projects in design and try-ing to manage them. At that point, sometimes Bruce will sit in with us, or at least we'll get back to Bruce on where we're at. That helps him give feedback to the clients when he's meeting them, in terms of what type of jobs we're trying to get and where we can fill the holes. When we see we have a hole, and we have a PM available, and it would be nice to get a kitchen or bathroom. Bruce could really focus on that. It allows him to pick and choose the clients a little more, too. There are a number of clients in the area that we'd just rather not work for. Once we get little bit of a backlog, we can do that. As far as who oversees the management, it's the three of us.

Jud: I think it's important that you indicate that you do it on a weekly basis. Do you also, in this process, notify the client as to just exactly where they're at or what you're doing? Do you have a process of getting a hold of the customer or client every two weeks or 30 days or some kind of a number?

Jacob: I wouldn't say that there's a process. At that point, the design studio would e-mail, and communications to the client are almost daily. We have key meetings for design presentation, selections and 90 percent CD review. Between all of that, I think that they just fine-tune things as they go through the process. Again, the communications with the client at that point is almost daily sometimes and a lot of back and forth, at least every couple of days. A lot of the questions are thrown out more casually and answered more casually.

Jud: Jef, how do you handle the backlog? And I know you don't have one, but how do you handle the workload?

Jef: While we're building a team; at some point in the next year we're going to be moving into a growth period. We're going to be aggressively trying to have up to five and six projects at a time. Right now, I'm in the stage where I'm building the team and we're getting our processes down. In terms of how we manage it right now and manage our workload, we have a weekly production meeting. In the meeting, we have our project manager, our general manager and myself. We focus on the next job that's coming ready to move into pre-construction. We have weekly meetings on that as well.

Jud: Again, we're back to the team effort, just like Jacob said. Jef, you're doing the same thing. Jacob made the comment that it's almost a daily conversation with the client one way or the other. How about you? How often are you in contact with the client?

Jef: I'm not in contact with them enough. We're currently trying to remedy that. We have a weekly e-mail that goes out with a schedule. Our project manager has a daily e-mail to certain clients. It's often not initiated; it may be answering questions or things like that.

Jud: Does cash flow ever have anything to do with the project or the backlog of projects?

Jef: Yes, very much so! We're always looking at that. We want to maintain a certain amount of projects in construction at one time. Right now we're down to two. That became apparent to us about a month and a half ago, that we were falling behind, and we've quickly gotten two up; one start next week and the other starts two weeks later. We're in a particularly busy time right now because twice a year there's a large remodeling home tour in Ann Arbor and my own personal house is on the tour this year. I've been spending a lot of time with it. My general manager was actually able to pick up on this; we're falling behind on this and need to get these projects up and out.

Jud: Jacob, does cash flow make a difference when you're trying to shift these projects around?

Jacob: It does, somewhat. But it can only impact cash flow so much when you're looking at a job over the course of over 3–6 months to get in construction and trying to bring that in.

the discussion continues...

Just as important is our gross sales. We meet quarterly to discuss our budget. We have a goal of specific revenue thisyear and if we are behind we usually have to make that up in construction. That's where this plays a more important role. With that, we saw we needed a good $150,000–$200,000 job to fill that hole. We looked at it schedule-wise to see if it would work out, but more importantly to reach our revenue goals. That's what our salesperson is working on: which leads he has and which ones are worth following up and which leads would benefit the company most. That's where I think it plays a bigger role.

Jud: That's interesting, because this idea of managing backlog is on the reverse side. Both of you have talked about that from the standpoint that it also helps you when you don't have a backlog. You know where you're at in the process and what you're going to have to have to keep the construction going.

Jacob: Yes. Again, we always try to go beyond that line of not having a backlog, but not having enough. In running that line, you're always trying to balance it. We don't want jobs hanging around too long, but we don't want to have a hole and have our guys slow. Absolutely, you're doing it both ways. You're trying to balance that for us, again, to prevent a backlog.

Jud: I want to bring something in right here, because this is interesting. You both are doing 10, 12 or 14 jobs a year. For the remodeler out here who does a little bit of everything like myself, and we do 250 jobs a year, we will get a backlog of as much as 12–14 weeks on small projects. We don't get into as much high-end stuff as you both do on the design/build side, a project that would take us six weeks to design, which would be a very simple project to you both. I think we need to bring into the article here that you both do several projects, but your projects are bigger. So the person who does smaller projects and gets that backlog also has a little different problem than you would. However, the whole idea of tracking it, whether it's on ACT of Microsoft Project, would certainly lend itself to those people, too. Would that be a fair statement, Jef?

Jef: I agree 100 percent.

Jud: How about you, Jacob?

Jacob: Yes, I agree. We have small things that come up — interiors, installs of a mantle or some hangings or minor remodels. Those can actually be a thorn in my side in terms of trying to get my guys over to do these things. Certainly there is definitely a backlog, and I'll let them know that; "Well, that's not going to happen for two months." It's just the nature of the job. We do have a small backlog then, but that's managed. I can give them a date with that information from managing it the way we do.

Jud: I can just see someone throwing a one-day job at you guys! Gentlemen, let's wind this up. I want to give both of you a shot to talk about or make any comments you'd like to make in regard to managing a backlog in one way or another. Jacob?

Jacob: I think it's managing the work flow. Using the word "backlog" — we're trying to prevent a backlog. Backlog can have a negative impact on things when you develop that. Trying to manage that benefits the company. We can pick and choose our jobs from the time the leads are generated, to pick those clients that would work best with us and not have to work with clients because of cash flow needs or because work is getting scarce. We do that by managing the backlog. Also, just to make sure that, next fall, the next thing you know we're out of work. It happens easy in construction. We don't want to lay people off; we want to keep things going. We want to keep things growing. Both those are done by managing the work flow.

Jud: In two general words, schedule and communications would be vital. Would that be a fair statement, Jacob?

Jacob: Yes.

Jud: Jef, how about you? Any final words or comments on schedule and communications?

Jef: I agree with everything Jacob said. We try to do something very similar. Our company is in a different stage of life than Wentworth. We're a little bit younger in that learning process, especially me as the owner. The biggest thing that I've learned is that it's one piece of the big picture, and if you don't manage it, everything else is going to come down. It's a big indicator to me whether our marketing is working correctly, whether we're getting the calls. That helps me tie everything into it.

Jud: When you see how the flow is going, you know that you need another project to get into design because, in three months, you're not going to have something to do for one crew. So, it reflects clear back into the marketing. I guess we still go back to this idea of teamwork. I don't care how big the company is, it's all got to be a team. Everyone works together to make sure it flows properly.

Jef, you answered this question earlier but could you please elaborate on it. What kind of software do you use to manage the backlog? You said you use ACT?

Jef: Yes, ACT 9.0, and within ACT we use its sales opportunities feature, which allows us to create stages and simply move the client through those stages. And it gives us a number of reporting features on that.

Jud: Jacob, do you have any software that you're using?

Jacob: We use Microsoft Project. We use it for a lot of things: construction job schedules and daily scheduling of our employees. Also, it's what we focus on during the design/build meeting with me and the director of architecture. We've created a custom template. We use that template and tweak it, and that will usually give us a number of dates, 90 percent construction documents review, design scheme presentation. At our scheduling meeting with the whole company, we'll share that with the company so they can then contact the client about when those meetings will be. That's all generated from that schedule. We've seen that when our design for CD phase will end, or when we forecast it will end, and we'll overlay that with our jobs in construction and when they'll end. We can see if we have three jobs potentially starting in September we're just not going to be able to do it. Which one could we potentially have delays on for one reason or another because of permitting? Which one can we move quicker? We'll put a lot of effort, at that point, into trying to manage that job through the design process so we have it end and can start in construction fairly quickly. We do all of that in Microsoft Project.

Jud: You use Microsoft Project to manage all of those things. You're using all the technology that you can at this point to help everybody.

Jacob: Yes.

Jud: Jacob, when we talked about these processes and using Microsoft in your case, can you tell me about a change you've had in your company to manage this backlog? Can you give me some examples of something you can go back to and say, "This was the problem and this is the way we solved it"?

Jacob: In terms of backlog, we've solved a lot of the problems by having this weekly meeting. Our bigger problems have been in other areas of converting jobs from design to construction. In terms of backlog, it's important to keep the client's enthusiasm going and getting those jobs through as quickly as we can. When we started having this weekly meeting, that's where we were able to do that. There's a sense of order that comes to things. When Kevin and I do this meeting, it does trickle down to the rest of the employees. Everyone has a sense of order. The clients pick up on that as well. They can see that we have a well-managed process. I think that they just feel more comfortable with us. In managing their expectations, they're not shocked as often or surprised or even disappointed by things. Doing this, we are just laying the road for what's to happen. I'd say before that, things could be very difficult. We didn't have a sense of what we could tell a client on how long it would take or when we would be ready or anything else. Doing this has been the biggest thing in terms of managing their expectations and the backlog.

Jud: So moving in to the software process and using Microsoft so that you could manage that, it set the goal for you as well as the client, in that case; it solved some of those backlog problems where things were not getting done.

Jacob: Yes. Also, completing the loop, getting that feedback to sales and then bringing it into our production meetings we hold every other week. Letting them know what jobs are potentially starting and why we might need this one to wrap up here; [for example] we can't let this punch list go on because we've got to get you out. Just bringing it full circle, that information really helps throughout just for the company to run more smoothly.

Jud: It gets back to that old word of communication.

Jacob: Yes.

Jud: Jef, what have you changed or, in your case, maybe even getting ready to change, for your growth pattern here?

Jef: About a year ago, we started to really document where people were and made sure that information was continually updated. Last March we got down to one job. We didn't have one ready in pre-construction. I hadn't been monitoring that. We added a general manager to the company, and that's part of her job description: to discuss it at the meeting every week. Again, that's about communication. The biggest thing we did was look at how we wanted to track it. We found that the easiest way to do it was with our contact manager, which we do a lot. ACT is really a solid foundation for us to communicate with our clients on a daily basis. We use Microsoft Project for scheduling the projects, as well as dry erase boards. But, ACT really allowed us to keep up with where things were. It also helps me foresee when we're low on leads, and I can look back at our marketing, such as, are we spending enough money on marketing right now? It allows me to see the big picture.

Jud: Jef, help me with this; I think you've answered it. You talked about documenting this stuff. You talked about ACT and using Microsoft Project and dry erase boards. Is there another piece of paper or other item that you use to help document things? Do you put it in a job file? Is it dated, timed? What is that?

Jef: It's a sales pipeline report. It's printed out. It lists each prospect and potential start dates. It lists through each stage: If I have a client in design and their anticipated close date, and that they want to get started by a certain date. I can put it in there, and that will help as we go through it as a team and look at which project is ready to move into pre-construction, where can we push? That report will show me that.

Jud: You have it documented in several different places, realistically, but there's a flow with that.

Jef: There's one central data base that the client lives in. It's not just in my job description to look at that; it's also in the general manager's and discussing it. The sales pipeline report is really the piece of paper that we review on a weekly basis.


Jef Forward, Owner
Forward Designers & Builders

Forward Designers & Builders is a design/build company located in Ann Arbor, Mich., that does not provide architectural design as a stand-alone service. Their current volume is around $1 million with an average job size of $130,000. Employees include a project manager, project manager's assistant, two project designers, a general manager and a bookkeeper.


Jacob Kirk, Director of Construction
Wentworth Inc.

Chevy Chase, Md.-based Wentworth Inc. design/build firm is driven by architecture: the staff has two licensed architects — including owner Bruce Wentworth — two to three draftsmen and five field workers. The majority of work is sub-contracted to an independent designer. The company does the carpentry but subcontracts framing. Job sizes range from $50,000 to $1,250,000.

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