Renewed Purpose

Eric Schneider wanted a change, so he stepped away from his $2.5 million remodeling business—and it didn’t fall apart.

January 31, 2001

Eric Schneider spent 18 years building his remodeling business by doing exceptional work, winning awards, building a reputation and generating lots of publicity. The effort paid off as the company grew to a $2.5-million business. And then early last year, he left. Through a transitional process that required the establishment of several new systems, he turned over control of his business to his former accountant and didn’t look back. Today, he receives weekly updates and a salary but offers only advice on how to run the business.

“I’m 52 years old, and I didn’t want to wind up being 65 and feeling that I missed an opportunity to do something else with my life,” says Schneider, the new chairman of the board of Eren Design & Construction Inc. in Tucson, Ariz. “I wanted to do other things as well as run my business, and I found a way that I could exit from it without causing it to stop running well.”

 

Schneider relinquished control of the company to Janice Donald when he realized that he didn’t enjoy management duties anymore than supervising the financials.
Eren Design & Construction Inc.

Location: Tucson, Ariz.

Type of company: General remodeler doing major kitchen and bath remodelings, room additions, home offices, plus a home-services division.

Staff model: Five office, 13 field

Sales history: $.90 million in 1995, $2.5 million in 2000

Annual jobs: 24

Work week: Janice Donald, 55; Eric Schneider, 0

Software: Quick Books Pro, MS Office, MS Outlook, AutoCAD.

Bio: Schneider and his wife, Ellen, opened Eren in 1982 as a home-based business and grew it from there, moving into their own business office in 1997. Donald served as their off-site accountant and took on more responsibilities until she joined the company as the full-time CEO last February.

Key to success: “Leaving a business is simply a matter of having it running so well the owner’s presence isn’t critical to its success and leaving it in the hands of people who understand his vision and that he trusts to run it well.”

Contact: (520) 885-2500; www.erendesign.com

The change wasn’t made overnight, and it wasn’t done without making significant alterations to the business. But achieving it wasn’t as difficult as most remodelers might think. “What we did, anybody can do,” says the new chief executive officer, Janice Donald. “When an owner’s passion is no longer expressed by running the business, it might be time to move on. For some, it would be easy to do and for others it would take more effort. But for all, it might make good business sense.”

The concept first presented itself to Schneider in 1997 when he won a National Remodeling Quality Gold Award. One of the speakers at the event, Silver Award winner Bill Asdal, CGR of Asdal Builders in Chester, N.J., discussed using his business to leverage other financial and personal interests. He stressed that remodelers should know why they’re in business and what the purpose of their business is.

“It was the most empowering thing I’d ever heard,” says Schneider. “I wondered if I could do that, and if I stepped away, if my business would be able to run itself. Little did I realize that I’d already inadvertently set up my business to make that possible.”

The secret to exiting a company smoothly relies on several key elements, with the fundamental one being the need for a self-reliant, proactive staff. Eren had long been employee oriented, with an attractive benefits package. This included holiday, vacation and mental-health leave along with other perks, such as an open-book financial approach and company-wide bonuses based on profit performance.

“My position was that Eren was the best, and only the best worked for us, and we showed that in how we treated them,” he says. “We focused on camaraderie and employee morale, to ensure we stayed on the cutting edge by allowing our employees to use all their skills.”

This resulted from a two-pronged hiring process that focused both on production abilities and people skills. “We always hired people who could take the initiative, be proactive and solve problems,” he says. When he began thinking about his exit strategy, he first focused his employees on team-management concepts and letting them take charge. “I started asking them to take on more responsibilities—and I paid them for doing that.”

Donald was included, even though she wasn’t an employee. She began working with Eren in 1992 as its freelance accountant, but her role quickly grew. Eren operated as a home-based business, and Schneider used Donald’s services to facilitate his expansion. She began paying bills, billing clients, answering the company’s phone, and serving as a primary office for subcontractors. The company didn’t expand into its own office space until 1997.

After Schneider outlined his goal to Donald, they brought in a facilitator, Michael Kuropatkin, to evaluate employees’ strengths and weaknesses, develop a program to strengthen the weaknesses, define the company’s vision and mission, and craft a strategy so Schneider could systematically lessen his role in the business. Kuropatkin conducted one-on-one interviews with the staff and used standardized personality and skill-evaluating tests to define the company’s available skill set. He also worked with Schneider and Donald to create a plan that could achieve the desired transition.

A key part of that program required Schneider to put down on paper all of his duties and procedures. And that was a challenge, Donald says, because “Eric was wearing about 19 hats.” This process required him to define each job clearly and systematize its function, Schneider says. “I had all the procedures I used in my head, which was all right when I was doing them all. But I had to create systems that could both be replicated by others and reviewed whenever necessary to ensure changes were evident and deliberate.”

 

The team: Craig Coryelle, Jan Kolack, Janice Donald and Mike Williams (from left to right).

 

Schneider’s initial goal was to allow him to focus on the activities he wanted to do and let go of those that others could do easily. The first to go were financial activities. “My strengths are in my people skills—which translates into selling the jobs—and creatively designing,” he says. “Day-to-day number crunching was not of interest to me.” Those duties went to Donald off-site.

With those strengths in mind, Eren began shifting duties internally. The first change came in having a former on-site superintendent take over estimating. Schneider and the new estimator did parallel estimates on projects, comparing their final numbers to see where they differed and why. Once he and the estimator could come within 1 to 2 percent of each other, Schneider relinquished that responsibility. “I let it go and never looked back.”

Schneider then wrote down functions and duties to cover his production system. This ensured a smooth process after the contract was signed, from showing up on the job the first day through the warranty period. “That aspect was pretty easy to shift with the people we had in place because they were geared to customer service,” he says.

The next transition area was drafting, and mechanical and structural shop drawings already were being subbed out. “Our financial numbers showed we could afford to bring someone on to do all of our own drafting internally,” he says. He paid for an employee to go to school to learn CAD programming and take this function off his own plate.

Sales was next. He found a strong candidate through a newspaper ad and turned over this function, too. “When I left sales, I knew the transition was complete,” he says. “That was the hardest part for me to give up.”

 

Step By Step
Reducing the owner’s responsibilities and duties in a remodeling company can be done systematically if he or she is ready for the process. Here are the key steps:

1. Hire Well. Hiring proactive, customer-oriented employees, who are ambitious, will help create the team spirit required to begin giving them more responsibility.

2. Know Your Strengths. Determine the activities at which you excel or want to continue performing and those for which you have less passion—no matter whether those are traditional activities for the owner.

3. Systematize Processes. Write out a procedure for each department, especially those you handle directly, to ensure everyone understands how systems work and that any changes that occur are evident and are being done deliberately.

4. Mentor Employees. Once naming someone to take on responsibilities, work closely with them so they understand why things are done as they are and to ensure your approaches remain in place.

5. Move Slowly. Even if employees are capable of taking on more responsibility, they may be reluctant to move too fast for fear of looking too ambitious or not being sure if they’re going too far. Push the process, but don’t outpace their ability to cope.

6. Let Go. Be sure you’re ready to give up activities when systems and people are ready, and then do it. Hanging around to look over people’s shoulders will dilute their power and send the message that you are still the one in charge.

That left only managing the company—and he realized he didn’t enjoy that any more than the financial side. “I have strong people skills, but they’re not geared to nurturing and managing interactions,” he says. “The care and maintaining of a staff, and the challenges of training, building morale and handling gossip are not my strong suites.”

Turning over that aspect to Donald, which was done in February, 2000, when she joined the company as an employee, wasn’t difficult—it was just Schneider’s last direct contact with the business. “The hardest part was giving up control of the company,” he says. “Everything had been done my way, and now things would be done differently.”

Ironically, Donald hadn’t been planning to take on such a key role, she had simply been helping Schneider achieve the transition as an outside planner. “I wasn’t contemplating joining the company as an employee,” she says. But in January, Schneider was becoming antsy to move on rather than provide only the managing aspects he was unenthusiastic about. “I told him I thought I could do it if he didn’t want to,” Donald says. Schneider didn’t hesitate. “I asked her how soon she could do it.”

It turned out she could take over pretty quickly. Donald sold her business in three weeks and joined the company in February as CEO. Then the final transition began, leaving employees concerned. “I tried to stress two points,” Schneider says. “First, the company was changing, and the employees had to get behind that or consider if they needed to move on. Second, I had to convey that it was now Janice’s vision, I supported that, and I was not coming back.”

That wasn’t as easy as it sounds, of course. “During the transition, something would need to be done, and I’d volunteer to do it,” Schneider says. “Janice would stop me and suggest someone else do it instead. People had to keep interrupting my habit of doing whatever had to be accomplished. My goal became not to get in the way.”

By September, the eighth month of the process, Schneider and Donald considered the transition complete. Schneider hasn’t been into the office since March—a month in which Donald bought additional trucks and created a new magazine-advertising campaign without Schneider’s involvement.

The transition has been successful, but they agree they would do it a bit differently if they had it to do over. “In hindsight, we should have taken the change more slowly to allow people to adjust,” says Donald. “The processes were there, but the employees and the customers both got more nervous than we would have liked or had expected.”

Schneider’s being around as the putative “boss” undermined the new approach, he adds. “Making the transition with me around left a back door open for second opinions when the staff wasn’t sure about something,” he says. “I wanted to be visible about my support and reassert that I wasn’t in charge, but it was difficult to convince everyone. Change is really hard to accomplish for people—they lock into what’s always been done and don’t want to change that approach, even if that isn’t the best way to do it any more.”

The result of the transition for Schneider has been time to recharge his batteries and enjoy the fruits of the successful business he built. “I’m into a decompression period that’s allowing me to assess my goals and freedom,” he says. That translates into spending more time with his children, aged 10 and 12, and focusing on his passions of gardening and landscaping, as well as his own personal growth and health.

 

Janice Donald, the new chief operating officer of Eren, hadn’t planned to take on such a key role, she had been helping Schneider with the transition as an outside planner.

 

Whether other remodeling business owners intend to relinquish complete control, simply going through the process creates a stronger business, Schneider stresses. “Developing this business model ensures the company doesn’t rely on one person who can’t be replaced,” he says. “It helps the company maximize its resources. It empowers your people to continue growing, it makes them proactive, and it protects the company from any turnover.”

As companies grow, they require many more hands to run smoothly, he points out. “This approach creates a team that can pick up the ball, and it provides systems that create smooth communication,” he says. “Without these systems, the company will founder when it grows too big for one person to handle.” Whereas with the systems in place, it’s simply a matter of how far off the throttle and steering wheel the owner wants his hand to be.

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