2021 Fred Case Award Winner: By the (Open) Book

by Kyle Clapham

Implementing change in any company is always difficult. There is a tendency for managers and employees to revert to a previous way of doing things. And during those times, the person leading the change must stop and redirect back toward the new way, oftentimes patiently re-explaining in a non-judgmental way. Only after weeks, months or even years later does the new way truly take hold.

For Clark Harris, the owner of Innovative Construction and the 2021 Fred Case Remodeling Entrepreneur of The Year Award winner, there were several moments along the path when he realized real change was taking hold. One of those successful moments happened this summer in a monthly meeting with carpenters and field staff.

After a long effort to impart business financial literacy to himself and each of his managers and staff, Harris handed out the company’s most recent profit-and-loss statement and asked what was different about this PL versus the one issued at the same meeting one month prior.

“Albert, who drives our dump truck and makes deliveries said, ‘You took the indirect carpenter costs and moved them below the line,’” Harris wrote in his application for the Case Award. “That earned Albert a high-five and a $20 bill. In the same meeting Diego, a project manager, said he could now afford a wedding because he used budgeting concepts he learned at the company. I had expectations it would work, but these two examples are what have made [the process] worthwhile.”

For Harris, the impetus for improving the company’s finances emerged over time. In 2015, after more than 14 years in business, Harris realized that he lacked the financial acumen to effectively lead his company. At one of his first peer-group meetings run by Remodelers Advantage, a group leader called his financial statements “gobbledygook.” Months before that stinging rebuke, Harris had been the victim of an unfortunate and all-too-common experience of theft by a bookkeeper.

His response was first to educate himself. The former college football player and St. Lawrence University graduate went back to school and enrolled in an accounting 101 course. He also read voraciously on the subject. Gradually, the company’s finances improved. But he wanted to take it a step further.

He implemented an open-book style of management, where all employees were given access to the company’s financial statements. Only salaries were obscured. Taking a cue from his peer-group leaders, Harris read and followed lessons found in the highly regarded business book, The Great Game of Business, by Bo Burlingham and Jack Stack. The book advocates a business-improvement program that distills key performance indicators and involves creating games to spur positive competitiveness among employees.

Around the office: Some—but by no means all—of the Innovative Construction team was on hand when Clark Harris was photographed. They are (from left): Lauren Hoke, interior designer; Eric Bain, production manager; Clark Harris; Megan Berry, sales; Aisling Bell, director of first impressions; and Jackeline Safran, pre-construction coordinator.

Harris and his production manager Eric Bain embarked on a series of competitions to help the company make improvements in several key areas. “We have run mini-games to improve,” Harris says. That is putting it mildly. There are games to reduce runs to The Home Depot and other retailers, where the true cost is lost production time. There is a game for job budgeting and reporting. There is a game to reduce punchlist items, warranty costs and turning in receipts for purchases.

“We have a different carpenter lead our PL presentation at each monthly meeting. They use a stack of 100, one-dollar bills and place dollars at each line to match the percentage of revenue,” Harris explains. “The dollar bills they are left holding at the end is equal to the net-profit percentage.”

The importance of net profit is further reinforced because it is a basis for the company’s bonus program. An employee’s year-end bonus is a combination of the company’s net-profit percentage with that team member’s years of service. Bonuses are tracked by calculating and posting the number of extra salary days an employee is being paid as a bonus. Additionally, each employee has key metrics for improvement, and they are displayed on signs in the company’s warehouse for everyone to see.

Through this company evolution, now in its fifth year, Harris’ role in the company has become truly managerial. “I have continued to get out of the way as an owner, and I am therefore not to be a bottleneck. I hired our first salesperson and estimator in the last two years. We have a true design team. I have no hand in day-to-day production. We rebuilt our website and have tripled our leads. We created a director-of-first-impressions role to answer all leads immediately and to assist with marketing,” says Harris, explaining his role amid recent changes at the firm.

Five years into a program of boosting financial literacy and leveraging open-book management, Harris’ team is driven by key performance indicators (KPIs) posted for all to see. Eric Bain tracks and posts those metrics. Professional goals for each team member are also posted.

The financial literacy program, combined with the open-book management system as well as a host of other improvements like the creation of very clear job descriptions, has worked wonders. Decisions are made with strict adherence to a written mission, vision and values statement. The company’s culture has become one of respect and accountability. Business results have followed.

“We expect to raise revenue 19 percent this year, and net profit has quadrupled between 2016 and 2020,” Harris says. In 2020 the company’s revenue was $3,519,433 on 37 jobs. In 2021, Harris estimates they will hit $4.2 million with 18 employees, seven in the office and 11 in the field.

Sometimes great entrepreneurship is not about big, game-changing ideas. It’s more about discipline and hard work and managing positive change. That has certainly been the type of entrepreneurship exhibited by Clark Harris and his team at Innovative Construction, but that was not the only reason that Harris was selected to win the 2021 Fred Case Award.

20 for 20

In November 2019, the company was looking for a way to celebrate its 20 years in business. The previous five years in particular had been nothing short of transformative for the company. With that in mind, Harris sought ideas for a way to show gratitude to clients and the community.

“It’s amazing to think of all of the people who had hired us and referred us over the years. We wanted to celebrate our achievement in an outward facing manner that displayed gratitude,” Harris wrote in the award application. “Our director of first impressions, Aisling Bell, called me late one evening in an excited state with the idea of doing an act of charity for every year we had been in business. We brought it up at our Friday company meeting, and everyone was very excited about it. We brainstormed for 20 minutes, and our 20 for 20 anniversary program was born.”

Clark Harris, The 2021 Fred Case Remodeling Entrepreneur of the Year Winner

The linchpin of the idea revolved around thanking past clients. They would ask them to suggest charitable acts that utilized and leveraged the company’s design and construction skills. “We voted on our best clients over the last 20 years,” Clark explains. “There were no formal requirements to be nominated. We tried to think of those who had supported us, displayed kindness, made us happy and helped us grow.”

From there, Harris drafted 85 handwritten notes thanking each of their top clients for their ongoing support and asked them to nominate a person or an organization in need. The team wanted the selected charitable acts to be “close to the heart” of their past clients, Harris says. “We took their responses and tried to honor at least two per month. We gave updates in our newsletters of each charity we supported and included a link to the organization’s website. When the pandemic hit, we pivoted to mainly making donations to charities rather than completing projects in people’s homes.”

One of the 20 charitable contributions that Innovative Construction donated in the name of one of its clients as part of its 20th anniversary was a room sponsorship at the local Ronald McDonald House for families caring for children undergoing hospital care. Harris and team intend to continue this donation annually.

Full credit for the charitable work went to the past clients who had written back and had made each individual suggestion. “I was very affected by this initiative,” Harris says. “It showed me that we had not been doing enough in our community. I was humbled by the amount of suggestions we received as well as the responses. We sponsored a room at the Ronald McDonald House and will continue to do so. We received a thank-you card from one of the families who stayed in our room. Aisling read it aloud during our Friday meeting and became emotional while reading it. There was not a dry eye on the Zoom call that day.”

In addition to the ongoing Ronald McDonald House room sponsorship, the company purchased a MacBook for a non-profit school for immigrant children. They did work for the Blanket Ministry, an organization that makes cozy blankets and sends them to sick people. Innovative also built a map display for a neighborhood green-space park. They performed repair and renovation work at numerous churches. They became involved in a Habitat for Humanity project as well, among others. The company gave $15,488 in all.

Eric Bain (left) is Harris’ strong No. 2. He manages production for Innovative Construction and has led the implementation of key performance indicators that have boosted profit.

Before the open-book change initiative and other business improvements implemented beginning in 2015, Harris and his team said the company was not well organized. He was working “in” the business all the time. He barely had time for vacations. There was an atmosphere of finger-pointing and scapegoating. Today, Harris is able to take a vacation, four weeks of it. The team is more engaged. They are earning more money as the company becomes more profitable. They have a policy of warehousing all the products they need for each job before construction on a project can begin.

The company is now in the process of a complete redesign and renovation of its showroom. Through strong communication with clients, they were able to safely keep big, design-build jobs moving during initial days of the pandemic—a feat that few design-build remodelers were able to accomplish.

Harris attributes their success and growth through the pandemic partly to the company’s policy of implementing lead-safe work practices on every jobsite, even the ones where lead is not present. Lead-safe work practices involve cordoning off areas of homes with floor-to-ceiling, clear polyethylene sheathing to create stiff barriers to dust and other airborne contaminants. “We keep our jobsites very clean,” Harris says.

Harris also credits the contributions of business coaches they hired to assist himself and Bain as they continue to manage through ongoing organizational change. Harris meets with his coach, remodeler Dave Bryan of Blackdog Builders, on a monthly basis. His help has enabled Harris to overcome some erroneous notions and hangups.

“I think the sky’s the limit,” Harris says. “We’ll do a little over $4 million this year. We grow at roughly 10 to 15 percent per year. I’m not one seeking to grow quickly. I want to have our growth and our quality be in check. I’m more comfortable growing at a steady pace. That being said, now that we’re truly a design-build company, that will enable us to get to the next level. I think we’re very close to being a $5 [million] or $6 million company. And I don’t see why we can’t be $10 [million] to $12 million. The bigger projects are what drive you. We have the core values and the kind of good people required to put us on that kind of trajectory.” QR

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