Q&A: Why should I departmentalize my company? Pt. 1

Hi Dave, I'm considering departmentalizing my company, but I'm not sure if it's a good idea. Do you think I should split my company into different divisions, and if so, how do I even start?

- Kevin D. from Houston, Texas

Hi Kevin,

Departmentalizing, or segmenting your business into measurable departments, is great for improving the success and workflow of your company.

First, you'll have better control of managing your business. When you split your company into different segments, you know exactly the profitability of each area. I've worked with many contractors who say something like, "My service department is costing a fortune," and when I ask for specific numbers, they only have aggregate financial statements. If this is the case, how do you actually know your service department is costing a lot of money? In order to accurately and efficiently manage your business, you must have a way to gauge the thought process behind determining profitability.

You'll also be able to hold your team accountable. For example, your service department can't be expected to generate a certain profit margin if you don't have an established way to measure its profitability. By departmentalizing, you can hold that division supervisor accountable for delivering those numbers. This accountability opens up the opportunity for all kinds of questions: What are we doing to achieve those numbers? Why aren't we there yet? How can we improve? Asking these essential questions will keep your employees responsible and productive.

While it's important to keep your team accountable, you can't lose sight of holding yourself accountable as well. People are often challenged by getting distracted, but if you know where you want to be within your company, you can stay focused on your goals.

Lastly, departmentalizing allows you to measure your company performance against that of your competitors. HVAC Learning Solutions recommends a set of key performance indicators (KPIs), and we know how the best companies in the industry are doing. By measuring your performance against that of competing businesses, you can see what gaps there might be and determine how to close that gap. For more information on defining and measuring KPIs, check out HVACLS.com or contact us about conducting a KPI coaching workshop at your business.

In part two of this Q&A about departmentalizing your company, I'll discuss important factors you should address before dividing up your business and how to stay organized and efficient during the changes.

Dave Nichols is a regional training manager with HVAC Learning Solutions.

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