Macro Management

Cover Feature Today is December 2, 2003 Macro Management by Jeremy J. Glowacki In the 1988 movie Bull Durham, a baseball team ownership brings in journeyman catcher, "Crash" Davis, to help mature a talented, but raw, pitching sensation, "Nuke" LaLoosh. His goal is to get him ready for big league baseball, and he begins by educating the kid on the art of giving interviews, emphasizing the importance of using clichs to explain his on-field successes. "Know your clichs," Crash tells him. "They are your friends."
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In the 1988 movie Bull Durham, a baseball team ownership brings in journeyman catcher, "Crash" Davis, to help mature a talented, but raw, pitching sensation, "Nuke" LaLoosh. His goal is to get him ready for big league baseball, and he begins by educating the kid on the art of giving interviews, emphasizing the importance of using cliches to explain his on-field successes. "Know your cliches," Crash tells him. "They are your friends."

If you've been involved in custom installation for a while, you might notice a resemblance between the interview style of Nuke LaLoosh and a conversation with Charles O'Meara. However, instead of baseball, O'Meara uses his clichs to describe how he has learned to succeed in the A/V business, and unlike the green baseball rookie, the president of Absolute Sound in Winter Park, Florida, is a seasoned management veteran of 21 years in retail and custom installation.

O'Meara freely acknowledges his penchant for clever word play ("Don't get caught up in the process; deal in the end result"... "Delegate to a system; don't dump onto a person"... "Always be decisive, not divisive"), but if two decades in business, and 90 percent growth this April over last are any indication, there's much more to Absolute Sound's visionary than a little business jargon and a few catch-phrases.

Unlike many A/V specialists who, like him, began as hobbyists with very little business knowledge, O'Meara has evolved his operation to run as a business, instead of as an entrepreneurial "shop," where an owner wears too many hats, works 60-hour weeks and has almost no personal life. He got his start in A/V retail, like many others, right out of high school. However, O'Meara also went on to earn an undergraduate degree from what is now the University of Central Florida, then to Rollins College where he graduated with a Masters of Business degree.

"While getting my Master's degree, I opened up Absolute Sound, on paper, as a project for my "Small Business" class," O'Meara recalled. "I did everything-right down to site selection and getting a copy of the lease of the building I ended up in." O'Meara said that he had already developed a basic understanding of A/V business while working in and around it since high school. However, Rollins College professors taught him how to turn that knowledge into a viable business plan.

"I realized I could make it work, so I went out and secured the financing, starting Absolute Sound with $7,200 of my own money and a $45,000 co-signed loan at the bank," he said.

The co-signer for the loan, O'Meara said, was a doctor friend of his named James Baker, who encouraged him to start his own business. Unlike many new business owners with technical backgrounds, O'Meara didn't leave much to chance when he first started out.

"I had my break-even and income projections-monthly and annually-and I broke them down by dollars and by percents, comparing them against the NARDA (North American Retail Dealers Association) statistics," he explained. "I even set up the licenses that I was going to need and who I needed to give deposits to. I also did a capital expenditures budget and a competitive matrix."

And that's not all. O'Meara, 27 years old at the time, was the model of business planning, having even broken down every vendor he planned to conduct business with, by their margins and their sheet terms, and whether or not they did any advertising. Suffice it to say, the man was prepared.

"I started out the business, trying to run it like a business, and I was very disciplined," he said. Anyone who is acquainted with O'Meara knows about his fascination with expensive toys and fine dining. However, for a young MBA getting started in his own business back in the early '80s, those luxuries would have to wait.

"The first eight months of business, I didn't draw any salary," O'Meara said. "My wife was working as the society editor for the newspaper, and she drove the new BMW; I drove the company van, and boy, I am not a van guy. I hated driving that van, but I drove it for the first 2 1/2 years."

It apparently didn't take long for this discipline of "growing the business slowly" to pay off, because, on his 30th birthday, O'Meara bought a Mercedes 450 SL, to reward himself.

Despite his own material success, O'Meara worries that too many people are committed to making "a lot of money" or to retiring when they're 50, instead staying committed to providing great customer service and a consistently high-quality product. If they focus on the latter instead of the former, O'Meara said, "they will end up making the money that goes along with that level of consistency."

O'Meara opened his company on Park Avenue in Winter Park, with the help of David Lafferman, who would become his buyer. Not long after they opened their business, Ted Hollander was hired to manage the custom installation side of the company.
"We started out doing custom installations on the day we opened our doors," O'Meara recalled. "In fact, Ted and I went down to Palm Beach and did our first out-of-town installation, for $12,000, in 1981."

The challenge back then, according to O'Meara, was the lack of custom products. "We used to cut speakers apart to fit them into walls, or we had to buy some god-awful looking commercial products and incorporate them into the residential environment," he remembered. On one of their early projects, Hollander came up with a creative solution to an installation challenge. "In 1981, we found that we could graft a second eye onto the circuit board inside a Kenwood KA 500 integrated amplifier amp," O'Meara explained. "We then could run wires up to 16 feet before the eye would not function. Ted came up with a way of grouting the eye into a fieldstone on the first level, and put the remote equipment upstairs. The result was one the first IR remote control, multi-level stereos."

In those early years, O'Meara learned many real-world business lessons that continue to influence the way he manages his employees today. One particular experience led to the creation of one of his favorite hypothetical business questions: "What is your reputation worth?" O'Meara says that he had to "eat" the $2,000 cost of a television when a savvy client questioned his "integrity" on a typographical error made on an installation proposal. "We forgot to add the numbers up in the last column," he explained. "So instead of $4,000 for two TVs, it said $2,000. I could have shown the client the published prices and proved I was right, but I sat back and thought to myself, 'What is Absolute Sound's reputation worth? Is it worth $2,000?' I realized that, yes, I could afford a 20 percent hit, even though we weren't making that kind of money on the job back then. I figured, I'm going to be in it for the long haul, and my reputation was worth a hell of a lot more than two grand."

O'Meara's calculation paid off, literally, because the woman to which he gave the free television is still a client and has spent tens of thousands of dollars more with Absolute Sound .

"That experience sent a message to our employees that we believe in our customers, and we stand behind our word," O'Meara concluded. These days, Absolute Sound's sales volume is spent 50/50 between retail and custom, but O'Meara points out that 80 percent of the retail business is still delivered and installed by the company. As a result, 90 percent of everything they sell is "installed business". Managing two sides of a company has never been a problem for O'Meara, because of his "decisive, not divisive" management philosophy. Unlike many other companies where each sides tends to guard its own turf, O'Meara says that Absolute Sound's two sides tend to complement each other. "The retail business can sell up to $50,000 jobs, but typically hands over a project to the custom side when ongoing project management or serious engineering is required," he said. Rick Bender, operations manager, has been directing a pilot program on the retail side that will eventually benefit the custom crew. "We have two installers who work only for the retail side," O'Meara explained. "They have been creating new procedures and paperwork, as well as some experimental flowcharts, which Rick will then adapt for the 12 men who install on the custom side of the company. It was simpler to try it with two people, then expand it from there."

Personally, O'Meara has seen his own management style evolve in recent years. He notes that over the years he has gone through the Hobbyist Phase, "where you're the center of everything, but can only reach three quarters of a million dollars worth of business," and the Business Management Phase, "where you hire other people to help, creating higher overhead; you're working just a hard, but making less money." Now, he's finally getting to the Entrepreneurial Phase, where he can delegate authority (but not responsibility!). Though it's still a work in progress, O'Meara notices that he's finally reached a point where he's enjoying his work again.

"When you make this shift from micro- to macro-manager, from hands in to hands on, that's when, in my opinion, it starts getting fun again," he said.

Now, instead of having his hands in every segment of the business, O'Meara has empowered to his 33-person organization to make many decisions on their own. "With job descriptions, accountability and clear-cut goals, I've got guys who keep things running, leaving me nothing to do with daily operations, aside from approving and signing vendor payables once a week," he said.

O'Meara thinks of his job as "head visioneer" as his company. "As the visioneer, you want to solicit opinions from your people, but ultimately you're the one who has to make the final decision. You want to set the boundaries and then give people the freedom to operate within them," O'Meara explained.

With his new decentralized style of management, O'Meara has become much more concerned with the hiring decisions of his managers. He still keeps his hands out of such matters, yet makes an effort to "constantly check the temperature" of his employees after they're hired. Otherwise, Absolute Sound's president only wants "exception reports" whereby he'll become involved if something goes outside boundaries set for a particular business system. This freedom from daily operations has given O'Meara the time to step back and take a fresh look at his business.
"I can streamline processes and look for growth opportunities with the company," he said. "I can look at profit potential and ways to de-stress the company and grow."

One of the ideas that grew from this analysis was O'Meara's cross-training strategy which establishes primary and secondary "backup people" for each position in the company. "So you can actually unplug and move people around if somebody goes on vacation," O'Meara explained. Not all of the ideas originate with O'Meara, however.

One such creation hatched by Brad Gilbert, project manager, and Hollander, was an attempt to improve the company's "word of mouth advertising." Through the use of a "Rapid Deployment Team," a three-man crew, with two vehicles, responds to service calls from existing clients, freeing the regular crews from interruption. To pay for the team, O'Meara has "re-routed" his $100,000 advertising budget this year, but he still expects to lose $100,000 on the program in 2001. That was until he discovered a way to help it "pay for itself." "We're finding that a lot of our customers are willing to invest in extended in-home service warranties," he explained. "With the N.E.W. $7,500 policy, instead of the customer getting 90 days, 6 months, or one year of free, in-home service, we are now getting paid whenever we go out-above and beyond the vendor's in-home warranty. We can schedule an annual fine tune and adjustment, building them into the schedule and budgeting the time for my field service team."

O'Meara says that while it's going to take a while to fully develop a revenue stream for his Rapid Deployment Team, that fact that he's already starting to make money, when he expected to lose $100,000, is a step in the right direction. Nonetheless, the key, O'Meara said, is always to provide the best customer service you can offer. "If you provide great customer service, you will stay in business, you will grow and you will make money. No question," he said.

It's just one more example of how effectively all of the pieces are coming together for O'Meara and Absolute Sound.

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