Mark McMillin guides The Corky McMillin Cos. through a down economy Featured

8:00pm EDT August 26, 2010

Mark McMillin’s story is not all that different from the stories of numerous other business leaders over the past couple of years.

The economic downturn hit his business hard.

McMillin is a second-generation leader of The Corky McMillin Cos., a San Diego-based custom homebuilder founded by his father 50 years ago. Today, McMillin leads the company as president and CEO, with his brother Scott in the chairman’s role.

But the stability of family leadership still hasn’t been enough to shield McMillin’s company from the harsh realities of dwindling housing starts and the subsequent drain it put on the company’s revenue — $255 million in 2009, down from an estimated $464 million in 2006.

The revenue crunch forced McMillin and his leadership team to make some tough decisions. None of those decisions was more difficult than to trim the work force by about 70 percent. The Corky McMillin Cos. now employs approximately 350 people in California and Texas.

Through all of it, McMillin had to figure out how to buoy morale for the remaining employees, minimize damage to customer confidence and keep everyone focused on the end goal of piloting the company to calmer waters.

“We’ve had to do a significant amount of downsizing and rightsizing, constantly looking at costs,” McMillin says. “It has been a painful process trying to keep the company alive with that much change. The people you are trying to keep, it’s hard to show them that there is a light at the end of the tunnel — and that the light isn’t an oncoming train.”

For McMillin, trying economic times meant getting his company back to the basics of good communication, soliciting feedback from employees and putting the company’s guiding principles and core values back in the spotlight.

There was also the simultaneous issue of making sure the company maximized its remaining revenue channels.

“We had to convince people working on existing projects that there is 18 or 20 months of work here,” McMillin says. “We had to try and give people working in an unstable environment a sense of security for longer than 12 months. Whether we’re doing well financially or not, we still have to keep the projects moving down the tracks. So we needed to have a lot of individualized conversations, pats on the back, convincing people that while there might be a lot of turmoil right now, what we’re working on is important, we need it, and please stick with us.”

Communicate with employees

In any type of uncertain business environment, communication needs to start from the top. Employees need guidance and ground rules set from the top tier of the company.

At The Corky McMillin Cos., McMillin set the communication wheels in motion with meetings on both a group and an individual basis, depending on each person’s position and situation.

“Employees want to be appreciated for the things they’re doing and they want to be in the know about what is going on,” McMillin says. “That’s why we had very open meetings with them both on a big group basis and one-on-one.”

McMillin wanted to set an overall positive tone for his group meetings, so he always led off with positive news. Whatever progress he could report was always first on the agenda.

“If we had a good sales week and month, we’d lead off with that,” he says. “Then we’d share where we are financially with our loans and so forth. But we’d tell them outwardly that we’re not out of the woods, that we still had some debt that we needed to work our way through, but the banks are working with us.

“You need to start out with the good news because people need to hear the good news. I like to tell them good news. If you can’t make lemonade out of lemons, get out of the kitchen, I guess.”

Not every meeting can have a positive angle, however. When McMillin had to reduce head count by laying off a portion of the staff in the company’s Bakersfield office, he went there to attempt to cushion the impact for those who were staying.

“You need to get out there and interact,” McMillin says. “I personally visit our four divisions, talk to people and be seen. In Bakersfield, I tried to make the light a little brighter for those who remained.

“You kind of have to look at it the same way as when you’re doing well financially. You need to be out there, on the ground, visit the sites and locations, visit your salespeople and so forth. We tout ourselves as a family company, family owned and operated, so we want to be an open book and show our people that, despite negative circumstances, we’re not going to give up.”

Ultimately, you have to remember that your people drive your business. You might have the blueprint for your business. You might have built the machine. But your employees fuel it, oil the parts and run it. If you’re not putting them in a position to succeed by keeping them connected and enabled, you’re not putting your business in a position to succeed.

“The No. 1 commodity in any business is people,” McMillin says. “People are what make the difference. Everybody can go somewhere and buy lumber. Everybody can go somewhere to get sales and marketing advice. But it’s the team you have put together that is going to be out there doing the right things for the people you serve. That’s my advice: Get out there and make sure you know and connect with the people who are representing you to your customers.”

Foster collaboration

Employees need stability and communication from the top of the organization in a challenging business climate. But communication can’t just flow downward. It needs to move upward and laterally, from employees to management and from department to department.

McMillin has helped to entrench that mindset by linking bonuses to company goals. It comes back to the idea that if the company doesn’t provide a healthy, constructive work environment, no one within the company will have a healthy mindset. The need increases exponentially during hard times.

“We always encourage people to work together for common goals,” McMillin says. “Our bonus system has always operated on companywide success, not project by project or even division by division. A company has to do well, otherwise projects won’t succeed, our credit is no good and other bad things start snowballing.

“The company has to be healthy, so that is why you need people who are working for the greater good. Bonuses based on the company’s overall performance is one way to make that happen. It enables us to buy new projects, negotiate existing projects with partners and so forth. If the company is not healthy, no one is healthy.”

You also need to make collaboration a priority when recruiting. If you bring collaborative example-setters into the mix, those employees can set an example for the rest of the company, helping to promote a focus on the company’s large-scale goals. But that focus needs to start with you and your human resources staff and the type of people you let in the door.

“It’s all in the personalities you find during the hiring process,” McMillin says. “During the question-and-answer dialogue of an interview, you ask questions about that person’s professional history and how they interacted at previous jobs. You find out what type of employee this person was for their previous employer. Listen carefully to their answers. If you hear a lot of ‘me, me, me’ instead of ‘We did this’ or ‘We did that,’ you need to watch out.”

If you’re hiring and grooming employees who value collaboration, you need to make sure that you’re not discouraging the behavior that you want to see out of them. Many business leaders trumpet their company’s open-door policy. The notion that employees can pop into the president’s or CEO’s office on a whim is used so often in business that it has become a cliché — to the point that employees now often view the phrase “open-door policy” with a heavy dose of skepticism.

Simply saying that you have an open-door policy isn’t enough anymore. You have to follow it with action. You have to actively encourage feedback and ideas in group and individual settings, and you need to accept all points of view on an issue, even those you don’t agree with.

“One thing employees know they’ll always get out of my brother and I is a good ear for listening,” McMillin says. “But they’ll also get the sense that we support them and the people working for them. We’re not going to knock anyone’s head off for something they want to share with us. Beyond having an open-door policy, you need to be open-minded. Of course, we do want employees to deal with their direct supervisors first, but in the event they feel awkward doing that, they can come to us first if the situation warrants it.”

Maybe you can implement an idea or maybe it doesn’t fit. But you do owe it to your employees to give them feedback on what they’re proposing, and do it before the employee’s enthusiasm for the idea dries up.

“Maybe the idea isn’t totally embraced or acted upon, but maybe there are parts and pieces that can be used,” McMillin says. “You need to figure out where the root of the suggestion is coming from. Is it going to benefit their personal agenda, the project or the company? That can play a role in whether you can implement the suggestion or not.”

Prepare yourself

All businesses that are prepared to weather an economic storm seem to have a few things in common. They all have good discipline around financials, a well-defined system of checks and balances throughout the leadership tiers of the organization, and an unwavering focus on executing the business plan in line with the company’s core values.

When it comes to preparing yourself for financial hardship, you need to make sure that you are keeping your eyes open.

“Be aware of where all of your costs are and how they are broken up,” McMillin says. “We learned a lot about ourselves and our costs — for example, our legal costs and who should be paying them — over the past several years. We’ve seen how a business can get kind of lackadaisical when things are going good. If there is a magic formula for making sure you stay on top of your costs when times are good, I haven’t found it. Really, you just have to make sure you’re staying up on your books, that you know what you’re spending your money on.”

Financial responsibility goes hand in hand with fostering a companywide desire to make the best of a bad situation. You want the people at your company — especially on your senior leadership team — to be willing and able to do whatever it takes to not just endure the bad times but emerge ready to flourish when the outlook improves.

“You just have to find the bright spots in bad times,” McMillin says. “You find out what you’re going to do and how you’re going to fix it. You brainstorm with your management team and come up with solutions. A lot of times, those solutions only cover the next day or week. You might try to always focus on long-term goals, but sometimes, you can’t worry about how this line of credit is going to affect us for the next year. Focus on getting to the end of the month, on getting the next round of bills paid. Sometimes, that alone can serve as a glimmer for the whole organization that you really do believe in what is going on around here.”

How to reach: The Corky McMillin Cos., (619) 477-4117 or www.mcmillin.com