My team and I recently performed a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) on our company.  After a rather dismal 2009 in the construction world, it seemed like the timing couldn’t be better than now to get everyone together and discuss what we do well, what we could improve upon and what we perceive to be the big drivers of change in our industry.

What came up more often than I would have suspected was the relative lack of credit available to the homeowner and small business owner.  In years past, we often didn’t have much direct dealing with the bank beyond a schedule of values, a draw schedule and a milestone inspection here and there.  Now, I am an old-fashioned business person and don’t use debt much, but judging by the change in business climate, most folks that hire us do.  Therefore - the lack or availability of credit has a huge impact on my organization.  What happens on Wall Street obviously doesn’t just stay on Wall Street, but impacts Main Street in towns and cities all across the nation.  What we also came up surprised me and provided a “Duh” moment.  Those companies that are still around must be well-managed enterprises, and we should have no shame in seeking out assistance from them.

My business training taught me to use metrics to judge the cost/benefit of an acquisition and to determine the Net Present Value of cash flows.  I was taught that a good deal pays back quicker, and a bad deal doesn’t.  Fairly basic stuff.  What I wasn’t taught is what happens when lending freezes?  What happens when there is no capital available on which to analyze, spreadsheet to pieces and make business decisions from?

We are operating in an area that I certainly wasn’t trained to handle.  I wasn’t trained how to manage business finances when the ability to get short term loans ceases.  I wasn’t taught how to get customers when the value of their home has plummeted, in many cases to less than they owe on the property.  Nor was I taught how to make capital markets liquid again and dollars available to lend.  Instead, the School of Hard Knocks (HKU) is teaching me, and the trouble is one cannot drop out from HKU.  We can hire a tutor.  We can consult with fellow students.  We can’t, however, turn the pipes back on, or make our clients feel good about their future.

What we can do is stick to our fundamentals.  Sharpen our processes and garner as much efficiency as our companies can muster.  We can pay down as much debt as possible.  We can take heed when the banks stop running credit card commercials and instead run savings commercials.  We can look to the future, but that future is unclear, aside from energy efficient construction and more severe pressure on sales prices.  Those that have made it thus far and have remained in business are experts in their field.  Take them out to lunch.  Sit next to them at the next AGC or HBA meeting.  Pick their brain.  ”Borrow” their ideas.  Above all, imitate!  The companies that remain in business are fountains of useful information and data - don’t be afraid to use them as a resource.  My guess is that they have well developed processes.  Excellent communication skills.  First rate staffs.  Very little debt load or inventory.  They operate in the BASICS of good business, and we can all learn a thing or two from them.

Maintaining a high-level of jobsite productivity is one of the most important activities for any foreman, superintendent, or project manager. By using the four pillars of productivity, the productivity levels of any construction crew, on every construction project can be increased.   

When production rates drop on a construction jobsite, money is lost, and often cannot be recovered. On the other hand, when production rates are monitored closely, and improved upon constantly, profits are earned and a company will gain a competitive advantage. How can jobsite productivity be enhanced? One ways is by utilizing the four pillars of productivity.

Getting productivity out of a crew breaks down into four key areas: materials, tools and equipment, information, and goals. How well you execute all four of these will determine the overall productivity of your crew. The systems you set up in your company to guarantee these four areas are managed effectively will determine the success of your company.

Let’s take a closer look at these four areas, and what you can do today to start increasing your productivity tomorrow.

Defining the Four Pillars

1.  Materials: This is priority number one, but luckily, materials are also relatively easy to manage and set up systems for. If the crews do not have materials, they cannot install anything. Making sure all materials are on the jobsite and that they are getting to the work areas for the crews to install in an efficient manner are what should be focused on.

2.  Tools and Equipment: This is a simple enough concept, as no tools equals no production. This is not a place any construction crew wants to find themselves at! Therefore, ascertain that the crews have all the tools they need and that the tools are easily accessible. Do a quick analysis to see if the higher cost of the tool will offset the savings in labor.

3.  Information: If people have materials and tools, then the only thing they need to get started with installation is the information about what, where, and how they will be doing the installation. This is the area where pre-planning comes in as a critical tool. You will never be able to achieve 100 percent in this area, which is why you need to be constantly working on improving what information you have, and how you communicate it to the crews.

4.  Goals: If your crew has the proper materials, tools, and information, you might wonder what’s left. Adding in goals can improve production by 10 percent or more on a consistent basis, so this pillar should not be overlooked. Don’t underestimate the power of setting goals for the crew on a daily and weekly basis. Look at tying small rewards to meeting certain production goals throughout the entire work process. If an activity is budgeted to take a crew three days of work, offer them all a steak dinner if they finish in two. You will be amazed at how many times they will earn that steak dinner.

Good jobsite productivity really is that simple! There is no reason to make it more complicated. Every project management process in your company, every activity that you do every day should be able to be categorized into one of these four pillars. If they aren’t, you need to ask yourself whether it is really necessary.

Remember that good productivity means a competitive advantage, more work, good profitability, and more opportunities for everyone in the company. It’s a win/win situation!

DAVID BROWN is the Founder and President of D. Brown Management, a consulting and management firm that helps construction companies improve profitability. See www.dbrownmanagement.com for more information and to sign up for a free newsletter. 

It is likely many firms are going to be showing either minimal profits and/or losses this coming year end. How is your surety going to view these results?  I think it comes down to the nature of the results and what you did to get there. 

If you picked up a lot of work with minimal profits I think you might have an issue.  Those projects will last for some time and continue to impact results while causing your surety pause on future work you want to pursue.  If your results are due to lack of revenue the positive is you don’t have baggage to deal with entering the new year.  In my opinion the surety will look at this business decision more favorably as your ability to pick up some work at the right margins will allow you to regain your standing quicker. 

End of the day I think the firm with minimal profits to a loss but little work will be in much better shape than the firm saddled with low margin work over the long haul.  Good luck out there.

I have often struggled with training programs for young carpenters.  As a laborer as a kid, I did the basic grunt work first, then got trusted with a hammer, then eventually was taught the finer points of building things.  The nature of the industry and the mobility of employees has put much of this informal apprenticeship training aside.  As managers, we lament the days of the talented carpenter that could build a project from A to B, but we fail to set aside quality training time to grow the next generation of these talented folks.  We assume that our employees won’t be here in a couple of years, so we don’t invest in developing them as builders and managers.  We quickly assume that they will head for greener pastures when the two dollar an hour (temporary) raise comes knocking.  We guarantee it when our organizations aren’t far-sighted enough to provide the pastureland for our staffs to grow into what they want to become.

As a small general contractor, I struggle with trades staffing needs.  I prefer to do as much of the work as I can in-house for both quality assurance and scheduling reasons.  But, unless these tradespeople are generalists in the sense that they can frame one week, drywall the next and run quality trim the week after that, I struggle to keep them busy.  This situation occurs countless times in construction companies everywhere.

Currently, I am internally debating  and leaning towards working with a local union for construction trades people more and more.  The benefits are obvious - fixed labor/hour costs, ample supply of personnel and, the most important aspects of all to me - apprenticeship training and continuing education.  Along with this is the ability to staff according to actual project needs and not projections.

The potential downsides that I see are a lack of ownership in the project (Doesn’t seem much different than a subcontract perspective); higher dollar per hour costs along with workplace continuity and how that would effect my clients.  I also worry about unionized workers giving non-unionized subs a tough time and vice versa.  Operating in a right to work state should quell this worry, but it is still a concern.

I would love to hear from any of you that have made the switch to union labor.  I would enjoy hearing the success stories and the horror stories.  In an effort to continuously grow both my organization and to adapt to an ever-changing marketplace, I have to reach out beyond my comfort zone a bit.  But, on paper, a well trained on-staff project management team provided with the ability to draw highly trained carpentry labor seems like a win/win and another tool to become more efficient. 

Aside from a political argument, which I have no desire to entertain here, have any of you found that using union trades (carpentry) labor has been beneficial to your organizaton?  Have any of you found it not to be?

I’ve always been somewhat of a Green builder.  Growing up and coming of age in a cold climate, I learned to  prefer 2 x 6 exterior walls for additional insulation.  We use to catch rainwater in an old cistern and pumped it out to water the garden.  We were squarely in the working class, so we re-used nearly everything and built for function way more than form.

Green idealism has been around for years.  But it wasn’t until recently with the surge in energy prices and the discussion about global warming that becoming Green is a necessary business strategy.  Customers look for some kind of tangible “green” symbol on anything and everything.  They now care about where the product was sourced, where it was built, the sustainability of the materials involved, etc.

I have always felt much of the recent green trend is just that - a trend with a defined shelf life.  With that sentiment, I do think a realistic greening of our industry is upon us.  This is an important shift in public perception.  I recently joined the U.S. Green Building Council and am diligently working towards the LEED AP certification.  Sustainability is upon us, and fighting the tide is a losing battle.  Although I could tell clients that Building Science has been a passion of mine since I was a teenager, there is nothing like the proverbial letters after one’s name to verify and qualify that statement.  I am beginning to feel like a credential collector, which is something I never thought I needed in this industry - but I believe that sentiment is no longer correct.

Our clients don’t just want a contractor - they want an expert partner that can guide them through the maze of questions and regulations.  They want someone who understands tax credits enough to point them in the right direction.  They want a contractor that cares about where the product was sourced, how sustainable the process was in both harvesting and building the end result.

As contractors, we can never be educated enough.  Building scientist (BS), renewable energy guru (REG), tax credit understander (TCU), sustainable product sourcer (SPS) - and, oh yeah - be able to build a facility on time and within budget with no punchlist.  Sheesh!  These are all letters that we now must, in some way, put after our name.

It is unfortunate in some aspects, but true and incredibly exciting in others - our industry has grown up and continues to do so, and we are quickly being considered more of a professional service than anything else.  We always use to wear multiple hats in our companies, now we may need multiple heads to wear all of them that people expect of us.  Let’s not fear these new expectations put upon us, but rather embrace them as a sign that we are succeeding at our goal, and are looked to for expert guidance and advice.  That alone is a powerful change in perception.  Trust me, it will take some time to get used to.

I am about to put the finishing touches on a porch I have been building for my family.  A rather unremarkable job for the most part, until I set down to thinkin’ about it.

Part of the process that I steer all of my potential clients to is an attempt to assign each lead a number that corresponds to a stage in the sales/execution process.  (1-5)

1. Website feeler or call for information (cold lead)
2. Potential for developing relationship (warm lead)
3. Pursuit in Progress (prelim scope of work/design ideas)
4. Proposal
5. Client

But what struck me as I was sanding and spit polishing our new gathering place last weekend was just how different the project seems from an owner’s perspective.  We didn’t want to start with anything more than a rough design, because it is fun to tinker, modify, change and adapt as we go.  My wife (our CFO) wanted a firm price before we tore the old one off (without a design! Sound familiar?)  I wanted to know how many of my summer weekends this porch that I hadn’t designed yet or planned would take. (Familiar to anyone?)  In essence, my wife and I were the worst possible clients!   

It made me realize just how important the process of lead to client navigation is.  I preach over and over that we cannot give anything more than an absolute ballpark guess of cost (and I try to stay away from anything other than a # to see if we aren’t even in the same orbit)  until after Phase 3 is complete.  We can’t begin to know what something will cost or how long it will take until we have a rough scope of work and at least a preliminary concept design, which then pushes us into phase 4.  But yet, on my own porch, with my own precious time and my own precious resources, I became the worst possible client.  I wanted to know everything possible without going through steps 1-4.  It suddently dawned on me on why my clients are often like this.

When we commit to a project, we know the end will justify the means.  But so often, our clients don’t enjoy the means of getting there.  This is the area that I strive to excel in for my customers.  We have developed a simplified process not only for tracking lead to client - but for tracking earthwork to punchlist.  We strive to make the means enjoyable by setting out a plan that gets them to the justification at the end of the project.  We work diligently, almost religiously, on tracking costs and avoiding missing steps in our process.  I did none of this on my own project at my own home.  Part of it is because I didn’t want to make the effort.  Part of it is, as sick as it sounds, building things is not only my livelihood but my hobby.  I didn’t want to make my hobby seem like work.  In so doing, we bumbled the cost to complete.  We missed the estimated completion time.  Our design looked nothing like what we started out with, because we started with hardly an idea.  Sure we are happy with the end result.  But is cost 1/3 more than I thought and took 3 weekends of work longer than I estimated.

Our clients want to behave in this manner, too.  They have a vision and immediately want to send out invitations for the housewarming party while the addition is nothing more than a sketch or two on a sheet of paper.  It is our job as professionals to guide them in the steps of building, the “Order of Things” as I like to call them.  Betraying this order causes a curse to be put on our projects in terms of time and dollars and ultimately client retention and good word of mouth.  The “Order of Things” is darn near the ten commandments in my company.  But, oddly enough, not for my own project.  I betrayed my own commandment of thou shalt not betray the Order.  I like this phrase so much I want to write a book about it someday.

I often marvelled at how some folks that hire us haven’t a concept of the difficulties and pitfalls in renovation and construction.  It is our job to develop a process, stick to it and not sacrifice it for the sake of expediency.   If we do, years of tinkering with process go out the window, and goodwill often goes with it.  Don’t become your own worst enemy - develop your process and stick with it.  The efficiencies gained when you can say “Client X is a 3 right now” and everyone knows exactly what that means is important for laying the foundation that our reputations are built upon.  I didn’t follow my own plan, but I learned something valuable - how my client thinks the moment that they call some one to design or renovate their home.  How much will it cost?  When will it be done?  When can you start?  I am sorry, Mr. or Mrs. client - the answers to all of these questions can’t be determined until you are at least a 4!!!

How many out there have had people working for them and things going along well when that person leaves your company for whatever reason?  Did you panic?  Did that person take a lot of knowledge with them?  Or did you have proper documentation in place to not “miss a beat” with you processes?  We have been preparing and gathering knowledge about systems and contacts for a few years now.  And when someone recently left, we were prepared to continue operating and a very high level.  Was it a hit to our normal flow, absolutely, but it did not stop progress.  Additionally, it did not take months to get back into moving smoothly.  Our journey began with us hiring a consultant to help us understand process flow and documentation.  The cost of that consultant was insignificant when compared to the potential loss of efficiency that we could have experienced.

So ask yourself, if person ”X” left tomorrow, would I know exactly what their job entailed and could I (or someone else) perform it?

Let’s Discuss.   

Let me start by saying that I am a dyed-in-the-wool believer in our version of capitalism.  All the good, the bad, the ugly, I firmly believe it is the most efficient and fair system yet devised.  I hesitated discussing this topic on a short blog post, but I firmly believe that healthcare is a distinct problem for us as an industry.  I don’t have the answers, but I do know that the costs of the current system make providing health coverage to our employees increasingly difficult, if not impossible, to maintain. 

Normally, when costs rise beyond a standard rate of inflation,  the market generally sees an opportunity to earn money and fills that need with hospitals, outpatient care facilities, etc.   Young people train as doctors, nurses and anesthesitists because the demand is so great.  In essence, the void is filled by competitive forces and costs normalize over a period of time.  If they don’t, and the cost of service outstrips the consumer’s ability to pay it, we have a healthcare version of a bubble bursting.  This is how it should work.  But something in the system is not functioning, costs rise annually well beyond inflation, and the losers are the business that pays all or a portion of healthcare coverage costs for their employees and the employees themselves.

Now that we have determined that I can see a giant brick wall crashing down around me, what is the solution?  What have some of you done to lessen your healthcare coverage costs, or at least ease the insatiable rate increases?  A construction company, billing $45/hr. or so for skilled tradesman does not have the additional revenue to absorb double digit percentage increases yearly.  In this market of declining revenue, the simple solution is to drop coverage for your employees.  This can cause a downward spiral effect as quality employees leave for locales that offer health coverage.  Not a pretty picture from any vantage point.

Some firms are exploring  Health Savings Accounts (HSA’s) and Health Reimbursement Accounts (HRA’s).  In effect, these are high deductible plans with a fairly substantial co-pay.  In the HSA, the employee keeps the funds in the account at the end of the year, in the HRA the employer keeps them.  Folks in our industry have told me that these work well for construction firms where the majority of workers are under the age of 35 and in relatively strong health.

Other firms I have spoke with have joined forces with groups in order to leverage purchasing power.  Perhaps the local Home Builder’s Association has an option availabe.  In any regard, providing coverage is increasingly expensive, and many of our brethren in the industry, through no real choice of their own, have to opt out of providing coverage to their employees.  We all lose in this instance.  Our best and brightest will not stay with us for long without a competitive benefit package. 

In short, please explore all available options (Group plans; HMO’s; increase co-pay; HSA’s or HRA’s) before eliminating the benefit altogether.  Keep open lines of communication with your staff.  Examine your plan yearly and shop it competitively.  Some employees may be willing to fore go a raise in order to keep their premiums affordable.  Our national healthcare system is in trouble.  Our ability to stay a worthy competitor for bright young talent hangs on our industry’s ability to provide good pay and benefits, along with quality of life issues.  I personally don’t believe a socialized medical system is the solution.  But I also know that high single digit or double digit annual cost increases are simply not sustainable and will cripple our industry.

What have some of you done to provide this benefit affordably to your staffs?  I, and many others I will assume, would love to hear any and all options available to us.

Maintaining a high-level of jobsite productivity is one of the most important activities for any foreman, superintendent, or project manager. The first step to increasing—and maintaining—jobsite productivity levels is to understand what all the fuss is about.

When production rates drop, a project can lose money. Without proper documentation, these losses cannot be recovered. Worse yet, if production rates are left at a lower level, and a company adjusts their estimating to match their production rates, the company will become uncompetitive in the marketplace.

On the other side of the coin, if production rates are monitored closely, and improved upon constantly, then the company will gain a competitive advantage in the market, and any impacts will be seen immediately, when they can be dealt with. Many factors affecting productivity are well within our control, but many more factors are generally out of our control.

Here, we’re going to explore what productivity is and how it is measured.

What is Productivity?

Quite simply, productivity is a measure of how much of something is produced for a given amount of resources.

Productivity is related to job costing, but is typically more detailed in that it captures both the quantity of installation AND costs for a specific period of time.

Job costing systems typically capture costs at such a “big picture” level that it is impossible to get accurate production numbers out of them.

Job costing systems also typically run a minimum of one week behind, so by the time you could get any useful productivity information out of them—it is likely too late.

How Productivity is Measured

Productivity is expressed as a ratio between units produced or installed and
resources used.

A very simple calculation example is a trenching operation where production could be expressed in feet per day. Typically one of the numbers, either resources or units, is set to “1,” and that is typically expressed as the second part of the equation, as in the different examples below:

• 310 Feet Per Day

• $4.62 Per Foot

• 32 Fixtures Per Day

• 0.25 Hours Per Fixture

• $12.76 Per Fixture

The following table shows some typical Units and Resources used in productivity measurements:

PRODUCTION UNITS	RESOURCES
• Each • Linear Feet • Square Feet • Cubic Feet • Cubic Yards • Tons	• Schedule - Weeks, Days, Hours • Manpower - Hours, Crew Days • Equipment - Weeks, Days, Hours • Cost - Total, Variable

Production Rates at Extreme Detail

A great example of production rates are the labor units used in the bidding of construction projects. These rates have been determined through very detailed cost accounting on a variety of construction projects.

There are several companies that assemble this type of cost data. Some are industry specific such as NECA (www.necanet.org), while others hit the broad construction market such as RS Means (www.rsmeans.com).

While this level of detail is required for accurate bidding, it is impractical to track job costs or production in the field at this level of detail.

Measuring Production in the Real World

You have to find a balance between labor units used for estimating, which are too detailed, and the job costing system, which is too broad and provides information that is too late.

A realistic production measurement timeframe needs to happen on a daily basis, at a maximum, in order to provide actionable feedback. These should also be summarized by the week to even out high-production and low-production days, as well as taking into account when setup and pre-fabrication is done to support higher production over the following days.

Production Rates are Relative

Production rates are relative. They mean nothing if they are not compared to something else.

The typical comparisons are:

• Estimated: If your production rate exceeds the rates you estimated the project by, you are making money. If not, then you are losing money. It is critical to know this on a daily basis so you can make corrections. If you are unable to attain the estimated productivity rates, then the feedback needs to get back to the estimators so they can adjust the production rates they estimate jobs at. Overestimating productivity on a bid CANNOT be made up for with more volume!

• Past Production: Comparing your current production rates to your past production rates on the same or other projects is the best way to determine if you are being impacted or if the new installation method is working.

• Industry Standards: This information is hard to attain, but with a little work, you can gain a lot of information and set benchmarks for your production. The importance of comparing your production with the rest of the industry is that if you can exceed that production, you will gain a competitive advantage, which equals more work, more profits, and more opportunity for everyone. The opposite is also true.

One other area you can compare production rates is between crews and even crew members. This will clearly show the wide variation between a top producer, an average producer, and a bottom producer. You can use this information to help share ideas about production, and in turn, raise the overall average. Having this data widely available takes care of a lot of people management problems because it makes it obvious where people really rank.

By understanding what productivity is, how it is measured, and by monitoring production rates closely, a company can increase their jobsite productivity level, and therefore, create a strong competitive advantage in the marketplace. It’s worth the effort!

	DAVID BROWN is the Founder and President of D. Brown Management, a consulting and management firm that helps construction companies improve profitability. Headquartered in Northern California, the company provides a full scope of general management solutions to construction clients nationwide, including strategy, planning, operations, field productivity, workflow, financial management, technology, and marketing.
As always, ask any questions and comments are always welcome. You can post them here or send an email to david@dbrownmanagement.com. Reader comments and questions will become future posts.

It is very easy to spend too much time working on small problems and not enough time forecasting icebergs and scouting opportunities.  In my organization, I swear we will spend hours debating the font size and attached clip art of a particular memo and only a few minutes discussing the content!  We’ve even gotten bogged down on what brand of glue works best for interior miter joints.  Every once in a while it becomes necessary to close the notepad and start over with a fresh page and perspective.  It is all about getting back to basics.

Simplicity in thinking is not necessarily about behaving like a simpleton.  (Although some might call me this!)  It is about organizing priorities in such a way that no one issue takes more of our valuable time than it should.  Breaking a large problem into smaller, more manageable pieces so that segments can be solved and the remaining issues challenged.  It means delegating issues to capable subordinates and allowing them the opportunity and the space to grow into leaders.  It is too easy to get overwhelmed in minutiae while opportunity passes us by.  It also means maintaining focus on the simple issues that impact our organizations and not worrying about those that we cannot alter despite our best efforts.

While I was working on a project in business school, I came up with an acronym that attempts to convey my thoughts on business leadership into a simple phrase that I can repeat to myself when I begin to feel overwhelmed.  Yes, it is an oversimplification of difficult processes - but I am a huge devotee of thinking as simple as possible.

Get back to BASICS:

·         Believe in the product, service and organization

o   If you don’t believe in what you do, no one else will, either.

·         Actions, not words

o   Words are what clients read.  Your actions are what they remember and pass on.

·         Simplicity in thinking

o   The keystone concept of my approach – Keep it as Simple as possible!  Simplicity allows for a checklist to make certain we are being thorough in our judgments.

·         Initiate ideas

o   Be an idea generator.  Bring solutions to problems (both your clients and your own) Think beyond the canned response.  Above all, think proactively.

·         Communicate

o   Without communication, even simplicity becomes unruly.

·         Service above all

Business leadership can’t be broken down into an acronym alone.  However; the cleaner and more simple we can make our approach, the more efficient it becomes.  The more efficient an organization becomes, the more time can be spent on scouting for work, earning profit or, heaven forbid – relaxing.

The current environment holds numerous challenges.  I have no idea when the tide will turn or when/what/where the next big thing will be.  But the message I preach over and over is timeless.  Simple thinking approached with clarity and focus, a tight control of spending, and a willingness to bring new tools, ideas and analytics into your organization while providing exemplary service will win in every environment.  Whether winning is defined as simply staying alive or actually thriving is a point for debate.  The key point here is to get back to BASICS and focus on what will make your organization successful.