Defining Operational Excellence

Two of the world’s leading minds in operations consulting for the construction industry are Scott Kimpland and Ethan Cowles. 

Kimpland is a principal at FMI Corporation and has been with the organization since 1987. He spends most of his time working with labor-intensive contractors, helping them fine-tune and improve the operational side of their businesses. He has been on FMI’s board of directors and has also served as the project execution leader within FMI.

Cowles got his start in the construction industry in 1992, working in the carpenter trade as a foreman, superintendent and project manager (PM) prior to joining FMI. He is a principal and has been with the organization for 13 years. Cowles helps contractors achieve project control where they recognize, understand and believe what the expectations are. In addition to his operations background, he is also the leader of FMI’s Project Manager Academy.

They have both consulted for hundreds of contractors across the globe and have seen their share of strong construction operations, as well as less than stellar performance. Here, you can read their responses to some of the construction industry’s questions about defining and fostering operational excellence.

GS: What personality traits make a great PM?

SK: I would break it down into two big categories of traits. The first category would include behavioral characteristics—like a great work ethic and drive, with an attitude to do whatever it takes. The better PMs tend to have a high sense of urgency and the ability to stay focused on getting things done and resolving problems. They like to win, hate to lose, have a competitive spirit, and, in most cases, they’re generally fairly extroverted and have strong communication skills and negotiation skills, which are important to project management. Being able to operate in an environment where there is constant change and to adapt and thrive in that environment is important. 

The second category is more about business acumen and an understanding of basic financial management principles. Today’s PMs are businessmen and businesswomen who are running a company consisting of either a single project or a portfolio of projects. And in most cases, the typical construction PM is probably managing more revenue in a year than the average United States business generates, so those business skills—like being able to understand contracts, scope of work, notice requirements and change order terms—are important. Great PMs are not simply administrators on a project. As the title implies, PMs proactively manage the contract, costs, schedule and satisfaction. They’re willing and capable to accept ownership and accountability for overall performance of a project—covering everything from financial performance to the schedule and customer satisfaction.

EC: Great PMs are good listeners—purposeful listeners—certainly to their clients, the end user, other trade contractors and their own guys. This is the trait I see as a separator between an average PM and an exceptional PM. Another critically important trait is a focus on proactive planning. To constantly solve for roadblocks or risks is a requirement for PMs, not a luxury.

And one more trait that separates an exceptional PM from an average one is a strong ability or aptitude for teaching. As part of their job, they will be teaching field guys, engineers or assistant project managers. PMs are constant teachers—at least, the best ones are. Strength and willingness in this ability are both signs of a great PM.

GS: How do you transition a great PM to a great business leader?

EC: First, exposure to, or participation in, strategic planning and business planning can play a big role. PMs who get promoted to business unit manager have to see new things, have new ideas and learn new vocabulary. For a potential candidate to take on those roles or responsibilities, it’s best for them to first build some sort of financial literacy—whether that’s working with the chief financial officer or controller to understand the ins and outs of the business, or taking an external course to understand direct costs, variable costs and financial accounting. It’s also important to have a good mentor for at least a year or two before assuming a leadership role. That mentor is someone who can answer and ask questions to help prepare the candidate for life in a real position, and to act as an ally and confidant.

SK: The skills required to successfully manage a business unit or a group of people are a lot different than the skills required to be an effective PM. It’s a big transition going from building projects to building an organization or a business unit. Having some knowledge and understanding of just basic work acquisition—the ability to get work and what it takes to do that—might be a new skill set that some PMs may not already possess. What’s important is having the financial understanding and ability to go from reading a job-cost report or job-specific financial data to truly understanding a balance sheet, an income statement or how to keep score for the business unit or overall company. 

They must also have the proven ability to develop a successor for their role as PM because if you’re going to be running a business unit or a portion of the business, your focus moves from building projects to building people, processes and an organization. One of the first things I’d look at before promoting a PM to a leadership position is whether they have been able to train other PMs or take someone from a project engineer level to a PM level.

GS: What are the biggest impediments to making the leap from PM to business unit leader?

SK: I think the person being considered for promotion has to understand that their role is going to be much different, and if their passions are building and managing projects and they want to continue to hang onto that, it’s going to be a hard transition. First and foremost, the candidate must be willing to learn, willing to grow and willing to give up some of the things they did as a PM that may have initially attracted them to the industry.

This is a mistake a lot of companies make: trying to take a senior PM and ask them to play the role of operations manager while also leading other PMs with the same project management responsibilities. It rarely works out well. It is kind of the player-coach mentality.

EC: The part I see often throughout the industry, with relatively few exceptions, is that contractors run lean—and because of that, they run their operations fairly thin. It seems almost a luxury that one might have an opportunity to step away from work on projects to help to develop the skills necessary to run a business before a person is promoted. One of the biggest hurdles is just making sure a company has the capacity to allow people to step out of project roles and into business leadership roles. Make sure they’re not bogged down in the day-to-day tasks of a project or client. They do have to be able to step back and look at a bigger picture and need time to be able to do that.

GS: How have leading firms dealt with the void left by departing field leaders?

EC: The best firms make sure that it’s not a surprise. You can look at your field managers, or even your PMs or project leaders, and get a pretty good idea of retirements or approximate retirements and not waste that time. Make sure they know what their demands are going to be over the next 5 to 10 years and think of good ways out. It will also be important for senior field leaders to share their knowledge and be teachers, grooming the next group and dumping all the experience they possibly can into the next generation. It’s not something that can be fixed in a week or two. 

You can’t wait until the last minute to start training people and just put them in a classroom for a couple of weeks. This is something that is best done in the field, in real-life situations, to teach the up-and-coming generation how to think through and solve problems and create solutions to get great results. It’s about teaching people how to do things, not doing things for them.

SK: The key to this is getting out ahead of it, and it’s just like managing succession anywhere else in the business. Whether it’s foremen, superintendents or general superintendents, each one of those people should have at least one or two people they’re trying to develop alongside their normal workload. Leading firms seem to have given their departing leaders some expectations for developing their successor, and you don’t do that overnight. It has to be intentional. It has to be deliberate. The employee you’re developing must be aware of it. Not everyone is going to make it to the next level or a leadership position, but if everybody is focused on—or responsible for—developing their successor, then chances are you’re going to have a bigger potential stable of future field leaders. 

Firms that do a good job of this also have an unwritten policy that states that before you can be promoted, you have to develop your successor. Sometimes, an incentive compensation system or bonus program can influence this behavior. So, in addition to just reinforcing bottom-line financial performance on projects, I would suggest looking at your compensation system to make sure you are rewarding, or at least recognizing, people who are doing good work in that respect. 

GS: How has the proliferation of new technology affected overall operations?

SK: There’s a lot of technology out there that, on the surface, looks cool and intriguing. It’s all exciting, but, at the end of the day, the question is: “Is this really improving quality, safety, productivity and the performance of my projects?” I’ve noticed that some of this technology has put a spotlight on inefficiencies in the field and the opportunities to improve productivity. In addition, because the younger generation of construction professionals tends to support technology and embrace it much quicker, it’s allowed some of them to become bigger contributors much earlier in their careers than they would have without it.

EC: If it’s done right, it certainly should give us much easier access to information. The speed and transparency of that information is very positive. I think it is easier to enable strong documentation, and it certainly decreases the need for double entry. At its best, it can certainly speed up communications much with a much higher degree of transparency, and ideally, more accurate information. 

As a downside, it is one of the lowest-scored items on the surveys we analyze in our assessments. Just because the software is available, and just because they have been given 4 hours of introduction and training, doesn’t mean that managers actually know how to use it or leverage it. I think most organizations shortchange themselves by not undergoing enough training. We have new software and applications that we’re asking our people to use—and we assume they know how to use it. I don’t think that’s a good assumption. 

GS: In light of COVID-19, the world has changed dramatically in the last few months. How can a great PM support a business and its projects in post-pandemic recovery?

EC: Certainly being mindful of the new safety measures being required—whether it be teams maintaining social distancing guidelines; planning work; or ensuring we do not stacking too many trades in one room—all of it requires a lot more communication with other trade contractors and clients. A huge benefit to the situation we’re in is better planning and better communication with other contractors.

I also think it’s important that the attitude toward COVID-19—and the additional safety measures—is genuine and real. For instance, in my conversations, I have seen that people run the thought spectrum from, “This is a drastic reaction,” to, “Is it appropriate to ask my people to work in a potentially dangerous situation?”

I really want PMs to know that they are essentially high profile right now. If they are working right now, people are watching. And it’s not just about making their own teams happy—there are expectations around COVID-19 safety and working safely. It’s up to those PMs to set a good example, and to show both teams and onlookers that everything is being taken seriously and guidelines are being properly handled, not only for the workers outside of the building, but also the people inside. 

SK: The new COVID-19 requirements on jobsites involve social distancing, so the old solutions of throwing bodies at the problem, trade-stacking or lack of coordination is no longer an option. I think this is really going to highlight and actually somewhat force people to plan better—they’ll have to move one trade out of an area before moving another trade moves in. It’s all going to result in a lot of good planning.

Additionally, there is something to be said about being flexible. Just when you think you have it all figured out, there’s a new variable or something that comes up and hits you, so I think one of the things that PMs need to be doing or need to be thinking about in this kind of environment is being adaptable and nimble. PMS need the ability to change quickly, change means and methods, or make adjustments on the fly to be able to address the ever-changing variables that will arise as a result of working in this pandemic situation.

GS: Taking COVID-19 out the equation, what is the next big hurdle for businesses moving forward?

SK: We would be shortsighted not to believe there will be some sort of lasting economic impact from this. I don’t know if it’s going to be in 1 year, 2 years, or what, but there’s going to be an economic impact to all of this, and, quite frankly, the need to become leaner and meaner and more productive. If you think about it, in a good market or strong economy, the low-cost producer ultimately wins. I think we’re going to enter some periods in the next couple of years that might have a different market dynamic than what we’ve seen over the last 8 or 10 years.

We must also note that anyone who has entered the industry in the last 10 years has probably mostly experienced growth, prosperity, year-over-year success; so I think it’s going to be very important to be prepared and start working on your business in terms of making sure you’re lean, mean, well-run operationally, because I don’t think it’s going to be the same economic environment we’re become accustomed to. Everyone must prepare for tighter, more difficult economic times, and figure out how we continue to be successful and profitable in a potentially more competitive and tighter market.

EC: Where we’re really seeing some changes—and this is going to depend highly on geography—is in the slowdown in the engineer/architecture space. For most contractors, the next big hurdle is to not only build their backlogs, but also to make sure to build into that backlog wisely; not just filling up their plates with a bunch of low-margin work. Just like anytime, best-in-class contractors know their costs—so know what your costs are, have a high degree of certainty, of transparency of those costs, for any scope of work. Stay selective with the scope of work you take on; don’t necessarily chase every project and every owner—be picky and continue to be picky. Know the projects you’re good at, know the owners you like working with and the ones who like working with you.