Improve Your Business Health by Correcting Contractor Misconceptions

Tabloids have made an industry of politicians’ and celebrities’ misquotes, gaffs and overall embarrassing situations. What makes construction professionals immune? In the age of Twitter, Facebook, CNN and other outlets, business leaders have no shortage of vehicles for communication. However, the method of communication is largely not the issue. Problems arise because messages often become distorted and convoluted. The best of intentions quickly fall into the ranks of trite euphemism. This is not to say that industry leaders and managers are spouting ignorant, malicious rants like those of Mel Gibson, Michael Richards and Donald Sterling. While no one strives to make the “infamous” list, construction professionals must recognize the liability of an inappropriate message. This light-hearted examination of the misquoted will help contractors identify and correct common misconceptions in the business.

“I’m too busy putting out fires to work on the business.”

While you have been putting out small brush fires, a dangerous blaze has been destroying your business. Strategic initiatives fail to gain traction, while day-to-day distractions muddy the water. This is an all-too-common perspective among leaders in the industry. Every day, countless tasks pull leaders into the minutia of the business. By contrast, businesses that have a strong team of managers who can tactically execute allow senior leaders to focus on the right things.

Consider this: If everyone is down in the engine room wrenching on the system, who is at the helm steering the ship away from an iceberg? There is never an ideal time to think about strategic issues—succession planning, value propositions, market-entry strategies, employee training, etc. However, the longer this important strategic thinking is delayed, the more difficult it is to implement new ideas in the business and to grow in a rapidly changing marketplace.“We’ll do it for no profit. We have to keep our people and equipment moving. This also will get us in the door with that customer.”

This sounds noble, and—in light of the war for talent—one might think this is an excellent strategy to maintain key resources. However, no-margin work begins a cycle in a firm that is difficult to break.

First, consider the potential risks the firm faces. For instance, what if a catastrophic event occurs? Profitability should be adequately tied to the level of risk a firm takes—the higher the risk, the higher the margin potential.

Second, consider the resources that are now dedicated to the project. What if the timeline slips or economic conditions improve so that completing a low-margin project is no longer practical? Unfortunately, the resources are dedicated to a low-margin, high-risk project with little upside. The same strategy often is applied to firms that own their own equipment. In the short term, absorbing equipment costs may appear to be an ingenious strategy. In the long term, however, this tactic becomes difficult to justify when examining a firm’s true costs and the impact on a firm’s reinvestment in new infrastructure.

Last, the age-old argument of using a low price to woo a customer is a fallacy. Unfortunately, the bar is set relative to price, and the firm that managed to crack the door with a screaming low price has now wedged the door with a firm customer expectation.

“We have to lower costs. Brand X will do it for 20 percent less.”

Your costs are your costs. Consider two estimators in the same firm: Would they estimate exactly the same? Chances are their estimates will vary. Now, consider two different firms, with two entirely different cost structures. Brand X does not have the same cost structure as your firm. Do the work for your costs. Cutting costs when the intent is to cut margin sends the wrong message.

First, cutting costs with no strategy for building at that lower rate is a strategy destined for failure.

Second, it is wrong to tell the field that they had $1,000 to do a task but now have $500, yet the profit margin is still 10 percent. Finding a more productive means to execute work in the field is an important step, but placing the burden of a flawed business decision on the field because of Brand X’s cost structure is the real mistake.

“There is no way the competition can do it for that amount.”

So, the reason your firm did not get the project was because of the competition? Plenty of firms employ bad business practices; however, many competitors that do low-price work are still thriving. When a job is lost, reflect on the root causes of the loss. Was it a productivity issue: Does Brand X have a better way of building the work? Was it a business development issue: Did the competition have a strategic edge or relationship? Was it our value proposition: Did we fail to identify the customer’s pain point?

There are plenty of examples of aberrant bid-day behavior, but when every loss gets lumped into the “crazy competition” barrel, a firm might be missing the bigger picture.

These are powerful and noble words. Customer service is a lost art in today’s world. Every contractor must recognize the importance of finishing. However, many firms will do whatever it takes to get the job done, even at their own expense. The good news is that the project meets its deadline, but the cost overruns associated with the last 10 percent of the schedule are enormous. This is not to say a firm shouldn’t meet its obligations, but the company should proactively identify the right ways to plan and script the finish to avoid overruns. In an era in which superintendents, foremen and managers get shuffled off a project to start a new one, every firm must have a process that is focused on delivering the most important part of the project in the customer’s eyes, without hemorrhaging money.

“We’ll have a great year as long as project X starts on day X and project Y starts on day Y.”

Contractors can be an optimistic bunch. If only all projects began with a linear A + B progression, managing backlogs would be much simpler. The construction world is ripe with project delays due to financing, bid disputes, lawsuits, weather, designs, etc. While no firm has a crystal ball, contractors should have a discussion about the challenges a project might face and the appropriate strategic response. Hinging the firm’s success on one project is similar to planning for retirement by playing the Powerball.

“It wasn’t our fault. It was our (specific trade) contractor.”

When a favorite team loses the big game, the offense does not come off the field and say, “Well, we played a winning game, but the defense was the reason we lost.” A lack of unity exists among many project teams. Everyone hates when people pass the buck, especially when the buck is being shuffled among the same team. Regardless of the contractual arrangements, the customer does not see a dividing line. You hired the trade contractor, so you are on the same team. Taking ownership of the team means the project manager and superintendent lead the project and plan to make it a success.

Not every contractor is created equal, and some trades may require more planning and assistance. Either way, waiting until the end to throw that no-good trade partner under the bus for underperforming does nothing but make a customer question why they selected you in the first place.

“We don’t have time to plan our work—it happens too fast.”

Construction projects by nature happen at a frenetic pace. Contractors have no excuse for not planning a project. “But, we got the award on Friday, and we are slated to begin on Monday.” First, if this is the norm for a business, the firm must develop a process to deal with this case. Whether it is weekend planning or Monday planning on the jobsite while mobilization/demolition (or any other initial, low-energy starting task) is taking place, contractors should be planning some level of project strategy. More important, an internal transformation in how a company views planning must take place.

Planning is work, and true project strategies require effort. If the firm is simply “checking the boxes” with no real thought leadership, no wonder planning is shucked. Planning is the most important element of any project and will ensure success regardless of the velocity a project takes.

“Most of our training is done in the field: on-the-job training.”

“Thrown to the wolves,” “thrown into the fire,” “the cream will rise”—the industry uses a variety of euphemisms to describe the training regimen used in many modern firms.

Today’s marketplace is marked by a distinct lack of hands-on field training. Without a codified training program to instruct new associates—office or field—on hard skills, soft skills, business skills, trade skills, etc., a firm faces the danger of losing talented youth to the competition or to other industries entirely.

This new generation expects to be developed and trained. Being thrown to the wolves may have worked 20 to 30 years ago, but today’s workforce will demand more attention. This is not because they are needy. Training and developing a workforce, regardless of the industry, is becoming the norm.

The proponents of no training will say, “What if we train them and they go to work for the competition?” What if you don’t train them and they stay?

The Message

Rationalizing why someone in a construction company might make one of the statements above is easy. The construction industry has faced challenging times in recent years. Leaders in today’s firms have the best of intentions and mean no ill will when they talk about ignoring a firm’s strategy or failing to appropriately plan a project.

However, leadership must make decisions today for the short-term and long-term health of their business and communicate this rationale to their team to continually reinforce the vision they have developed.

Your company is intently listening to this message. Make sure you get quoted on that.