Even today, some construction companies are reluctant to share information with the field employees — mainly, the budget figures. For a litany of reasons, “the office” is fearful of the superintendent or foremen possessing job cost information.
Additionally, field leaders are equally reluctant to have this information. Ask some field leaders about their general conditions or their labor budget, and you might hear, “You’ll have to ask the office because that’s not my job. I’m just building the project.” That would be like asking a blue-chip quarterback if his team is winning, only to hear, “Hey, I just throw the ball. I have no idea if we’re winning or losing.” Organizations must first confront the challenge of creating a scoreboard that is transparent, believable and, most importantly, realistic.
Establishing the Currency
One of the most interesting aspects of construction budget creation and controls is the currency. But the information being shared with the field can be about more than dollars and cents. You should be able to trust the team members who are building multimillion-dollar structures with millions of dollars’ worth of equipment and materials to see the budget. However, consider the following scenario: You tell your field leader he or she has $125,000 to complete a particular trade package, but they might better understand that they have 1,500 man-hours to complete that same trade package. The currency for the field is not about euros or dollars or pesos, but rather the actual denomination those leaders use on a daily basis.
Financial management is multipronged (see Figure 1). The dollars on a project are inextricably linked. A field leader, however, is largely concerned with the top line of the graphic. But from an estimating and project management perspective, there may be a tendency to create budgets that manage costs, schedule values and bill simultaneously. If this can be done, that’s outstanding. But there is often a push to crowbar everything into a one-size-fits-all bucket. For instance, consider a highway project where there could easily be hundreds or thousands of pay items. Sometimes, those same pay items might be labor codes that have dollars or hours attached to them. The field now has to choose from a menu that should correlate to a job feedback report they can see. Without proper forethought and strategic thinking, there is little hope the field will recognize the importance of seeing how each element intersects with the other. You should create budgets that speak to the field in their currency of choice: hours.
Addressing the ‘Why’
Let’s step back a moment. Why do firms not share budget and job cost information with the field? Below is a brief list:
- The “games” — Money is shuffled from job code to job code, so even if the field did see a job cost update, it might lack integrity.
- Fear of it falling into the wrong hands — What if the budget/job cost information is left in the job trailer and someone sees it?
- Fear of a team slowing down — What if the team members see they are doing well, so they slow down because they might work themselves out of jobs?
- Stacks of money — If the field employees knew how much money we make, they would want more money.
These are definitely some of the reasons why, but consider this: Would a sports team shut off a scoreboard so the team couldn’t see the clock or performance statistics? It certainly doesn’t seem realistic, so why do construction organizations think keeping the team most connected to the work in the dark is a viable idea? The arguments against these theories are below:
- The “games” — Integrity is not just a corner-office trait. Project managers who are shuffling money might have larger issues, and this can certainly create a pervasive lack of distrust.
- Fear of falling into the wrong hands — Since most of the information is electronic, this is a bit far-fetched. Second, have you seen your cost reports? Some of your own people can’t read them, so who is to think a competitor, owner or trade contractor could decipher them?
- Fear of a team slowing down — It is only natural to want to engage in “job protection mode.” However, the organization has an obligation to drive strong internal communication so this doesn’t occur by sharing what is on the horizon.
- Stacks of money — A little education goes a long way. The construction industry is largely a 3% to 4% net profit margin business (translation: low margin, high risk). Teach your teams this nugget so there is not a misconception about bloated profits.
Focusing on the Behavior
If the company has the right tools and structure, reinforcing behaviors becomes a great deal easier. If there are no guardrails, field leaders will assume the mantra: “That’s not my job.” In reality, there is no job more important to the field leader than budget management. Who else will drive daily productivity and cost management if not that field leader? Organizations that have the infrastructure have a greater ability to drive individual accountability. Furthermore, they more than likely spend time educating all team members — office and field — on financial acumen. In the end, being better builders means being well rounded and exceptional at adding money to the bottom line. If you aren’t lighting up the scoreboard, are you really a great builder in the first place?