The Perfect Construction Year

June 02, 2008

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Many businesses operate based on the "things to do" strategy. While this can be successful, it is also very stressful.

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What if you were to sit down with your team and jointly decide what a perfect day, week, month, and year would look like in your company? Strive to achieve these ideals every day. Focus on the process, not on the task. I am not advocating the elimination of planning and goals. The achievement of these goals can be enhanced if you back up and focus on the underlying processes that lead to successful execution. If you design the process correctly, and focus on the process, then goals will be achieved as a byproduct.

For discussion purposes, let's focus on one version of an annual cycle for a contractor. This cycle will achieve great results, but the process is very hard to execute. There are many things that come up throughout the year that will make the contractor want to delay or delete certain phases of the cycle.

The best companies start with a process like this, usually at the annual level, and then break it down into quarterly, monthly, and weekly processes. Refining the processes is what drives results.

Trying to drive results with a task list can work, but it is VERY stressful and puts a lot of the responsibility (stress) in the hands of the person(s) making the list.

Let's take a look at the phases of our model construction year. This cycle has more to do with when the busy / slow times of the year are versus the accounting cycle or calendar year.

 

• December (General Goals): This is the time of the year when things have really slowed down. You are just getting back from Thanksgiving. If you are an underground contractor, moratoriums are likely in place and you cannot work on the city streets. It is possibly raining or snowing for many of the days during the month. Everyone is thinking about the upcoming holidays. This is the perfect time to get your team together and start creating some general plans for the upcoming twelve months. Is there a new market you would like to enter? Do you want the company to grow? By how much? Are there specific areas that you would like to cut costs? Are there some major capital investments you would like to make? This does not have to be anything fancy - just a list and some brainstorming. Keep it short with no more than five or six major items.

 

• January (Action Plans): People have come back from the holidays and now it is time to unveil the plan for the rest of the team. Hold a series of meetings to describe each of the big goals. As a group, break down each of these bigger goals into specific action items and assign responsibilities and due dates. It is at this point that a common measurement system needs to be put into place to monitor progress; this is where accounting comes in. If the goal is for a certain amount of growth, then tracking systems need to be set up to monitor estimating progress, earned revenue, gross profit maintenance, manpower levels, and cash. These systems need to be set up to identify problems and opportunities on a weekly, monthly, and quarterly basis. Without these feedback systems, execution will be haphazard.

 

• February (People): People are the driver for EVERYTHING that happens - either good or bad. Jack Welch was the CEO of General Electric for over twenty years prior to retiring several years ago. He is known as being both one of the best and toughest bosses around, and GE's financial performance reflected this. His thought on people was, "if you pick the right people and give them the opportunity to spread their wings and put compensation as a carrier behind it, you almost don't have to manage them."

At this time, you should have your general goals for the year defined, as well as detailed action plans and feedback systems in place to support these plans. You should spend the month of February reviewing individual action plans with each person. Look at their performance from last year. Set goals with them during this review process. When applicable, tie their compensation to the achievement of these goals and specific action items. Set learning and personal development goals for them that support both their personal vision of a "perfect day" and your vision of a "perfect year" for the company. Make sure they understand the feedback systems that are in place so they can monitor their own progress.

 

• March-May (RUN!): By March, the work is usually starting to break loose and everyone is in run mode - it feels like a full sprint most days. Jobs are starting, there is not enough manpower, equipment breaks down, schedules are getting compressed and cash is tight; all the normal things that happen during this time of year. If you do not have a general plan, established goals, feedback systems created, and "people plans" in place, this process seems very frustrating. It can lead to very little actual growth in the value of the company. In this case, everyone is doing things based on little planning and with no feedback.

During this time, thousands of decisions are made throughout the company every day. Each of these decisions has a direct impact on cash, profitability, quality, safety, and customer service. Some of these decisions are good - some are bad. Good planning and rapid feedback systems will increase the number of good decisions that are made.

 

• June (Review / Adjust): This is very difficult to do. During June, you are still in peak production. If you close your fiscal year in June, you have that additional stress as well. It will be very easy to push off a formal review at this time and react on gut feeling instead. This is exactly why you need to make the time in June to review your progress and make adjustments. If you worked hard in December, January, and February, this should be a relatively simple process because all the information will already be available. If the process is difficult, then work your way through it as best you can and remember this experience so you can improve the process starting in December.

 

• July-November (RUN FASTER!): You are still in peak production months. Continue executing every day, every week, and every month just as you have been. Look closely at both the results AND the process. Are you making decisions based on good feedback? Is the feedback fast enough? Is it accurate? What else would help? You will need to take this information right into the December planning phase when you start all over.
  

Focusing on improving the process is a simple and important shift. Making a buck is hard - building a process that makes a buck is VERY hard, but this is the only way to create long-term value. It is the only way to stop feeling like a fire fighter.

This works at the project level and at the company level. It also works at the country level, with the United States having an almost insignificant portion of the world population, and being a "toddler" in age, yet holding most of the world's wealth and power.

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D. Brown Management provides a wide range of services to help define and document critical processes. These range from the simplest, such as how to properly fill out a Daily Job Journal to bigger, more global processes, such as a "Project Manager's Perfect Week" or even the "Perfect Construction Year".

 

Cut the Fat

February 18, 2008

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“Two rules:  #1 Preserve the principal and #2 When in doubt, see Rule #1.”

–Warren Buffet

QUESTION: What possible good could come out of the construction slow down?

ANSWER: Too many to cover in just one short article!

Here are just a few. Of course some action may be required on your part. This first series is on cutting the fat and turning a financial downturn into a win for your construction company.

Forced Ranking

Look around your company for those employees that just don’t shine quite as brightly as others.  Now trim the fat. Use this time to get rid of “Okay” performers. Think very carefully before cutting key employees.  Ranking on detailed lists will help. Many of the costs for replacement are hidden. Long term employees know and understand your business. It’s essential during vast change to keep together a cohesive core.

Salaries & Wages

Where did salaries go through this last building craze? Through the roof.  Guess what? The slope just changed. Take command of your company.  Trim just five or ten percent across the board while it’s here.  Will it go over well? Probably not. However, having a job is much better than standing in the unemployment line. Employees will recover nicely, especially when the realization that over fifty percent of the positions in home building and other sectors don’t exist any longer. Let them go look. It’s not out there.

Equal Opportunity

One last thought on employment: age, race, weight, and sex all seem to have come to the aid of some in the way of job security.  Any cuts made with a broad enough knife can include all those politically correct classes. Tough love.

Insurance & Taxes

Be sure you’ve scrutinized your insurance policies. Be sure to adjust estimated payrolls for projected premiums. Look at your estimated tax payments. Be sure they are re-aligned. The impact on cash flow from adjusted tax deposits and premiums can only be of help.

Overhead

Look up.  Why?  Because I want you to see what’s overhead.  That’s right; no doubt things became a little cushy.  Trim it all.  Many costs as you downsize naturally fall.  Look at your floor space.  It’s not going to shrink.  If, like many contractors you own the building, cost compare renting a smaller space, leasing your space to another business.  If you’ve recently built, the change may pencil.

Profitable Details

Keep the knife sharpener handy. Cuts don’t have to be deep nor drastic by any means.  From toilet paper quantities, to pencils, to cell phone plans, to benefits, cinch it in. Lock it up if you must and designate a gatekeeper.

Harness Brainpower

Hold brainstorming sessions on how savings can be achieved with key employees and their subordinates. Create departmental teams and offer incentives for finding ways to save or increase efficiencies.  

Tighten Controls

Take a very close look at your material handling or lack thereof.  Take your field guys to the conference room.  Audit material handling and develop strict material handling training and processes. No nail shall go unclaimed. No board shall be cut too short. Use them as your tool for coming up with best practices. Most of it should stick when the heat dials up again. You’ll be operating as the new trimmer you.

Renegotiate Everything:

Renegotiate with vendors. How low can they go? Negotiate a long term relationship to stabilize your costs.

Coming Soon: This is just the first in an entire series of articles and tools that will help you manage through a financial downturn and come out stronger on the other side.  Stay Informed: www.dbrownmanagement.com/subscribe.htm

 

D. Brown Management has successfully helped a variety of different contractors manage business processes, systems and training. We consistently perform by improving cash flow and profitability for our clients through innovative tools producing great results. A third party can make it much easier to make the necessary hard changes in times of cutting back. We can push you past the emotions by illustrating the harsh reality of not taking action. This validation relieves stress at critical junctures. We offer onsite coaching and sessions that can be done remotely to minimize the impact on your team. Our team is from construction working exclusively for contractors.

One area where we find a lot of efficiencies and profit is in the tighter integration between operations and accounting. Learn more at:
www.dbrownmanagement.com/solutions_ops_acctg.htm

Direct Contact (Financial Solutions)
LeAnn Evoniuk
leann@dbrownmanagement.com
(916) 719-6866 PH | (916) 244-0413 FAX

 

Cutting The Fat - Slow Down Survival Tips

November 25, 2007

Action is the key to success. Here are just a few tips on leaning out during a slow down. This is a first of an upcoming series on surviving the market slow down.

Look around your company for those employees that just don’t shine quite as brightly as others. OK, now trim the fat. It’s that easy. Use this time to get rid of non performers. Think very carefully before cutting key employees. Replacement many of the costs for replacement are hidden. Long term employees know and understand your business. It’s essential during vast change to keep together a cohesive core.

Where did salaries go through this last building craze? Through the roof. Guess what, the slope just changed. Take command of your company. Trim just five or ten percent across the board while it’s here. Will it go over well? Probably not. However, having a job is much better than standing in the unemployment line.

Be sure you’ve scrutinized your insurance policies. Be sure to adjust estimated payrolls for projected premiums. Look at your estimated tax payments. Be sure they are re-aligned. The impact on cash flow from adjusted tax deposits and premiums can only be of help.

Many costs as you downsize naturally fall. Look at your floor space. It’s not going to shrink. If like many contractors you own the building, cost compare renting a smaller space, leasing your space to a more another business. If you’ve recently built, the change may pencil.

Keep the knife sharpener handy. Cuts don’t have to be deep nor drastic by any means. From toilet paper quantities, to pencils, to the cell phone plans to benefits synch it in. Lock it up if you must and designate a gatekeeper.

Hold brain storming sessions on how savings can be achieved with key employees and their subordinates. Create departmental teams and offer incentives for finding ways to save or increase efficiencies.

Take a very close look at your material handling or lack thereof it. Take your field guys to the conference room. Audit material handling and develop strict material handling training and processes. No nail shall go unclaimed. No board shall be cut too short. Use them as your tool for coming up with best practices. Most of it should stick when the heat dials up again. You’ll be operating as the new trimmer you.

Renegotiate with vendors. How low can they go? Negotiate a long term relationship to stabilize your costs if at all possible. Be sure to leave market adjustment allowances built into the agreements.

Stay tuned for more. Coming soon are moves that generate cash plus tips on running a successful construction company.

Work in Progress Class - Coming Soon!

September 06, 2007

If you would like to learn more about the Work-In-Progress Schedule stay posted. Class dates will be posted on our Web Site soon. No matter your level of involvement in project management, whether it's creating job reports for accounting or relying on information to better manage your projects, this class contains valuable information you don't want to miss. You will take with you a better understanding and appreciation for this highly under- utilized reporting tool. Learn a fast and efficient way to view jobs and gauge profits, billing and backlog.
This is an interactive module of Profit Happens Here... This module breaks down the Work-In-Progress into five basic segments giving insight to the practical affect each process within a projects life cycle has on the report.

This is an interactive module of Profit Happens Here... This module down breaks the Work-In-Progress down into five basic segments giving insight to the practical affect each process within a projects life cycle has on the report.

The Work In Progress (WIP) Series

July 19, 2007

For a construction financial manager, mastering the understanding of how a work in progress calculates and compiling the report successfully are only the first steps in really working with this important tool. The work in progress is much more than in income reconciling tool. Taking the time to gain understanding on what affects the numbers really do have on the health of a project will lead you to a greater understanding of construction processes.

Let's take the a look at change orders and extra work for instance. What affect does extra costs hitting a project have on the calculations of earned revenue? What if the contract is not adjusted to meet the value of what is actually to be expected? The affect is that the project looks as though more work has been completed. Because the schedule is driven off of the original estimate, as actual costs rise the mathematical calculation against the projected earnings essentially rises causing an increase in the under billed. That is why it is so important for changes to be updated on both sides of the system. Costs are naturally captured. Estimate adjustments/documentation of change orders are driven only by how well processes are set in place. Discovering whether or not extra costs are going to lead to increased revenue in the way of billable change orders or if the case is that the project is running over early on in the project is crucial. Examining line item budget items if over billing occurs will lead you right into whether or not a project is running over budget or is just not invoiced up to date. Identifying cost overruns makes a huge difference in the steps that will be taken from that point on. If it's discovered that a project truly is running over early enough, perhaps you as the CFM can be the star in assisting the turn around on a project.

In summary, a CFM should always question the under billed. Assuming the cause is a lack of billing that will catch up in the next cycle is if nothing else is dangerous. Apply business sense to the numbers that appear in front of you and it's surprising as to what might be uncovered. Especially in an under-billed situation. There are many factors in the life of a project that can affect the numbers on the work in progress. Learn what they are. Don't just produce the work in progress and balance out the income on the financial statement.

Woman-Owned Construction Businesses

March 13, 2007

EC&M Magazine recently ran an article called No Man's Land that highlighed some of the opportunities and challenges of being a WBE (Women's Business Enterprise).

Google's HR

March 08, 2007

A recent article in HR Executive magazine discusses some of the changes made to hiring withing Google and the addition of Laszlo Bock from GE as the VP of People Operations.

There are many great ideas here for any company to think about when it comes to managing their talent.

The Great Game of Measurements

March 07, 2007

This morning Seth Godin makes some comments related to employees at Sears gaming the system setup by management to try to get customers served within 10 minutes. I completely agree with the comment at the end of the post.

"Often, more effort goes into circumventing a system then it would take to just do a great job in the first place..."

This is more of a "fact" than an observation and anyone who has tried to put measurement and reward systems in place knows this.

Often when first trying to put a system in place the people on the team immediately seek to find a way to "game the system" and the desired results are not achieved.

If this is the first time management has tried to put something like this in place they get frustrated and simply throw up their hands saying "this will never work!"

What needs to happen is that management needs to look hard at both how and why the rules of the game and scoring system did not produce the desired business results. They then need to tweak the system a little and watch, tweak and watch, again and again.

Over time this practice will produce a great operating system for the company. If you give up on every system that does not work without asking why and then trying to tweak it a company will just move from one worthless measurement system to the next without ever achieving results.

One of the best books I have read regarding this subject is "The Great Game of Business"

Measure What Matters

March 06, 2007

John Moore pointed out a great quote from Jack Welch:

“Too often we measure everything and understand nothing. The three most important things you need to measure in a business are customer satisfaction, employee satisfaction, and cash flow. If you’re growing customer satisfaction, your global market share is sure to grow, too. Employee satisfaction gets you productivity, quality, pride, and creativity. And cash flow is the pulse—the key vital sign of a company.”-- JACK WELCH --

Thanks John for pointing this out again. With the advent of computer technology it is so easy to measure every detail of a business and overlook the true things that matter. The book, Control Your Destiny or Someone Else Will was a great book with timeless advice.

For a contractor most of the critical measurements can be found between the Work-In-Progress (WIP) schedule and the Accounts Receivable Aging report with a customer satisfaction survey added in.

User Documentation / Marketing / Profits

Kathy Sierra makes some great points in her post called "The Best User Manuals EVER" about how valuable people find documentation.

We discussed this previously in a post - Marketing Should Be Involved In Many Company Processes

If you are a contractor I encourage you to look at these articles with an open mind and think about how you could improve your project documentation such as proposals, pre-construction guidelines, submittals, as-builts, drawings, specifications, training, etc.

You would be suprised at how much of a difference minor improvements can make when it comes to both customer satisfaction, the "perception" of your company and profits.

Scoreboards & Construction

March 05, 2007

I just read a great article in Contractor Magazine by Dennis Sowards called You Can Be Guided by Scoreboard, Dashboard.

The article makes some great points about why a clear company scoreboard is necessary and also about the challenges of managing a company by a scoreboard that is populated with old information.

We always work hard with clients to get them focused on this line of thinking - especially when it comes to providing feedback to the field where a lot of money is made and lost every day. We focus heavily on this subject with our Project Pre-Planning Facilitation and also with our "Profit Happens Here..." series of construction training modules including slides taken from the Production Tracking module as shown below.

Fine-Tune Your Marketing Plan

March 03, 2007

Doug Dwyer makes a multitude of great points in his February column called Fine-Tune Your Marketing Plan.

Of particular interest is how he describes marketing as being integral to every part of the company, not just a collection of advertisements and sales collatoral.

Contractors as a whole do a very poor job of marketing and that causes many to leave hundreds of thousands of dollars in profit on the table each and every year.

Mashups - IT Dashboard Technology

March 02, 2007

This is a technology to keep your eye on - it allows for easily making your own dashboards of information using tools known as Widgits, Wikis, etc.

No exact applications for contractors at this time but it will come in the near future and will really help the executive decision making process.

Mashups Make Their Way Into Business Apps--Slowly

The High Cost Of Turnover

March 01, 2007

While in Santa Barbara last weekend for a company getaway with one of our clients I picked up the paper and found a great article by Jim Pawlak that did a fantastic job of describing what the true cost of employee turnover is. It is only by looking at numbers like these that you can truly set a budget for recruting and retention.

I wanted to provide a link to the article but could not find one - I emailed Jim and he was nice enough to send this over to republish here.

CAREER MOVES
02/17/07
Jim Pawlak

Hot off the newswire – The demand for electrical workers is skyrocketing. The US Bureau of Labor Statistics estimates demand will outstrip supply by more than 78,000 workers by 2014. The shortage is so acute that the National Association of Electrical Contractors and the International Brotherhood of Electrical Workers have pooled their efforts to promote apprenticeship programs in the industry.

You’ll need a solid background in math to get into an apprenticeship program. For more information, head for www.electrifyingcareers.com. You can browse 59 job descriptions and view video commentary of apprentices pursuing their careers. There’s information for guidance counselors and parents, too.

Temporary legal staffing is another fast growing field – especially for paralegals, legal assistants and legal secretaries. Growth is concentrated in the large metropolitan areas, with New York City and Washington D.C. accounting for about 16 percent of the jobs.

Spherion, a national recruiting and staffing company, completed its “Workplace Snapshot” survey for 2006. It showed that 21 percent of US workers voluntarily changed jobs in 2006. That’s the sign of a good economy (except for the rust belt). The top two reason for changing jobs: 1. Growth and earnings potential (30 percent); 2. Time and flexibility (23 percent).

The downside of such a large voluntary job change is the cost of turnover to employers. Spherion’s report says turnover costs $7K for an hourly worker, $30K for a mid-level salaried employee and up to $80K for technical employees and senior managers. So if a firm lost just one of each during a year, the one-year cost of finding and training replacements and covering the lost productivity of those who left (i.e. the three new employees would have a learning curve) totals $117K.

Now for the really bad news: The effect of turnover on profits. For my example, let’s assume that the three employees left January 1, 2007 and the firm has a five percent after-tax profit margin. To ensure the loss of the three employees had no impact on its bottom line, the company would have to generate INCREMENTAL sales of $2.34 million in 2007: $117K / .05.

My point: Finding three replacements is easy. Finding the incremental sales needed to offset recruiting and training costs and the productivity of three experienced workers is very difficult. HR managers can use the Spherion costs, their employee turnover data and the simple example to build a business case for retention programs.
Process improvement has long been limited to the backroom. Not anymore. Retailing giant, Wal-Mart, taking a cue from its vaunted just-in-time logistics system, will move many of its 1.3 million workers from standard shifts to customer-driven shifts. The customer-friendly shifts will ensure that stores are fully-staffed during peak shopping times. Wal-Mart says no hours will be cut and that employees will know their shifts at least three weeks in advance. It will try to make allowances for employee preferences, too.

While it may be great for customers, I guarantee the system will create problems for some employees – mostly those with latchkey kids and daycare situations. Been there/seen that: I worked for a company in San Francisco that moved its workday from 7:30- 4:30 to 8-5. The change created havoc because many workers took the Bay ferry, which departed at 4:45. The 4:30 quitting time was ideal for picking up kids at daycare, which all charged by-the-minute for after 6 pick-ups. The same problem existed for those riding the train 45 minutes to the eastern suburbs.

Resumes hit the streets in droves in a matter of days. Turnover went through the roof. Four months and 43 replacements later, management instituted flex time – 7:30-4:30 or 8-5. Too late. Employees continued bailing; they lost faith in management.

I hope Wal-Mart did its homework on its workforce. At its skinny profit margins, the incremental sales it would have to generate to offset turnover costs would be huge.

Contractor Failure Rates

February 28, 2007

Last week we did a session at the Electric West show on How Project Managers Can Increase Cash Flow. Cash flow is very critical for contractors and one of the slides I wanted to make to underscore this point was the failure rate of contractors. I knew it was high but wanted to do something that would bring attention to the subject.

In doing the research I came across a great website from the Surety Information Office that had a ton of good information on it.

One of the great things they had was a short paper called Why Do Contractors Fail? It brings up dozens of great points that any contractor can use as a checklist to build a stronger business.

Remember that surety companies bet their own money on your success or failure. They know a lot about the indicators that a contractor will fail. Having a good relationship with a surety is one of the best things a contractor can do to stay healthy.

Ability To Check Quality Of Contractors

February 24, 2007

Last week was a pretty hectic travel week that included dropping by the Electric West show in Long Beach to teach a class.

One of the best parts of the class was meeting Joe Salimando who is a writer and general industry expert covering the electrical industry for over two decades. Joe is a wealth of knowledge and should be in the Rolodex of ANYONE in the electrical industry.

His website blog at www.electricalcontractor.com has some great nuggets of information. One story that grabbed my attention this morning was an article about how someone finally got sick of poorly performing contractors that mis-treat vendors and subs. They launched a site (www.forinoreport.com) to help people rate the contractors they work for and keep others from getting into the same trouble.

The industry needs more people like Joe and Rocco to keep ourselves progressing in the right direction. The future of our industry lies in our ability to keep ourselves moving forward and progressive people like this are what it takes.

Personality as a Prediction of Performance

An article in Professional Remodeler magazine called "Hire With Personality" discusses the use of personality profile tests such as Myers-Briggs, DiSC or Predictive Index when it comes to hiring people.

It's funny how much people in the construction industry get caught up in technical interviews when two of the biggest factors that will predict long-term success are personality and raw intelligence.

We were working with a client the other day as part of our Emerging Contractor Development (ECD) program and the topic was on recruiting. They were very focused on the techical aspects of the job but when we got down to rating their team and picked all the 'A' players the common traits they had were personality and intelligence while their actual experience varied greatly and compared equally to other people on the team who were 'C' players.

This highlighted how important personality and intelligence were to building their team and they set out changing the advertising and interview process to focus more heavily on these areas.

Cash Flow - Collecting Accounts Receivable

February 21, 2007

Bob Ring from Meyer & Depew Co. made some great points in a couple articles called:

Collect Accounts Receivable Fast Part 1

Collect Accounts Receivable Fast Part 2

Based on statistics about how many contractors fail each year about 14 contractors will fail in the next hour - many of these failures are due to cash flow issues. Do not underestimate the importance of cash flow for contractors.

Wal-Smart

I have not yet read the book Wal-Smart that John Moore discusses in his recent post called The DNA of Wal-Mart but can say that I've read other books that outline both the good and bad points of the Wal-Mart strategy.

The bottom-line is that many (all) of the things that Wal-Mart is coming under fire for today are only visible because they have become the employer of over 1,000,000 people.

If any of these same tactics were employed by a local business with 1-5, even 100 stores they would not be seen as negatives but rather extremely good, smart business.

The challenge that any business has is that when it gets to be a certain size the "rules" change - no different than IBM or Microsoft. The problem is that for a business to become truly great it needs to have some key traits burned into its DNA and that DNA is hard to change once the "rules" change.

Wanting to "put a PC on everyone's desk and own the operating system" is considered bravado by an excited company founder when the company is growing and few people understand what a PC is.

Burn that DNA into the company, work hard, add in a little luck and that same quote 20 years later when Microsoft really did own 95%+ of the PC market became the focus of anti-trust violations.

Wal-Mart is feeling similar things today that many great companies in the past have also felt. Don't let the negativity that dominates the news today cloud your judgement and keep you from taking away the truly great ideas that Wal-Mart brings to the table.

Maintenance Agreements

February 20, 2007

Adams Hudson of Hudson, Ink makes some great points in this article about Maintenance Agreements. Though this article is geared toward HVAC contractors almost any contractor can structure part of their business to focus on long-term recurring service contracts.

These may not seem like that big of a deal when you could be looking at millions of dollars in revenue from the next "big" project but when it comes to running a business building up a base of these "little" maintenance contracts is the smartest thing you can do.

Having regular work that can be done at any time (helps with scheduling) and is paid in advance (cash flow) and is recurring (no marketing / bid costs after first sale) and at the same time helps you sell project work.

Adams always has great ideas on marketing. Some of his past articles from Contracting Business can be found here and his website is www.hudsonink.com

The ABC's of Building a New Market or Business

February 19, 2007

CFO Magazine and Edward Teach had a great article about what works and what does not work when an existing business is trying to expand into a new market or start different type of business.

The article titled First, Forget What Works is based on the book Ten Rules for Strategic Innovators: From Idea to Execution and discusses several key points including both the need to forget the existing paradigms (to build something new and really be innovative) while borrowing resources and knowledge that gives the new venture a competitive advantage.

This balance is difficult to attain and the companies that master this balance will be more successful with starting up in new markets.

Contractors often under estimate how difficult starting a new market is - this article is a must read for any contractor looking to expand their business.

2007 Innovators (Professional Remodeler)

February 16, 2007

It's always good to learn what others are doing to innovate. This article is short and highlights 8 innovative companies using ideas that could easily be transferred to any other construction industry.

2007 Remodeling Company Innovators

The Benefits of Adversity

February 15, 2007

Doug Dwyer (www.dwyergroup.com) brings us a great story about how adversity can go a long ways towards helping build a solid business or career.

There was a study once that showed strong leaders are built by either very good experiences or very bad experiences - the middle ground does not build strong leaders and only strong leaders can build strong companies.

Building a business is about building yourself and your team. Make sure you build systems in place where no one in the company is isolated from the challenges of the market place. Let the market place provide the highs and lows that build leaders. Don't isolate your team from the challenges of marketing, competition, cash flow or profitability. Let them learn from the experiences. You will lose people - you want to lose those people. The people who remain are the ones who will build your company.

The Genius of the Five Why's

February 14, 2007

Such a simple concept....

So sad that it is not used more widely...

I wonder if it is because construction is dominated by type 'A' personalities and asking a questions is seen as a sign of weakness...

If asking one question is a sign of weakness then asking five questions must be utter incompetence...

I wonder if this is why we routinely see the people with LESS experience actually achieving better production once they are shown the basics of a Production Tracking system...

Perhaps it is because they are still asking why...

Read more about asking why...

Retaining Good Employees Takes Commitment

February 13, 2007

Excellent interview with F. Leigh Branham of Keeping the People, Inc.

There are a lot of great points made about how the construction industry treats people and often fails to do the basic things required to retain top talent.

One of the questions we get asked a lot is about compensation or bonus programs, what we have seen, what works, what does not, etc.

Mr. Branham makes a great point by calling it C-A-R: Challenge-Acheivement-Reward

I can not think of a better phrase for this and was just telling a client last night about using this strategy to provide bonuses and rapid feedback.

You can not expect results to be driven off of some formula based on company profitability that rewards each person in the company some little slice of those profits.

When you hand an electrician a check for $200 for a job that they worked on which closed out 6 months ago you have done nothing at all to drive performance.

On the other hand let's look at something that could truly drive performance. Let's say we had to hang light fixtures and there were 1,000 of them.

Per the estimate each fixture was suppose to be installed in 30 minutes - for a total of 500 man hours.

At this point in the job we look at the job cost report and see that we have already spent 40 hours just receiving and moving the fixtures around the jobsite, leaving 460 hours to actually install them.

Do a quick estimate of how long it will take to troubleshoot and punch list the inevitable minor problems such as bad ballasts and lamps that you will have with 1,000 fixtures, let's say we take out another 30 man hours.

That leaves us with 430 man hours to get these 1,000 fixtures installed.

Some quick math tells us that we need to get 18.6 (19) fixtures per day, per person installed.

We know that only 65% of the time we spend 'working' is spend on actual installation during the average construction day so we have lots of room for improvement and can easily set stretch goals a little high - 20% or 25% increased productivity is not an unrealistic goal.

Let's set the daily goal per-person for these fixtures at 23 fixtures and set up a little reward / competion system.

You have a four person crew working on this so it should take just over 2 weeks to complete (1,000 / 23 / 4 = 11 Days)

Step 1: Simple visual measuring devices are the key to good process improvement. People are naturally competitive. Put up a piece of sheetrock by the gang box or trailer and write the total fixture goal (1,000) and the total expected per person, per-day (23) on there.

Step 2: Make a simple table showing the four people down one side and the days across the top where they can write in the number of fixtures they installed daily.

Step 3: Setup short and long-term rewards. The short-term reward is that you buy lunch the following day for everyone who makes their daily goal. The long-term reward is that they can go home (with pay) early on Friday (day 10) if they get all 1,000 fixtures installed.

Step 4: Communicate this with everyone on the team

Step 5: Be a cheerleader - your job as leader is to MAKE everyone successful

Let's look at the math on this:

Let's say that setting this whole thing up and staying on top of the crew, being head cheerleader, etc. cost you 10 man hours. You had already spent 40 hours on logistics and planned for another 30 hours on misc. punch and inspection time.

You will have bought lunch for your crew every day for 10 days - about $320 or so.

If the crew really knocked stuff out they may have gotten to go home early on that Friday - or not had to come in at all depending on how much they accomplished. In any case they got rewarded and got a feeling of accomplishment.

If you are able to accomplish the goals outlined including sending the crew home early with pay you will have spent 400 hours out of a 500 hour budget - saving 100 man hours at a cost of $320. That's a good investment if I've ever seen one!

Even if you failed to meet the finish by Friday goal and worked the 11th day to finish up you would have spent 432 out of 500 hours, still saving 68 hours at a cost of buying lunch every day and making the work day fun.

People do really innovative things if given the chance and the productivity level in construction is so low that you can really beat the budget by an amazing amount if you get creative.

Building Information Modeling (BIM) Update

This morning I just saw two great articles in Building Design+Construction magazine talking about developments in Building Information Modeling (BIM) which will have a huge impact on the entire construction process.

BIM Software Integrates RSMeans for Project Costing - imagine that - designers actually being able to figure out how much things cost while they are designing!

Steel Teams Lead The Way Toward 3-D Integration - great article that points to actual dollars saved on a project through planning - Saved $400,000!

Pre-planning construction projects will always save you money. The BIM and 3D CAD applications are just the latest tools for helping this process out.

Building Information Modeling (BIM) Update

This morning I just saw two great articles in Building Design+Construction magazine talking about developments in Building Information Modeling (BIM) which will have a huge impact on the entire construction process.

BIM Software Integrates RSMeans for Project Costing - imagine that - designers actually being able to figure out how much things cost while they are designing!

Steel Teams Lead The Way Toward 3-D Integration - great article that points to actual dollars saved on a project through planning - Saved $400,000!

Pre-planning construction projects will always save you money. The BIM and 3D CAD applications are just the latest tools for helping this process out.

Top Ten Ways to Increase Cash Flow

February 12, 2007

Inadequate cash flow kills more construction companies than any other problem. A recent article in EC&M Magazine highlights Top Ten Ways to Increase Cash Flow for contractors.

This article was derived from one of our training modules called "Cash Flow and the Project Team" which is designed to train everyone on the project team including estimators, project managers, purchasing agents, foremen and crew leaders about what cash flow is and how they can help improve it.

For the 2006 Dexter+Chaney user conference we did a similar presentation and the slides are below.

Coming up on February 21st we will be giving another similar presentation at Electric West.

Please contact us for more information about any of these events or if you are interested in talking about how we can help work with your project team to improve cash flow.

Which Numbers To Look At?

February 10, 2007

Lawrence Snow (Lawrencesnow@comcast.net) provides a great look at how to use the correct numbers to manage with in his article "Are We Looking At The Right Numbers?" from Contracting Magazine.

Often contractors get caught up looking at the wrong numbers. Big buckets of numbers are just that - big buckets of numbers. No real decisions can be made from them. If you want to actually use numbers that mean something try breaking them down into their core components.

Don't bring a job cost report out to the site and show the foreman that they are over-budget on the 5,000 hour cost code for light fixtures. First of all, if you see it on the job cost report then it already happened and secondly there isn't enough detail in this cost code to make a difference.

You would get better results by looking at the fixtures that make up 70% of that budget (likely 3-4 types) and then having a "competition" for which team could install the most, tracking results daily.

Learn more - "Job Cost Variables (What Your Reports May Not Tell You)"

Top 100 Companies To Work For - How Contractors Rank...

February 06, 2007

Every year I look forward to seeing the issue of Fortune magazine that ranks the "Top 100 Companies to Work For" because I like to see how many construction industry companies make it onto the list.

This year is a serious disappointment with only three companies making it to the list and of those only Granite Construction being what I consider a hands-on, mainly direct-hire construction company.

Knowing that there are serious labor shortages facing the industry where a large amount of companies will be fighting for a finite number of qualified people I would expect that more attention would be paid to making our industry more exciting for employees.

COMPANY	RANK	WHAT MAKES IT SO GREAT?
David Weekley Homes www.davidweekleyhomes.com	12	Founder David Weekley, whose messianic vision shaped the homebuilder's zany culture, allocates half his pay to charity.  Last year, after the company placed 24th on our list, all employees were given their birthday's off.
Kimley-Horn & Assoc. www.kimley-horn.com	28	At this engineering consultancy employees typically work 7:30 to 5:30 Mondays through Thursdays and leave at 11:30AM on Fridays.  And any employee can award a $50 on-the-spot bonus to a colleague.
PCL Construction www.pcl.com	42	Employee ownership is the cornerstone of PCL, a Canadian construction company with nearly 200 job sites and offices in the U.S.  All shares are employee-owned, with no one allowed to control more than 5%
Granite Construction www.graniteconstruction.com	56	The construction firm's employees applaud CEO Bill Dorey, who "isn't afraid to admit he doesn't know something."  There's no salary cap, but Dorey's salary is only ten times that of many heavy-construction-equipment operators.
Source:  Fortune Magazine Top 100 Companies To Work For List, January 2007 Issue

Free Consulting

February 04, 2007

I just saw a quick article talking about a really, really simple way to get free high-end consulting services for your contracting business.

Steven Driscoll of Menold Construction & Restoration simply has the project manager meet with the customer 2-3 weeks after the installation is complete and just listen to what the customer has to say.

They then go back to the office, type up some notes and send them around.

That simple process provides way better information than any survey or outside consultant. When it comes to solving problems and making contractors better 50% of the problem is just identifying the problem, the other 50% is simply rolling up your sleeves and getting to work with a solution.

I can not stand it when a contractor calls us and wants us to do a survey to figure out "what is wrong." If you want an outside consultant to do a survey and print up a report that is procrastination at its best. Save your money because the report will just sit on your desk and gather dust (very expensive dust).

Do what Steven has done and just get out there to talk to your customers one-on-one. Those candid conversations will tell you everything that you need.

If you think you want an outside consultant use them for providing a potentially fresh eye, possibly helping identify the root cause of a problem and possibly use them to help solve a known problem but never, never hire a consultant to do a "survey" of your customers.

How To Improve Your Website - For Contractors

February 02, 2007

This month's Professional Remodeler had a great article by Jud Motsenbocker about using websites effectively for contractors.

The article is a great discussion with Terri King of Blue Canyon Construction and John Habermeier of Synergy Builders. Lots of great real-world advice on how to turn your website into a tool to both generate leads and help with the customer education / closing process.

John had a great comment that 35% of his total leads come in through the website and also had great insight on how to use the various web marketing services out there.

Terri built a great site to help educate customers including places where they can shop around and learn more about what they are about to purchase.

Terri, John and Jud all had some questions about SEO (Search Engine Optimization) which is basically how to get your page to rank higher on the search engines.

Well, if your website is www.abcconstruction.com and people are looking for ABC Construction chances are pretty good they will find it. More likely people are searching for something more like "remodel contractor, Chicago, IL"

It is important to design your website both for customers who already know your name and are in need of more information as well as for potential customers who are just looking for a contractor at this point in time. We are not in the website business but do care about how contractors market themselves and see a lot of mistakes made when it comes to websites. One thing we did get heavily involved in for one client project was SEO and even attended a conference specifically on the subject.

We summarized Search Engine Optimization from a contractor's perspective and hopefully this helps out a little with your website efforts.

Top 5 Reasons Why People Leave Their Jobs

The January issue of Fortune Magazine brings us the annual 100 best places to work list. Other than being mildly offended that only a couple of construction companies made it into the running they also provided some good statistics from a survey on why people leave their jobs.

1	Better Compensation (Including Benefits Elsewhere)	30%
2	Better Career Opportunity Elsewhere	27%
3	Ready For New Experience	27%		75%
4	Dissatisfied With Career Opportunities At Present Job	21%
5	Desire To Change Careers or Industries	16%

The best I can tell numbers 2, 3 & 4 all have the same basic root cause. If you want to recruit and retain good people make sure (1) that your compensation package is at least at market levels and more importantly, (2) make sure that you offer exciting career opportunities for everyone in the company.

Remember that you don't have to find the opportunity necessarily exciting to you - but it has to be exciting to the people who will be looking at your company.

Why should someone work for ABC Construction versus XYZ Competitor?

If you can't answer that question clearly then you are wasting most of your recruiting money.

Answer that question and live the answer - good people will beat a path to your door.

Project Management Weaknesses

January 31, 2007

FMI's 2006 Project Management Survey ranked the top three skills lacking in Project Managers as:

1. Lack of proactive planning

2. Lack of effective communication

3. Weak financial / business acumen

Electrical Construction & Maintenance (EC&M) recently ran a short excerpt about the study and the full study is available through FMI by contacting Phil Warner at pwarner@fminet.com

Lasting Legacy - Shea Homes, Builder of the Year

January 29, 2007

There are a lot of lessons to be learned from looking at best practices at other companies both inside and outside the construction industry.

Shea Homes is the 2007 builder of the year and this article in Professional Builder magazine highlights some of the cultural and strategic things Shea has done to consistently grow for 125 years.

Take special note of the use of the Dashboard to rapidly display critical metrics from across the company. Any contractor can benefit from such systems and with today's accounting, project management, estimating and CRM systems all migrating towards common database backends these dashboards are relatively easy to create whether you are running on a combination of Excel and QuickBooks or larger enterprise systems such as Forefront, Timberline or Maxwell.

Revenue Cures Most Problems!

January 27, 2007

This was a quote from a long-term Wal*Mart executive and could not be more true for any business. I would only add a little to the quote:

"Quality, profitable revenue cures most problems."

Our focus as a company is about helping contractors improve operational processes, all of which can be cured if there is a steady stream of quality revenue coming into the company.

If a business lacks a good revenue generator then there is nothing operationally you can do to "fix" things.

This month in Contractor Magazine, Robert P. Mader brings us some great tips in his article "How to find weaknesses of sales candidates."

Do The Math!

January 11, 2007

Just do the math - why is this so hard for people to understand?

Quality Digest magazine has a regular column called "Do The Math" and in December they make some great points about how widespread the mis-use of numbers and statistics really are.

The problem is that most people do not ever take the time to do some simple, back-of-the-napkin math to determine if what someone is saying is BS or not!

When someone can not read we have a word for it and talk widely about it as being a problem - why don't we feel the same way about the problem of Innumeracy (when people can't do basic math!) John Allen Paulos makes some great points in this book.

So, what does this have to do with construction?

Well, if you are asking this question then you should definitely go out and buy this book and read it 3-4 times!

Most contractors place large bets on assumptions (estimates) about how long it will take a field crew to build something.

Huge losses occur when these assumptions are wrong and often this is not known until the job is mostly complete and the PM realizes the job has used 120% of the man hours and still has another 2 months to go!

On the other hand huge, windfall profits are often realized when the field crew sees a different way of building the project that results in a substantially lower cost.

If field foremen, superintendents and crew leaders all understood the math of production a little better they would be able to "Do the Math" prior to starting work and during the process to see if their assumptions were really correct.

Is it really cheaper to consolidate homeruns?

How much cheaper?

Are we installing pipe at the same cost as what was in the estimate?

Are we better off working overtime to finish this phase today or to come back tomorrow?

We've been digging for 2 hours - what is our cost per foot and how does it compare to the estimate?

What if we added a full-time material handler to the crew?

Sometimes these questsions are not asked at all. Other times these questions are answered by "Experience and Gut" which may or may not be correct. These questions can all be answered simply by "Doing The Math" which is what the best performers do.

When you are planning your construction jobs focus on teaching your team how to do the math and ask the right questions rather than just giving them some minimum production level or worse yet, just telling them to work as fast as they can. We focus heavily on teaching people to think about production during our Project Pre-Planning facilitation. This approach starts slower but eventually builds a project team and company that is virtually immune to losing money.

Do The Math!

Just do the math - why is this so hard for people to understand?

Quality Digest magazine has a regular column called "Do The Math" and in December they make some great points about how widespread the mis-use of numbers and statistics really are.

The problem is that most people do not ever take the time to do some simple, back-of-the-napkin math to determine if what someone is saying is BS or not!

When someone can not read we have a word for it and talk widely about it as being a problem - why don't we feel the same way about the problem of Innumeracy (when people can't do basic math!) John Allen Paulos makes some great points in this book.

So, what does this have to do with construction?

Well, if you are asking this question then you should definitely go out and buy this book and read it 3-4 times!

Most contractors place large bets on assumptions (estimates) about how long it will take a field crew to build something.

Huge losses occur when these assumptions are wrong and often this is not known until the job is mostly complete and the PM realizes the job has used 120% of the man hours and still has another 2 months to go!

On the other hand huge, windfall profits are often realized when the field crew sees a different way of building the project that results in a substantially lower cost.

If field foremen, superintendents and crew leaders all understood the math of production a little better they would be able to "Do the Math" prior to starting work and during the process to see if their assumptions were really correct.

Is it really cheaper to consolidate homeruns?

How much cheaper?

Are we installing pipe at the same cost as what was in the estimate?

Are we better off working overtime to finish this phase today or to come back tomorrow?

We've been digging for 2 hours - what is our cost per foot and how does it compare to the estimate?

What if we added a full-time material handler to the crew?

Sometimes these questsions are not asked at all. Other times these questions are answered by "Experience and Gut" which may or may not be correct. These questions can all be answered simply by "Doing The Math" which is what the best performers do.

When you are planning your construction jobs focus on teaching your team how to do the math and ask the right questions rather than just giving them some minimum production level or worse yet, just telling them to work as fast as they can. We focus heavily on teaching people to think about production during our Project Pre-Planning facilitation. This approach starts slower but eventually builds a project team and company that is virtually immune to losing money.

Project Audits

January 05, 2007

While the article by Michael Stanleigh in Quality Digest magazine called Project Audits Work is geared towards keeping quality control projects on track it is just as applicable for a construction project.

The sad fact is that construction project managers have almost no controls in place other than the end result. This often creates situations where large losses occur before the company realizes it.

The truth is that simple audits throughout the project can minimize problems and maximize profits. Think about doing a simple audit checklist:

Is there a current punch list for the job that is of sufficient detail?

Is the RFI log current?

Are all change orders being priced and negotiated quickly?

Are the project files in the office, on the computer network and in the field in order?

Has the schedule been updated?

Are accounts receivable current?

What is the status of over/under billings?

When was the last projection done?

Create a simple checklist to audit your projects and randomly select 2-3 projects per week to audit. You will be amazed at how much better things are kept on track.

Classroom Training & The Construction Industry

As part of our consulting business we provide a lot of training classes because it is something the industry desperately needs.

There is some structured training during an apprenticeship but many people want to bypass even that level of classroom learning. Want to become a foreman, superintendent or PM? There is very little training and people are just thrown into it.

When we do provide training we often end up with low attendance levels and even end up cancelling classes sometimes. Why? People simply do not believe that they need to be proactive in learning - they believe that everything can be learned "Hands-On, On-The-Job" which is only partially true.

Georgian Lussier, an Industry Educator makes some great points in a recent article from Contractor Magazine called "We Don't Need No Stinkin' Books!"

The other thing I find amazing is the difference between contractors in how they view education. Some companies send their whole crew and others want to save a few pennies by only sending one person. What is the ROI on training? It's hard to pin a specific number but here's one example of training ROI that I just saw last week with one of our clients:

We did some Project Management training for one of our retainer clients who was on the Construction Company Development (CCD) program. Part of the training was on Change Order Negotiation. One of the PM's just told me that he was able to build a case for lost productivity into a change order and would have never even thought to do that before the training. Even if they settle for 50 cents on the dollar this one little tip will pay for this year's retainer fees plus some!

Getting Paid - A Quick Financial Primer

January 02, 2007

There are some basic metrics that every contractor should look at and one of them is DSO - Days Sales Outstanding which is a good indicator of accounts receivable performance. Scott Smith does a good job of explaining this along with some good ways to improve cash flow in a recent article from Contracting Business magazine.

Get Paid Upon Delivery . . . A New Concept?

Private Companies Tackling Healthcare

December 30, 2006

There is a lot of negative publicity about companies not providing healthcare coverage but at the heart of the matter is a flawed system. One of the biggest flaws is that people consider health insurance a catch-all to relieve them of responsibility for taking care of themselves proactively. No one would ever expect auto insurance to cover repairs and maintenance.

If everyone were to start to rely on auto insurance to take care of all repairs and maintenance then why bother with the routine stuff like oil changes? The lack of proactive health management on the part of individuals is one of the key causes of high costs.

Some of the largest companies around are seeking to make medical records for their employees readily available online. Their hope is that the information will lead people into thinking more proactively about their health and lower costs.

More information in the Information Week article Get Well Soon

Work Today Building Tomorrow’s Construction Workforce

December 29, 2006

Maintenance Technology Magazine ran an article called Homegrown Talent about BE&K’s development of an in-house training center. The curriculum is approved by the National Center for Construction Education and Research (NCCER). BE&K hopes to make this facility open to the public and is also looking at expanding the program to other states where they do work.

The workforce problems we are experiencing in the industry will not go away in the near future and we all have to take part in fixing them. Programs like this are not just for the big companies. The smallest operating team in construction is a journeyman and an apprentice and in that situation a good journeyman takes time out of their day to teach the apprentice the craft. If the leader of a two person team can find time to train their workforce then so can the owner of a two person company and therefore any business can and should make the time to train.

These do not have to be formalized programs. They can be lunchtime sessions. When we were doing work in the Bay Area during the dot-com boom of the late 1990’s we had trouble finding qualified craftsmen. We put on lunchtime training, focusing on conduit bending, wire pulling, basic code, etc. One superintendent running multi-family residential held after-work code sessions for his crew. Just having a PM and Superintendent sit down and have a meeting with foremen about pre-planning, scheduling or change orders will provide huge benefits.

The Project CEO

December 06, 2006

In a great article by Matt Stevens called Take off the tool belt: The foreman as manager there are 16 great tips that are applicable to anyone who is or wants to be a leader in the construction industry.

Matt makes a great point that the average jobsite size is about equal to a small business and the foreman is the business owner. I have used many similar analogies in my training calling Project Managers the Project CEO and the Foreman or Superintendent the President.

Leaders in construction have a lot of gray areas they need to deal with and wide lattitude about how to deal with those gray areas. They truly do have executive level power on the project. We all need to treat that position with that level of respect.

Workforce Development Ideas - Digineer

December 03, 2006

Some great ideas from Digineer about how they develop their workforce using more than monetary perks. Digineer is a IT consulting firm but the ideas are very applicable to what contractors could do to enhance both the loyalty and skills of their workforce.

InformationWeek ran a short article called How to Keep Employees Around about Digineer's HR strategy.

What they had in the print version but not online was a sidebar disicussing the four categories of their employee training. Each of these has a direct translation to construction and could be effective for developing your team.

101 - The Basics: When a new employee gets hired at your company do you have a structured way to teach them how you specifically do business? Who does what in your business? How you treat your customers? How they can succeed in your business? In construction we tend to assume that people should just know - this is an incorrect assumption. Spending a little time creating a '101' course for your business will help you clarify your thoughts and will also get everyone on the same page.

Coffee Talks: These are informal and could easily be done with coffee and donuts on the jobsite or at the office. They should be hosted by an 'expert' and focus on one topic such as daily job logs or doing 3-week schedules. The informal nature lowers people's barriers and helps build the team.

Deep Dives: Bring in an expert every month on a specific subject such as grounding, earthquaking, SWPP, etc. Go very deep on the subject and stimulate everyone's brain.

User Groups: Get people to form outside groups and focus on developing new skills. After our apprenticeship programs there isn't much out there. What about all the PM's, Estimators and Foremen getting together over pizza one night every few weeks to kick around pre-planning ideas?

IT - Management or Leadership?

December 02, 2006

"Management is about control. Leadership is about releasing."

- John C. Maxwell from The 360 Degree Leader

Regarding IT management this quote could not be more relevant - especially for contractors who usually do not have dedicated IT staff.

Few things in business have the power to release (lead) than good IT systems. With good IT systems the right information can get to the right people at the right time to help them make better and better decisions. With good IT systems workflow can be more efficient and customer satisfaction can be improved.

If your IT strategy is "how little can we get by with" or is focused just on the basics like making sure everyone has working printers and e-mail then you are missing a ton of profits!

Information Week magazine had a great article called A Culture of 'No' which makes some great points about what IT should and should not be doing to help the organization.

Start Quickly and Shut-Down Even Quicker - Finish First!

December 01, 2006

Perfect advice this morning from Seth Godin regarding the shutting down of an under-performing business unit. Almost every serious mistake I have made has been due to lack of speed when shutting something down.

It is easy to fall into this trap - you had a great idea.

You worked your ass off to build that idea.

You may have even made some money with the idea.

Your competitors may be making money (or appearing to) with the idea.

You are in love with the idea plus you have invested so much already...

But a fact of business and life is that you have a finite amount of resources - both monetary and human. You have to be relentless in how you allocate both. Do you have a strong team working on something that is not performing that well? Most likely they would be better off deployed to another project.

A key difference in thinking between companies that hang-on versus those that start quickly and stop even quicker is this:

Companies that hang-on tend to look at each market or project strictly on a P&L (Profit & Loss) basis and if it is making money they use that to justify hanging on. A P&L is a relatively simple calculation.

A much more difficult calculation is ROI (Return on Investment) which will then force you to look at each project or market and compare them regardless of size. A market or project making $100,000 may actually have a much higher ROI than a market making $1,000,000. The smart way to allocate resources is to continually evaluate ROI and shift resources to those areas with the best ROI.

Thinking about this another way - if you have a stock portfolio and one investment was returning 2% annually on your money (but still making a "profit") and another was returning 12% would you leave your money invested in the stock with the 2% return? Don't you shift around your investments according to ROI balanced with risk?

Are you and your team as relentless with the allocation of resources inside your company as you are with your personal investment portfolios?

The Art of Layoffs in Construction

November 27, 2006

CFO Magazine ran a great short article called You're Fired! But Why? which points out a couple things that really apply to contractors.

The first major point is that only 74% of employees believe they were clearly informed of the reasons for their dismissal. This is a general survey - I bet the number is much, much lower for craft people in construction.

Our typical explanation is that people are "laid-off due to lack of work." I know I've done my share of these "lay-offs" and the truth is that only a few of them were truly heart-wrenching and fell into the category of: Market sucks, I feel like I failed to do my job and therefore you have to lose your job.

The rest of them fell into the category of: WOW - I'm glad that crunch is over and I can finally get rid of you because you have all the skills of a bad second-year apprentice!

In 1999 when out here in CA were were in the peak of the dot-com boom I recognized that part of the incredible labor shortage we were facing had to do with this practice. Looking around the crew I saw many people who had been through dozens of employers and always just had to "move-on due to lack of work."

No one had ever sat down and explained to them the basic concept of:

The weakest players usually get laid-off first.

This is a fact in construction and in life. How much better-off would the industry be if every time we laid someone off we took the time to explain to them where they were strong and where they were weak? What if we sent them on their way with a recomendation for training to help them improve that weak spot?

Schools and and the entitlement mentality that many people grow up with do not lead to deep self-reflection and with so many employeers basically lying to people about why they are being laid-off it actually keeps the industry from improving.

In January of 1999 I decided to change this for myself. On one job I had about 20 layoff checks to hand out and instead of doing it quickly at the end of the week like I had done in the past I sat down and spent several hours making a list for each person so they knew exactly where we felt they were weak and where they were strong. Working with the job foreman we had conversations with each and everyone person.

It was emotionally very hard for us to do - and it was emotional for the employees. There were tears - for many you could tell it was the first time they had ever been confronted on their performance.

What if everyone in the industry had started doing that 7 years ago? Do you think our workforce would be a little better developed by now?

This brings us to the second great point of the article - the concern that if this is done then past employees will come back on the company with wrongful terminations lawsuits.

If your HR Manager is giving you this advice simply fire them and find a real leader for this position.

As the article points out the opposite is true.

First of all, people sue people, not companies.

Secondly, if employees are confronted up front about both their good and bad performance and given a method to improve then there will likely be negative emotions at the moment but the next morning they will see that you really did care about them and their attitude will improve.

When employees are simply laid-off the intial emotional reaction may not be that bad but the next morning they will start to think about it. Why did YOU let them go? YOU must have been playing favorites. YOU must have had it out for them. As their job search progresses they will continue to boil inside - YOU did this to them.

That is where most of the lawsuits come from - not from the employee that you really helped out.

What A Real Entrepreneur Does

November 14, 2006

The other night I was having dinner with Rodd Palon from 2 Rivers Demolition and we were talking about success in business and how many times the correct answer only comes to you when you DO NOT have everything you need to get something done whether that is money or people or the myriad of other things people think they need.

Innovation often comes because people lack resources, not because they had too many. Seth Godin makes this point perfectly in his recent post called When To Start? It's simple - don't worry about the resources and having everything perfect - just do it now!

Look at your business - what resources could you take away to help make your team more innovative? Could they do with one less vehicle? Could they get by with one less person on the crew? This is not about cost-cutting, it is about having people come up with innovative solutions that produce the same or better results with less resources.

Process Documentation For Contractors

November 12, 2006

Construction Business Owner magazine is almost done with a twelve part series called Entrepreneurial Excellence by George Hedley. One underlying theme of the articles is that if you want a successful business you need to create systems for what do and document those systems. A couple of the great articles from the series include:

Field Operational Systems - Minimize Problems & Maximize Profitability

Project Management Systems

If you can not describe what you do as a clear process and then document that process so others can do it then you are not building a business, you are just over-extending yourself. It is probably showing in the amount of hours you work and stress you feel.

Helping contractors streamline and document their processes is one of the most challenging but also most rewarding services we provide.

Hope you enjoy these articles. We have an article coming out in an upcoming newsletter that addresses the subject of process documentation. If you are not already receiving our newsletter you can signup here.

Graphics and the Communication Process

Kathy Sierra makes some great points about how to use graphics to really communicate a point. I instantly bought several of the books she describes and all the points really hit home.

Whenever I have worked on designing a communication I always think about the graphics first and the words second. If the idea can not be clearly communicated with a flowchart or other simple illustration then no amount of words either spoken or written will likely get the point across.

Being in construction I'm sure everyone can relate - could you imagine building a project based on the written specification manual? We could all imagine building a project and filling in the details based on a few good elevation drawings. The interpretation from person to person on the details would vary but only slightly. There would be far wider variation if the same project were described in 2-3 written pages with no pictures or illustrations.

You will have far better results from your communication efforts if you spend enough time thinking of a simple way to illustrate it on a slide, half a page or full page.

Use words to fill in the details. If you are going to skimp on anything skimp on the words.

If you are designing a process for the company such as RFI's or Change Orders spend time on a flowchart illustrating clearly who is responsible and what the ultimate outcome should be (cash, customer satisfaction, quality, etc.)

Creating this illustration and getting people to buy into it is the heavy lifting. Filling in the details with words is just the icing on the cake.

Negotiated Construction Contracts

In a recent article titled Negotiate More Contracts! in Construction Business Owner magazine George Hedley makes some excellent points about why negotiated contracts are far better than low-bid type contracts.

While everyone probably realizes this by now it is amazing how few contractors really embrace this. I see a lot of contractors talking about it, wishing for it but still continueing to do the same thing over and over.

Shifting from a "basic service provider" mentality to a "value-add partner" mentality is difficult. It will involve pain. The pain is worth it in the long-run.

Beyond providing some good ideas about why negotiated contracts are better, there are some great tips for helping maximize the value in the negotiated contract. This article is worth reading for anyone in the construction industry.

Practice = Success

October 31, 2006

Fortune magazine has been running a series of articles profiling work habits of great people. There are a ton of lessons to be learned. In their current installment they discuss "The Myth of the Natural" and describe how most people achieve greatness through consistent hard work and practice.

There is discussion of what is know as the "10 year rule" that researchers have established as a minimum time to work hard and practice daily before becoming great.

Most people have no drive for anything like that type of dedication. They believe that going to school or just doing a job for a period of time will make them successful. That could not be further from the truth. The cold, hard reality is that if you want to become excellent you need to go much, much further. You need to practice relentlessly.

You need to push yourself to make one more phone call, get one more thing off your desk, read one more chapter, etc.

Whatever it is that you do, do it longer and better than everyone else. Do that for a minimum of 10 years and you have a shot at being great.

At the end of the article there is also a discussion about how most people find this very uncomfortable. It is much more comfortable to believe you are where you are in life because you haven't found your place, not because you haven't worked hard enough.

Practice = Success

Fortune magazine has been running a series of articles profiling work habits of great people. There are a ton of lessons to be learned. In their current installment they discuss "The Myth of the Natural" and describe how most people achieve greatness through consistent hard work and practice.

There is discussion of what is know as the "10 year rule" that researchers have established as a minimum time to work hard and practice daily before becoming great.

Most people have no drive for anything like that type of dedication. They believe that going to school or just doing a job for a period of time will make them successful. That could not be further from the truth. The cold, hard reality is that if you want to become excellent you need to go much, much further. You need to practice relentlessly.

You need to push yourself to make one more phone call, get one more thing off your desk, read one more chapter, etc.

Whatever it is that you do, do it longer and better than everyone else. Do that for a minimum of 10 years and you have a shot at being great.

At the end of the article there is also a discussion about how most people find this very uncomfortable. It is much more comfortable to believe you are where you are in life because you haven't found your place, not because you haven't worked hard enough.

Organizational Change - One Difficult Question

October 30, 2006

Seth Godin asks a very difficult question - Will You Be Missed?

He makes some great points about "dead" businesses and what you can do to change your potential fate.

This is true for whole businesses as well as parts of businesses. Have you embraced all the changes that are inevitable in the construction industry?

Pre-Planning?
Pre-Fab Shop?
CAD/CAM Layout?
Building Information Modeling?
Company-Wide Project Management System?
Integrated Accounting & Operations?

If pieces of your company are getting left behind they hurt your overall business just like a dying body part hurts the whole body.

Brainstorming

October 28, 2006

Business 2.0 magazine had a great article by Michael Myser on brainstorming and how it can be very effective but is usually very ineffective.

We usually get involved in facilitation when it comes to brainstorming processes for contractors. The most difficult part is (1) getting all parties to both talk, (2) getting all parties to listen and (3) getting everyone to talk through things at the detail level required to really solve problems.

It is amazing how long it really takes to document something as simple as "How do we process change orders?"

What is even more amazing is how much this simple process can be improved within a short period of time just by having an effective brainstorming session followed by detailed documentation of the new, agreed upon process.

Pre-Planning as a Business - www.houseraising.com

October 20, 2006

BusinessWeek magazine highlighted this business in an article about the next web businesses - see article and subtitle called Online Job Foreman.

The article is about how Robert McLemore who is a custom homebuilder took his construction project pre-planning experience and turned it into a business - www.houseraising.com

Basically what he did was come up with 1,269 specific problems that are encountered during the course of building a custom home. From there he came up with 3,400 steps to mitigate the problems. This was all built into a management system that allows builders, owners, vendors and subcontractors to login to a website specific to a project and manage these problems and mitigating steps.

This is EXACTLY the approach that should be taken during normal project pre-planning. Get the whole project team to look through the entire project in a structured manner, looking for all potential conflicts, problems, points of impacted productivity, opportunities for improved productivity, etc.

Of the various services that we provide I love working with contractors on project pre-planning facilitation more than anything else. Don't burn money by failing to pre-plan.

Measuring Customer Service

October 17, 2006

You may know that customer service is important but how do you measure it? You could do a survey but how can you quantify the financial bottom-line? What is your Return on Investment for all your hard work?

There is a strategy called Net Promoter Score which is easy to quantify and easy to communicate to your team. A recent article in Inc Magazine discusses some basic details of the method and it can easily be used by a contractor.

I love talking about customer service and all the ways a construction project team can improve customer service including how RFI's are processed, how bills are sent, how changes are dealt with, etc. I am always amazed that while some contractors are so short-sighted that they don't send their teams to a seminar on "soft skills" the people that do stay have great feedback.

Create Your Perfect Competitor

Josh Linkner runs a successful business but knows that success can drive complacency and lead to failure. He lays out one of his strategies for Inc Magazine which involved creating a fictitious "Perfect Competitor" and used the description of that business including fake press releases to spur his team to keep innovating.

Who would your perfect competitor be?

What work would they go after?

Which of your best customers would they steal?

How would they steal them?

Which of your key employees would they recruit?

How would they recruit them away?

Answer those questions and then go out and beat the heck out of your "competition!"

Testing New Markets

October 16, 2006

Business 2.0 magazine's article called The Startup Facade presents some great points about launching a business.

Why not let it be market-driven?

The normal route to opening up a business is to "perceive" a market need, build a product or service and then try to market it.

When you do this valuable capital is used often leaving the business over-extended and then even when things are good the market demand usually lags more than expected because it takes time for marketing efforts to take effect.

Why not do some test marketing to see if the idea will fly and then start building the operations to support the marketing?

Some might think that is risky or even unethical - but is it any different than having a business that has spent all their capital building operations to then go out of business and not be able to provide the services offered?

The article also points to a key flaw in how most businesses advertise on the web. If someone is already going to the web and searching on "ABC Construction" they already want to do business with you. Most likely someone is searching on "Electrical Contractor Sacramento" or something else generic.

Value-Add Services Improving Relationships

October 11, 2006

Forbes magazine recently ran a story about how Home Depot is offering health insurance service to its many small business, contractor customers.

Programs like this can make incremental money for a company like Home Depot but their primary purpose is to build loyalty.

Could you build programs like this within your company? Focus on both your customers and your vendors or subcontractors.

Do you have good internal systems that you could share with your key vendors or subcontractors? Could you help them learn to operate their businesses more efficiently?

GE helps their suppliers streamline their processes - if your suppliers and subcontractors are more efficient doesn't that help you as well?

Avoiding Silos - Finding Solutions

October 08, 2006

This math guru has found some solutions to some very long standing and challenging problems. What does that have to do with business? His approach was to pull together techniques from several seperate branches of mathematics to create the solution.

Whether we are talking about the business world or academia there is always a tendency to stay within a particular box (field). In business by learning the dynamics and methods outside your chosen field you may be able to solve some long-standing problems as well.

One of my personal favorite solutions has to do with better management of change orders for construction contractors by taking lessons learned from accounting and sales management.

Go read some magazines outside your industry. Buy some books focused on other businesses. Meet some friends outside your field; buy them lunch and talk to them about how they manage their businesses.

A Clear Road To The Top

Enterprise Rent-a-Car succeeds in large part because of their management training program which makes everyone in the company start at the bottom.

What if such a program were instituted in your construction business?

What if every Purchasing Agent spent 6 months in the field learning the dynamics of what was required to make the supply chain efficient?

What if everyone in Accounts Receivable spent 6 months as a Project Engineer working with the project team learning the dynamics of coordinating with the field and customer to improve the process of getting cash into the company?

Organizational planning is critical for the future growth of your contracting business. Hiring when you have a need for say a Project Manager is reactive - planning for that need and creating a clear career path is what makes a company truly successful.

IT Reporting Structure & Profits

October 07, 2006

Jack & Suzy Welch make some great points on how the reporting structure of IT in the organization determines the success. If you want your IT function to simply keep the printers working and desktops operating then you should have and outside IT consultant report to someone who is good at the basics of management and cost control. If you want IT to be an integral part of your business process and really help improve the business then you should bring on one or more internal IT gurus that have a "Can-Do" attitude and have them report to the President or CEO. Which will matter more - keeping the printer working with toner in it or seamlessly integrating estimating, project management and accounting? How about providing real-time field production feedback to estimating?

Better Business Through TV

Tom Peters recently posted some great thoughts about the TV show House and how it relates to business performance.

At a gut level I have felt many of the same things when watching the show and Tom articulates them very well. A few of the best lessons that can be learned relating to business are:

All the problems that House deals with are out of the ordinary with no clear solution (sound familiar to your business?)

The biggest difference in how he executes compared to most people in business is that he is performing against the very immediate possibility of the patient (business) dying.

People all tend to act with urgency in these situations - the key is keeping a cool head and still acting with urgency.

The other key is to constantly work with the same urgency even when death is not imminent. It is human nature to work harder to survive than to thrive. House even demonstrates this in the way he deals with his own problems. What if we all worked as hard on thriving as we do when our survival is tested?

Hard Hat Presentations - Construction Business Owner Magazine

October 01, 2006

There is a fantastic series of articles about building excellence in various aspects of a contracting business in Construction Business Owner Magazine. It is called the Construction Business Best Practices Series by George Hedley of Hard Hat Presentations.

A common theme across all of these articles is the building and documenting of systems to help run an effective contracting business.

Articles like this are thought provoking and the primary reason I recommend subcribing to a variety of construction trade magazines. Often times these articles present an idea you have already had from a slightly different point of view providing that necessary spark to implement the idea.

The Pursuit of Luck

September 02, 2006

Tom Peters recently posted a list from his book Liberation Management on his blog. This short, to-the-point list of 50 things is really about creating your own luck.

I remember reading Liberation Management for the first time just about the time when Apple hired Steve Jobs back. In the book which had been written years earlier Tom Peters predicted that Apple would never return to greatness unless either Steve Jobs or another visionary leader came back to the company. Rarely are management "guru" predictions so accurate.

Everyone involved in business in any way as an employee or a CEO or owner should have at least a few Tom Peters books on their shelves.

Google Revealed

September 01, 2006

Google Revealed: The IT Strategy That Makes It Work - Internet News by InformationWeek

This is a great article about both the IT and management phisophies employed by Google. Whether you are a technical company, corner grocery store or contractor some of these tactics are very practical - especially the points about sharing information.

Many of the solutions we work with contractors on involve improving and automating communications and this article just brought some fresh ideas to the table.

Marketing Should Be Involved In Many Company Processes

Seth Godin points out a couple views on whether marketing should be involved in the creation of user manuals.

I agree with Darren that many marketers may have a tendency to "spin" things or gloss over technical details but I think that is a lot easier to control through a joint effort than trying to get the technical team to write at a clarity level that would make me want to read the manual and that is Kathy's main point.

The existance of information means nothing if it is not widely absorbed by others. This is why I personally perfer things like the Teach Yourself Visually series of books on computers rather than the really dry information that comes from Microsoft.

I'll go a few steps further - how about getting marketing involved in these other processes:

Billing: We send these to customers all the time - why not get a marketer to look at it and make it both pleasing to the eye and simple to understand, possibly working in additional ways to communicate with the customer via the bill. When you are sitting down to negotiate a T&M bill for $500,000 aren't you really "selling?" Wouldn't you rather have the bill as easy to read and understand as possible? We spend a lot of time with clients on these details to help improve cash flow.

Other Customer Documentation: In construction we deal with a lot of documents that go to the customer including change orders, requests for information, etc. It really does not take that long for a marketer to design these customer facing forms to match the look and feel of the company's overall marketing. This is definitely noticed by clients.

Internal Forms: Why not have your internal forms designed with some style? Employees are proud of the company they work for. Why should they be any less important than the customers we spend big $$ marketing to?

Employee Handbooks, Safety Manuals & Traning Material: A key to getting maximum performance out of the organization is documenting your processes including safety and then training new team members with the materials. Often these documents take on the same "Do I really have to read all of this" format that user manuals take on. Why not make these into exciting page turners? Do you think your safety numbers would improve if your safety material was actually compelling to read rather than a bunch of 10pt font checklists?

Engineers believe that the content is what matters - that is true but if no one is compelled to read it then the best content in the world is useless. A joint effort with marketing will create huge performance improvements both externally and internally.

Purchasing Best Practices

August 31, 2006

A ton of great ideas about improving the purchasing and subcontracting process for any contractor - Spotlight on Ellen Knorring: On-Track Mind

Labor Productivity & Cost Cutting

Scott Sedman makes some great points in his article titled Your Choice in Cost Control about where a contractor should choose to attack costs. Attacking overhead is fairly simple but will not always yield the intended results.

The article ran in Professional Builder magazine and was geared towards a home builder's cost structure. For subcontractors that have direct-hire labor the points about inefficiency during construction are even more prominent as shown in the chart below.

With the cost of labor being up to 70% of the total project costs for subcontractors working on improving the amount of time spent actually installing the work can have a huge impact on the bottom-line. Project Pre-Planning is one way to help minimize this non-installation time.

NHQ - Handbook For Winning

Professional Builder magazine recently published a great summary of all the builders who won the National Housing Quality award along with their best practices.

While these are all homebuilders many of the best practices are applicable to every contracting business. You will have to create a one-time login account to view the content but it is well worth it. I would recommend using one article for each of your next few executive or management meetings to spark some ideas.

NHQ - Handbook for Winning

Construction Material Escalation Management (Great Idea!)

Barry Kindt of SECCO Inc. had a great column in this month's IEC Insights magazine with an interesting strategy on dealing with pricing of material escalation for contractors.

Unfortunately IEC does not have an online version available but the basic strategy was to update one of the user fields in your estimating database to include the weight in pounds for various materials - copper, steel, aluminum, etc.

This will take some work to do up front looking to see how much say #12 THHN copper wire weighs per foot and setting up the database but after this exercise is complete you can then summarize your bid based on X Pounds of metals.

Once you get your pricing complete you can then add a clause to your scope that says something similar to:

"Our bid is based on a copper (steel, aluminum, etc) price of $ ##.## per pound based on the price listed in the Wall Street Journal as of the date of this proposal. We have listed the weight as a point of reference only. When actual procurement takes place a additive or deductive change order will be processed based on this weight and the price of materials at that point in time."

I really wish we could provide a link to the full article but this is such a good idea that it just has to get out there. Hope you find it helpful.

Safety For Contractors

Chip Macdonald of Best Safety wrote a fantastic article called Observe, Act and Verify in the current issue of Walls & Ceilings. The safety ideas in this article are very well laid-out and applicable to any contractor.

In the same issue Charles E. Vasconez followed up with another great safety article highlighting real-life challenges of implementing a safety program for small contractors - Build a Defensible Construction Safety Program.

Improving Productivity From The Trenches

August 27, 2006

Tom Rooney, the CEO of Insituform had a fantastic idea to improve productivity. They setup a contest for all field crews about who would have the highest level of productivity for the quarter. The winning team would get a week off and would be replaced by the executive team.

Personally I can not think of a much better way to motivate the crew or to help the executive team understand the challenges faced in the trenches every day by field crews.

The full article called CEO in the Ditch from the July / August CEO Magazine. Definitely worth a read.

Preventing Service Callbacks

August 18, 2006

There is nothing that will kill profits in a service business faster than callbacks and most problems are so incredibly simple it is a shame that we don't prevent them.

Vince Difilippo did a great article on callbacks and some prevention ideas. Though the article is geared towards HVAC contractors the ideas are very relevant to any contractor.

Perfecting Your Presentation

Making a presentation is some of the most important work you do in your career whether it is a pitch for a big customer or a pitch to your boss for a new set of responsibilities.

Business Week had a great article called The Pitch Coach about David Rose with a lot of great tips about business presentations.

Is it the People or the System?

Whether the business goal is Project Managers doing better projections or a Foreman being better with their production it is often the people that get blamed when in fact many times the problem is the system.

People can improve the performance of a system - but only slightly. A well designed system will produce a relatively narrow range of performance variations across the entire team.

A poorly designed system will produce wide variations across the samem time.

People adjustments are very important but if you are currently seeing wide performance variations in your results then you should take a harder look at the systems and infrastructure you have in place.

CMO Magazine had a good article related to this subject called Ego Systems - well worth a quick read.

Business Smarts

"It's my belief that industry knowledge can be gained by someone with good thinking skills. If they bring that to the party, they can assess the new environment and get a feel for the business very quickly." - Jack Welch

Chief Executive magazine had a great article discussing Business Smarts and some ideas for finding top management people. The ideas are just as relevant for GE as they are for a 10 person construction company.

Changing World of Press Releases

August 16, 2006

Shift Communications is providing some great insights into the new world of public relations and press releases. With the internet and the rise of social networking sites, blogs, etc. it is important for businesses to understand the best way to get the message about their companies out there. Though contracting is typically a little behind the curve on things like this it is very important to at least get a rough primer in these ideas.

On their website they have a great guide called PR 2.0 Essentials that has great information and hundreds of links that let you explore the web and learn about different ways your company can be marketed. It is worth a few hours on a lazy Sunday afternoon to browse through this document and explore the links.

The Future Of Pre-Fab & Construction

It seems like everytime the concept of pre-fabrication is brought up to contractors the room gets divided. There are those that are big believers and those that believe what we build has to many variations to pre-fab. I've had crews argue with me over pre-fabrication of things as simple as cable lengths and labeling saying that there is no possible way it can be done. All I can say is that whether you are a contractor or craftsman if you do not embrace the possibilities you will eventually find yourself non-competitive. Take a look at what this company is doing with complete bathroom facilities - Bathroom as An Appliance

Imagine completing 93 bathrooms in less than a week - what would that do for the schedule? What could that do for leveling out your workforce and not having to supply 60 plumbers during this peak production period? There are efficiencies to be gained by the project owners, general contractors and specialty contractors.

The first step in sparking your team into thinking about pre-fabrication opportunities like this is to get them thinking about how much time is wasted during the average construction day and how pre-planning can significantly improve their processes.

Maintenance Marketing For Contractors

As usual another great article by Adams Hudson - Make More by Marketing Maintenance.

There is a lot of money to be made from both the direct maintenance work as well as the additional work contractors gain just from being present in a facility on a regular basis. Almost any contractor can take advantage of this opportunity including homebuilders, electrical and mechanical contractors. There are industry franchises such as TEGG (electrical) and LINC (mechanical) that focus on structured system maintenance programs and with a little elbow grease almost any contractor can design their own maintenance programs for their customers.

It is not a quick process but building a base of 15-20% of your revenue on recurring maintenance contracts will provide stability through all market cycles. Remember that when people are spending less on new construction and remodels they are spending more on maintenance.

VoIP For Contractors

For a medium sized contractor a good Voice Over IP (VoIP) phone system can provide huge benefits especially because our "workspace" is very dynamic - office one day, jobsite trailer the next, another state the next...

Information Week magazine had a great article summarizing VoIP implementations with good advice for any business. In Depth: Five Things You Must Know About VoIP - News by InformationWeek

A great friend of mine has built a company around providing technology infrastructure solutions to contractors including VoIP. You can learn more about some of his VoIP experience with contractors in this article from Cisco iQ Magazine. Working in partnership to help contractors improve their technology systems D. Brown Management and Span The WAN have teamed up to provide a complete technology audit geared towards contractors.

From Wharton To War

August 14, 2006

From Wharton To War is a fantastic article about teamwork. Pay a lot of attention to the part about making beds and ask yourself how well you or your team would perform - I wasn't that pleased with my answer but it gives me a lot to work on.

Successful Work Habits

Fortune magazine started a great series called Secrets of Greatness and the first in the series was called How I Work which profiled 12 successful people and really goes to show what a wide variation there is between all people when it comes to work habits. This is why you are better off defining the results you expect from people and giving them the tools to monitor their own progress rather than trying to define actual work methods.

Read through the interviews - fantastic ideas!

Controlling Fleet Costs For Contractors

Control the Cost of Your Fleet

Some great tips for keeping the cost of your fleet down including discussions about lease vs. purchase and use of your vehicles for marketing.

The Profit "Process"

Creating a profit is a process - not a function. Too many individuals think it is about a single person or department. The reality is that the best estimator in the world is not going to be as effective as they can possibly be if they are not in-sync with the operations group and there is no system in place for rapid feedback and communication.

Profit comes from the rapid feedback and constant corrections required to get everyone in sync. This process is no different than the cycle described in this article on plant maintenance: Asset Management - Realizing The Benefits Of Design, Operate, Maintain

Compensation Is Challenging

It is nice to know that even very large companies with sophisticated systems, dedicated staff for bonus and compensation programs not to mention the best consultants around still make compensation mistakes that either drive the wrong behavior or hurt the bottom line. Makes you feel a little better if you are just a normal sized contractor and can't seem to get your compensation system "perfect."

Sins of Commission - Topline - CFO.com

Why Can't Contractor Applications Talk To Each Other?

XBR-What? - CFO Magazine - August Issue 2006 - CFO.com

XBRL is Extensible Business Reporting Language and it is taking some time to take hold in the financial world. Sure will be nice when there is a construction version available and all the various applications we use including Excel, accounting, project management, estimating, scheduling, etc. will all be able to talk to each other. Imagine not having to re-type in RFI's from one contractor to the next. Imagine not having to synchronize data between a project management program, a scheduling program and accounting when there are change orders associated with that RFI.

So, are any of the software companies out there working to develop some standards and truly save some money for contractors or are they all trying to keep thing proprietary and rush to develop their view of a "integrated" system?

Wireless For Contractors

Wireless Advantages Come in Loud & Clear

You should be watching out for opportunities to streamline your business with the various wireless applications out there. Even if they are not perfect today they will become the standard tomorrow for the construction industry so you should start the learning curve today. At a Sacramento CFMA meeting we recently discussed the many opportunities that technology provides for contractors. You can download the slides about construction technology here.

Contractors & The Internet

The Internet Imperative is a fantastic article discussing all the ways contractors can be using the web for both marketing and streamlining. Many contractors are still simply using the web as a copy of their printed marketing materials and that completely misses the point of what the web is all about.

For additional information about marketing of your website for contractors see our summary of the Search Engine Strategies conference in 2005.

The Ultimate In Construction Pre-Planning!

August 05, 2006

Imagine having a 3D model of the building that contained all the detailed information about construction allowing you to clearly see problems and progress; allowing you to see opportunities to save time and money; seamlessly tied together with scheduling and cost control systems; a single model where all trades, engineers, architects and owners could add their information.

For many contractors today pre-planning the construction project means spending 1 hour with the foreman instead of having them pick up the plans in the office on Friday afternoon in order to start on Monday!

When we discuss construction project pre-planning basics with project teams they often think it is a good idea but fall back to doing things the old way when time and resources are crunched.

The reality is that the landscape of design and planning are changing in the industry and while contractors can still get by today with their current systems they will find themselves uncompetetive in the near future if they don't embrace the technologies available.

If you want to have a glimpse into the future of pre-planning there is a fantastic article on Building Information Modeling (BIM) by Building Design & Construction magazine that provides a lot of insight.

Giants 300 (Biggest AEC Firms 2005)

Reed Construction Data - A Beacon of Hope: Giants 300

Always interesting to look at lists of the biggest contractors by category to see where trends may be and where the potential opportunities in construction may be.

Trademark Guidelines

August 04, 2006

This blog post by Guy Kawasaki is geared towards trademarks for web applications because technology is his realm but the advice is good for any other type of product / service trademark. Advice applies to general marketing as well as trademarking.

Whether trademarking applies to you or not there is great marketing advice here. Contractors should be more thoughtful when marketing their services - if you want to differentiate yourself in the market you can not use generic descriptions.

Creating Clarity Through Writing

August 03, 2006

Seth Godin provides some fantastic tips on the writing process that are very applicable for anyone building a project team or business. Tip #4 describes the purpose of writing as a "vessel to contain an idea" which is a wonderful way to put it. The idea only has value if it spreads - the book, paper, website, etc. only helps with that process. The last thought he leaves us with is #19 which is that writing clarifies thinking.

In construction many company owners and project managers get frustrated with people not being able to do things "the way I do it!" which is a thought I've struggled with quite often. One of the best ways to get past this point is to truly commit your "brain" to writing. The process of going through and trying to write down a detailed description of say a change order or submittal is very challenging. It forces you to clarify your thoughts. It forces you to continually draw diagrams trying to describe the flow of things. If you go through the process of editing it and having it reviewed by everyone on the team you will find the clarity you are looking for.

There is no doubt that this is a time consuming process but it is well worth it and will often make you think deeply about what and how much information you are trying to convey. You will clearly see streamlining opportunities as you go through the documentation process. Don't worry about being "good" at writing - the important part isn't grammatical (or political) correctness - the important part is clarifying your thoughts and committing them to paper which will help others understand your "brain."

How many critical processes are there really in your company - you know - the processes that really create profit: Get work, do work, keep score. I bet there are 10-15 key processes that really make profit happen. If you just picked off one of those every month or two you would have your thoughts completely clarified and documented over the course of a couple years.

Should Employees or Customers Come "First"?

August 02, 2006

John Moore makes some good points about a quote from Frederick Reichheld relating to how marketing should focus more on employee relationships to be really successful in the market place.

It seems a little counter-intuitive but if you put employees first they will put the customer first - if you just say "Customers First" in your mission statement or values hanging on the wall then it is very unlikely that the organization will actually execute and truly build customer loyalty.

Looking In The Mirror

July 31, 2006

Guy Kawasaki makes some fantastic points in "The Art of Firing Peope" with the last one probably being the most important - Look In The Mirror.

This simple statement is probably one of the key things missing in the process of becoming a great leader or great company - not just as it relates to firing someone but as it relates to everything about excellence. Think about the honest answer to two simple questions:

How much time do you spend at the beginning of every day planning out the most important thing(s) to be done?

How much time do you spend at the end every day reflecting on what you did and how much of that time is spent thinking about what you did poorly, what you shouldn't have done and what you should have done?

Your success is directly related to how much time you spend on these two simple activities - and don't think that having a drink with your team and talking about everything that you did right counts!

KA$H!

July 30, 2006

I have never heard this acronym before - it is worth repeating:

K = Knowledge
A = Attitude
S = Skills
H = Habits

The full article called Get Bigger Than Your Job by Mark Matteson has some great tips for building a more successful career and life.

Your Website as a Recruiting Tool

Contractor Magazine recently had a great article about the use of the web for recruiting new talent.

I have had great luck with this and the process of building a simple recruiting & screening web portal for contractors is relatively easy. This is a great addition to your website and with the increasing cost of classified ads the ROI is fantastic.

Journeyman Licensing & Quality

Young Plumber is Unlicensed and Proud of It

This letter makes some very good points regarding licensing and this is a hard discussion. I agree on one level that some sort of licensing sets a level but also agree that licensing is absolutely not a predictor of competency.

This is the same as the union vs. non-union argument. There are very good technicians and companies on both sides of the fence - there are also horrible technicians and companies on both sides.

The bottom line is that licensing does not guarantee quality and lack of licensing does not guarantee lack of quality.

If you want to hire a good contractor interview them, look at other work they have done, talk to other customers - follow the same procedure for hiring good technicians. Do not ever rely on a watered-down test created by a committee to determine quality.

Contractors, Technology & Productivity

Contractor Magazine just published an article about the 2006 CFMA IT Survey discussing how contractors today are using IT to improve productivity. Other than simply making the processes in the business more operationally efficient IT also has the power to provide rapid feedback to the project teams. By using technology to more closely integrate accounting and operations you can develop desktop displays similar to the one in the link below.

Desktop Display Example

When combined with a good business plan, the right training an the right "People Processes" this rapid feedback system provides the infrastructure of success.

Pre-Planning & Project Success

Chris Higgens is a successful project management leader who honed his skills while working logistics for the Army Rangers - a demanding job that left him wll positioned for becoming Bank of America's "Mr. Project"

When looking at his #1 rule for success you can learn a lot about managing projects - construction or otherwise:

First, he says, spend less time "doing" and more time "planning." Higgins warns that teams are often too quick to act and too slow to think. "If you spend enough time planning," he says, "execution time can be very short. If you work on the fly, you do things fast. But you may do the wrong things - which slows down the project."

Pre-planning on construction projects can increase profitability while decreasing schedule time substantially.

Difficult Practice Makes Perfect Execution

This morning I found this article from Presentations Magazine on "Murder Boards" which basically is just a very challenging way way to prepare for a presentation. As with everything in life the harder you prepare the easier and more successful the actual execution will be.

If you are reading this and thinking that "presentations" are only for speakers, consultants and sales people I submit to you that 90% of what you do is a series of presentations and the best people spend the appropriate amount of time preparing.

John C. Maxwell in his book The 360 Degree Leader makes a comment that you should always prepare 10X for a meeting with your boss - in other words for every minute you plan to meet spend 10 minutes preparing.

That is phenominal advice and I can honestly say that in my experience when I have spent the time it has paid off and when I have "winged it" that has also showed.

Spend the time - be prepared - practice - it will pay off.

What about spending the same amount of time preparing for an interaction with people who work for you?

FMI Project Management Survey

July 25, 2006

FMI project management survey: Perfect PM elusive

It is amazing that financial management skills are cited as one of the most lacking traits in project managers - for a contractor project managers control most of the things that produce profit and cash!

There are many reasons why project managers typically have poor financial skills starting with the normal separation of accounting and operations inside the company. Many contractor owners and executives actually don't think the project managers should be involved in financial details very much - this is one of the dumbest thought processes out there and will continue to produce poor results.

Project managers need to be educated constantly on how everything they do impacts the bottom line - we did one such presentation recently on cash flow & project managers for the Dexter+Chaney user conference and also have training modules geared towards teaching project teams profit dynamics, construction financial basics and even presenting a brief roadmap for integrating accounting and operations.

At the end of the day the contractor is trying to (1) make a profit, (2) generate cash and (3) utilize assets effectively. If the project manager does not understand how their actions relate to one of these three things then how can you possibly expect them to perform well?

Jack Stack makes some fantastic points about getting a team focused by teaching everyone The Great Game of Business - this book is well worth reading for all contractors.

Most of my approach toward improving performance with the project team has to do with more closely integrating all areas of the company and getting the whole project team to really focus on "dollarizing" their actions - especially during the project pre-planning process.

Getting To The Truth

Tom Peters reminds us of a very simple truth about management and that is that you will never hear the truth again regardless of what level you are at - whether you are a new crew leader, accomplished superintendent or the owner of the company.

The example is from General Norman Schwarzkopf's autobiography which is a fantastic book.

From the moment you take on any management responsibilities you will need to make it your #1 priority to find ways of getting the truth - the more management responsibilities you take on the harder you will have to work to get the truth.

Jobsite Productivity

March 21, 2006

Most on-site time is unproductive: expert

Interesting points about jobsite production - or lack of it.

Intuit Construction Industry Survey

March 07, 2006

Contractors face roadblocks to growth: Intuit survey

Very interesting information about contractors - especially concerning the fact that 45% of the contractors felt that integrated software systems were critical for growth. Integrated will always be better than seperate, even seperate best-of-breed technology systems.

There are many other fantastic details that the survey offers regarding the industry - what I find the most interesting about these surveys is how they make you feel like you are not alone in the problems you face. Often small businesses feel that they are the only ones suffering from certain problems. Surveys like this show that all businesses, from the billion dollar contractor down to the 1 service van operation all have very similar problems.

The great thing about this fact is that the solutions are also very similar - a $50 million dollar contractor can learn a lot from a 6 person, well-oiled machine.

It Takes More Than Strategy

December 26, 2005

Professional Remodeler magazine recently ran an article about the ranking system made famous by General Electric & Jack Welch and discussed in Jack's latest book, Winning. The premise of the system is that you need to create turnover in the bottom 10% of your workforce every year in order to constantly upgrade the quality of your team. The article presents the point-of-view that this system does not lead to the best organizational performance and that perhaps GE could have done far better without the system.

HousingZone.com - Rank and Yank

Scott makes some great observations and quite honestly he's right. Jack Welch was also right. How can this be? Well, before you jump into any management philosophy you have to realize that no strategy wheter financial, operational or talent-based is a stand-alone "Management Module."

The strategy has to fit the leader AND the culture of the company. This is why you cannot simply bolt-on the latest management strategy to a company. First and foremost the leader has to believe, live and love the strategy, second and also very important is that the culture of the company has to generally fit with the strategy and third the leader has to work like crazy to EXECUTE the strategy which Larry Bossidy discusses in his book Execution.

When you look around at business there are millions of ways to make money and be successful and just as many different management styles. Some are more successful than others but there is not a one-size-fits-all management style. Jack Welch had his - it was very successful. It fit his personality and the company and produced phenominal results.

On the complete opposite end of the scale there is SEMCO run by Ricardo Semler. His book Maverick details how SEMCO is loosly run, its culuture and details about himself.

As a business leader or owner you owe it to yourself and your team to read about and talk to as many different people as possible about different programs and leadership styles and then put them together into something that works for you and your company.

If a consultant comes in and claims to have this "toolkit" of solutions for your business you should simply thank them for their time and then RUN!!

Benchmarking: Setting Standards for the Industry

December 24, 2005

Alan Hanbury Jr. and Professonal Remodeler did a wonderful series on key business metrics and benchmarking. These were geared towards a remodeling contractor but can be easily adapted to any business.

Benchmarking: Setting Standards for the Industry

Overpaid? Sometimes Paid? Owed Pay?

Leading the Way to Profit

Does your company need performance-enhancing help?

Are You Dying to Grow?

The New Rules: Work Smarter by Working Less

Making Sausage

Bring the Business Plan to Life

Secrets to Recruiting "A" Players

There is nothing that will enable your organization to grow faster or be more profitable than to learn to successfully find and recruit "A" players in the industry. This short article provides some good recruiting tips.

HousingZone.com - Secrets to Recruiting "A" Players

Once you have successfully found some potential recruits the next step is making a deal with them through the interview and job offer process. The following two articles provide some great insight including a job offer outline.

The Job Offer & The Job Offer Part II

As you plan your company's strategy keep in mind that Organizational Planning & Alignment is a very crucial piece of your success.

Searched and Found on the Web

HousingZone.com - Searched and Found on the Web

Creating a beautiful website means nothing if potential customers cannot find you. Remember that there are billions of web pages and a potential customer isn't likely to be searching for your company by name. The article above provides a great overview of search engines and Pay-Per-Click (PPC) advertising.

In addition we recently attended a conference directed solely at Search Engine Strategies and summarized what we learned in a white paper.

If your website was designed a few years ago it may need to be revamped. Information Week had a great article on website content upgrades recently.

Simulation Modeling

Quality Digest Magazine

Quality Digest Magazine

Quality Digest Magazine

This series of three short articles gets into the math behind modeling business processes and making decisions. Breaking every process down to this level of detail is the basis of Six Sigma quality control which large organizations have used to reap huge rewards over the last decade.

Smaller businesses often ignore the math behind decisions and rely on "gut" instinct to make management decisions but often even a company with as little as $1M in revenues can benefit from better analysis of their processes.

What if you applied the same basic analysis outlined in Part 3 for an order fulfilment process to your internal processes - getting material and tools to the jobsite or providing submittals to the customer or turning around RFP's?

How to Value a Business Before You Buy It

How to Value a Business Before You Buy It :: Contracting Business

You should read this article whether you are planning to buy or sell a business or just want to run a company as efficiently as possible.

The same metrics that make a business valuable to a buyer also make the business run well.

Design your financial systems and reporting to provide rapid feedback on the same key metrics that are used to judge business value.

Teach your team what the metrics are and how their actions affect them.

Share key metrics on a regular basis.

Produce detailed monthly financial statements with a narrative discussing the key metrics, how they have changed and what changes are coming.

Follow these practices and you will be rewarded almost immediately with a company that runs better and a team that feels more involved. Continue down that path for 2-3 years and you will be rewarded with a huge increase in value.

Seven Ways to KNOW Your Competition

Seven Ways to KNOW Your Competition :: Contracting Business

I really enjoy the trade publications for HVAC and Remodeling contractors because their businesses are very focused on sales, customer service and repeat business.

ALL contracting businesses and anyone in the industry can benefit from focusing more on gaining a competitive advantage. One of the first steps in gaining a competitive advantage has to do with getting to know your competition. This article contains great ideas about gaining this knowledge.

Remember that this information isn't only valuable for business owners or sales people. It is just just as valuable for anyone in the industry and if you plan to build your career you should start a file on all companies in the marketplace. You will be amazed at how valuable all the tidbits of information you collect will be after 5-10 years.

Construction Trades - A Good Career Choice

November 25, 2005

ContraCostaTimes.com | 11/23/2005 | Traditional trades face declining interest even as business booms

I just saw this article this morning and quite honestly it's one of thousands. What continues to bother me is that parents and educators are still ignoring the skiled trades as a viable career option.

When I was in school I was told that I'd never make anything of myself if I didn't go to college - luckily I followed my own guiding light and stuck with the electrical trade. Looking back I'm glad I did because of both the personal satisfaction I get from building things as well as the fantastic compensation that comes from being highly skilled in all elements of construction.

I think it is sad that more people don't open their eyes and realize that a journeyman trades person is just as skilled and just as valuable as a CPA, lawyer or other professional - here's what the difference is:

A skilled tradesperson applies their craft on-site and is therefore immune to most outsourcing. Have you been reading about what is happening in IT? A team of "Construction Workers" laid a fiber optic cable across the ocean and now we can get the same IT services performed for 10% or less in another country.

Thanks to those construction workers we can now ship anything electronic around the world instantly. Even small businesses can outsource using services such as eLance. I posted a project for computer programming and got over 40 bids for a $2,000 job. The bids started at $1 per hour! Spend some time looking around and you will see offshore CPA services, engineering, design, etc.

As a small business I've used these services often to keep costs down and I've got to say that the quality is excellent - on the other hand when my HVAC unit went out a couple of winters ago I still had to pay $150 per hour for a HVAC service call and the guy couldn't show up until 7PM because he was too busy.

If you are in the trades you understand this intimately - if you are one of the parents or educators who associates construction with digging a ditch you should re-think your position. Imagine the future when many of the "white collar jobs" you think you are preparing people for either get replaced by a computer and database or shipped across the ocean to lower-income areas. Remember that there are still billions of people around the world who can live on a couple of US Dollars per day - and many of them can be trained to do those programming, design, analysis and engineering jobs.

Whether you agree with this or not it is a reality and is not likely to change.

If you keep hanging on to the past and telling people they will fail if they go into the skilled-trades or other service industries you are the ones actually creating the failure of a generation.

Recruiting - Leave No Stone Unturned

HousingZone.com - Leave No Stone Unturned

Excellent roundtable discussion about how to find quality employees. Succeeding in the talent game today requires some innovation - if you think that running an ad in the classified's is a strategy you are missing out on a world of other recruiting possibilities. Some notable ideas.

1. School Career Days/Intern Programs: These people are very motivated - they have already made an investment in themselves and are looking to put those new skills to work. The problem - if an employer goes there for the first time they are unlikely to get noticed and will feel that this is a huge waste of time. The reality is that you will have to show consistency. Pick a school or program - define your position as a company clearly - define why you are the best choice to work for - show consistency by showing up to every event and presenting career advice to the students. If you are consistent you will start to see results after a few events.

2. Emplyee Referrals: Don't overlook this and you should reward this - give your employees a bonus for finding good people but make sure you don't pay until they have been on board for 90 days or so.

3. Recruiters: This article downplays recruiters and many people have had bad experience with recruiters. There are two things that lead to the negative image; the first is that there are a lot of bad recruiters out there who simply work as a middle person looking up potential "candidates" in the help wanted ads. The second is that many employers don't clearly define either the job or the search. To find success with a recruiter you should understand that you are goigng to be spending a lot of money to find someone very specific. Spend an appropriate amount of time defining the position, goals, your culture, how they fit with your company, etc. Now go interview a bunch of recruiters - ask them how they find candidates and how their research department is run. Good recruiters have teams of people who will draw a geographic area around your business and then start calling into those businesses to find the top talent. The recruiter will then screen these people before sending them to you for an interview. If this process is done right this can be a very powerful way to find top-level help.

4. Advertise Everywhere: You should make it clear on all your jobsites, all your vehicles and possibly even on your company shirts that you are always looking for the best talent. Keey your name in front of everyone all the time - sooner or later when someone is looking to make a change you want them to remember your company.

5. Smaller Companies: This article makes an excellent point about recruiting the smaller business owners who may be tired. I believe in designing a company structure to be entrepreneurial in structure from the strategy to the accounting system to the organizational chart so that these prior owners would fit right in.

Talent is a very important part of your business - you cannot grow without spending a lot of time developing a good "Talent Plan".

Learn more about organizational planning and alignment.

Finding Hidden Profits

November 23, 2005

Acland Brierty…explained ? Blog Archive ? Cropping works for business and photos

This is one of the better analogies I've seen for describing why it's so important to focus just on the most profitable pieces of your business.

Personally I have a limited artistic eye so I would never be able to look at the bigger picture in this example and crop the right things out - many leaders of smaller and growing businesses are in the exact same category.

A lot of the problem stems from the fact that most accounting systems were setup to simply show the big picture and to help prepare taxes. This means that deciding where to crop is based more on art than science.

Before taking any drastic moves with a growing business you should work to integrate your accounting and operations so that you can clearly see the nuggets within your business that are worth nurturing, the cash cows that are worth milking and the dogs that need to be cropped; the ones that are making your performance simply average even though you have some fantastic nuggest and cash cows.

While this seems obvious it rarely is for many businesses. Very few growing companies even have regular financial statements, much less integrated accounting and operations that allow them this level of detail.

In short - I strongly agree with the cropping analogy and you should work to make it 90% science and 10% art.

How to Write a Handbook Techs Use

October 22, 2005

Author & Date: Matthew Halverson

Publication: Electrical Construction & Maintenance (EC&M)

Article Link

The process of documenting your processes, analyzing them and then streamlining them will help your business growth and profitability. 

The culmination of all these documented processes should be an employee handbook and operations manuals for the key functional areas of your business. 

"If you can't describe what you are doing as a process, you don't know what you're doing." - W. Edwards Deming

This article describes the success of Your Electrical Connection based in Michigan, a business that grew to 6 service technicians within 4 years of opening the doors.

If your background is at medium to large companies that may not sound like a lot but this is actually a phenomenal business to grow.  6 technicians means they are probably doing $2-3M per year and have a very wide customer base.  Service work also generates good cash flow and has pull-through effects for larger project work.

The owner, Tom Shuster, credits a lot of the success to committing his ideas, ethics, processes and the legally required information to paper in the format of an employee handbook.  From personal experience I have always had great success when I committed an idea to paper and developed it into a training module. 

First of all, it helps me clarify the details.  It's amazing that I can think of something and it seems very clear in my mind.  It is only after trying to commit it to a flow-chart taking into account the variables someone might face that I finally get the process refined.  Creating clear, written how's and why's to go with the process is the next step and brings even more clarity.  One of the deliverables for our Project Management Training is an operations manual for the project team, customized for a specific company and their processes. Michael Gerber, author of the E-Myth Contractor and the entire E-Myth series of books is also very focused on processes. 

If you don't currently have an employee handbook or any operations manuals I encourage you to think hard about this as a strategic way to grow your business.  The smaller you are the easier it is to implement. 

Whatever you do, don't turn this over to an HR consultant or lawyer unless your only desire is to do the CYA (Cover Your Ass!) legal minimum.  That MIGHT keep you from getting sued by an ex-employee but your are far better off focusing on what it takes to be successful in your company, track production, satisfy the customer, plan the project, etc. 

Different by Design

September 22, 2005

Author & Date: Kimberly Sweet, 12/04

Publication: Professional Remodeler

Article Link

The business practices utilized by Creative Contracting to earn the "Remodeler of the Year, 2004" award can apply to any business. The introduction to the article is called A Whole Greater Than the Sum which is an excellent way to describe what happens when all the aspects of a business are aligned. One of the many things that Creative Contracting does which can apply to any business is to utilize outside consultants to provide insight, perform special projects such as survey customers to better focus their marketing efforts and to help implement, train and document operational systems. This has both streamlined operations and allowed them to grow revenue while increasing gross margin but also has allowed them to focus on hiring people with raw talent and the right personality to fit into the team. Often in the hiring process because companies don't have the right documentation of their processes or training in place they end up having to make a compromise on personality, fit and potential in order to get the skills and experience to fill an immediate need. This solves a short-term problem but does not do anything to help long-term growth and team dynamics. Skills are much easier to adapt than personalities. For more information see the Process Improvement section of this website.

Specializing in Small Projects

August 21, 2005

Author & Date: Wendy A. Jordan 12/2004
Publication: Professional Remodeler
Article Link

Many contractors have a department of the company that handles service work and small projects but rarely do you find a company that actually specializes in service and small projects. Often a company starts by doing larger projects and the service is treated like an add-on department. This profile of D/R Services Unlimited shows that a company can be built around small and service projects with the larger projects treated as an add-on and why this may be a good strategy to think about. The downside to service work is that you have to deal with hundreds or even thousands of small jobs, marketing to find new customers, dealing with customers, problems, invoices and collections over the course of a year.

OK, now look at the HUGE upside advantages: Your revenue and profit base is diversified over many customers. If the work is primarily service based then it is not as cyclical as large project work. The work is not going to be as price sensitive as competitive, large project work so your margins can be substantially higher even considering the higher overhead costs required. Cash flow is much better because you have smaller amounts of money coming in from a diverse group of customers so a single bad job, claim or other dispute will not impact your company. From a marketing standpoint you touch a lot more customers and get your name out in the community a lot more and that leads to more business.

Utilize this article just for sparking ideas about whether a service department is right for your organization or if your existing service department is getting the attention and results it deserves.

Marketing for the Long Haul

August 16, 2005

Author & Date: Stanley F. Ehrlich 03/2003
Publication: Luxury Home Builder
Article Link

This is a common theme across almost all small and medium sized businesses. The owner usually got started by being technically good and was the Chief Marketing Officer that got the company started. As the organization grows the owner starts spending more time focused on operations and less on the marketing. Even later the owner starts spending most of their time focused on the other aspects of running the business such as the multitude of employment laws, taxes, compliance issues, internal operational items such as accounting, payroll and purchasing. The duties of marketing are usually some of the first to be handed off and the amount of time the owner spends focused on marketing usually becomes less and less the more the company grows.

This article is focused on the homebuilder and hits the very basics but is applicable to every service business. It will help you regain your focus on marketing and brand building and why those things are the most critical functions in your company regardless of what the daily fires are. You started your business by marketing and getting the best jobs. Use articles like this to spark thoughts and motivate your team to refocus on the important, not just the urgent.

Battlespace Awareness

July 05, 2005

Author & Date: Irvin Buck, November 1, 2004
Publication: GeoIntelligence Magazine
Article Link

There are many aspects of business that relate to military strategy and operations. One of the biggest challenges faced by both business leaders and military leaders is accurate visualization and communication of the market, business or battlefield. Technology has brought many advances to both of these areas. It is interesting to look at the technology used by the military and imagine the business implications. This is an excellent article focused on some of the technologies used today to provide this intelligence in real time for military units moving across a battlefield.

These kinds of systems integrated with the intelligence gathering capabilities such as the unmanned aerial vehicle (UAV) have shrank the time between identification of a target and engagement/destruction to less than 20 minutes (see article on the Global Hawk for more information). How quickly to the systems in your organization notify you of potential problems, opportunities or just the status of your business? If you are like most business leaders you find yourself often thinking "If I would have known about that sooner I would have had time to react; now the damage is already done and the opportunity is lost."

The answer to this can be found by aligning your IT Systems, Accounting Systems, Customers and your People. It is only when these systems are fully aligned and streamlined that you can start to get good information in time to proactively act on it. Use this article to imagine "WHAT IF?"

Campaign For Your Company

May 02, 2005

Author & Date: Meghan Haynes, 12/2003
Publication: Professional Remodeler
Article Link

This article highlights the success of Landmark Construction's use of custom printed campaign signs supporting various political agendas that include the company logo for brand recognition. When I first read this it immediately invoked the "Aha" moment. This is a great idea and is a lot cheaper than most other forms of brand building. If you support particular candidates and/or propositions that affect local businesses in positive way you could also follow-up with a letter to those businesses letting them know what your are doing to support a cause that affects their business.

Chances are pretty good that their existing contractor isn't going to such lengths to help them out. In your letter or phone call ask them if there is anywhere else that you may be able to place your signs related to the campaign. At worst you will have added another contact to your rolodex and at best you will be asked to bid on or do a job which gets you in the door. More information can be found regarding using similar networking tactics in the book Networking With Millionaires which I would highly recommend reading or listening to. Most of the book is geared towards professional services but enough ideas are applicable to contractors that I would definitely recommend it.

Campaign For Your Company

Author & Date: Meghan Haynes, 12/2003
Publication: Professional Remodeler
Article Link

This article highlights the success of Landmark Construction's use of custom printed campaign signs supporting various political agendas that include the company logo for brand recognition. When I first read this it immediately invoked the "Aha" moment. This is a great idea and is a lot cheaper than most other forms of brand building. If you support particular candidates and/or propositions that affect local businesses in positive way you could also follow-up with a letter to those businesses letting them know what your are doing to support a cause that affects their business.

Chances are pretty good that their existing contractor isn't going to such lengths to help them out. In your letter or phone call ask them if there is anywhere else that you may be able to place your signs related to the campaign. At worst you will have added another contact to your rolodex and at best you will be asked to bid on or do a job which gets you in the door. More information can be found regarding using similar networking tactics in the book Networking With Millionaires which I would highly recommend reading or listening to. Most of the book is geared towards professional services but enough ideas are applicable to contractors that I would definitely recommend it.

Targeting the Middle Market (Remodeler Of The Year 2003)

April 16, 2005

Author & Date: Kimberly Sweet, 12/03
Publication: Professional Remodeler
Article Link

The company featured is trying to build out a national brand through franchise agreements. The model of structuring and documenting every process from marketing to punch list of projects to accounting is crucial for the success of a franchise. These same tactics can also be used very effectively to build any business more profitably and to make it more self-sustaining where the owner can enjoy more time off without the worries of "Are my customers being treated right?"

Having been part of a franchise group before I can honestly say that I would never do it again but during that time I learned a lot about operations and that has helped me in every aspect of business. If you are looking to grow your company I recommend looking into how franchises operate whether it's how Kinko's opens a new branch or how McDonalds searches for a new market. Some key things to take away from the article:

Gross Margins: They are operating typically at 40%+ which is good for ANY business. A lot of this comes from fact that these are smaller projects but also comes from the structured processes and the 5% typically spent on marketing. Even after deducting the marketing costs you are still left with 35% margins which leaves a lot of room for profitable growth. It should always be your goal to work on higher margin work rather than higher volume. Higher volume feels good for the ego but higher profit margins feel better for the retirement program.

Training Programs: All franchises put into place some sort of training programs. You can easily do this in your own business regardless of the size. You probably already have most of the processes down. Developing these into training programs including operations manuals, audio programs or actual classes will improve your performance.

Learn more by reviewing our Construction Company Development (CCD) program.

There is a book I recently read called the E-Myth Contractor which also did a great job of explaining the trap that most contractors find themselves in and how to get out of it.

Reporting to the Depot

February 19, 2005

Author & Date: Martin Booe, 1/05
Publication: Workforce (Quick Sign-Up Required To Access)
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This article brings focus to a huge and often un-tapped labor market. The US Military turns out over 200,000 veterans who transition into civilian life every year making them a huge source of employees. In the military people are taught to both lead and follow. They are taught a lot of practical skills; how to work very hard under extreme conditions. There is a lot of potential to partner with the government and utilize ex-military personnel in construction.

The article also makes some fantastic points about leadership development and how well the veterans work out in their leadership programs. I believe that the military teaches the use of standardized systems and that is something that many smaller and medium sized contractors have difficulty implementing. If you start to implement Process Documentation and Improvement you should also think about how you are going to approach hiring new people into your organization to make sure they will follow, maintain and improve the systems you are trying to implement.

It should also be noted that a lot of the reasons for Home Depot's success under CEO Robert Nardelli is that he came from General Electric and puts a lot of stock in Human Resources. Shortly after arriving at Home Depot he hired Dennis Donovan to lead the HR effort and made him the second highest paid person in the company - that definitely made a statement about how highly Home Depot ranks HR and personnel development. Is your HR Manager the second highest paid person in your organization? What do you think the impact of hiring an HR Manager of that caliber would be? There is nothing as important for your success as the talent you surround yourself with.

Don't treat HR like an administrative function.

Sarbanes-Oxley, Transparency & Your Business (General Thoughts)

January 20, 2005

The Sarbanes-Oxley act was put into place to help protect shareholders in public traded companies after the multitude of corporate scandals in the last few years.  Even though the act applies only to large, publicly traded companies there are some aspects that will make any company run better.  A key thing that many people are focusing on is the issue of "Transparency."  James Goodnight, CEO of SAS defines part of this as "The need for defined business processes and procedures as well as dissemination of an enterprise wide compliance strategy within an organization..." in an opinion piece from the Sarbanes-Oxley Compliance Journal. 

The general guidelines require that a business have the ability to get accurate, detailed financial and other information from all areas of a business that relates to the health and operations of that area and the overall business in near real-time.  It additionally requires that processes be put in place, documented and audited which will guarantee the accuracy of this information. 

To some companies this seems like an incredible burden - to the best companies they already have most of these systems in place and are using the regulation as an opportunity to build even better systems.  Whether a company does $1 Million in business or $100 Billion in revenue the same dynamics apply.  The need for information does not change.  The cost of not having accurate, real-time information is just as high (potentially fatal). 

John Chambers, CEO of Cisco explains that a business is like a ship sailing through the ocean.  It is off-course most of the time and without land in sight the ability to know where you are at and make course corrections is difficult.  Years ago captains could only get accurate information at night when the stars were out so sailing across the ocean took a very long time because the ship could become seriously off-course and require huge course corrections each day.  Today ships are guided by a computer that automatically checks locations by GPS satellite many times each minute.  The course corrections are automatic and very minor giving the appearance of an almost perfectly straight line which also provides the fastest and cheapest route between any two points. 

How often do you get feedback information in your business regarding talent, marketing efforts, financial results and progress on key strategic goals?  Do you even have regular, detailed, monthly financial statements?  Can you see an accurate financial status of your business at any given point in time?  How often do you have the opportunity to make course corrections?  How far off-course is it possible for you to get before you realize that something has to be done? 

This leads to another very critical insight provided by John Chamber's comparison to a ship.  In years past the captain (business leader/owner) was the person who had to identify the destination (corporate goal/vision/mission), chart the course (strategy/operational plan), check every night to see if they were on course (review the financials, jobs, etc.) and then make order the crew to implement the required course corrections.  Today the captain figures out the destination, sets the course and then systems on the ship automatically check position and make adjustments directly to rudder, throttle, etc.  This allows the captain to spend a lot more time focused on other aspects of running the ship such as planning a more efficient course, a different destination or improving the systems.  In years past the captain had to literally work day and night just to stay roughly on course (sound familiar?). 

Just like technology provided a better way to sail it can also provide a lot of better ways to run a business.  Technology alone is not the answer but using the right technology and aligning it with your financial systems, customers and organizational chart can have fantastic effects on your business.  To learn more review the Solutions / Process Improvement and Resources / IT Systems sections of this website. 

For more information about transparency in organizations see author Dan Tapscott at www.ageoftransparency.com and the series of articles and thought pieces he has written for Intelligent Enterprise magazine (www.intelligententerprise.com).  Dan's archives are located at: www.intelligentinterprise.com