Economy Or Just Bad (HORRIBLE) Business Practices?

February 15, 2009

During the last few months we have been doing a lot to help our clients out with their marketing.  One of the most basic things we see as a problem over and over again is simply the lack of follow-up on the part of the contractor. 

IF SOMEONE CALLS - CALL THEM BACK!

IF SOMEONE WANTS A PRICE - GIVE THEM A PROPOSAL!

See Steve Smith's recent article in Plumbing & Mechanical magazine about his remodeling experiences. 

Why Won't Contractors Call Me Back?

If you don't think this is a problem in your company you might want to take a closer look.  It truly may not be but in several of the customer satisfaction surveys we have done for customers we have found that communication is a problem - even for the contractors who swore they followed up on everything. 

We have fewer clients who are in trouble right now do to the economy than those that are in trouble because they didn't follow solid business development practices over the last five years. 

Great Insights

January 28, 2008

Flying out to Florida on Sunday I was reading the lastest copy of Fortune magazine and came across a couple fantastic tid-bits of insight that everyone could benefit from. 

 The first comes from Melinda Gates -

"If you are successful, it is because somewhere, sometime, someone gave you a life or an idea that started you in the right direction.  Remember also that you are indebted to life until you help some less fortunate person, just as you were helped"

We could all benefit from feeling a little more indebted and seeking to help out others. 

 

The second great piece came from Robert Polet who is now the CEO of Gucci and discussing a time when he was first put in charge of all Malaysian operations for Unilever when he was just 35 years old. 

One day when faced with a particularly tricky issue, Polet put in a call to Unilever's head office to ask for help.  The advice that came back was simple:  Take a piece of paper, write down all the options available, and pick the best one.  "The next morning I said to my wife, 'They're right,'" Polet recalls.  "It's only by going through tough experiences that you can grow."

I think that a lot of times we all forget this.  People often forget that most of their most difficult times were also those that taught them the most.  Don't think that you are being a good boss by "helping" people past those difficult experiences.  You are really doing them a dis-service.  The best thing you can do is to actually make sure that your high-potential people get as many chances to go through difficult situations as possible. 

 

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.

Good Marketing - Good Company

October 05, 2007

This morning on the way to the office I got a phone call from Allied Decals in Florida. They call on a regular basis - about once every 9-12 months to follow-up on an order that I placed several years ago just to make sure I'm still happy and the decals are doing what we wanted.

What they had printed for us (when I was at Royal Electric) were a bunch of "24 Hour Service" labels for equipment that had a reflective background. These looked great and make it easy for maintenance personnel to find the company's phone number if they were looking for an equipment problem in the dark.

Anyway, the company did a great job, the labels looked and worked great. I would recommend Allied Decals for any label job.

But the biggest thing to note is the power of making regular phone calls to existing, potential and old clients. If you are just waiting for the phone to ring you are probably leaving about 50% of your business results behind!

A couple hours a week of phone time will yield HUGE results.

Workforce Quality or Management Quality?

August 24, 2007

I'm in Florida this week and was reading an interview with Stuart Graham, the CEO of Skanska, a construction company listed as 125 on the Fortune 500. They have construction projects worldwide so a natural interview question was:

QUESTION: Where in the world do you find the most productive workers with the best work ethic?

ANSWER: We have 12,000 projects, so I see vast differences in productivity. But I can't attribute it to a country or a culture. I attribute it to the management on a project. Productivity is not the willingness of the workers but how good and demanding the supervision is.

I haven't been on 12,000 projects but have been involved in a significant amount of project turnarounds and have NEVER had to replace the workforce in order to turn a bad project around. This is the fault of the industry, not the individual foreman, superintendent or project manager. There is a significant amount of craft training but very little management training.

Companies who are looking to succeed will be the ones who are building strong construction management and leadership training programs.

"Master Plan" or Rapid Experimentation?

August 05, 2007

Tom Peters posted some very interesting thoughts "The Right Plan Is to Have No Plan" which touches both on why a lot of foreign aid programs fail and how that applies to business execution as well.

At the heart of the matter is a difference in execution styles - some companies and people want to try to plan out every single detail having meeting after meeting working on a grand "master plan." Over time these companies build cultures that are afraid to experiment and believe they need every detail planned out in order to get anything done.

The other execution style focuses on getting the major pieces of the plan worked out and then gets to work rapidly implementing. They rapidly try things out - often trying several small things at once. As soon as they find something that works they build on it. When they find something that does not work they ask "how could it work?" and "what did we learn?"

While the "Master Plan" approach may seem great from an acedemic perspective it rarely works in reality because there is no way for anyone to be able to see all the details in a complex system (like a company with more than 1 employee!) to be able to create that "Master Plan" no matter how many meetings are held.

The rapid experimentation, if built into the company culture properly will always perform the best. While this method may seem like chaos - it can be very effective is the chaos can be controlled just a little. Managing the chaos is very challenging and you will always be working in the gray area between total chaos and restrictive bureaucracy.

Managing the chaos should come in a few stages:

1. Set clear goals for “RESULTS” – not “PROCESS”

2. Encourage the team to “EXPERIMENT” with different “PROCESSES” to attain the “RESULTS” – if at all possible have more than one team working on the problem separately

3. Push for experimentation and thinking outside the box – ask “WHY” (5) times at each step of the process – including “Why even do this step?”

4. Reward even failures – the constant “EXPERIMENTATION” is the key to long-term organizational success

5. “MEASURE” the differences between the different “PROCESSES” and the actual “RESULTS” achieved. Discuss the various experiments rigorously with the team(s) and determine what the best “PROCESS” really is

6. “DOCUMENT” the process thoroughly including descriptions of why and anticipated results

7. Setup “VERIFICATION” systems to ensure the new “PROCESS” is being followed including reports and visual indicators

8. “TRAIN” everyone across the company in the new “PROCESS”

9. “VERIFY” that everyone is using the new “PROCESS” consistently – in the long-term any “system” will beat any “non-system” in performance

10. Once everyone is using the system consistently encourage people to start “EXPERIMENTING” again on refinement. There is no “PROCESS” that will last forever so constant reinvention of the systems is crucial. Go back to step 1.

Online Applicant Screening Idea

May 02, 2007

Last night I was doing some research on the Boston Consulting Group and came across their online interview preparation process.

They base part of their hiring decision on the questions that people ask. When you really think about it there are such things as "stupid questions" and it's a good tool to use to judge a potential applicant whether they are applying for an electrician slot or senior management.

See the Boston Consulting Group example

Start Slow - Finish Fast

April 08, 2007

If you want to master change, the first thing you have to do is become a student of change. Try things. Watch the results. Talk to others. Read about how people deal with change.

Change RARELY originates at the top.
Change NEVER “happens” at the top.
Change, like evolution, happens SLOWLY.
Change usually starts as a GRASSROOTS effort and bubbles up.

Following these 9 steps will produce the best results and will build an organization that is great at change over time. Too many people want to run out and do everything all at once - SLOW DOWN if you really want to GO FAST.

1. Pick one SMALL thing you have control over.
2. Work UNDER the radar – less people = more results.
3. Work like CRAZY to change that one thing.
4. Document RESULTS thoroughly.
5. BRAG loudly about the results.
6. Give other people CREDIT as necessary.
7. If no one responds – WAIT and try again later (go back to #1).
8. If people respond positively, try something BIGGER.

A Few Good Expenses

April 01, 2007

Ordinarily I can't stand email jokes because most are simply dumb and a waste of time. Because I'm so harsh on this I only receive the "best" jokes people find. This one was sent out last week by a very good friend (name hidden to protect the guilty) and it was just too darn funny not to post. Back to more serious stuff later but for now laugh!

Does this resemble anyone you know (possibly yourself)

The Winning Thought Process #2

March 24, 2007

I just finished reading Losing My Virginity - by Richard Branson again. It is a very good book and makes you realize more than anything that if you simply have the right mindset you can achieve anything. Richard Branson lived on the edge of constant failure for more than 20 years while building the Virgin Group which was basically started on a payphone and some free shop space in a not-so-great area of town for the first Virgin music store.

Someone noticed me reading it the other day and I commented on how Richard Branson "just did it" when most people would worry about things and do nothing. No matter how much I tried to explain how he got started and struggled all she could see was that today, almost 30 years later he is rich. She could not make the connection that she could actually achieve the exact same thing if she "just did it" the same way Richard Branson did.

Again, this is the key difference between those who win and those who don't. Quite simply it is all in the thought process and how you frame things. If you never take a risk it will not guarantee that you will never fail but it will also guarantee that you will never win big.

It reminds me of a quote I keep on my desk at all times:

"Some people succeed because they are destined to but most succeed because they are determined to."

Winning Personality

March 19, 2007

I read a quote from somewhere and I can't fully remember it but the basics boiled down to this:

"Whether you think you will succeed or think you will fail either way you will be right."

I can't even begin to say how true this is. In the companies we meet this is the biggest single deciding factor in how quickly they can move from point 'A' to point 'B'.

You can take the exact same situation and one person will choose to be positive while one chooses to be negative. Even if the person with the negative outlook has way more skills they will almost always be outperformed by the person who believes they will succeed.

It's simple - think positive and you will win!

Engineering & Construction in Dubai

March 10, 2007

These slides got forwarded to me by a good friend, Ethelyne Molnar of Brown Construction. I'm sure that almost everyone in construction has already seen these or some form of them but the magnitude of the engineering and construction still amazes me!

Electric Smarts - Contracting Profitably

February 03, 2007

A while ago Bill Floyd of ElectricSmarts commented on one of our articles (Pre-Planning Projects Means More Contractor Profits). That got us into a discussion on how contractors and distributors can work together to enhance profitability for both.

CLICK HERE:   Open audio / video portion of interview on www.electricsmarts.com.  Look for Brain Bank and navigate to Contracting Profitably

The slides to go along with the audio are below

You can also download the Contracting Profitably slides in high-resolution if you want to use them in your company to help convey these points to your team or contact us for more information.

Customer Satisfaction For Contractors

I saw this short story on Seth Godin's blog this morning and it got me thinking about a formula I heard a long time ago regarding customer satisfaction.

Customer Satisfaction equals

the Perceived Value the customer receives from the product or service minus

the Cost to the customer for that product or service

This is so simple and so true - it has been part of my philosophy for negotiating projects and change orders ever since.

Why is this so hard to grasp for contractors? First of all it is because there is a serious lack of financial training at all levels in the construction industry. What little training there is centers around estimating where you figure out YOUR costs and then mark them up to create a "sell price."

The formula for customer satisfaction has NOTHING to do with what your costs are - it has to do with the cost to the customer.

If you want to make more money AND have happier customers then figure out how to raise "Perceived Value" at a greater rate than your costs.

CFMA - Construction Technology Overview

February 01, 2007

We do a variety of training both in groups and tailored for specific clients and are constantly adding to and refining our collection of slides that help communicate ideas. We have been experimenting with a tool called Slideshare that is used for online archiving of presentations. We are constantly seeking ways to share information more effectively to help contractors grow.

The slides below are from a presentation we did as part of a panel for the CFMA (Construction Financial Managers Association) that focused on the use of technology for contractors.

To download these slides and see other currently posted presentations go to http://www.dbrownmanagement.com/about_speaking.htm

Problem Solving Flowchart

January 30, 2007

Last week I was visiting a client that we have been working with to help streamline their project management processes. I guess my constant nagging about flowcharts and efficiency got to them because one of the PM's took me into his office and was very excited to show me their latest "flowchart" for a "very important process."

View in full-screen

Turns out it was a joke e-mail. I had seen it a long time ago but it is still very funny. Just had to share...

On a serious note, flowcharting of a process across all functions really can make a huge difference in the organization. Learn more about workflow improvement and process documentation for contractors.

Herding Cats

January 06, 2007

The larger a team or company gets the more the job of leading feels like herding cats. This is an incredibly funny ad from EDS about technology but is just as applicable to anything else. Nothing too deep but anyone who manages people or projects for a living will laugh out loud at this!

Click the Play button below:

Link to Video

Great Marketing Idea For Service Contractors

January 04, 2007

I just saw an ad for NeighborMail which is a program offered by Armstrong Air for their dealers. It looks like what they do is send out a targeted direct mail piece for 20-30 houses immediately surrounding an installation you have already done.

This is geared towards HVAC and they manage the program for you but what if you tweaked it a little to use it for your own service business...

Imagine building a system so that everytime you did a service call or small project you logged into Sales Genie (www.salesgenie.com) or a similar database and got 20-30 contacts from neighboring businesses or homes.

Create a template mail-merge letter that includes a description of your services and highlights a project that you have just done, or are doing right in the neighborhood along with contact information to get an instant referral from your customer. Of course you would have to check with the customer for permission to use them as a referral but most customers will say yes.

This mailer goes out within 48 hours of you completing every job or service call. Many times people have a need to have work done and they are just procrastinating - just like many people would like to stop by and check in on a neighbor.

You can kill two birds with one stone - you are giving a neighbor a chance to stop by or call a friend and you are also getting your name in front of people.

Use a tagline on the outside of your envelope that says something like "Checkout The Project We Just Did For ______" or something along those lines.

I bet if you made this a habit after every service call or small project you would end up doubling your work in a matter of a couple years just by enhancing the word-of-mouth marketing that good service already generates.

You would then send out this letter to all the surrounding homes or businesses.

True Rewards – Mastering Your Craft

December 31, 2006

If you are a true craftsman you will never master your craft – you will always be working on it, getting better each and every day. Last week I got to know Jim Woolems (Founder/Owner of Woolems, Inc.) a little better and he is a great example of a true craftsman. He has built a great business focused on high-end homes and commercial properties.

Jim truly enjoys all aspects of the building process and on this trip to their company I got the opportunity to see what he does for fun on the weekends. Guess what it is – he builds things, constantly working on mastering his craft as a carpenter, welder and builder.

Being a craftsman is not about having a job in the construction industry. That is just the beginning. Being a craftsman is about truly taking pride in building things. It is about constantly working to expand your knowledge of the craft and of the industry. It is about helping others get involved in the industry and helping them achieve more. I believe to some degree we have lost sight of that in today’s construction industry.

Bottom line - we need more leaders like Jim Woolems passing their craft on to others.

Marketing Should Be The Customer’s WORST Experience With Your Company

December 30, 2006

Counterintuitive? Hear me out…

A few months ago I commented on a great post about why marketing should be involved in every aspect of the company. I firmly believe in this because marketing exists to help polish the company’s image.

This week I was in Florida with Woolems, a high-end home builder in Palm Beach. When I first arrived I was having dinner with the VP of Operations, John Rogers and he said something that really hit home:

“I want people to meet Jim (the owner) and have that be the worst experience they have with the company.”

John could tell I was looking at him a little funny and he continued explaining that he wanted to make sure that every interaction the company had with the customer after they met Jim would only serve to enhance and polish the image of the company.

That simple statement and explains John’s painstaking attention to detail in every aspect of the business. They build homes of phenomenal quality but they also go way beyond that. John is looking at every single point of customer contact from the way estimates are presented to how Woolems prepares homeowners on what to expect when building a house to how the bills are processed.

The results show and I only wish more contractors realized how critical every single customer interaction is. There is no such thing as a detail that is too small when it comes to pleasing customers.

Today Matters!

November 24, 2006

You are standing where you are today because of things you did or did not do in the past.

What you do today will determine where you will stand in the future.

Tomorrow will never come and all the money in the world will not let you re-live today.

Make one more phone call.

Send one more e-mail.

Have another cup of coffee and write down some details about that idea you had this morning on the way to work.

Develop that marketing piece.

Start that new business.

Spend some time researching that new technology you read the headline about.

Go home early and spend two extra hours with your family.

Whatever you decide to do - just do it. Do it with urgency. Do it 100%. Do it with passion.

How To Lose & Then Regain A Customer

November 19, 2006

I spend a lot of time traveling between client sites that are a ways away from my office. The two places I usually choose to spend that time are Starbuck's and Borders Bookstores. They both have T-Mobile and are nice places to work. If I have a long period of time I will usually go to a Borders and when I get stuck or just need a break from what I'm working on I will walk around and pick up magazines, books, CD's, etc. I can also get something to snack on and the all-important coffee jolt to get me through the day!

Being a lover of knowledge I spend a ton of money on books every year. The tactical ones I know I want are usually ordered on Amazon for the convenience. It's the things I see when wandering around that I will buy at Borders or in the airport.

Now I'm sure that I'm not alone in this and there are hundreds of thousands of professionals who have similar habits out there. I also bet that these people make up the majority of the profits that a book store sees because of the average purchase size being $100+ and frequency several times per month.

So, what got me irritated?

In the last few weeks I've been having several meetings near a Borders in Sacramento in a higher end shopping center and down the street from CSUS campus. My guess is that there are a higher percentage of people like me in this area than in other areas - just a thought.

What do I need when I go to a Borders? Just a table and power outlet. Give me those two things combined with snacks and coffee and I'll likely spend $50+ between books, magazines and food over the course of a couple hours.

What does this Borders have? No power outlets except one in the corner where they moved all tables away from and put a sticker on it saying "DO NOT USE - NO LAPTOPS" Basically "GO AWAY AND DO NOT GIVE US YOUR MONEY!" Last night after my laptop dies but a couple hours before I was going to leave I still wanted to buy a few things that I was looking at. After standing in line for 10 minutes I gave up and left. They got a grand total of $1.90 for a cup of coffee.

This morning I went to another, friendlier Borders and they also only have one outlet but they have put a long table right next to it, added a second outlet on the column and even put up a sign saying that this table was "Reserved For T-Mobile Customers."

What a contrast! Well, I got a coffee - then a water - then a snack - then got some work done - then left buying $90 worth of books.

I'm sure that the few dollars it cost them to add the second outlet in next to the existing one so that 4 people at a time could take advantage of the one table has come back to them many times over. It made me think about how much money the other Borders saved on electricity from pesky people like me "stealing" their power.

But wait - the story gets even better. Back to the first store. When I was working last night I saw what looked like a management team walking around doing inspections and generally looking to improve the place. I asked if they truly wanted my opinion - and they actually said yes. I told them everything I stated above and they nodded and thanked me for my input.

Honestly I figured it was the usual worthless "we want your opinion as a customer but not really" thing that is so common in today's business world. What amazed me is that tonight I returned to that Borders and in less than 24 hours they had moved a large table next to the outlet!

Simple fix - and as I write this I'm sitting here next to another business owner and we both have a stack of books we are getting ready to buy.

Are you doing simple things that seem smart (like saving pennies on electricity) but keep your customers from spending as much money as they can?

Do you take customer feedback and turn it into action that quickly? I am confident that my purchases this evening will more than pay for not only the electricity that I used but also for the labor it took to get this table moved into location.

I bet you can look around your business and find at least a dozen things you do that irritate customers just a little.

I bet you can solve all these problems for pennies.

I bet that the improved customer satisfaction will show up on your bottom line.

Software, Features & Design

"Customers are expert in knowing what they need to accomplish, but not in knowing how software ought to be designed to support their needs. Allowing customers to design software through feature requests is the worst form of disaster by committee." - Stephen Few from Information Dashboard Design

I run into this constantly when it comes to the design of project management or estimating systems. Honestly it is the fault of both the customers and the software designers. The customers "demand" features or else they won't buy the software and the software maker is trying to run a business so they attempt to build the feature into the next version.

I just started reading this book after reading about it in a post by Kathy Sierra that I talked about previously. I am only on page 35 and love it. The pictures of various dashboard displays on the first pages were worth the price of the book alone.

It is interesting to see the differences between dashboards that were built by software companies versus those built by end-users like the "Digital Cockpit" that GE uses. It shows how wide the divide is between how a software engineer thinks versus a manager, executive or business owner.

Feedback Systems & Customer Service

November 05, 2006

Saw this sign / system installed in Chicago airport and thought it was a good idea for a system that provides rapid feedback and makes customers feel involved in the process - also, the restroom was VERY clean!

What automatic feedback systems could you incorporate in your company? Could you make them involve your custommers? Remember that communication is huge - customers want to be heard.

It's All About Communication

November 04, 2006

In the last few days I saw several examples of customer service that are very applicable to contractors.

1. For a presentation on integrating accounting and operations I needed to get some tabs printed for the binders. I sent the order to Kinko's and they consistently failed to communicate receipt of the order or status. When I went to pick it up it was not even started. For all their talk about improved project management practices after FedEx bought them they failed in a few key areas. Netflix has built systems to specifically address the communication issues - they notify you when they receive a movie and when they do anything with the movie including shipping it. Couldn't Kinko's do the same thing? Why not send a confirmation e-mail from the store that will be filling the order stating that the order was received and that there are no problems. After that what about an e-mail when the project goes into production - possibly even with a note that the project will be done on-time. Finally send out an e-mail or give me a phone call when the order is complete. Do your project managers communcate well with their customers?

2. I tried to get home early from Philadelphia by taking a late flight on US Airways. They had problems getting off the runway. No big deal - problems happen. It is how you deal with problems that makes the difference on whether you keep a customer or not. Well, they failed completely. They showed no signs of "hustling" and that is what people want to see. This is why Les Schwab has people run to your car to change the tires, not walk. Next they failed to do anything special to make up for the more than 1 hour delay. Most airlines would have given away free drinks or something else to keep the customers happy during this period of time. I understand that you are trying to cut costs and I will help you out - in the future you will NEVER have to bear the cost of serving me because you will be the last airline I ever choose for travel. When we were coming into Las Vegas they could have communicated to find out connecting flight / gate information notifying those passengers who would completely miss their connections and helping those that still had a chance. They completely failed to communicate anything and even at the gate they failed to demonstrate any "hustle." Finally once in Las Vegas with a missed flight I had to go to multiple locations to get re-booked, get my luggage and get a hotel voucher. Again, one piece here is communication - even with problems customers are forgiving if they are communicated with. A second is the process for serving the customer. I am sure that a very highly paid consultant helped them design the "customer missed flight" process and it is very "efficient" for US Airways to have the process completed by four different people in four different parts of the airports making dozens of passengers walk from one location to the next at 2AM. What if you mapped out every process in your company that touches a customer? How seemless does it feel for the customer?

3. The next morning after a couple hours of sleep I had the opportunity to finally fly home (arriving 2 hours later than if I had just flown on United) and got into a conversation about contractors with Paul who was sitting next to me. He discussed how he had built his own backyard serving as the GC. What was his biggest complaint? Poor communication on the part of all the contractors. They did not show up when promised. They did not complete punch list items in a timely manner. They would show up at unscheduled times and expect to do work.

Customer service begins with communication. Do not ever underestimate the power of a phone call or e-mail. When in doubt over-communicate. Communicate even if it is to say you have no new information. It will make your customers happier and happier customers pay their bills faster!

If you don't serve your customers you will have fewer to serve and that will keep your costs way, way down! Spend a few extra minutes and a few extra dollars serving customers and you will be rewarded.

Where Are The Construction Workers?

November 01, 2006

Every company I talk to seems to have three things in common -

1. Their business is different and harder than any other construction business and much, much harder than simpler businesses like manufacturing.

2. Their hometown sports team is the best!

3. They always ask where the best people are hiding at.

Well, to address these questions in order -

1. ALL businesses are hard - if one business were substantially easier than another everyone would be doing it!

2. Of course it is.

3. Get a clue - they aren't hiding anywhere. They aren't there and the situation is not going to be getting better. With the current level of skilled trades people there is nothing that is going to magically fix the problem. The only thing you can do as a company to excel in this environment is to focus heavily on organizational planning that will provide a clear and rapid path from an entry-level position through a productive, skilled team member. Focus on training both at the craft level and at the management level to grow good crew leaders, foremen and project managers.

Business / Life Balance

October 28, 2006

I just came across a quote in BusinessWeek where Jim Koch was asked what the one thing he wished he had known before starting Brewery Boston Beer Co.

"It eats your life. If you're successful, the business requires all your energy to keep it going. If you're not, it requires all your energy to keep it from sinking. I thought it might be that way for a year - that was 22 years ago. "

Jim Koch is founder and brewer of Boston Beer, brewer of Samuel Adams

This is true for all businesses - especially for contractors. It seems so easy to go out and get your contractors license. It does not take long for the cold, hard reality to set in that (1) it is not going to be as easy as it looks, (2) there really is not much training out there for the business side of contracting and (3) this is going to take much, much longer than expected.

I don't think there are any two greater challenges or joys in life than raising kids or building a business. Both are a lot harder than they appear to do correctly but both provide emotional rewards that are far greater than any amount of money.

PDF Software - Worth A Look

October 17, 2006

Nuance - PDF Solutions - PDF Converter Professional 4

Cheaper than a full version of Adobe PDF professional and possibly worth a try for converting all your documents into a single format. PDF is one of the best all-around construction project management documentation tools around.

Delaney Construction + Forefront

September 18, 2006

Last week (9/11 Through 9/15 2006) I got the opportunity to visit Delaney Construction located in upstate New York. Delaney has a fantastic culture and the assignment was a lot of fun. Upstate NY is simply beautiful. See more pictures from the trip here.

Service Guarantees - Good For Customers & Good For Operations

August 18, 2006

This HVAC company is putting their money where their mouth is when it comes to a service guarantee. They are also loudly broadcasting this claim by putting it prominently on the side of their vehicles.

Guarantees like this are not only good for marketing but they also drive internal operations to be more efficient.

What guarantees could you provide that would serve both of those purposes and help improve your business?

A Brand Called You - 2006

August 16, 2006

It has been almost 10 years since Tom Peters wrote The Brand Called You for Fast Company magazine - this article had great insights on how to build your career and your company. The ideas are just as valid today as they were in 1997.

Recently on a long plane ride I was reading an issue of Forbes and they had an article about the rapper 50 Cent describing how he turned his life experiences (good and bad) into a clearly defined brand and the steps he continues to take to build that brand. The article is not about rap music - it is very much about business and brand building and is worth a few minutes of your time. Capitalist Rap.

30 Days (Outsourcing)

August 04, 2006

Last night I was watching Morgan Spurlock's show "30 Days" last night about outsourcing of IT jobs. The subject person was Chris Jobin who was a programmer with Morgan Stanley until his job was subcontracted out to Bangalore, India. Over dinner with his family he makes a comment that he would suggest that his son become a "plumber or something.." as if that were a step down from "programmer."

This is exactly the type of mentality that lead to the current problems we have in the construction industry. Starting many years ago the education system has somehow created an environment where people believe that a career in construction is a bad choice where one in IT and some other "professional occupations" are good.

Let me remind you of a few things -

(1) Most construction workers make as much if not more than these "professional" jobs

(2) Most of these so-called "professional" jobs that the weak education system trains people for are basically low-level jobs that actually create little value and there is no reason why a company wouldn't want to subcontract these out as cheaply as possible - be real with yourself about your work - are you really creating value or is it basic data entry / analysis stuff?

(3) while some pre-fabrication activities for construction can be done out of the country construction jobs are pretty immune to outsourcing and

(4) It was us "dumb" construction workers that laid the fiber across the county and across the oceans (while getting paid a lot!) that allowed for 3rd world countries to start pulling themselves up out of poverty.

I sincerely apologize for the harshness of this post but I love construction - it was the path I chose. When I was in school I was told I wouldn't amount to much because of this chosen path. At least I had the benefit of good vocational classes when I was in school - today kids don't even have that opportunity. Wood, metal and auto shops have been replaced with computer labs. Great job! Create even more kids that think construction is a bad career choice who will soon have their jobs outsourced.

Building your career in the construction industry is a great opportunity - don't listen to the masses!

Construction Pricing Negotiation

August 02, 2006

Yesterday I had a long drive to a client site and picked up an audio book for the trip called "Often Wrong, Never In Doubt" by Donny Deutsch which focuses primarily about lessons he learned building an advertising agency in NY. In one chapter he discusses the pricing models for advertising which in construction terms is T&M or Cost+. The rates were based on a formula designed to cover salary costs plus an overhead allocation and mark-up for profit.

One of the trends in the advertising world was that some of the large clients like Phizer started coming into the agencies with auditors and "analyzing" these costs - checking to see how much actual salaries were, what rent on the building was, etc. They were trying to make sure the mark-ups were "fair!" While these audits may have looked for the things that were easy to measure such as costs and mark-up they did not take into account anything else that mattered. They were not comparing actual billable rates against competitors. They were not comparing actual work done for a certain amount of hours (productivity) against competetors. They were not comparing quality or results either. These auditors were simply looking at costs and making sure that the markup was as low as possible! Donny states that he doesn't know of any other industry that is subjected to this - well, here's one - CONSTRUCTION.

Almost every day in construction a project manager or estimator is asked for "backup" for their pricing by a customer or potential customer. This is especially bad when working on a T&M job or change order. Whether a customer has any construction experience or not for some reason many of them turn into these construction operations gurus when it comes time to review a proposal, bill or change order. They start asking all kinds of questions such as why does this take two people, this activity should have only taken X time, why does this guy have a company truck, why is your overhead so high, etc.

Many times their right to this information is in your contract and if it is you should be aware of it but also remember that as soon as you start negotiating pricing based on your costs you have already started down the wrong road. From the very first conversation you have with the customer you should be positioning for value - whether it is your speed, quality, ability to start ASAP, etc. Focus on what makes you different from your competitors. If you start talking about costs then the conversation has shifted and you are no longer a valuable service - now you are considered a commodity and like rice or grain will just be paid for in a similar manner.

One other thing to keep in mind - the customer only wants to talk to you about pricing based on your costs when things are going well. If things go bad and your costs go way up then they would prefer you stick to the lump-sum price. If you give in constantly when negotiating pricing when things are going well you will not have enough money left over to cover the risks when things will inevitably go wrong.

Lack of Resources = Strength!

July 30, 2006

Seth Godin makes some very strong points regarding how too much money and resources can actually be counter productive. We see this on a regular basis with contrator clients - when business is "good" they have some free cash flow so they often spend it on paying for professional services that they could easily do themselves with a little "elbow grease and innovation."

What inevitably happens is that the market shifts just a little and isn't so "good" forcing them to do some really innovative and dificult things on their own - thus learning and becoming stronger as a company; as a team. The lack of resources and temporary pain actually gets them a lot closer to being a "great" company.

When it comes to professional services whether it is consulting, accounting or legal - if you think you can do it yourself then try. If you think you need help then get as little help as you can regardless of how much help you can afford. In the long-run you will be better off.

Don't Lose Focus (Advanced)

Building a strong business has to do with creating value each and every day both for the customers and for the owners and stakeholders in the business.

Previously we commented on avoiding a focus on the top line and focusing on bottom line, net profits.

We consistently encourage contractors to integrate their accounting and operations systems to measure net profit down to specific teams in the organization to help keep everyone focused.

This month in Contractor Magazine consultant Matt Stevens takes this a critical step further by discussing Return on Investment (ROI) - both at the company level and then breaking it down to the project level.

Don't Lose Focus

"Top line is VANITY - bottom line is SANITY"

Excellent quote from Jeffrey Fox and his book How To Be A Marketing Superstar

The revenue trap is something that many estimators and contractors fall into - only go after customers and jobs that have a good bottom line. Going after revenue for the sake of revenue will only hurt your cash flow and stretch your resources thin making profitibility even more difficult.

Kerry O'Brien - Productivity Consultant

March 21, 2006

Construction Jobsite Productivity Improvement. K.E. O'Brien & Associates Inc.

A very interesting consultant with a lot of great ideas for jobsite production improvements.

A Perfect Cup Of Coffee

February 27, 2006

Today I was at Starbucks working on a presentation on Impacted Jobsite Productivity and at the table next to me was a woman studying a 4" binder, taking notes, filling out forms, doing activities and taking quizes.

Every so often a manager came over and would review certain things with her, ask questions, explain details, etc.

After a few hours I asked her what she was doing. She explained that she had worked there for a while and was moving up to an assistant manager position. The 4" manual contained every detail about running the store. Some modules had classes associated with them that she had to go attend which were presented by other store or regional managers. The store manager went over every module with her and signed off when she had completed them.

I was completely amazed at the level of detail and it explains why you get a darn near perfect cup of coffee along with a very consistent corporate personality at every location. What is even more amazing is that Starbucks has maintained that level of quality and consistent customer service even as they are hiring upwards of 20,000 new people in 2006.

Now contrast that with construction - how much time do we spend with a new crew leader or foreman before sending them out to run hundreds of thousands of dollars; even millions of dollars worth of installation? How many more variables are there in construction than there are in making a cup of coffee?

What if you had a manual about how you do things in your company, how customers get treated, how employees are treated and how money is made?

What if you sat down and went over EVERY detail with EVERY supervisor? Would you get a return on that investment in time? You bet you would!

Why don't more companies do this? It's darn hard work!

It takes a lot of time to analyze the basics of your business, document those and then spend time training people.

If you are tired of inconsistent treatment of customers and employees by your supervisors and are frustrated by fluctuating profit margins then you should look into creating an operations manual for your company - and then using it!

Landscape Lighting

December 24, 2005

Design and Installation Guide

Great how-to guide about designing a landscape lighting system. Few things can change the looks of your property more than great outdoor lighting. Just one of those things to add to next year's list of "To-Do's" around the house.

Market Share & Customer Service

December 22, 2005

I had a phenominal customer service experience this week with Intuit / QuickBooks and just had to relay it because it has implications for any business. For a client project we had purchased various pieces of the QuickBooks software after consulting with Intuit. When we got down to the implementation we found that two of the licenses needed upgrading. It was a $500 problem on a much bigger project and because we had coordinated the software and hardware requirements I was prepared to make this problem go away for our client even though we were only marginally responsible for this error.

When I called Intuit's customer service and told them the story they quickly understood and they also believed they were marginally responsible and without prompting they upgraded the licenses for us. It was simply handled. I've always believed that if I am responsible in any way I will make it right by the customer because the goodwill generated will outweigh any short-term costs.

It is obvious that Intuit's management feels the same way. There is definately a connection between customer service and market share - Intuit proves it and is the #1 provider of small-business accounting software.

You can contrast this with the customer service at AT&T or Cingular - all the language used is the same "Thank you", "Appreciate your business", etc. but for the simplest of problems you need to escalate through 2-3 levels to get a $20 problem taken care of. It definately sends the wrong message to the customer but unfortunately the cost of entry is very high for certain markets so companies can get by providing poor customer service.

Most likely you don't operate a virtual monopoly so customer service is VERY important to your business. EVERYONE in your company should be trained and have the authority to provide great customer service. Along with the right pricing and quality you will gain market share by providing the best customer service in your industry.

Hard Work

December 11, 2005

"We may have invented capitalism, but we took our eye off the ball. Perhaps it is our complacency, but the truth of the matter is that we are being outworked from the boardroom to the factory floor. In my travels overseas, I have seen a hunger for success far greater than what I see at home. If your counterpart anywhere in the world is willing to work harder then you, they win, you lose. This applies whether you are a CEO or a pipe-fitter." - Mike Neiss (TomPeters.com)

Read More: tompeters! management consulting leadership training development project management

I came across this the other day and found it very "on-point" regarding the state of employment, the economy and globalization.

I see way too many people sitting around and blaming others for their problems. It appears that most people have gotten very lazy and would rather spend time complaining about the situation rather than trying to improve themselves and their situation.

Most steps being taken including Project Labor Agreements (PLA's), attempts to unionize the technology industry, union agreements that are out-of-touch with the realities of business and other political moves are all very short-term patches that will do nothing to cure the problem.

These steps will only weaken our position because they delay the American worker's need to innovate and improve themselves.

Here's one thing I have a hard time reconciling in my mind - on one hand I watch the news and it points to this widespread unemployment caused by "X" and on the other hand I've NEVER talked to a business owner or executive who claims to have all the good people they need.

Are both sides right? The answer is yes. Business owners and managers WILL find ways to serve their customers and keep their businesses alive. The problem is the average person is NOT taking responsibility for making sure their skills match the requirements of the businesses.

It's much easier to sit back and expect that a union or the government or the business owner will take care of them.

THIS THOUGHT PROCESS WILL ONLY LEAD TO FAILURE!

The other thing I find amazing is that people are still complaining about this even though we are in an age where information is nearing zero cost. If someone were motivated with an internet connection, bus pass and public library card they could become very productive in almost any field, allowing them to make a very good living.

Sorry for ranting about this so much but this is a serious problem and people do need to start taking personal responsibility rather than expecting someone else to solve their problems.

Equipment Expenses & The Contractor

February 07, 2005

Today I got into a discussion regarding the various methods of accounting for equipment expenses for contracting businesses.  These are all the costs associated with an equipment fleet including registration, license fees, insurance, depreciation, maintenance, modifications and repairs.  Depending on the type of contractor these costs range from insignificant up to 30% or more of their annual costs. 

Some contractors simply choose to look at these costs as overhead.  Depending on the type of business this is usually an inaccurate allocation of the costs since they are really indirect job costs - costs that are incurred as part of constructing a project but not directly attributable to a specific project.  Assuming that the business is looking at these costs as indirect costs there are a couple of ways to allocate them. 

The simplest method is to simply allocate the costs to individual projects as a factor of labor, total revenue or using some other methodology.  There are strong arguments for this method including the fact that it takes very little time to manage throughout the year and strictly from a reporting and accounting standpoint when looking at the project portfolio for the year this method seems to be within a reasonable range of the more challenging but also most accurate method of utilizing internal billing rates for equipment as described below. 

Utilizing internal billing rates on either an hourly, weekly or monthly basis for equipment is the most accurate method of allocating indirect equipment costs to individual jobs.  The goal is to set equipment billing rates that over the course of the year will offset the total cost of the equipment fleet based on utilization on your projects.  This method requires additional paperwork, accounting data entry, management and possibly an upgrade of the accounting system to one with an equipment module.  As stated previously this is the most accurate method of recovering equipment costs but if it requires all the additional work and systems and doesn't produce substantially different accounting results then the simpler allocation methods then why go to the extra trouble? 

If you are a contractor where equipment utilized varies significantly based on the particular job and equipment makes up at least 20% of your job costs then the proper utilization of that equipment can make a huge difference in your job costs and therefore your profitability.  Running a business successfully is all about the proper utilization of resources; cash, people, material and equipment. 

I believe that people will make the right decisions if given the right information.  If you show someone how to save 10% on their job costs by changing their mix of people and equipment then they will make the right decisions every day.  If equipment costs are charged to overhead or allocated then there is no direct connection in their minds between taking an extra truck to the jobsite and additional costs.  This creates a culture of hording and feeling like the job is constantly being over-charged for the use of the equipment.  This drives poor utilization of equipment resources and that costs money every day. 

On the other hand if equipment is charged directly to the job at a rate then when estimators bid the job they have an exact number to work with and when people including project managers, superintendents and foreman take a piece of equipment to the job they know exactly what the cost will be.  When they are trained to track productivity and plan efficiently they will decide to take one truck with three people in it rather than two trucks.  Even if there are two trucks available in the yard it is still more efficient to leave one in the yard - less fuel, less risk, less wear & tear.  They will choose to work overtime to get a job done to avoid a second day of equipment utilization costs - thus making the equipment and the crew available to be utilized elsewhere. 

Again, depending on the specifics of the business but in general these little decisions made every day by every employee add up to a lot of money at the end of the year and will far outweigh the costs of implementing an equipment tracking system.  For more information regarding whether this could benefit your company look into a Rapid Construction Company Analysis (RCCA) which is potentially a free assessment.