High-Performing Contractor - NEWSLETTER Oct 2007

**************** Leadership
Ted Garrison discusses the importance of being a high-performing contractor:

“The reason that high performance is so important is very simple: High performing contractors make higher profits! This claim is supported by a Harvard Business School-funded research project (Corporate Culture and Performance by Kotter and Heskett) that discovered that businesses that focus on meeting the needs of customers, employees and owners while developing leadership through the company, outperform the competition in four critical areas:

Revenues increase 4 times faster.
Job creation is 7 times faster.
Owner equity grows 12 times faster.
Profit performance is 750 times higher.

“The question is what is high performance? Most contractors claim they provide high performance; however, general clients have a different opinion. Unfortunately for the contractor the only opinion that matters is the client's.

“The problem starts with quality, which I declare consists of three essential elements. The first is the bricks and mortar and most contractors do a reasonable job in that area.

“Service and relationships are the other two elements that make up quality. In these two areas there is a substantial difference between contractors. However, the contractors that master these two areas differentiate their companies from their competitors and experience extraordinary benefits.

“I have heard statements that illustrate the importance of service and relationship. One common statement is, "They are the best contractor in town, yet if they improved their close-out procedures and communication they could substantially improve their performance." The highest-performing contractors listen to their clients.

“A key to this concept is better understanding the concept of client. I prefer the definition of a client as "someone under the protection of." How long would you keep your attorney or financial planner if you didn't think they were protecting you? Then how long should a construction client keep a contractor if he's not protecting him? Yet, how many construction clients think their contractor is out to protect them?

“Instead of protecting the client, contractors often find themselves in conflict with them. This serves no one. And yes, I understand that many clients create many of the conflicts. However, instead of protecting the client from himself the contractor retaliates in an effort to level the playing field.

“The confrontational approach has a fundamental flaw. There is no such thing as a successful win-lose situation. The reason is the loser will sabotage the process until it finally ends up in a lose-lose situation. Therefore, the only sustainable relationship is a win-win-win environment that includes, customers, employees and construction company owners.

“Cooperation is the spirit of the "Best Value Procurement Approach." This approach works because it delivers the greatest value to the client, doesn't exploit the workers, and rewards the contractor for high performance. I realize that some customers will insist on hammering on price with the aim of getting something for nothing.

“The alternative is for contractors to seek out clients who understand value. Contractors that do that are rewarded with higher profits and growth and have happier clients.

“Dr. Kashiwagi, in his book Best Value Procurement states, "Quality contractors earn more profit because they are more efficient, are not price based, perform work properly the first time, and are requested by [clients] who want work done right."

“I don't want to mislead you; this approach isn't easy. It takes hard work, but it is certainly better than the alternative of competing on price.

“The choice is yours, but when you find clients that realize that you're entitled to make a fair profit for the value delivered and you treat them the way they want to be treated, your business will soar to new levels.”

Source: “High Performance is the Path for Successful Contractors” by Ted Garrison, Southeast Construction Magazine: September 2005.

**************** Customer Focused
Customers do not want cheap, they really want the best value. Value is more than just price. It includes the functionality of the product and the whole service experience. Adams Hudson, a noted industry expert on marketing and customer satisfaction, says there are four things that drive Service customers crazy:
“Not scheduling the appointment fast enough.
Not showing up on time or at all.
Not finishing on time.
Not cleaning up.” (1)
Notice that price is not one of the four. While price is always a consideration, especially in service work, most customers will seek more than low price. They will especially remember what made them mad during the last service call. Contractors doing Service work can use this list as a start for exploring how to add value, as seen by the customer. Even if you don’t do service work, this can led to a useful discussion. What are the four things that drive your customers crazy? How do you know? What are you doing about it?

(1) Hudson, Adams, “The Four Things that Drive Your Customers Crazy”, ACHR - For the News, Nov. 14, 2004.

**************** Employee Focus – Motivating Employees – One more time
A 2007 Contractor productivity survey conducted by FMI, a leading construction industry consultant firm, found that only 19% of the contractors surveyed feel that financial incentives had a substantial impact on productivity. (2) Another study of workers in manufacturing on what helped them improve productivity found the only 4% of the workers felt that pay for performance caused them to be more productive. Other factors such as Lean tools, technology and skill workers contributed to increased productivity rather than incentives. It is interesting that the 8% of the employers saw money as a major contributor to increasing productivity, again compared to 4% of the workers. (3) Management thinks money is more motivating than do those doing the work.

There is ample research to show that throwing money at workers will not generate the productivity levels wanted. While money is a motivator for almost everyone, bonuses or incentives alone do not generate long-term productivity gains and often encourage productivity number games! If someone offered to double your annual pay in exchange for doubling your productivity this year, could you do it? This is a trick question and how you answer it may reflect on your current work level and capacity.

If money doesn’t motivate, what does? Feeling valued as a human being is a strong motivator. Being recognized for contributing to the company and doing something right motivates employees stronger than money. Trust motivates employees. Asking employees for their opinions and then really listening and responding to their concerns and answers grows trust. Sharing the vision for the company and telling employees what’s happening and what is expected build trust. Employees feel they are part of the team when included in the communications. Exclude them by keeping them in the dark sends a very powerful negative message to employees. It is not the message most managers intend to send, but often do by default. The ways to improve employee productivity and loyalty are usually less expensive than financial ones. They require a different kind of investment. They require managers to actually learn how to lead their employees and engage them in continuous improvement. It means management needs to communicate with and listen to the workers. That takes time and effort which some managers are just too busy working in the business to work on the business. In the end, the company’s success depends on its people more than any other factor. Money will buy short-term improvements but workers will do more when they feel valued by management.

(2) “Work Smarter, not just harder,” Bob Miodonski, Contractor Magazine Nov. 2006.
(3) “Efficiency Boosts Productivity,” By Jonathan Katz, IndustryWeek, Oct. 1, 2007.

**************** Learning Opportunities
You may be interested in attending one of these training seminars by Dennis Sowards:
Oct. 22, 2007 – Lean Works in Construction – an update of recent research - Las Vegas, NV SMACNA National Convention, contact: wwwsmacna.org
Oct. 25, 2007 – Performance Measurement - How to Use Measures to Manage and Improve Performance - Phoenix, AZ – Sponsor: PIPE & 469 JAC, contact Cathy at pipetrust@qwest.net

**************** Thought for the day
To paraphrase computer genius Alan Kay, the only way to predict the future is to create it.
- Mark Smith