Strategic Planning

Typically in construction owners/leaders never have time to do strategic planning because they are either too busy doing work or too busy getting work. There is never time to plan! Today, most contractors are busy on getting work, not just because the of recession, BUT because there was no strategic planning done back when the “doing the work” was big.

Someone said, “Don’t waste a good recession.” As Steven Covey suggests that which is important, but not urgent, should be a leadership priority. You don’t need to do a weeklong retreat in some exotic location to do strategic planning. Here are some things you can do:
Take time to study your competition – what are they doing and what does it look like they will be doing (to you.)?
Do a SWOT analysis as part of your weekly management team meeting. Allocate about 30 minutes a week for 4 weeks. Do Strengths and Weaknesses one week and Opportunities & Threats the next. In each session list ideas and seek understanding – no actions or decisions. During the third week put the information generated in the previous two sessions together and identify the key points relevant to your company. Use week four to identify key actions to take for the next six months. Delegate by determining who will do what by when. Once a month, review progress.
Visit your key customers. Don’t sell – just ask questions about their plans and listen to understand.
Meet with your key suppliers and ask about their plans and also what they hear from other customers – listen to understand.
Do improvement sessions with your employees – ask for their ideas on how to improve the company. Listen to understand. Prioritize the list by what is low hanging fruit and do it. The sooner they see their ideas implemented, the more likely they will be to give more ideas.
Determine what training your employees need or will need when the recession is over. Start training now.
Do a partnership with other key subcontractors and/or general contractors. Develop ways to market yourselves as a team.

Customer Focused

A recent survey from Industryweek it found that most companies (44% of the survey population) are focusing their efforts on cutting costs in 2010. This is up from 36% last year. When a company is in a survival mode, cutting costs is usually the first response. The same survey found that some companies (18%) are focusing on Customer Service. This is down from last year’s 27%.

While the number of companies focusing on customer service is down, these companies are the wise ones. When a company focuses on cost cutting, customer service usually goes down. As customers experience this loss they become less loyal. The recession won’t last forever. When it does change, many companies will be surprised to discover that their once loyal customers have vanished. Getting these customers back will not be easy.

Customers want value – “value” is always in the eyes of the beholder (customer). One owner may value weekly updates on the status of his job, while another may value an excellent safety record. Most owners would be thrilled to have the project come in ahead of schedule, but some may not if the original schedule deadline was set to match the arrival of special equipment. To determine what a customer values, one must really listen to the customer’s communications. This is more than what is printed in bid specifications; it comes from discussions in face-to-face meetings. It comes from asking many questions and listening to understand not to rebuttal. It doesn’t happen once, but many times in frequent messages sent between customer and contractor. Not only must one listen to the customer, but also one must have a system to collect and share this information. If each employee keeps what he or she learned about the customer to him/herself, it will do little good for the company.

This system to collect what the customer is saying need not be complex. It can be a log that records information for future analysis. This includes a file of customer complaints. It would include comments captured by employees. Take the time in meetings to ask employees what they have heard customers say. The log can note customer comments heard in other meetings including post project reviews and interviews with customers. Collecting this information is not sufficient, but a great start. There must be a periodic review to spot trends and changes in customer behavior. Review the information quarterly and then again annually, looking at what was learned each quarter.

What ways to do you learn from your customers? Cutting cost may be necessary to survive this year, but do not lose focus on your most important key to success – your customers. If you lose them, all the cost cutting efforts will be for naught.

Process Management

What risks are you not seeing?

The problem with all of us humans is that we are not omnipresent. We don’t know what we don’t know and can’t see everything. However we can learn from others. In this troubled economy we are all trying to manage our risks better.

Here is one way you may not have considered – What if a key supplier goes out of business? The one that you used to submit a low bid on a major project? If you don’t win the job, you can breath a little easier. But what if you do get the job? Bigger jobs are not being rewarded all that quickly, and you may have thought the supplier was doing fine at the time of the bid, but not now. How can you minimize this risk?

Monitor the company – Indications include not being able to fill current orders – material always backlogged. Employee turnover is another indication – observant people leave a sinking ship or the company may be caught in a downsizing death spiral so your people never work with the same people. Fast to bill and slow to credit is another sign.

Another way is to follow the parent companies – many suppliers are owned by a larger corporation. If a supplier is key to your success, keep tabs on the parent company.

Keep the relationships open. Face to face contact is still the best form of communications. While working to maintain loyal customers, don’t forget to work with your key suppliers.

Keeping Score – How do you manage cash

If not always, then certainly now, Cash is King. High-performing contractors are doing all they can to manage their cash-flow to maintain a competitive advantage. Karen Kroll in her article New Thinking on Cash Management, January 13th, 2010 has some thoughts on cash management.

“It’s not surprising that more than four in five of the 130 finance executives who participated in a recent study from Aberdeen Group said that their firm’s focus on cash management had increased over the past 12 months….

“What is surprising is the mix of steps that best-in-class companies have taken to navigate the economic downturn and credit crunch. For this study, best-in-class firms were those with lower-than-average days-sales-outstanding (DSO), which is one measure of receivables management, says Nasreen Quibria, senior analyst with Aberdeen and an author of the study. DSO was 21 days at the top firms, versus 72 days at the firms that made up the bottom 30 percent of companies, aka the laggards.”

Are you a “best-in-class” company or a “laggard?” What is your days-sales-outstanding number? With the challenged economy many customers are trying to stretch payments to suppliers. Many contractors just accept this as part of doing business. High-performing contractors take a proactive role to make sure they are paid on time. They have a system in place to indicate when payment is lagging and a process defined for what action to take. I have noted that most contractors do not have a well-defined process to address late payments and many who do are not following it. One client was surprised to learn that late payments happened often because the customer had a problem with the billed work or an invoice calculation. This did not surface until almost 90 days later when the billing clerk called the customer to see why payment had not been made. Why did they wait 90 days to call? How long do you wait to call about a past due invoice? How do you know?

Is it time to reevaluate your collection system? Do you even have a defined system? Do you follow it, or is every job an exception? Project managers love to manage jobs and rarely like to worry about collecting money. Yet often customers don’t pay because the accounts payable clerk is waiting clearance from the company’s field operations manager. Your PM can improve payment by frequent discussions with his/her customer’s counterpart. This is basic solid management 101 but many contractors don’t do it. How proactive are you? What is your DSO? Are you best in class?

Learning Opportunities

Some articles you may want to read:

The Risk of Bidding Green (Contractor Magazine – March 2010): http://contractormag.com/columns/sowards/risk-bidding-green-jobs-0310/

Taking Waste out of Construction (Contractors Tools Source – April 2010): http://www.ctsmag.com/index.php/in-this-issue-/108-productivity-take-the-waste-out-of-construction.html

You may be interested in attending one of these training seminars:

April 22, 2010 - Lean Applied to Service – Phoenix, AZ, Sponsor: PIPE & 469 JAC, contact Cathy Mayeux at 480.966.0377 or CMayeux@pipetrust.org

April 23, 2010 - Applying the 5S’s in Lean Construction, Phoenix, AZ – The National Association of Women in Construction (NAWIC) Regional Forum. Contact: Kim Baldwin at Kim.Baldwin@pcg.com

May 20, 2010 - Getting to the Root Cause by Analysis not Luck - Phoenix, AZ, Sponsor: PIPE & 469 JAC, contact Cathy Mayeux at 480.966.0377 or CMayeux@pipetrust.org

Sept 30, 2010 – Lean Construction – It can work for you - Phoenix, AZ, Sponsor: PIPE & 469 JAC, contact Cathy Mayeux at 480.966.0377 or CMayeux@pipetrust.org

Oct. 28, 2010 – Gaining Customer Loyalty by Design - Phoenix, AZ, Sponsor: PIPE & 469 JAC, contact Cathy Mayeux at 480.966.0377 or CMayeux@pipetrust.org

Oct. 29, 2010 – Lean in Construction and Lean applied to Service at PHCC National Convention, Las Vegas.

Thought for the day

Nothing shows respect for another person as much as asking for his advice, because what you are really saying when you ask for advice is, ‘I appreciate what you know and the experiences you have had, and I value your ideas and suggestions.
- M. Russell Ballard

For more information about the High-Performing Contractor assessment process contact Dennis Sowards at 480-835-1185

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