High-Performing Contractor - NEWSLETTER February 2006

High-Performing Contractor - NEWSLETTER

February 2006

**************** Leadership Fosters Success

A research study of the industrial products sector identifies four attributes that the stock-value growth leaders in that industry demonstrates. Their findings are also applicable to contractors too.

The study was done by Accenture. It looked at the financial, operational, and value systems of 100 public companies that consistently deliver "above-average return to shareholders and achieve growth and returns in excess of capital costs above the industry median." The research used the period of March 2000 to March 2005 for the stock price comparison. The study identified four "pillars" common to all the leading companies.  These are:

1. Global Flexibility: Sales and marketing, product development, manufacturing and distribution, parts and service -- basically, all components of the supply chain work in an integrated way that allow companies to be responsive to market opportunities. Most contractors are not concerned on global markets but what would having all the components of our supply chain working together would do for us? Do our people who bid the jobs really work with the shop, material delivery and labor superintendent to ensure we can meet the job requirements?  What about working with air balance subcontractors and with the Service team to propose an ongoing service contract after the installation?

2.  Innovation and Pricing Power: The companies have "an exceptionally good understanding of their customers' needs" and therefore can command premium pricing. This insight comes from rigorous marketing analytics that bring an in-depth understanding of customers.  What are we doing to better understand our customer’s changing needs?  How much time does anyone in our company spend with the customer learning their plans, challenges and expectations?  We usually only spend enough time to find out about the next job and/or making a sales pitch.  When I refer to ‘customer” I am including the facilities owner not just the general contractor. What do you do to better understand their business?

3.  Productivity Plus: A lean culture permeates the companies, the result of which is high productivity. Most contractors are just beginning to hear the word ‘Lean’ as applied to construction. Just like in manufacturing where the Lean companies are the lead companies, contractors who embrace Lean construction will be leaders in their markets.

4.  People Performance: The high-growth companies emphasize recruitment and retention of employees with needed skills and attitude. This plays out with strictly managed measurement and reward systems. Also, continuous learning is a philosophical priority. With growth in most markets today, a major challenge for contractors is to have enough skilled employees. I’ve recently heard many stories of contractors turning down good work because they can’t man it. Do you have a good measurement system to indicate when crews are performing well? Do you have a fair and consistent rewards system so excellent performance is recognized?  What is your investment in employee training? Do you do the least possible to meet contactor requirements, or do you train to develop your employees?

Accenture feels these findings are particularly significant as a company begins to experience a rebound in the economy. Accenture expects "2006 and 2007 will continue to present significant growth opportunities." As the construction market follows this rebound, Living these pillars will also help savvy contractors separate themselves from the competition.

**************** Strategic Planning

Most contractors question the need for a strategic plan. At best they already have a business plan submitted to the bank, so why a strategic plan? One owner even suggested that “strategic” is a bad word among contractors and to be avoided.  A study by the Construction Financial Managers Association (CFMA) found that contractors who “regularly engage with the big–picture, long term vision and mission for their company are larger and more successful than their peers who do not.” Examples cited in the study are:

Some contractors feel that strategic planning is only for the large companies but this is somewhat a chicken & egg issue. Did the plan lead to growing large, or does being large drive the need for a plan? Small contractors who do strategic planning do not go through as extensive of a planning process as larger companies but still develop a plan and implement it. The reality is that any organization will do better if it knows where it is going, and the numbers prove it.

The report said ‘no time’ was most often the reason given by contractors for not doing strategic planning.  In construction, we are always too busy to stop and sharpen the saw. How does a company overcome the time crunch?  The answer is almost too simple. Just do it! We all have the same 24 hours of time - big or small company.  There is never enough time to do everything we want to do. Making time for creating a simple strategic plan will save time and resources in the long run. What do I mean by a ‘simple’ plan? It is one that answers these three questions:

·       Who we  are? (Our purpose for existing.)

·       Where we want to be in a few (5 to 10) years?  (Our strategic vision.)

·       What actions we plan to take this year to move towards the vision?

Whether you use all the terms of strategic planning (vision, mission, strategic intent, values, etc.) or not isn’t as important as having simple and meaningful answers to the questions and often communicating those answers to your employees.  A simple plan need not take months to develop and several 3-ring binders to document. It can be one to two pages.  Managers become leaders by setting and communicating the direction the company is to go. Companies become more successful by having and following a strategic plan.  So what’s in your plan?

**************** Process Management - Five Erroneous Assumptions about Quality

There are five assumptions about quality that many managers and employees believe to be true - but are not!  These are:

1.     Quality means goodness, luxury, or shininess!  Quality is meeting the customer’s requirements. When someone says, “I can’t afford more quality!” they are really saying I can’t provide more luxury. If we can’t meet the customer’s requirements then why are we in the business? High-performing contractors invest much time in making sure they understand the customer’s requirements then designing systems and processes to meet those requirements.

2.     Quality is intangible - so it can’t be measured. Many say, “I can’t define quality but I know it when I see it.” If you can’t define it, you cannot build to the requirements. You will spend all your time negotiating on what it looks like. Quality is definable in terms of the customer’s requirements and if we meet them or not.

3.     There is an economic limit to Quality.  There has never been a proven situation where it was cheaper to rework a job than to do it right the first time!  It is always more economical to do it right the first pass. The key again is defining what ‘right’ is and delivering on that requirement.

4.      The “workers” cause all quality problems! The quality gurus agree and research supports their point that most quality problems do not come because of the workers. Over 80% of all problems are because of inadequate systems and failed processes, not because of workers with bad attitudes or poor skills. Management is responsible to fix the processes, but most of the time management blames the workers.

5.      Quality originates with the Quality Department! Just like safety, quality must be part of the culture and values of the company. It will not be part of the culture if it is seen as the sole responsibility of a staff person or department.

The pathway to improve quality is to debunk these myths and to work on your quality management systems. Consider these numbers as you ponder the U. S. Auto industry’s challenges, in 2004* these are the average hours used to assemble a single vehicle:

·       DaimlerChrysler – 25.17 hours

·       GM – 23.09 hours

·       Ford – 24.48 hours

Compare this to Toyota. In 2004 they took 20.62 hours.  Toyota is constantly looking to improve quality and become more Lean.  They don’t believe the myths of Quality. By the way Toyota does the least outsourcing of any of the big automakers and is planning to build three new plants in the USA.

* Source for numbers: What’s Bugging the Big Three? Quality Digest, November 2005

**************** Learning Opportunities
These training seminars are presented by Dennis Sowards:

• Feb. 23, 2006 - Creating Customer Loyalty by Design – Phoenix AZ - Sponsor: PIPE and 469 JATC
• March 23, 2006 - Continuous Improvement – Breakfast of Champions - Phoenix AZ - Sponsor: PIPE and 469 JATC  
• March 30, 2006 - Lean Applied to Construction at the Partners in Progress Conference, Caesars Palace, Las Vegas, NV  
• April 20, 2006 - Job Planning that Works (Lean Construction tools) - Phoenix AZ - Sponsor: PIPE and 469 JATC  
• May 18, 2006 -5S’s for Lean Construction - Phoenix AZ - Sponsor: PIPE and 469 JATC
• Oct. 9, 2005 – Measuring Customer Loyalty -  SMACNA National Convention - Phoenix AZ.

**************** Thought for the day

"Worry about being better; bigger will take care of itself. Think one customer at a time and take care of each one the best way you can."  Gary Comer

 This e-newsletter is dedicated to supporting the SMACNA High-Performing Contractor Assessment Model and all contractors working to become High-Performing Contractors.  Written by Dennis Sowards

For more information about the High-Performing Contractor assessment process contact Dennis Sowards at 480-835-1185 or at dennis@YourQSS.com (see www.YourQSS.com)