At the start of the new year, many companies are assessing their past year's performance and developing plans for improvement in the year to come. This is a good time to review what makes a good contractor. Gauge your own level of susceptibility to each item as you read the list of problems that cause contractors to go broke:
- They grow too fast
- They lose leadership or key people through retirement or to competitors
- Someone at the top loses interest
- They suffer bad luck in the form of weather, strikes, death, accidents, or bankrupt general contractors, subs, suppliers, or owners
- They take on unfamiliar work or work in an unfamiliar market
- They have incompetent estimators, field managers, or top managers
- They follow a flawed strategy for too long
- They rely on bad information from a poor management information system
All of these problems are preventable, even to some extent the one involving just bad luck. Because this topic should not be over-simplified I am presenting it in two parts. But, as serious as these problems are, the preventative measures, or the characteristics that good contractors share, can be listed under only five management areas
1. The organization
4. Project control
I will save marketing, project control, and planning for part two. Even though each of these areas could require a book to cover thoroughly, just recognizing the traits of a good contractor can help focus attention in the right areas for managing the company.
Developing an organization requires training at all levels. Imagine a football coach who teaches the plays just to the running backs without letting the lineman in on them. Once in the game, the running backs will run into their blockers, resulting in a humiliating loss. Training, both formal and on-the-job, should include all levels of the company. A common educational experience leads to a coordinated plan for the organization's success.
There is no “one-size-fits-all” compensation plan. The good contractor needs to have a logical, incentive-based compensation plan updated constantly to meet company and individual needs. If the plan is a winner only for the company while individuals lose, that's a recipe for disaster.
Good contractors have tenured, proven field superintendents. Field people handle most of the revenue flowing through a construction firm. Taking on a project using only untrained or unmotivated field managers is the same as playing roulette with the company cash. Train field people from the beginning to move up within the organization. Make it exciting for them to work there, but don't wait until the seasoned field people are about to retire.
There is a severe shortage of qualified labor in the construction industry. On one hand, this has brought about some good productivity practices. However, companies are also finding that they are unable to take advantage of new opportunities because they do not have enough depth in the organization. Even project managers that juggle multiple projects reach a limit of effectiveness, not to mention what happens if that project manager leaves the company. Being a contractor with little or no depth in key positions is like driving a pick-up truck onto a deep pond covered with thin ice. Creating depth requires good recruiting and hiring practices and training people for new roles in all levels of the organization before they are needed to fill those roles.