Since the beginning of the Great Recession in 2008, many contractors have found themselves in a continuous battle to achieve a positive bottom line. They have reduced overhead, whittled away at their bid margins, and expanded their geography — all proven strategies for short-term, once-in-awhile growth spurts.
We are now into the fifth year of this downturn and these tactics are now considered the new norm for the construction industry. While some positive outcomes may occur from these tactics, it takes a toll on your greatest asset — your people. The reality is that many employees may begin to seek greener pastures if these issues are not addressed. Perhaps exiting employees have already started to affect your jobs and your business.
Take a step back and think about the survival strategies you have instituted. In most cases, they revolve around doing more with less — being “leaner and meaner.” In order to generate additional profits and work farther from home, you have placed a burden on your project teams to produce at the same or higher level with fewer people.
Have you taken the time to share the reasons for these actions? Have your key employees played a part in developing these strategies? Have you explored other means and methods for increasing productivity? If your answer to any of these queries is “no,” it’s time to call a timeout and regroup.
The regrouping process begins with understanding the reasons that you have designated certain people in your organization as “key.” They are self-starters, problem-solvers, and moneymakers. These key individuals know how to build “your way” and they have generated a following in their sphere of influence. If any of them left your firm, you would be hard-pressed to replace them with someone of equal talent.
With margins shrinking, the chances of significant increases in wages and incentives are also shrinking. An alternative approach is to close the ranks by bringing key employees closer to the decision-maker by making them a stakeholder.
The term is stakeholder, not shareholder. Key employees don’t need to become owners in order to play a vital part in the overall business. However, your employees are primarily builders and not necessarily entrepreneurs, like yourself. They need to develop a different skill set with supplemental training to understand the issues you face and the decisions you make as a business owner.
Part two of this training is the development of the employees immediately below your key personnel. As the stakeholders begin working on the business along with you, they will need to strengthen their teams to assist them in the business, too. This tactic has been considered a win-win for all participants. This involvement is something more than just an individual project; it creates a strong incentive to stay with a company as an employee’s future with the business becomes much more clear.
The first step in this process is to identify your key personnel. Who are the keepers? These are the employees you rely on most heavily to maintain a steady hand on the work and have earned your confidence that they will do the right thing, whether you are watching or not. Maybe it’s one or two managers or field supervisors, or it could be as many as a dozen.
The selection process is very important, but it shouldn’t delay the implementation of the stakeholder program. You will have the luxury of adding or subtracting candidates along the way as the team’s synergy begins to unfold.
The second step is to generate a specific list of questions regarding your business and let each potential stakeholder provide confidential responses. This Q&A exercise is the initial function performed by an outside facilitator, who will guide the development process and assist you in selecting the proper training package.
The first facilitated meeting for you and your designated stakeholders includes a review of the compiled Q&A responses, with no names attached. As facilitators for a number of these meetings, the experiences of Bonadio construction consultants have shown that the openness developed by this exercise can be both eye-opening and rewarding for all participants. Concerns of both the owner and the stakeholders are shared, possibly for the first time, with everyone leaving with a better understanding of the challenges and opportunities confronting the team.
An additional positive outcome of this first facilitated meeting is the identification of some of the leaks in, or areas of improvement for, the organization. These are money wasters, so putting the proper fix in place can directly add to the bottom line. The identified leaks also act as the vehicle to set the stakeholders on their path to working on the business. By selecting key individuals to plug the leaks, they suddenly become more than just employees.
The outcomes from this process also establish the training program going forward. Based on the needs of the team, issues including basic financial reporting, cost accountings, field productivity, project purchasing, and bid selection can all factor into the further development and training of the stakeholders. This usually generates future topics for the next tier of employees in an effort to advance their interests and importance within the business.
Finally, an additional positive outcome from this leak-identification process includes the potential for generating a self-funding incentive pool for key employees. Identifying the importance in resolving these leaks can result in up to a seven-figure gain in total savings. Stakeholders can now be rewarded for achieving the identified solutions that have been designated as key performance indicators. The ultimate outcome of this training process is ensuring that employees are more involved and invested in the company.
Thomas (Tom) M. Eckert, P.E., is a senior consultant with The Bonadio Group’s Construction Division and former president and CEO of MLB Construction Services. As a consultant, he is involved in succession planning and strategic planning for construction companies, claim preparation assistance, strategy development, and expert testimony for construction claims, damage assessment, and control work for surety companies, as well as executive coaching for construction company CEOs. Contact him at email@example.com