Beyond COVID
Part 3
Construction Company Self-Analysis
After taking steps to mitigate the negative effects of the current pandemic-induced construction market contraction, this “Beyond COVID” blog series attempts to look beyond this market cycle and imagine what we would want our companies to look like when the market starts to rebound.
- Now is the time for construction professionals to ask the question, “What do I want my organization to look like after this market contraction ends and the construction market begins to grow again, as it most certainly will?”
- What are the improvements I would like to make in my organization’s structure and operating procedures? Improvement implies change. Change is difficult. What changes need to be made to strengthen our company’s performance, and position us to compete more competitively in the coming growth market?
In order to explore what you may want to change, it is first necessary to discern what a “best in class” construction enterprise looks like and how your firm measures up against that template.
Part 3 – Construction Company Self-Analysis
Our extensive research over the past 30 years on behalf of the surety industry into “why construction organizations fail” resulted in the Construction Company Self-Analysis Program that can be found here on this website. We looked at the multi-layered business side of the construction industry and the complicated interdependent relationships between marketing, production, and accounting. We asked the following question: “How did the most successful construction enterprises handle these relationships?”
We compiled the results into the self-analysis program summarized below:
FINANCIAL MANAGEMENT
Accounting Proficiency– Is your CFO and his or her input and reporting respected and included in the management of the business?
Financial Reporting – Is each project’s profitability reported to top management accurately and at a minimum on a monthly basis?
Cash Flow Management – Is cash flow tracked on a real-time project basis? Is each project planned with cash flow in mind?
Debt Management – Are banking relationships and major credit needs planned at least six months in advance, avoiding unanticipated borrowing to supplement cash flow management.
Receivables Management – Does management believe they are entitled to timely, accurate, and complete payment and taking the steps necessary to ensure this?
BUSINESS MANAGEMENT
Organizational Structure – Do you have a clearly defined organization chart?
Record Keeping – Do field personnel and supervision communicate in writing on a timely basis?
Overhead management – Are you using the principles of “flexible” overhead?
Change Order Management – Are change orders contractual, formally documented, and managed according to a stated written change order policy?
Subcontractor Management – Are all subcontractors treated fairly and according to a formal written subcontractor policy?
Project Selection – Is successful experience with similar projects weighted when evaluating risk in the selection of potential projects?
Management Style/Personnel – Do you recognize and compensate your key- employees who have an excellent score in annual evaluations?
Multi-year business plan – Does your firm have a formal, written, three-year (or longer) business plan that senior management adheres to?
Succession Planning – Do you recognize that your company is the sum and substance of the experience of your senior management personnel and if one leaves your organization is altered?
Control/Threats – Do you perform a SWOT (strengths, weaknesses, opportunities, threats) analysis annually?
Risk Management – Does your firm have a formal risk management policy?
Dispute Resolution – Is management trained to resolve project disagreements before they become disputes?
Complete the Construction Company Self-Analysis Program-FREE on this site
In order to improve your organization, you must decide what could be enhanced. You can only decide on what you might want to improve if you know what “best in class” performance is and how your company’s current performance compares. This is the purpose of the self-analysis tool.
If you have decided to take this opportunity to improve your company and prepare it for the future market recovery, the next step is to determine what enhancements are indicated. Scoring your organization with the self-analysis program available here on the site will reveal your company’s strengths and weaknesses and indicate in what exact areas you might improve.
