Construction is a risky business. Diving from the springboard of project selection into the deep end of the risk pool immerses the contractor in a virtual ocean of risk factors. Like Football games, project financial risk can only be effectively managed before kickoff.
Don Shula
Don Shula was the winningest head coach in NFL history with a total of 328 regular season wins. When asked how he did it, he replied, “One game at a time.” This response sounded like a cliché so the interviewer pressed for more detail. After six months of interviews, Shula’s game winning technique began to emerge. It was summed up like this…
- Begin by ensuring each member of the team is prepared to be the best athlete he can be.
- After receiving the schedule for the next season, analyze the opposition by watching game film and prepare a customized game plan for each opponent’s unique style of play.
- Have your Offensive Coordinator deconstruct each opponent’s defensive strengths and resulting defensive gamesmanship. Note weaknesses.
- Have your Defensive Coordinator deconstruct each opponent’s offensive strengths and resulting offensive gamesmanship. Note weaknesses.
- Based on the strengths and weaknesses of the opposition, have the OC and the DC design a playbook for that upcoming week’s game with that opponent.
Shula emphasized that each opponent dictated how his team would play that game. He cautioned not to look down the road and don’t develop a routine style of play used for all opponents. Every game was a separate contest that presented his team with unique challenges.
The Construction Contractor as Head Coach
There are many risk management parallels between being a head coach in the NFL and being a construction contractor.
- Like NFL coaches preparing for one game at a time, contractors go from project to project, and each new project is like going into business for the first time.
- In the NFL, each opponent is different and requires a customized game plan. The same is true in the construction business. Every project presents new challenges and must be analyzed and evaluated on a stand-alone basis. Like football, completing one project successfully is no guarantee that your team will successfully complete the next.
- The offensive and defensive coordinators are the head coach’s key employees. The CFO and VP Ops (along with individual project managers) are the contractor’s key employees. Without their analysis and expertise, the contractor can’t begin to develop a game plan.
- It takes an entire team to win a football game. All the managers, subcontractors, and their skilled labor must perform up to standard for the general contractor (Head Coach) to complete each project successfully (win each game).
- Prior and proper preparation prevents poor performance. This must be the primary guiding risk management principle for all contractors and all projects.
The Game Plan
Immediately after selecting a project, contractors need to begin to put together a game plan. Each step is a risk event. Each carries its own unique risk and requires analysis and evaluation by all the key players (Contractor, CFO, VP Ops).
Risky Step by Risky Step
After a project has been selected, the contractor (head coach) must make (at a minimum) the following choices to assemble the team and prepare it to execute the project. How careful the contractor is will determine how much accumulated risk the project is burdened with.
- If not already known, the contractor starts by learning about the designer.
- Next, it is time to select the key employees to staff pre-project preparation.
- The VP Ops (Offensive Coordinator) then evaluates the existing employee’s technical capacity to take on a project of this size and type.
- In concert with the contractor, the key employees select subcontractors from a list limited to those available.
- The VP Operations then measures each subcontractor’s past performance to determine fitness and reliability.
- Next the CFO (Defensive Coordinator) must analyze the company’s current financial capacity to evaluate the availability of adequate working capital going forward.
- From the design details, the VP Operations weighs the potential impact of long lead critical and sole-source items.
- Now the VP Ops must staff the project with qualified field and office personnel.
- The VP Ops must also arrange for the equipment needed to complete the project.
- The CFO considers any impact of the project’s geographic location.
- The VP Ops measures the firm’s experience with this specific type of project.
- The CFO evaluates project owner’s financial and litigious reputation.
- The CFO also weighs any financial impact of public versus private projects.
- The VP Ops weighs any impact of union versus merit shop at this location.
- Finally, the VP Ops evaluates the likelihood of potential labor disputes.
One Project at a Time
The evaluation and choices made in advance at each of these (at least) 15 preliminary preparation steps (risk events) described above determine the likelihood of completing each individual project for a reasonable profit (covering the spread). Think like an NFL head coach and reduce risk by using your key employees to design a unique game plan, one project at a time.
For a deeper look into the assembling the team, read more here: TEAM
For a broader view on construction teamwork, read more here: TEAMWORK
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