And Harmful Bias
Continuing our Best-in-Class series: Last year we discussed the concept of “unexamined beliefs” and the role they play in the management decision-making process. We talked about how these deeply held beliefs go largely unexamined. That is to say, we aren’t even aware that we believe what we believe. The problem arises when these unexamined beliefs affect our decision-making long after they are no longer true. They are the hidden reason we often make decisions that are not good for us. Here are some “unexamined beliefs” that lead to self-destructive decisions in the management of a construction enterprise.
Unexamined Construction Beliefs
- Top-line growth is the only answer to continued success in construction.
- Budgeting and strategic planning are academic exercises that have little practical application in the construction business.
- When “low-bid” leads to unprofitable jobs, it’s just the nature of the construction business. You’ll make it up in volume. Getting new work is always the immediate goal.
- Getting paid on a timely basis is not our right. We must provide proof that we deserve to be paid and negotiate for it.
- In construction, “if anything can go wrong, it will.” Risk is the nature of the business. You can’t do anything about it.
I have heard these five beliefs repeated time and time again over the fifty years I have spent in the construction industry. I have been told they are the “facts of life” – “Come to grips” with them. However, they are not true.
During our research into “best-in-class” construction management practices, we interviewed a CEO who was managing his construction company from an entirely new belief system. Listen for the “examined” beliefs he espoused.
- “We try to select customers who are good at what they do…
- “We tell our customer there will be less cost to them finishing on schedule without hassle than low-bid will ever get them…
- “We never let any outside influence impact pricing…
- “We would rather do less work than take cheap work…”
Is that a contractor talking? Contractors don’t – “select customers who are good at what they do.” What’s he talking about? Don’t customers select contractors who are “good at what they do…” – not the other way around?
When our “best-in-class” contractor says that his company “tries to select customers who are good at what they do,” he reveals both a new belief and a deep sense of company self-esteem that used to be rare among contractors.
I contend that in the past unexamined beliefs and dampened self-esteem led contractors to compete for work by submitting unprofitable low bids and then being forced to salvage marginal cash flow by cutting corners and winning disputes with the owner.
Historically, these unexamined beliefs and dampened self-esteem made the contracting business the riskiest business in the country (second only to restaurants). Some contractors boxed themselves into a corner where, in order to get the next job, they signed contracts that placed potential financial losses onto their books, absorbing 90% of the job-related risk. In any transaction, the party that assumes all the risk is automatically on the weaker end of the exchange.
Our “best-in-class” CEO saw his company as an equal partner in the construction transaction and adopted a new belief that might be put like this:
The dominant success factor in the construction industry is the quality of the relationship between the contractor and owner.
This belief led to this management decision:
“We try to select customers who are good at what they do (They make good business partners)
The contractor who believes that the quality of the relationship is paramount believes he or she has the right to evaluate the owner and designer by asking questions like the following:
- Is this owner a timely payer?
- How often is this owner involved in litigation with contractors?
- Does this designer communicate and cooperate with project managers?
- Does this developer seek to build quality projects rather than constantly cut corners?
- How many projects has the agency, developer, or owner completed successfully for all stakeholders?
- Has this owner ever built a project of this kind before?
- What do other contractors say about working with this owner? In other words, what is this owner’s reputation among industry professionals?
- What is this owner’s experience with sureties?
Better Beliefs – Better Decisions
When you’re considering bidding on a new project do you believe that you should evaluate the quality of the owner?
Do you routinely sign contracts that overwhelmingly favor the owner because you think you have to?
Do you see your company as a “best-in-class” performer that deserves to be paid on a timely basis?
Is it time to examine unexamined beliefs to evaluate how well they are serving you?
Read More: Business of Construction Library and Beliefs