Planning IS Managing
Managing a construction company is like steering a 1000-foot container ship. It takes a long time for adjustments at the helm to alter the direction of the bow. There is a lag between deciding to change course and the ship changing direction. It only gradually comes about after a tormenting delay.
The construction industry is unique in that the lag time between decision, execution and outcome is often measured in months if not years. It’s simply the nature of the business. From the day a contractor decides to respond positively to an RFP to the day he puts the first shovel in the ground, six months or even a year might pass. Managing a construction business underway is like steering that large container ship. Decisions made in the moment do not bear fruit for some time to come.
Even after a project commences, it can sometimes take as many as two or three years or longer for the project to be completed, billed, and paid for, including final payment and retention. From management’s perspective, actively managing a project in progress is like watching a crash in slow motion. I’m reminded of the scene in Fast and Furious when the chase car is launched airborne off a ramp and the director films the rest of the scene in slow motion as the car slowly tumbles and begins a twist before bouncing down on four wheels going in the opposite direction. With the hero at the wheel the viewer expects that all will come out OK, but they aren’t sure. With a construction company, the laws of inertia take hold once a strategic decision is made, and there’s little management can do to immediately change the course of events even if they know the planned outcome might be in jeopardy.
Managing IS Planning
“Planning is not making future decisions. Planning is concerned with making current decisions in light of the anticipated future. It is not what should be done in the future, but rather what should be done now to achieve outcomes in the uncertain future. Decisions can only be made in the present. Yet, decisions cannot be made only for the present. Once made, decisions have long-term irrevocable consequences.” (The Secrets to Construction Business Success, Thomas C. Schleifer, Mounir El Asmar, Routledge, p. 35).
Throughout the first quarter of 2022, we have been demonstrating management techniques required to run a successful construction business in an unstable market. The repeated question we have been asking over the past twelve weeks is, considering rampant inflation, materials shortages, and the shortage of skilled labor, what choices should we make in the present to avoid pitfalls as the year unfolds? In other words, how does a construction professional manage around rampant cost inflation, delayed materials, and a critical shortage of skilled labor?
Planning IS Managing
Managing a construction company through the shoal waters of 2022 and 2023 begins with accepting (not denying) the uncertain nature of the business environment and using current reality checks to anticipate future conditions. In other words, “deciding what should be done now in light of the anticipated future.”
- ANTICIPATED INFLATION 1) Management decisions at the beginning of this year should anticipate continued cost inflation and develop measures to mitigate the impact on future profits. 2) When executing contracts today, include “cost inflator clauses” wherever possible. If that is not possible, be sure to include future inflation rate factors in bid prices. In this current environment, historic inflation rates will not cover future inflated costs. Inflation is out of control and will not correct in the short-term as many are suggesting. 3) Bypass fixed-price opportunities that commit your company over an extended period (more than a year, two at the very most). The distant future is too uncertain.
- ANTICIPATED LABOR SUPPLY SHORTAGE 1) Develop and prioritize retention programs now to maintain a stable workforce in the future. 2) Forego projects that your existing labor force cannot complete comfortably. There are not additional skilled craftspeople available. The source of additional labor in the future is uncertain at best. 3) Adopt a ZERO TURNOVER posture by personally interacting with every employee who threatens to leave your employ.
- ANTICIPATED MATERIALS SHORTAGE 1) Anticipate that various construction materials will be in short supply well into the future because of continued kinks all along the supply chain. 2) Adjust construction schedules before material shortages force a project slow-down. Anticipated and announced extended project milestone, completion dates, and the potential for future schedule adjustments is never a “surprise”. Only schedule interruptions that are not anticipated surprise owners and cause contention and the imposition of penalties. 3) Plan completion schedules by factoring in both material and labor shortages and be mindful that both compound the inflation problem.
IN CONSTRUCTION – Planning IS Managing/Managing IS Planning
The original management consulting slogan was the adage – THINK AHEAD – Still not a bad idea.
Details on these issues in my latest book The Secretes To Construction Business Success, published by Routledge https://bit.ly/3G9ornf.
For a deeper look into employee retention, read more here: PLANNING
For a broader view into Leadership, read more here: MANAGEMENT
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