Do not be misled. Construction contractors are not manufacturing structures, or highways, and selling them to ultimate owners one piece at a time. We are selling construction services, much like business consultants are selling information services or law firms are selling legal services. What difference does it make? It makes all the difference in how we finance, structure, and market our construction companies.
Finance
- Business Consultants bill in advance and always stay well out in front of all costs. In other words, their clients finance their services.
- Service providers never start work without a substantial deposit up front. Try to hire a law firm without putting up a retainer.
- Law firms bill clients cost-plus and get paid on time. If not, they stop work.
- Neither business consultants nor law firms (service providers) sign a contract guaranteeing performance for a fixed price and then wait to get paid based on the client’s evaluation of their performance. That would be financial suicide for a service provider, but that’s the way we get paid for our services. See the problem?
Structure
Construction contractors sell construction services provided by our team of functional experts which are our only product. Assembling this team is our primary function. Building an organization of functional experts is an ongoing process that requires a commitment to fostering a positive organizational culture. To carefully assemble a team of functional experts, contractors must take the following steps:
- Define the clear functional objective for every new hire or promotion.
- Provide strong leadership guiding each employee to fulfill their specific function.
- Promote effective communication across functional departments.
- Foster an atmosphere of collaboration rather than competition.
- Invest in training to ensure advanced expertise in each function.
- Clarify roles so that each function stays in its lane while supporting complimentary functions.
- Utilize performance metrics for each function to reward accomplishment without fostering competition.
By emphasizing employee well-being to avoid depersonalizing functional performance, contractors can create a functional environment that drives success. They can develop a well-structured functional organization that achieves its goals while cultivating a workplace where employees feel valued and motivated to contribute their best efforts.
Marketing
Out of date traditional low bid acquisition sends the wrong marketing message for any company selling expert services.
- Low bid acquisition says to the market that construction services are a commodity so you may as well pay the cheapest price you can.
- Every other company marketing a service (consultants, law firms, architects, etc.) rely on “reputation” to sell their expert services. The marketplace has long ago accepted the obvious fact that quality costs more.
- The “low bid” acquisition posture in the construction industry has weakened in recent years. Buyers of construction services have begun to realize that reputation is an important factor when selecting a contractor, and the low bidder is no longer always chosen.
- Focus on reputation when building and operating your team of functional construction experts. “Quality is our most important product,” should be the contractor’s slogan when recruiting new team members.
Changing Beliefs is Hard
I am aware that changing long-held, unexamined beliefs is very difficult.
- Low-bid acquisition has been an industry standard for too long, but some contractors are forced to compete in that manner if they want to stay in business.
- Contracting to erect expensive complex facilities for no money down followed by a series of slow contingency payments is a standard in the industry that owners will hang on to for as long as they can.
- Seeing reputation as a primary marketing tool in a commodity marketplace may be too esoteric for some “go gettem” contractors, but it is the future.
In Closing
If we want to end sleepless nights worrying about cash flow, lawsuits, slow pay, or contentious extras, we must begin by changing some of our long-held unexamined beliefs about this industry we’re in.
- A successful construction concern is not necessarily made up of a collection of workers you know and trust or family and friends. It is made up of people who are experts in the function they were hired to execute.
- We do not sell structures our firm has erected. We sell construction services provided by the team of functional experts we have diligently assembled.
- Our team’s reputation for excellence is our most important product. Not our ability to submit the lowest bid.
- Our team of experts are motivated by dignity and respect not just money.
- Our team of experts must collaborate, not compete.
You are an expert. Do not let the market reduce you to a commodity.
For more information the role of a low bid, read more at: LOW BID
For a broader view on construction services , read more here: SERVICES
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Please circulate this widely. It will benefit your constituents. This research is continuous and includes new information weekly as it becomes available. Thank you.
