The earliest known instance of human engineering was discovered at Kalambo Falls, Zambia and dates to about 476,000 years ago. Researchers found two logs notched and interlocking forming a simple stable structure.
The first examples of human commerce were simple barters between individuals and groups as early as 300,000 years ago. These early exchanges evolved into more complex systems as societies transitioned to agriculture leading to organized trade of surplus goods like flint and obsidian between agricultural settlements.
It seems business and construction have equally long histories. Both evolved from instinctive human impulses into carefully calculated complex sciences that have guided human development into the modern era.
Engineering
The first known engineer in history is probably Imhotep, who designed the Step Pyramid in Egypt around 2611 BC. The rise of modern engineering as a profession, applying mathematics and science, began to develop around the 18th century. This period saw the development of specialized fields like mechanical and chemical engineering to meet the demands of large-scale industrial production.
Management
At the same time, during the Industrial Revolution, business management emerged as a distinct structured discipline and became a formal profession with the rise of university-level education in the late 19th and early 20th centuries. Key milestones include the founding of the Wharton School in 1881 and the first MBA program at Harvard in 1908, which formalized the field and signaled a shift toward management as a specialized profession.
Merger
The modern construction industry demonstrates the purest merger of these two professions.
- 99% of all contractors start out as one person shops where the founder is usually a skilled tradesman or engineer who hires a relative to answer the phones while he’s out on the job.
- The history of the industry, however, is of one-person start-ups growing into substantial business organizations. With the passage of time, the skilled tradesmen or engineer owners must hire business management experts to manage their growing enterprises, and these professionals are welcomed into the top management ranks.
- Usually, the owner now takes over as business manager.
- The problem, however, is that these owners are not trained in the science of business management. They recognize the need for the professional skills of the engineers and accountants, for example, but almost never recognize when the professional skills of business managers are needed.
- What’s more, most contractors don’t even see business management as a science. They think that if you own the business, you’re the one most qualified to manage it. Even if it grows quite large, you were the manager who got it there so you must be qualified to keep running it at this stage of success.
Small Business Dominates Construction
There is, of course, some truth to the notion that if you founded the business and own it outright you ought to run it. The dominance of private, small businesses is a defining characteristic of the U.S. construction sector, which continues to be a significant part of the U. S. economy. There are currently several million small businesses in the U.S. construction industry with the vast majority being privately owned.
When is a Small Business No Longer a Small Business?
However, in the construction industry, successful small contractors often grow into large business concerns before they realize it. There is a definite moment when the company grows to a certain size and complexity, and it requires the skills of a professional business manager. The question is, when is that moment?
- Is it a turnover milestone? When a contracting firm goes from $10 million in annual turnover to $20 million, is it no longer a small business?
- If a firm used to handle a few jobs at the same time now finds itself with multiple jobs going simultaneously is that the moment it is no longer a small business?
- When the founder/owner needs a therapist to fend off an impending nervous breakdown is it time to hire professional management?
In other words, when does a contractor know it’s time to hire professional management?
Self-Administered Test
The answer is – When contractors realize they’re not sure what they’re doing.
Only the contractor themself can ask and answer this question. Here is a short test you might self-administer to see if you’re qualified to run your company when it becomes a large business enterprise.
- What is capital, and what is meant by the allocation of capital?
- What’s the difference between a strategic plan and an operating budget?
- What competitive advantage does your firm possess?
- What is the primary motivator of your executive staff?
- How much annual top-line growth is healthy for your company?
- What is meant by flexible overhead?
- What percent of earnings should be retained on your company’s balance sheet?
- How can you avoid being trapped in constant low-bid acquisition?
- Who exactly are your key employees?
- What were the actual gross and net margins on your last ten projects?
Next week we’ll discuss what your test results indicate.
For more information on business management, read more at: MANAGEMENT
For a broader view on when the right time is to hire professional management, read more at: RIGHT TIME
To receive the free weekly Construction Messages, ask questions, or make comments contact me at research@simplarfoundation.org.
Please circulate this widely. It will benefit your constituents. This research is continuous and includes new information weekly as it becomes available. Thank you.
