When they start their business, all contractors should have the same objective in mind: to make a profit. Carpenters may be building forms, concrete workers pouring slabs, electricians installing wiring, and plumbers laying pipe, but should also all have the same objective in mind: to make money. This is the objective of any business. Profits enrich the owner, stabilize the company’s finances, and provide future lucrative employment for all the trades people involved.
It’s Not My Job
A problem is that trades people working in the field don’t necessarily see the connection between the boss making a profit and their making a good wage. Of course, if you asked them to reflect for a minute, they would vaguely see the connection between the job succeeding and their remaining employed. But, because of the way we have allowed employer/employee relations to deteriorate, most trades people simply believe that the boss “has” to pay them once he/she hires them. That’s the law, but tradespeople don’t necessarily make the immediate connection.
I Have My Own Objectives
Cynics would say that no one down the line in a construction company is working to make the contractor richer. They are right, of course. Only the CEO cares. The trades people have their own objectives to:
- Earn a wage.
- Make the work easier.
- Earn better wages in the near future.
- Make the work safer.
- Do quality work.
- Get promoted.
- Get their nephew hired.
- Retire to Florida.
Nowhere on their list of objectives is the firm’s profit mentioned.
Only One Objective
There is, however, only one objective to business activity–to make a profit. A primary function of industry leadership is to teach this to the entire organization down to labor in the field. Founding contractors, company owners and entrepreneurs must graduate from the familiar role of hands-on production to teaching, guiding, and motivating the entire team that everyone’s objective is to make money.
Teach
This transformation from manager to leader is critical to long term success as construction companies grow and become more complex. The small start-up contractor tends to manage crews by guiding and directing workers every day. But as the company grows and takes on multiple jobs, this high-energy hands-on approach becomes counterproductive. It is time to take on the role of leader, first by teaching how the company’s overall objective is in synch with each employee’s personal objective.
Guide
Coordinating these individual objectives into a unified cohesive plan of action to achieve the company’s overall objective is, of course, what we have been calling a Strategic Plan. A highly detailed long range written plan of action is the essential tool of the effective leader in any business. A strategic business plan turns dreams into reality. Without it, nothing happens.
Motivate
To achieve an organization’s ultimate objective (profitability), it requires engineering, legal expertise, accounting control, financial expertise, field supervision, and all the skilled trades that do the work. These functions are diverse and are performed by diverse personalities from widely diverse backgrounds. How can a leader motivate such a mixed pot of contributors to work on the same objective? The procedure is known as Management by Objective (MBO).
MBO
The Management by Objective process breaks down the primary company objective into the various functional objectives that eventually contribute to the completion of a construction project. Each function (accounting, estimating, operations, etc.) is assigned an objective that will contribute to the overall company’s profitability.
Operations may be assigned, for example, the objective of increasing the profit margin on the next bid the company wins by one percentage point. If they achieve that objective, at the end of the project, the department will be awarded a bonus. It has nothing to do with how the whole company performs over the time of the project but only if operations achieve the objective assigned to them. You can see from this example how the larger company objective is broken down into functional objectives and how these objectives contribute to the whole. The operations department, however, are only held responsible and rewarded for achieving their objective.
Imagine if your entire company were broken down into its component parts and motivated individually for their contribution to the overall company objective.
Next week we’ll see some examples.
For more information on Management by Objective, read more here: MBO
For a broader view on making a profit, read more here: PROFIT
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