“Pride goes before destruction, and haughtiness before a fall.”
(Proverbs 16:18)
A Personal Note
One of the reasons I have loved my lifelong career in the construction industry is the people I have been privileged to work with. They’re my kind of people; self-starters, go-getters, gutsy risk takers, common sense managers, no-nonsense individuals who get down to business. My brother and I started our contracting company in New Jersey more than 50 years ago with no capital, no backers, and no customers. In the beginning, we boldly bid contracts because we needed the work and fearlessly talked owners into believing we could complete the jobs. I don’t know if we were overconfident, but we survived the effort. My brother operates the same company to this day.
One of Life’s Persistent Questions
“What if our self-confidence becomes overconfidence, and we begin to let bad judgment and recklessness replace guts and instinct?”
The root question every contractor should ask themselves to have any hope of managing risk successfully is, “Am I putting my company in danger as a result of my natural self-confidence becoming over-confidence?”
Self-confidence Becomes Over-confidence If Contractors Believe:
Belief Number One – “Bigger is Better”
Overconfidence Looks Like This:
“The bigger we are the harder the customer falls into line. Let’s take all the work we can get.”
However, when an organization expands significantly in size, it is, in effect, becoming a different organization. Change has risks associated with it which can make or break a company. For example, growth- related changes impact the amount of capital required, the time and attention management can spend on multiple projects, and the expertise required to complete new types of projects. Research reveals that, when a construction company expands in size, it requires extremely accurate management decisions to reduce the risks inherent in the change.
Self-confidence Looks Like This:
“Our operation is running smoothly. It is time to take on more work. What growth rate could we sustain over how many years with our current personnel and financial resources?”
Belief Number Two – “We can build anything”
Overconfidence Looks Like This:
“We can build anything. We’ve never built a hospital but let’s bid it anyway and see what happens.”
Whenever an organization takes on a type of “new” work that they have never done before they dramatically increase their risk of failure. New types of projects call for changes in field and office technology, and may have different project funding requirements, either of which may dramatically increase risk potential. Selecting and implementing new technology consumes management time and, if the selected technology does not perform as expected, it can be extremely costly. Unexpected different project funding, such as public private financing, can present risk simply because they are new and there is limited experience with them.
Self-confidence Looks Like This:
“Maybe we could try to build a hospital. We’ve never done it before, and we’d have to be careful and start out small. We have some hospital experienced talent on the payroll now and can hire more. If we are cautious and vigilant we may be able to enter a profitable new market. If not we can withdraw”
Belief Number Three – “We can build anywhere”
Overconfidence Looks Like This:
“Austin, Texas is booming. Let’s get down there and get in on the act. We need to expand beyond Fort Worth anyway. We’ve completed enough successful jobs around here to prove that we can build anywhere.”
- Expansion into new and distant geographic regions greatly increases risk.
- Entrenched competition can naturally operate more efficiently leaving the invading contractor at a decided disadvantage.
- Supervisory travel expenses and adverse working conditions like living in motels away from home can prove costly in more ways than one.
- Unfamiliar local subcontractors can be the cause of a project’s demise.
Self-confidence Looks Like This:
“Austin, Texas is booming. Can we find a small job in that market that we can cut our travel teeth on? Something that we could build here in Fort Worth in our sleep. Let’s walk before we run and see how we do.”
It’s All About Beliefs
Management decisions will determine whether an organization will succeed or fail in this ever-changing construction business environment. The decision-making process begins with beliefs that must be regularly re-examined as the business environment evolves. Beliefs that were appropriate in the past may not be so in the new normal. Some unexamined beliefs in place for a long time are no longer valid, such as growth is always good, having some unprofitable work is unavoidable, and past success implies future success. These beliefs should be re-evaluated because they are not true and should not be embraced by the “Successful Contractor of the Future.”
