Let’s Talk the Business of Construction

Schleifer’s Weekly Construction Message

Please circulate this widely. It will benefit your constituents. This research is continuous and includes new information weekly as it becomes available. Thank you, Tom

Management Excellence

This “Let’s Talk Business” message is all about uncovering construction’s best-in-class management practices. The construction industry has always excelled at creating the built environment on the leading edge of modern engineering, design, and technology. However, the construction industry has lagged behind in the adaptation of the leading edge management and organizational processes of modern business enterprises.

Drucker Institute Annual List of 250 Best Managed Companies

The Drucker Institute at Claremont Graduate University in CA publishes an extensively researched annual list of the Best Managed Companies based on five criteria:

  1. Customer satisfaction
  2. Employee engagement and development
  3. Innovation
  4. Social responsibility
  5. Financial strength

Their research indicates that the five areas are interrelated and influence each other over time which they refer to as “reciprocal causation”. They point to a correlation between the five categories and a company’s overall management performance; what they call “effectiveness”. Drucker defined “effectiveness” as “doing the right things well”.They stipulate that their model accurately captures this essential quality of large companies (“effectiveness”) and the underlying factors that influence it. It is my position that this applies to mid-size and small construction enterprises alike.

The Ranking: #1 – Microsoft

Overall, researchers examined 886 companies this year, using 33 indicators of management effectiveness. Microsoft moved into the top spot in this year’s ranking by scoring strong marks in innovation while doubling down on corporate culture and social impact.

The institute indicates: “There is something going on in technology right now around just basic management. These top tech firms are very well managed. We think it speaks to their public prestige, and the extent to which they attract talent and customers. What’s more they have this relentless focus on being high-performance organizations.”

  1. Apple Inc
  2. IBM Corp
  3. Amazon.com Inc
  4. Alphabet Inc C
  5. Cisco Systems Inc
  6. Intel Corp
  7. Procter & Gamble
  8. Johnson & Johnson
  9. HP Inc

No Construction Companies in the Top 250

Construction has always been one of the top revenue-generating industries in the world.

  • Construction spending in the United States topped $1.49 trillion in 2019.
  • In 2017, construction accounted for 7% of total U.S. GDP.
  • 11.2 million people worked in the construction industry in 2018.
  • The average hourly wage of all construction employees was $31.08 in 2019.
  • 30% of the construction workforce identify themselves as Hispanic or Latino.
  • 10% of the total construction workforce is female.

Yet, no construction companies are included in Drucker’s top 250 best managed companies in America. Why not?

The Big Question

 How can the industry that has had the dominant impact on the economy of the richest country in the civilized world be ranked low in the management metrics that are measured by the Drucker Institute? What is the disconnect?

If we accept Peter Drucker’s theoretical construct (and who are we to argue with Peter Drucker?), we might take an internal inventory of our own companies to see how we each measure up to the top 250. Where are we strong, and where do we fall short?

I have always felt strongly about the importance of customer service, employee engagement and development, and financial strength but I have had difficulty interesting any but the most enlightened contractor clients in any of these but financial strength.

For example, what I learned about “social responsibility” (too late to use it because I retired) was that in the “modern” business/commercial world social responsibility attracts talent and customers, improves employee relationships and productivity, complies with labor laws and political motivations, supports quality control and, in current circumstances, has supported employees working remotely. The level of social responsibility impacts younger potential employee’s choice of firms to work for and their level of pride once employed.

For the next few weeks, I will be discussing the five Drucker criteria of management success and demonstrating ways to apply a self-analysis to your construction enterprise.

Tune in next week as I think this discussion will be enlightening to us all.