Posted by Matt Stevens at 9:49 AM | Comments (3)
Welcome
Thank you for visiting the Construction Contractor's Digest. We are pleased that you have joined us. This site is for the express purpose of being a resource for construction leaders. We work as management consultants with construction firms. We are Stevens Construction Institute.
Presently, we have written over 190 articles ranging in subjects such as managing people & processes to financial management & computers. Enter your key word (use American English) and I am certain we will have some information for you. As you read these articles, please let us know your thoughts. This adds to the quality of our digest. I am the author of an "old world book" McGraw Hill's Managing A Construction Firm On Just 24 Hours A Day by Matt Stevens. It's 406 pages describe issues, trends and "work smart" processes / tactics for construction contracting. We include over 100 illustrations with 130 Best Practices.
Posted by Matt Stevens at 10:57 PM | Comments (0)
The Best Industry in the United States
My child is in college. She is starting to ask about industries and careers. Olivia has made me think further about what construction contracting has to offer her. I have concluded it is the best career a young person could choose. You may not believe it, but the facts will show our business is unmatched. It offers participants long term tangible benefits. However, many people will argue that point. Let me show you the many virtues our industry has. You be the judge.
The Industry is Not Going Away - Construction is a basic necessity to human life (shelter, food, clothing, and water). Contrastingly, most manufacturing will be leaving this country over the next few years. Construction cannot be exported. It must be "insitu" or occurring where it produces the end product. This is unlike service center, computer programming or engineering where other countries provide it from afar and then send it back to the United States. Construction and its sister, demolition are captive to the site.
Merit Based - the construction industry rewards hard work. There is no substitute. We are all dissatisfied with the work ethic today. When we find it, we reward it. Let me give you an example - a person comes to you (male / female) doesn't speak English well, but has promised to work hard and keep their nose clean. You give them a chance and 1 year later, you are glad you did. They kept their promise. Now, what will you do? Ignore them? Cut their pay? Of course not! You will increase their wages and give them more responsibility. Construction contractors reward merit. We are an equal opportunity employer.
In a few years, that same person, having earned the technical understanding and crew following might start their own business. It is almost expected. After working in the field, interacting with clients and managing labor, it is normal and rational for this person to at least attempt it.
Additionally, the industry is also merit based. Question: What is the best advertising in the construction business? A completed project that is on-time and on-budget. It speaks volumes of a contractor's savvy and diligence. There are a minority of good contractors. Word of mouth will travel fast. Excellent contractors have more opportunities for work than their lesser competitors.
Continue reading "The Best Industry in the United States"
Posted by Matt Stevens at 4:18 AM | Comments (8)
Construction Estimating Software Study
Go to any national convention and you can't miss seeing dozens of software vendors. It is a big business and there is high value to construction firms. The product has made estimating a less clerical and more automated. Also, it has made estimating more efficient. Due to its power, counting and measuring is less of a task; taking hours instead of days. For those of us who don't looking forward to the job of estimating, computers and software has made it bearable.
We feel that most estimating software is very useful for contractors. However, I have personally witnessed software purchased one day and then never used. The salesman did his job. The rub is the time it takes to be proficient. The contractor's busy schedule doesn't allow for training. In several cases I know of, thousands of dollars has been invested and no payoff. The software sits in its shrink wrap still unopened.
I am raising a red flag. Take a look at all the risk in construction, some of it we choose. Buying estimating software (decreasing our cash) and never benefiting should not be one of our risk factors.
We recommend looking hard at Microsoft. (See our writing on "Computers".) If you use a computer, you can use the Microsoft Office Suite (90% of users do) and especially Excel. For any one just starting to use computers, the advent of the point and click system also known as Windows, makes it all the more easy.
As proof of our conclusion, The American Society of Professional Estimators released a survey in 2005. Here is the background and the results:
Respondents were asked if their satisfaction level with their current estimating software.
Satisfied 80%
Fairly Satisfied 14%
Dissatisfied/Plan to Change 3%
Other/n/a 2%
Respondents were asked if they anticipate change soon (one year or less)
No change planned 93%
Plan to change soon 7%
Respondents were asked the major factor in the purchase of their estimating software.
Ease of use 30%
Customization 30%
Features 25%
Price 4%
Other/n/a 11%
Average time in use
1-5 years 32%
5-10 years 47%
10+ years 21%
For the rest of the article, email us at mstevens@stevensci.com. with the title of the article. Limit 1 article per month
Continue reading "Construction Estimating Software Study"
Posted by Matt Stevens at 2:57 AM | Comments (0)
Part 2 of 2 - Storm Season / Emergency Preparedness For Contractors
After the storm, send out a letter stating what has happened to all clients and partners on your projects. This letter should have some detail as to times, events, estimating recovery time (project longer that you think, you can always shorten it) and other items. Don't have people assume what is obvious to you. Some will be upset and demanding at first. However, taking a proactive approach gives to you a good basis for discussion later when there may be some outstanding issues to resolve about the storm or wildfire.
Some people suggest taking highly defensive measures since we are a 2nd amendment country. Some are not shy about thinking in these terms if things go very badly as have recent looting events have shown. This is a personal decision for each construction company / owner / employee.
Have a hauling trailer(s) ready. (Large horse / livestock trailers work well) It may not be financially wise to stock a lot of extra material inventory/ personal items but, it may be wise to drive to a factory some distance away and load up on needed construction / personal supplies.
Posted by Matt Stevens at 7:34 PM | Comments (0)
Part 1 of 2 - Storm Season / Emergency Preparedness For Contractors
I am born and raised in a state (Florida) which has had it share of emergencies - tornados, hurricanes, wildfires etc.
- 65% of all construction contractors have 10 employees or less according to Risk Management Associates. There are currently 2.7 million construction firms in total - that's 1.7 million small firms. Construction is a huge small business industry.
- Minimum three contact methods of all employees - phone, cell, email and of course, physical location - one would go by their house to check on them
- Emergency cash is essential - $300 for each employee - to be paid back later.
- Generators are great in certain situations such as IT operations
- Designate a rally point or meeting place outside of a building or in a location so as to count missing persons.
- Back up computer systems are best if located another state. (I use Carbonite)
- Have syncing software that will keep laptops current with desktops. Laptops are much easier to use after a storm with Broadband capability and electrical charging via truck / car.
- Cars / trucks have electrical generating power for cell phones, laptops etc. make sure they have the adapter plug ins to be used.
- Batteries kept in their wrappers until needed in flash lights.
- Take pictures of all work completed before storm hits for any potential insurance claims.
- Get statistical data from your insurance company about weather related delays. Have this at the ready in case the client starts claims for delay after the storm.
- Wind and Flood are two different damages - know the difference in your insurance policy and adjust accordingly.
- People (your employees) will take unneccesary risks for their pets - consider sheltering them in your building.
- Run practice drills once a year during early storm season.
- Check on emergency rental rates for area hotels - some offer greatly reduced rates during after a storm. During 2004's Hurricane Charley, my daughter and I stayed at the Rosen Hotel - Orlando for $42 a night for 8 days. In hindsight, it was a very lucky we did some planning.
- Better to have a higher deductible and a higher maximum coverage than a lower deductible and a lower maximum coverage.
- Most insurance claims needing a contractor quote. Think about charging for quotes after a storm. Others have done so and homeowners / building owners don't object as long as you tell them upfront.
Posted by Matt Stevens at 7:31 PM | Comments (0)
Public Seminar Schedule for Spring, 2008 - Stevens Construction Institute, Inc.
Public Seminar Schedule.pdfPosted by Matt Stevens at 7:01 PM | Comments (0)
What is the Lean Approach in Construction Contracting?
In a phrase, we define it as asset productivity. (Current and fixed assets along with people) Productive assets means higher ROI. Healthy financial results bode well for construction contractors and their staffs. As you know, cash in the bank can determine whether your business future will be a) troubled b) robust or c) extinct. The bank does not have an opinion about your balance; it is not debatable. That balance allows you to take a long-term view or forces you focus only on the short term. Greater asset productivity is what most contractors desire. It beats the alternatives.
Posted by Matt Stevens at 7:33 AM | Comments (0)
The Lighter Side
Contractor's Definitions:
Government Contractor: A gambler who never gets to cut, shuffle or deal the cards.
Bid Opening: A poker game in which the losing hand wins
Low Bidder: A contractor who wonders what he or she left out of their bid
Engineer's Estimate: The cost of construction in Heaven
Project Manager: The conductor of an orchestra in which every muscian is in a different union
Critical Path Method Scheduling: A managment technique for losing your shirt under perfect control
Strike: An effort to increase golden egg production by strangling the goose.
Delayed Payment: a tourniquet applied at the pockets
Completion Date: The day before liquidate damages are assessed.
Liquidated Damages: The penalty for failing to acheive the impossible
Lawyer: People who go in after the war's lost and bayonet the wounded
IRS: The next people after the lawyers who strip the bodies of any valuables
Posted by Matt Stevens at 11:14 PM | Comments (0)
Benford's Law
A practical law also called the first digit law, first digit phenomenon, or leading digit phenomenon. Benford's law states that in listings, tables of statistics, etc., the digit 1 tends to occur with probability, much greater than the expected 11.1% (i.e., one digit out of 9). Benford's law can be observed, for instance, by examining tables of logarithms and noting that the first pages are much more worn and smudged than later pages (Newcomb 1881). While Benford's law unquestionably applies to many situations in the real world, a satisfactory explanation has been given only recently through the work of Hill (1996).
Where does this apply to the construction industry? There is limited application but, where it applies is powerful.
Before any discussion, let me make it clear that any fair treatment of this application is based on a statistically significant set of data points. That is, many invoices, cost codes, or expense reports must be a large sample size. For a construction company, hundreds if not thousands should be examined if this principal is to be used effectively and not be a dead end.
We see it as a security and anti embezzlement application. Take the first and / or last digit of invoices or purchase orders and see if they appear more than 11.1% of the time. If so, further investigation is needed.
Posted by Matt Stevens at 11:55 PM | Comments (0)
Hey Stupid! It's a $13 Trillion Economy
A small portion of Americans are taking council of their fears. The talk of recession started even before a confirmed report of 2 quarters of economic contraction. This emotion is fed by the:
1) Housing lobby looking for help.
2) Politicians looking for power or re-election (or both)
3) Americans looking for external help for their stupidity
4) Others who continuously spend time on a couch or barstool.
We are all in this together - the good and the bad. However, Americans are mostly individualists. We produce great works of art, science, literature etc than any other country. See Nobel, Hollywood, NASA and other places that clearly denote American citizens as leaders.
We have a $13 trillion economy. There is plenty of room for everyone. No one will go hungry. We have great individuals living within our borders. If you want to participate in the recession, be my guest. However, a majority of Americans are silently improving their productivity, saving more, spending less and generally figuring out ways to take market share from Asian, South American, European etc nations. That is the America I adore.
Posted by Matt Stevens at 12:30 PM | Comments (0)
Virtual Construction - Part 1
We are at the age of Virtual Construction. If you are younger, you are not surprised. You suspected that computers were a "solution looking for a problem" for many years. Why shouldn't you have seen and believed this. Computers work at the speed of light. They can process billions of pieces of information and the cost of this is more reasonable than ever.
It is interesting to note that Virtual Construction marries one of the oldest businesses with one of the newest business trends. This marriage has the possibility to minimize life-long problems.
If you are older, you sense that the probability is there that technology could give contracting a real boost. However, you remember how poorly managed most technology companies were in the last two decades. They busted the most important rules of business and went away (bankruptcy). Also, "Ghostware" was an accurate term for promised new versions of software. The lack of software upgrades disappointed many contractors several times a year as promises remained unfilled. These are fair criticisms.
Just as significant were the poor financial management practices that technology companies exhibited.
Confidence in tech companies in and out of the construction industry has decreased not increased. Many contractors feel a "wait and see" attitude is appropriate.
However, I believe our best days in the construction industry are in front of us. Wait and see.
Posted by Matt Stevens at 12:36 PM | Comments (1)
Provocateurs Abound
Provocateurs abound. To sell books in the United States these days, you can take one of two paths. The first one is to write as thoughtfully as your God-given talent allows you to. The second path is to cause as much controversy as you can. (See Michael Moore and Ann Coulter). Clearly, Broken Buildings, Busted Budgets: How to Fix America's Trillion Dollar Construction Industry by Barry LePatner is the of the second sort. His book has little redeeming value as a contribution to construction and contracting.
He is guilty of litigating in the pages. Not building or thinking through a better approach. He is a second guesser of the first sort. Mr LePatner certainly will attract attention from owners who are looking for someone to sue. His billings should be very high this year. He might even make partner in his firm, if he hasn't already. Maybe managing partner, if billings are high enough.
Hank Harris of FMI Corporation wrote a 5 page condemnation of the the book. I am sure Mr. LePatner thought it was too long. I think it was too short.
A man must choose between two options at one point in his professional life. Shall I strive for riches or significance? Sadly, Mr. LaPatner will certainly be financially wealthy from his work. His significance is to be determined. He can certainly point out what others have identified previously as problems. Good for him. However, his contribution to fixing those problems of construction are minimal.
Posted by Matt Stevens at 12:31 PM | Comments (0)
Our Approach to Management Consulting
Explaining a complex issue in a straight forward way is a management consultant's value. Making the complex more so is not. Sometimes we see this. Additionally, taking something simple and making it a Gordian knot is what our politicians do, certainly a management consultant should not.
The goal of our firm is to keep its owner (me) mentally engaged in assisting contractors while providing for my loved ones. It is our informal mission statement. Not complex but then again, see the first paragraph.
What Stevens Construction Institute, Inc. does is not a mystery, it shouldn't be. We are not "cool" consultants. We are "good" consultants. Our heart is in this business for the correct reasons. We love it and we like to be helpful.
What is interesting is that all our clients are people of good character. We don't work with anyone who is continuously angry, contemptuous or is a detriment to people around them. As you know, I don't choose the clients, but I think the (point of the) previous paragraph helps (Yes, I have fired a couple over the years). However, all of our clients are good contractors and people.
What is also interesting, I don't know why this is so, all of the construction firms we work with are first generation contractors. These established firms are not ones started by a previous generation and now are controlled by another one. Don't ask me why but, I find it interesting.
One of our services is process improvment. Our consulting and subsequent documentation of process re-engineering is based on the Lean Approach. Again, no mystery. Lean works well when contractors and their staffs try to improve their business operations. As I don't work as a technical building consultant, I strongly believe any business benefits from Lean. As in all models, it doesn't fit our industry exactly, but it is the best. I don't know of an equal.
If you have read any writings on Lean and you have read my book, Managing a Construction Firm on Just 24 Hours a Day, (McGraw Hill, 2007), you can see the parallels. When I wrote the book in 2005-2006, it was more intuitive and observation based from my years in construction. A few friends have suggested that the book "is the practical Lean approach to construction contracting". Once I read all I could on Lean, I agree.
You are probably curious about one question: Yes, I bought a 2008 Toyota Tundra. How can you not be a fan of the company after you have read about Lean? I don't sell for Toyota, I just love the truck. To appreciate this fully, you have to also know that both my grandfather and great grandfather were plant managers for General Motors. Yes, I believe in Lean.
More tangibly will be my 2009 book that will be my interpretation of Lean for construction contracting. Accordingly, we use established and well accepted tools in our consulting work. Effective ones such as Moveable Type, Tool Book, WebEx, Zoomerang, Constant Contact, DISC, Media Temple, Lombardi Blue Print, SecureWebs and the like. Less mystery for my clents. Remember, it is the content or knowledge that makes a consulting firm a value, not the presentation (sizzle). Addtionally, if (and when) I die, my clients can pick up where I left off. This is the spirit of Lean.
So look seriously at the Lean Approach, read all you can. You will find this is a tenured and established method. It has been vetted by some of the great business people in the world. It is decades old and it is effective. You can confidently apply it to your construction company as dozens of others successfully have before you. But, if you are looking for something new and cool, Lean is not for you.
More to the point, if you want to talk with a management consultant who can help apply it, I am a candidate. I hope you will appreciate my focus on making things less complex and less mysterious. Helpful but not cool.
Posted by Matt Stevens at 9:01 PM | Comments (0)
10 Years
Client after client has shared this little known fact. Although anecdotal in nature, it has been repeated enough to me that some statistical significance should be assigned to it. Stronger still, I am statistically confident this is true.
This little known fact is "10 years". That is, it takes 10 years to figure out this business called construction contracting. We have such a complex challenge in building work that it takes many years to understand and then act on the true drivers of profitability, safety, quality, speed and people.
As an aside, comedian / actor / writer Steve Martin said the same in his latest book. It took him 10 years to understand what he was doing and then to bring crowds to their feet. Most professions are not instantaneous events. Much like an athlete, it takes thinking, nurturing and faith. Even the most talented, have to go through a period of modest, inconsistent results. If you know Mr. Martin, ask him about performing at the Steak & Ale in Gainesville, Florida. That kind of humble beginning is not what show business is all about however, it is a critical step while keeping the insincere and weakest from earning fame and fortune.
In construction contracting, I do not work with start ups. My books are for established contractors and their staffs to understand more and different things about the construction business. Once in a while I will be asked to help someone in their new business. After I quietly tell them I don't do that kind of work, I usually offer up some quick advice to leave them on an encouraging note. I always bring up the concept of "10 years". Silence from the other party usually ensues.
There are two immediate benefits from mentioning this little known fact. 1) I don't get another inquiry about their new business 2) It keeps the weakest and insincere from competing against the existing contractors.
Doing something because you want to versus doing it because it is cool or profitable is a classic conflict in construction. Obviously, having more contractors building our habitat and our infrastructure who want to be in the business benefits society and our profession. Contrast this with all the "house flippers" of just a couple of years ago.
As you can tell, I vote for the people who are long term and sincere in their professional goals.
Posted by Matt Stevens at 8:12 PM | Comments (0)
The Velveteen Rabbit
This may be a sign of my age but, not a sign of my ignorance. I am often reminded of the parable of the velveteen rabbit. It is a classic that should be (must be) retold by future parents. Without stories such as this, no standard language can be established between the older generation (wiser) and the younger generation (inexperienced). I will go so far as to say without these transcending parables, less transfer of wisdom will occur leaving the youth of our world less prepared.
Established societies use these tales to tell and teach their youngsters life's principles. These societies have made a choice. It is better to teach experience before someone needs it. Contrast this to letting people experience the lesson first hand. Scar tissue is not a bad thing, but it is inefficient in growing leadership. Mentoring is largely based on this principal.
What is the parable of the velveteen rabbit? I will let you look it up. Google is a great invention. The lessons are many. However, this is what I see: Don't be afraid of life's lessons. Its ups and downs, it makes you real. Take anyone who has met a payroll, raised children, built an invention or run a construction company. I can confidently state they are real people. Ones whose opinion matters.
Conversely, those have not done much in their lives, they cannot be considered a source of much. Whether through laziness or fear, (it doesn't matter the reason), these kinds of people should not be sought as counsel or as a mentor. They just don't know much of the detail of life. Detail is where life happens.
The 30,000 foot view is the same as the theoretical view. A solid starting point for action and discussion, afterward little is accomplished. The ball does not reach the end zone. Theory does not make it happen.
The velveteen rabbit is a great standard. The author knew more than just how to place words together correctly and smoothly. He was probably a great dad or friend or mentor or son (or all of these things).
Life is not a theory. The rabbit teaches us this. It for those who are unafraid to participate.
Posted by Matt Stevens at 7:51 PM | Comments (0)
I am an A10
Much like the A-10 Wart Hog Airplane is the management consulting work that I do. Close in and ugly. I am a contractor at heart. That is why I do what I do. I love it. It's fun, stimulating and rewarding. Many construction firms are family owned. Helping families is work that gives back to your professional soul.
I am an A10 is not a designation of my good looks or my performance in school. If it was, the letter would be toward the "c" side and the number would not be double digits, it would be in single digits.
I don't think at 30,000 feet. I certainly know we have to be in the right battlefield if we are going to win. I do think at the global level but, not for very long. I do think at a low or close level to the battlefield (job site). More of my time is spent at the treetops.
One of my attitudes is "If you are in a fair fight, you didn't plan well enough". Suggest that at your next strategic planning session.
You may or may not appreciate the approach but, it is a detailed, knowledge driven one. One that is missing in the consulting industry. Since I am a fee based consultant (versus commission based), it is risky. I have to "dance for my dinner" or deliver real value. I don't benefit from clients buying products. Solutions and specific process is the product. Hard but, fun and very challenging.
"What is the right thing to do" is a lot easier if you are not commissioned based. The client and I benefit in many ways by answering only that question.
Posted by Matt Stevens at 2:01 PM | Comments (1)
Estimating is Mostly Science
You may or may not believe that successful bidding (winning projects) is mostly science, not luck. Somehow, young construction professional somehow an innate gut feel allows a construction company to win work. That is, to know what the price on bid day should be to be low or in the running. That is absolutely not true.
We first have to agree that the work costs something based on logic. The first driver of cost is quantity or count. How much product to install tells us the first piece of a logic chain that extends to labor pricing and subsequently, all the way to the summary sheet. From opening the plans to proposing the work, there is little room for luck. It is largely based on science. On any project, the truth is not told on bid day but at project close out. Connecting the two is hard for the unsuccessful bidder. He or she does not know the outcome or the final result. The successful construction contractor does.
Only from a conversation with that company (or a former employee) can the estimator be confident that he or she had the right number. Being low is not success, being right is. Since the quantity takeoff or count is the driver of the final cost, you can see why we strongly conclude that estimating is largely a scientific or logical exercise. No voodoo needed.
Posted by Matt Stevens at 7:49 PM | Comments (0)
It is a 50 Year Career
All professionals are in a long swim as they pursue their career while providing for themselves and others. As we can work longer with better health, it is a longer swim than our father's (my mother was not allowed to work outside the house). So, whatever we choose we will be at it for a while. Even if our "ship comes in", we still have to do something in a serious way, otherwise the person we will become is not worth much.
Choose carefully. We have concluded that construction is the best industry. You'll have to read my book to understand the analysis and to determine if the conclusion is valid. However, I have not been challenged by another person about this professional opinion. Silence must mean agreement.
Know that moderation in all things is a wise path. Certainly, we can become enamored with being rich or famous (or both) Good for you if that is a goal. Just remember, it is a long swim. To reach your goals with carefulness would be my advice here. People can reach their goals by acting in all manner of ways. Only to find out that it is the little things that really matter. Also, they will discover that to celebrate the achievement of a dream alone is no celebration.
It is truly a long swim. By my reasoning, 50 years. You have time to fail and restart but, there is no time to quit.
To never try to reach your dreams is regret. So, let's be aware that there is a middle ground here as in all things. Go forward, go for it, and do the right thing on the way. Then, you can have a true celebration when you arrive at your goal.
Posted by Matt Stevens at 2:51 PM | Comments (0)
Growth is Good?
Construction is different. We don't know of another industry with all the good and bad that construction has to offer. Several business characteristics are unique. A general approach can help in some areas but, hurts in others.
Growth of all types is not good. In certain areas, it is desired and growing other parts is not. What am I talking about? Growth of your employees as professionals is important. It allows benefits past a more efficient staff. Intellectual growth is important, that is, always searching and finding better ways to conduct your business. These reasons for growth are not hard to fathom.
Contrastingly, growth of revenue can be a disaster in construction contracting. To raise revenue profitably in a management intensive business is hard. Our trusted staff can only work so hard and then we have to hire unproven and untrusted new people.
Added to this, we cannot get a premium of even 5% over a like competitor. To sell more in the short term is to have to cut price to gain agreement from new customers. Cost will be the same and probably more due to overworked staff and new hires.
We are in cost side business and the greater the distance of cost from revenue, the more secure the business. Said another way, if these two business numbers are close together then the company may have one bad event and cost can quickly become more than revenue (a loss).
As Denis Waitley said, "If you are growing you are green, if you are ripe, you rot". True in most cases and most industries, but not construction contracting.
Posted by Matt Stevens at 5:40 AM | Comments (0)
The Learning Curve
Most people's work quality does improve with age. The exceptions tend to be in clothes modeling and sports. However, each of us can probably say we make more money than we did 20 years ago. This is of course driven by being better at our profession. Knowledge increases with age for most our lives. It affords us the efficacy (efficiency and effectiveness) to be rated from "very good" to "excellent" at what we have chosen to do.
As we look at our subordinates, we know this applies to them as well. Our people have grown in their skills and it has allowed us more time to work at the important / urgent tasks that drive the profit dollars. Our subordinates of tenure, in turn, earn a higher wage than average.
All this works to our benefit in the construction industry. However, how do we increase this phenomenon to our advantage? How do we speed up this learning curve?
Certainly, this is why all the industry focus on training. Taking some of the curve out of the learning curve is the object of training. To be clear about the construction industry, we are unique. Some of the training concepts that are well accepted in other industries don't fit us. If we are make training a strategic advantage over our competitors, we must see insights most others don't.
For my part, I have several observations and some conclusions. As a double check on my work, I can look to the industry for proof although somewhat anecdotal. To be fair, our industry is so fragmented and also mostly privately held, deep research is hard to come by much less conduct.
On other posts, we will examine some of the generally accepted rules for training, and why/why not they drive the result we want.
Posted by Matt Stevens at 4:07 AM | Comments (0)
Our Next Boot Camp is April 15-17 in Philadelphia, PA
4_2008 Boot Camp Brochure.pdfReferences of our Business Management Boot Camp, double click here
Posted by Matt Stevens at 7:43 PM | Comments (0)
Construction Training Basics - Part 1
As we look to grow our present workforce to assume more responsibility (and authority), a training approach has to be option 1A or 1B. It has to be the first option.
Another option is "let the cream rise" or your best people will just naturally earn more responsibly and authority. I don't think it is a second option, that is, let all your people make mistakes and learn. Darwin would understand this approach. The fittest become rulers and the rest of us work. As you know, this approach is inefficient, costly and takes a long time.
I have been actively training for many years as a construction supervisor during the 70's 80's and early 90's. Since that time, I have trained many groups as a management consultant. From both tenures, I can tell you some basics that may help you as you try to speed up the learning curve with your subordinates.
- Train your people to task / skill just before they need to use it. This means one task is trained and acquired. It may sound strange but, it is true. As a result, it takes weeks to train someone who does a myriad of tasks. Not what most construction companies want. However, "drinking from the fire hose of knowledge" leads to poor results. People can only absorb so much.
- Adult learners like new or interesting information. This causes mental engagement. It makes the whole experience deeper and less boring.
- We have to get past the first 7 minutes of training. People will become focused deeply after 20 minutes. Psychologically, we should take a break at 1 hour and 15 minutes. Getting past that first 7 minutes is critical.
- Adult learners like interactivity. This also causes mental engagement and makes that 1 hour and 15 minutes seem brief.
Posted by Matt Stevens at 10:24 AM | Comments (0)
The New Generation
To paraphrase, "They are reckless, ill-mannered and disrespectful of adults". Sounds like today's young people. You're right. However, Socrates said this over 2,000 years ago about the youth of his day.
We can be awfully harsh on the next generation. Most of it is undeserved. They are just young and inexperienced, full of emotion and ideals. No scar tissue. They just don't know some basic truths about what can happen to them. How fragile life is and how fickle it can be. Lastly, that God has a sense of humor.
Some of our criticism is deserved. We have a generation that ( most of) hasn't experience three basic emotions:
- Hunger
- Financial Distress
- Loss of a loved one's life
The first two are part of the great abundance of the United States. The last is only grace or luck depending on your religious outlook. The first two is where we are frustrated. Too much consumption and not enough investment by us as parents, uncles, aunts, neighbors and the like. We don't want our young people to go through the awful time most of us went through.
Now, we can all share stories about our first car, our first job, our first month on our own etc. The older generations didn't have as much given to them as the latter ones. It is a fact we cannot control. The 20- and 30- somethings as a group aren't as circumspect about their lives as we are.
All this means to me as a management consultant is that the pool of strong management talent has gotten weaker. We have to ignore this trend and focus on finding those who have touched by harsh reality. They are out there.
Posted by Matt Stevens at 6:36 AM | Comments (0)
16 / 3 Rule
Over the years, general contractors have consistently taken small gambles on young or unproven subcontractors. Time and again, the ratio I used to see was 16 / 3. That is, if a GC had 16 subcontractors on a project, he or she was using 3 who were not proven or simply cheap. As you know, this is a rational gamble as the building owner was asking for price first and then asking for speed second.
In my experience, this ratio has changed to 16 / 2 or 16 / 1. It seems since the turn of the millenium, GC's have led the charge for insisting for quality subcontractors and passing on the additional cost. It is to their credit.
Additionally, the drive for speed has risen has been matched by the GC's determination to change the economics of constructing work. Certainly, we all take a gamble. However, proven subs are 90+% of the equation and it is to the credit to the 700,000 builders along with the AGC, HBA and other contractor representatives.
Posted by Matt Stevens at 8:01 PM | Comments (0)
Frustrated by Your Construction Software?
Your computer system can be a blessing and a curse. We know when it is blessing because it has sped up the collection and reporting of information. This makes our analysis of those reports much timelier. Important in our risky, superheated race to completion on construction projects.
However, when it is a curse, we know that as well. The system sometimes won't produce reports that we must have. Certainly, a good report writing software on the back end helps here. To name a name, Crystal Reports has a following among contractors.
Another alternative is to use a download of your information resident in your software and report / analyze it in a spreadsheet. Machine language is also known as ASCII. ASCII Stands for American Standard for Information Interchange. It is a type of file format. All software will read these files. All contractors should know how to download data from an accounting, project management, or estimating software package into an easy to use spreadsheet such as Microsoft Excel. From here, we can analyze the data extensively.
This should untie the software knot some contractors may be experiencing.
Posted by Matt Stevens at 2:41 AM | Comments (0)
ConsensusDOCS Have Arrived
After three years of hard work, several construction industry associations and related outside parties have created 70+ documents that are a real effort to standardize practices in our industry. Standardization allows for professionalism and fairness. This is a long term value to 4 parties:
- Funders (owners, developers, etc)
- Users (owners, tenants, etc.)
- Designers (engineers, architects, etc)
- Builders (contractors)
- The Construction Users Roundtable
- Construction Owners Association of America
- Association of General Contractors
- Associated Builders and Contractors
- National Roofing Contractors Association
- National Electrical Contractors Association
- National Subcontractors Alliance
- National Plumbing - Heating - Cooling Contractors Association
- Mechanical Contractors Association of America
- American Subcontractors Association
- Painting and Decorating Contractors Association of America
- Lean Construction Institute
- Construction Industry Round Table
- National Insulation Association
- Finishing Contractors Association
The American Institute of Architects (AIA) is notably missing. Long term, this prestigious organization will hurt itself in many ways by not joining the rest of the industry - Owners, Engineers and Contractors - in standardizing the business of construction. From a PR standpoint, it is hard for the average person to understand their lack of community. Several reasonable but negative perceptions will evolve from that.
Posted by Matt Stevens at 2:29 AM | Comments (0)
Opportunity Cost in Construction - Simply Put
Opportunity cost is a term that many of us have struggled to understand completely. I was unsure of the definition and how it applied to the "real world" when I first heard it. It is seemed a little abstract or not concrete, more of an academic concept. However, all these smart people believed it was real and so there was something there I should understand.
We know that opportunity cost revolves around of the idea of lost profit when you do something that is not billable. As an example, if my crew is doing rework on the first floor, I am losing the opportunity to install work on the second floor and bill it. As we know, rework is non-billable. There was an opportunity cost to us because we were performing rework. Fair enough.
However, some see mistakes, lost productivity, meetings as part of the business. So, they may not fully grasp the importance of this concept.
Here is another way to look at it. You have business bills due each month. Personally, each of us has costs to live. These expenses don't suspend because we can't invoice the client. Just because we have less revenue this month doesn't affect the demand payments from vendors, landlords and the like.
Opportunity cost is real to those of us who have experienced "too much month". We know we can't be unproductive whether it is from rework, unproductive meetings or laziness. There is a real opportunity cost (emotional, academic and practical) when we are behind on our bills.
Posted by Matt Stevens at 2:20 AM | Comments (0)
Question and Answer About ROI
ROI is not profit, ROI is based on cash to cash cycle and profit dollars
Read my book and buy the templates, They will calculate your numbers
Good luck
Matt Stevens
Sent from my Verizon Wireless BlackBerry
____________________________________________________________________________________
Date: Wed, 23 Jan 2008 02:06:37
To:mstevens@stevensci.com
Subject: RE: Question
Matt,
Thanks for the reply. So the job with all the subs, permits, etc. looks to be over 12 million dollars. 30% is 3.6 million. Doesn't that seem extremely high?? I would love to do the job and were going up against three other contractors.
Thank you in advance.
____________________________________________________________________________________
>Date: Wed, 23 Jan 2008 02:02:37
To:mstevens@stevensci.com
Subject: RE: Question
Look at the ROI to set price and profit
Somewhere around 30% ROI is appropriate. It is up to you whether you want to go higher or lower. There is no right or wrong. It is a business decision. My book has the complete calculation.
Best of luck
Matt Stevens
Sent from my Verizon Wireless BlackBerry
____________________________________________________________________________________
Date: Wed, 23 Jan 2008 01:40:53
To :
Subject: Question
Matt
Thanks for taking the time to read this e-mail. I have a quick question for you. My friend (who is a carpenter) and I (an electrical contractor) have started a general contracting business. So far we have done some houses and some smaller commercial buildings. We have recently been offered to submit a bid on a 114 unit town home project that looks to be 12 million plus. Does the standard 10% apply on that scale?? If so it would be over 1.2 million dollars... or does the markup change based upon the price associated with a big job??
Thanks for any info,
Posted by Matt Stevens at 3:13 AM | Comments (0)
Process Improvement - The Second Most Important Thing
Any construction firm seeking a faster or more accurate business process must start at a reservoir of best practices. For a quicker achievement of its goal, a library of best practices allows a contractor to sort, discard and pare down dozens of ideas in a single day to the strongest ones which will help him or her reach schedule, financial, safety and quality goals. Once a good set of practices are destined for adoption, the next step is not so obvious.
It is the concept of "discrete tasks go to the lowest possible level, functional tasks go to the highest possible". Said differently, project duties should be done by the people closest to the tasks, corporate duties should be done by folks who are higher in the hierarchy. Why? We make more money on projects than by corporate strategies. The executives should help push the infrastructure and systems along while the field and administration managers keep projects on-time and on-budget while keeping safety and quality excellent.
As an example, Job Estimates and Project Planning (discrete duties) are best done by the middle managers. Hiring people and buying software (functional duties) are more effectively done by Senior Managers. Both sets of managers are tasked with decisions that allow for them to effectively drive the cost equation.
Continue reading "Process Improvement - The Second Most Important Thing"
Posted by Matt Stevens at 9:06 PM | Comments (0)
Integration in Construction Contracting
There are three business activities every construction contractor must perform.
1. Acquiring Work
2. Building that Work
3. Tracking it All
Doing these with accuracy and speed assures a certain future.
Clients, Service Providers, Subcontractors, Material Suppliers and others affect the quality of these three critical functions. Each of these project partners must be communicated with if the three functions are to be done well thus, provide a competitive advantage.
Acquiring work means building work. That is where the real risk starts. This is no place for fumbled information or unclear processes. Tracking it all doesn't come easy. Speed in these processes is a competitive advantage. People have to be helped when trying to gain speed. Hardwiring these critical pieces only helps with tracking. Leaving this to chance can endanger the financial health and reputation of a contractor.
Said differently, integration is the coordination of these moving parts. Good integration management is guiding all of these functions and partners to a profitable conclusion.
Our integration presentation explains:
• Integration and its purpose
• Why integration is critical to the future to a construction company
• The process of integration
• Integration traps
• What integration cannot deliver
Posted by Matt Stevens at 4:19 AM | Comments (0)
Promotional Video for McGraw Hill's New Book, Managing a Construction Firm on Just 24 Hours a Day
Click on this link.
http://mudpuddlenews.com/programs/flash/buymybook.html
Thank you for your interest.
Sincerely,
Matt Stevens
Posted by Matt Stevens at 4:52 PM | Comments (0)
Overhead Question and Answer
Question:
Hello Matt;
After reading your book, I have a question regarding dual overhead percentage and Total Mark-up percentages. My mark-up percentage calculates to 35%. For my dual overhead calculations I am using a 8% profit, 7% material/sub-contractor & 20% Labor and equipment. This totals to 35%. The thing that I have noticed is that if I take my raw labor/equipment, materials/sub-contract costs, & take them x 1.35 this total number is higher than if I accumulate the percentages separately on my spreadsheet. Is my process correct? Is this the benefit of the dual overhead and still covering my required overhead?
I continue to enjoy the Digest.
Hope this finds you & your family with things going well.
Answer:
Good morning.
Certainly. Your math is correct. As you know, you are placing parts of the total percentage number on smaller numbers. Therefore, the result is less than taking the total percentage and multiplying it by total (larger) number.
The dual rate is the only way to arrive at a true cost or breakeven for the job. From breakeven, we add the profit margin we believe we can get or at least gain entry into a negotiation.
Many contractors have fat or contingency on each part of the total number. This is good in a steady economy but, can be a business mistake in a poor economy. Said another way, if a negotiator knows his breakeven or "walk away number" he can play the poker game with confidence whatever the economic conditions.
Further discussion and examples in the book (as you know).
Hope all continues to go very well.
Sincerely,
Matt
Posted by Matt Stevens at 10:08 AM | Comments (0)
Construction Contracting by the People Numbers
Construction Contracting by the Numbers
- 2,770,888 Number of U.S. firms
- 7 percent are female-owned
- 83 percent are male-owned
- 10 percent equally male/female owned
- 7.7 percent owned by Hispanics
- 2.7 percent owned by African Americans
- 1.5 percent owned by Asians
What does this mean to you? What impact does it have on the industry?
Certainly, any fairhanded treatment has to point out positives and negatives. An unfair analysis would not include one side. So with the belief in that, let me point out the good and the "needs improvement" sides of the ledger.
Good -
- We have seen improvement in the industry in race and gender representation.
- Without hesitation, we can also assume a greater mix of religious, agnostic and aethesists. Although, a lighthearted comment might be "how can you not believe in God in our difficult and dangerous business".
- On the same vein, we should be confident that a greater range of national origins exists today than decades ago.
- Same with sexual orientation, political beliefs and the like
Needs Improvement -
- The numbers are not close to the population census of the United States. We would think any profession should strive to have a representative mix of the country it is situated in.
- As some races are known for certain affinities i.e. Asians tend to be less athletic but, more studious. We can certainly have some forgiveness as a cultural component can creep into these numbers. Women tend to still want to have children, a family and choose when and how they want a career.
- We see shades of good and not so good in these numbers. You can certainly take a hard view on either side. However, we wish to point out that the construction industry is still a merit based business. Hard, hard work installs construction work. You can't fake it. Owners, the ones who fund projects, only reward completed work and not the promise to perform. Hard work and smart work does keep one's cost lower than lazier competitors.
The answer here is to continue the conversation. Be open to talking about it. If you are dissatisfied with the numbers, the only way to change them long term and permanently is to continue to keep communication alive. In the United States, that is the proper and legal way we solve our problems.
Posted by Matt Stevens at 10:27 PM | Comments (0)
New! Sample Case Study for Construction Contracting
For a free sample case study course from Stevens Construction Institute, Inc., go to:
http://www.constructioncbt.com/tracker3/NewStudent/LMSNewStudentLogon.aspx
Posted by Matt Stevens at 4:50 PM | Comments (0)
References of Our Annual Boot Camp
Matt,
I wanted to write to express my appreciation for the Business Management Boot Camp seminar you put on through the Southeastern Pennsylvania Associated Builders and Contractors from 4-23-07 through 4-27-07
My personal experience in our industry has been one of coming up through the ranks of a carpentry company, from Apprentice, to Carpenter, to Superintendent and now into management. This is not an uncommon path for many managers in the construction business; however the shift in paradigms from the field to a management position was a struggle for me as I am sure it continues to be for many others.
Your course was excellent in bringing to light many of the issues I have had to struggle through as well as several of the necessary points of focus for new managers in the industry. Your passion for your topic is evident in your delivery of the course as well as in the text and tools you provide to the participants.
I found the course to be very informative and valuable, not only for small business owners, but new Project Managers, and Superintendents looking to take the next step as well. I anticipate sending others from our firm to attend your next offering of the course in October.
Thanks Again and I hope all is well,
Christian Kalbach
Manager of Field Personnel, Safety and Training
E. Allen Reeves Inc.
____________________________________________________________________________________
Matt: Thanks for sending the information. I just got time to get to go over
what I may have not completed due to other scheduled events Friday PM and
Saturday. Your Boot Camp was well worth the time we had to dedicate to it and I
know we will get a great deal out of it. Your presentation was
professional, personable and encouraging. I am sure glad I made the
decision to attend. I look forward putting to use the tools you taught.
Hope to see and hear from you in the future.
Regards,
Joe McColgan, Vice President
Wescott Electric Company
________________________________________________________________________________
Hi Matt,
Hope you have recovered from a long week of teaching the Boot Camp!
Thanks for the info, found the entire week to be tailor made for me. Found many areas in which my business can improve in, and I am looking forward to implementing the new ideas and moving beyond average. I am one of those guys who have a tendency to focus on growth, so I think I received a wakeup call on watching cost last week.
I was hoping you could send me a copy of the overly complete check list that you mentioned in class, and the list of best practices.
Thanks again for all your effort; I look forward to going to one of your classes in the future!
Curtis Wray
_____________________________________________________
Matt,
The boot camp format was excellent by taking repeated breaks on time I found myself paying very much attention while in the class. Being able to have a break every hour put me at ease. I was able to put my cell on vibrate and if a call did come up decide weather to leave the room to deal with it or wait for a timely break. I also was appreciative that you realized everyone there had business to take care and you did not take affront to anyone having to leave the class to take care of it. Maybe there could be some way you could communicate to potential clients although they will be away from work they will not be out of touch. It was the best format for a teaching situation that I ever attended. I was alert, interested and wanted to participate. I thought you had a very friendly and engaging personality. You clearly had a grasp of your subject matter. I felt you made the class at ease. We were a class and not a group of individuals sitting back and getting lectured all week and listening to old war stories. Sometimes when I go to these types of classes the moderator stands up on a soapbox bragging about there accomplishments. I felt you were very flexible to listen to others opinions and your comment about starting points for conversations for all you analytic info was great.
My favorite part of the seminar was the exercise with the critical path method. It taught me a great tool and it helped foster camaraderie with some of my class mates. Drawing on others experiences and expertise was a tremendous benefit. I love networking with people. My rule of thumb is that if I attend a class I have a goal to hopefully bring back one or two ideas that may help me in my own work situation. There were more than ten off the chart suggestions that I am going to try and introduce. If one or two actually take hold in my organization I will be thrilled.
Interacting with the others in the class gave me some insights that I may take home. For example one of my classmates suggested that doing a credit check on an individual could give you an idea about someone's character. His comment was that if you pay your bills usually you are a conscientious, serious candidate for employment. Feedback like this you just can't measure and is a tremendous side benefit of the class. I think because you set the tone of the class everyone contributed. I could go on and on with positive comments but I do have to get back to work sometime.
I want to mention that the setting at our association was great and John Judge's effort and hospitality was appreciated.
Tom Collinson
Collinson, Inc.
Uwchland, Pennsylvania
_____________________________________________________________________________________
Matt,
I was telling our estimator that we as project managers must take off the job a second time immediately after we are given it. In this way we can confirm the accuracy and know the quantities before we begin. This is well worth the effort and it will give us more time to address any mistakes and to develop a schedule that will allow us to beat the estimate. I have already used a number of your lessons learned to the benefit of our company!
Thanks for the training
Russ Reithmeyer
Project Manager
Blair Concrete Services
____________________________________________________________________________________
Matt,
I wanted to let you know that my brother Victor and I have been using
several of the techniques for negotiating contracts that you spoke of both
in your book and at the class I attended last year. Over the course of that
time we have had several customers take us up on the offer of a discount for
not holding retainage and likewise a discount for paying net 10 days. Last
week we had a customer take advantage of both the net 10 discount and the
retainage discount as a result this job has completely funded itself
increasing our net profit margins and likewise our ability to accept
additional work for that work period. The most important part is that our
customers our looking at our company much differently, we are no longer just
a group of carpenters but instead we are savy business professionals.
Thank you for your insight and knoweledge your book and class work have
helped us to develop our strategies and techniques to further our success in
the construction industry.
Tammi Talese
Vice President
V-Talese Inc.
Posted by Matt Stevens at 1:29 PM | Comments (0)
2008 boot camp flyer.pdfPosted by Matt Stevens at 12:55 PM | Comments (0)
Firing a Client
It is a tough emotional day when you have to fire a client. When we started in this business, we had one or no customers. It was scary. I can remember waking up in the middle of the night and asking myself why I ever left my regular job to go out on my own. No clients means no income. A truly humbling but, electric experience. Small victories mean more when you have little.
So, we all remember that time. As we mature as business owners, we soon discover an ugly fact. There are clients who aren't partners. They see us as a resource to be managed. There is no warmth or well wish from them. They use us for our service and nothing more. Add to that late pay or payment that is often disputed and you really see the effect of keeping this client as a customer. Hours taken up discussing on non-billable issues. When the problems are not your fault, reality collides with that emotion cited above. You know you must take action.
Firing a client is not natural. It is conflict and most people shy away from conflict. People seek positive environments and skirt unfriendly ones. Ask anyone who has married the wrong person and subsequently divorced. They weren't consistently home on time. There were other places they went to before going into that unwelcome home environment.
Some of us must struggle with the ultimately difficult conversation of placing a client on our "do not call, do not answer" list. Here are some steps:
• Meet them in their office - go to their place so, you may leave as you wish. Meeting in a restaurant allows outside interruption and detail to creep in as wait staff, food, check, and privacy are not in your control. Going to their office is a small sign of respect. Certainly, president's of client firms can close their door.
For the rest of the article, please email us at clientservices@stevensci.com and write "Firing a Client". We will return the full article to you within 3 working days in Adobe Acrobat.
Posted by Matt Stevens at 9:50 AM | Comments (0)
Strategic Planning for Construction Contractors - Unwound
I have witnessed several strategic planning attempts which have resulted in many successes and a few failures. From afar and with discussions with construction contractors (some of which are clients of mine), I have summarized my observations and subsequent analysis of strategic planning efforts in construction contracting companies below.
1) If a consultant is utilized to facilitate this effort, make certain he or she has the following characteristics:
a. Construction specific experience. Generalists will use overall business models and concepts that may guide you to an inefficient and ineffective plan. Our construction contracting business is unique.
b. Not a recent ex-contractor. He or she may be too close to and have to much experience in the construction industry to be objective.
2) Make certain past efforts are considered in the process. A contractor's failures as well as successes show where a company should concentrate their efforts.
3) Give the potential directions time to air out in between meetings. Enthusiasm is great in the implementation of the plan but, can lead to errors in the creation of the plan.
4) All strategic directions have to be vetted against potential financial performance. Be conservative in your projections as money is the only barrier here between you and bankruptcy.
5) Always consider what reactions your competitors will have. Competitive moves against you have to be planned for as your peers will react against your preliminary directions. As a side note, the most fun you can have in strategic planning is watching your competitors react, squirm and generally blink at your moves.
For the rest of the article, please email us at clientservices@stevensci.com with "Strategic Planning - Unwound. We will return an Adobe Acrobat copy in 3 working days.
Posted by Matt Stevens at 8:31 AM | Comments (0)
The "F" Words to Managing a Construction Contracting Firm
Friendliness - Relationships and People grow in a friendly atmosphere. All people do seek friendly atmospheres and turn away from unfriendly ones. Let your place of business have the air of positiveness and not the tension of negativity.
Your managers and supervisors will certainly look forward to coming to work. They are half-way to wanting to do a good job for you. See the other four "F"'s below.
For the rest of the article, email us at mstevens@stevensci.com. with the title of the article. Limit 1 article per month
Continue reading "The "F" Words to Managing a Construction Contracting Firm"
Posted by Matt Stevens at 1:35 PM | Comments (1)
Immigrant 101 in Construction
Immigrants have always been a part of the fabric of construction. When we started to gather around city centers and built infrastructure such as roads, buildings, subways, and the like, construction contractors starting looking for people to work in a dirty and dangerous environment. Second generation Americans looked to work in other places. However, immigrants were interested as construction pay was better and the hours more civil than the farm industry where picking, plowing, and bending over during the daylight hours was the norm.
This scenario has continued to today. I don't think it will change much as long as we have legal immigration in this country. (I am hopeful the illegal kind will soon cease).
A couple of contractors I know are still wrestling with the idea of using first generation immigrants in their construction business. They are hopeful to find a way to attract and retain native workers. This is a worthy but, difficult goal. They continue to experience frustration.
The current number of illegal immigrants will not change downward in this country. Our political system will not allow for deportation. The American people are forgiving. I can see a day where our borders are secure and we start talking about a path to citizenship. We certainly won't do that when we cannot secure the borders. We are not that forgiving as a people. However, we won't lose our workers to immigration reform. It is not in the political cards.
For the contractor, if you are seeking more "ready to work" people in you field staffs, immigrants are the only place to start. Most come from farms and know what hard work is. They also, are not afraid of long hours. Don't be shy about recruiting this group. You have a couple hundred years of American Construction History behind you. Said another way, it is quite normal to have those who have not realized the American Dream (yet) to work in construction.
Posted by Matt Stevens at 8:45 PM | Comments (0)
My Visit to Clemson University
I recently was invited to speak before two Project Management Sections at Clemson University. As they had adopted my book for the course, this was a very easy decision to make. I made time and arrived to that beautiful campus in Clemson, SC. in the month of October.
As you may have wondered about the next generation, I found them to be a smart and interesting group. Especially those who sit in the middle rows of the class. Of course, I am assuming that all college seniors in construction management are like this. I hope I am right, but then again, Clemson's curriculm has some rigor and practicality.Also. it is well known they are demanding of their students.
I discussed with them two case studies from my workbook I recently published. One was based on a general contractor and one on a specialty contractor. Both concerned financial management.
I worked fairly hard to make this an interesting topic. All I can say is that I tried. Let's face it, finance is a staid subject. If you don't tell a couple of jokes and state some interesting facts about construction firms, you will bore anyone to tears. Later, the professor told me that I did make it interesting. Whew!
One of the interesting topics we discussed was revenue growth. As most older contractors know, growth has to be carefully controlled. If not, it will cost you. You will end up paying to finish projects. So, I did my level best to tell this curious group that half the business is about people. If we hire the wrong person to take on a 1 million dollars of cost, that cost obligation can grow very fast to 1.5 or 2 million dollars. Again, you will end up paying to complete the project at the end.
A lesson that was not lost on this group.
Purchase a copy of my McGraw-Hill book, Managing a Construction Firm on Just 24 Hours a Day. We offer a bundle with Excel templates that are featured in the book and 5 on-line courses to help teach construction business concepts. Go to www.stevensci.com and click on the book link
Our workbook companion with 10 case studies is titled, The Business Management Workbook for Construction with Case Studies is now available.This text is focused as an assist for Colleges, Associations and Contractor Training Programs that teach the business of construction.
My next book, The New Business Model of Construction Contracting is planned for December 2007. Its focus concerns the changing construction environment and what processes address those changes.
Matt Stevens is President of Stevens Construction Institute, Inc. A management consulting firm which works only with construction contractors. Learn more at www.stevensci.com. Take a free course at www.constructioncbt.com and sign in as a new student. For a seminar schedule, email us at mstevens@stevensci.com
Posted by Matt Stevens at 10:02 PM | Comments (0)
What the Top 25% of Construction Foreman Do
The field is where a contractor makes or loses money. The cost of the project is mostly at the site. Making those costs result in a finished installation within the budget is the basic task of the construction foreman.
Learn from our data and our experience what the top foreman consistently do and how they do it.
For the rest of the article, email us at mstevens@stevensci.com. with the title of the article. Limit 1 article per month
Continue reading "What the Top 25% of Construction Foreman Do"
Posted by Matt Stevens at 10:54 AM | Comments (0)
Cash Flow - Keep Water Out of Your Ship - Podcast
Hear the beginning of our article on Cash Flow in Construction.
Email us at clientservices@stevensci.com for the remainder of the article. Limit 1 article per month. We will send it to you in three working days.
Order our book published by McGraw - Hill, Managing a Construction Firm on Just 24 Hours a Day by going to stevensci.com
Continue reading "Cash Flow - Keep Water Out of Your Ship - Podcast"
Posted by Matt Stevens at 1:38 PM | Comments (0)
Are There Too Many White Collars in the Construction Process?
It is our observation that there are too many "white collars" in the building of a construction project. Have you ever looked at the total numbers? We count over 10 different people involved who are in a "profession"
It begs the questions, "Who is doing all the heavy lifting?", "Who is taking the most risk?", and "Who is delivering the most value?"
Here is a sample listing of the people wearing a necktie involved in a typical construction project.
Before the project is started:
1) Developer
2) Real Estate Broker and Agent
3) Architect(s)
4) Engineer(s)
5) Government Official(s)
During construction:
1) Inspector(s)
2) Government Official(s)
3) Insurance Representative
4) Lawyer(s)
For the rest of the article, email us at mstevens@stevensci.com. with the title of the article. Limit 1 article per month
Continue reading "Are There Too Many White Collars in the Construction Process?"
Posted by Matt Stevens at 1:28 PM | Comments (3)
Construction Estimator's Job Description
Estimators are becoming more of the project team. This is in contrast to years ago where the take off and pricing was done in a relative vacuum and then, presented to a senior manager usually the Chief Estimator or President for review and discussion. With the advent of increased competition and the design build concept, companies are making the estimator more a part of their on-going business process. Their tasks are more varied, such as helping to sell projects and interacting with the field including verifying effective construction techniques at the time of bid.
The role of the estimator is a critical one. Your ability to predict the direct and indirect cost of work is paramount to being a successful. As an Estimator, you are responsible for:
• Communication all business and technical aspects to the project manager and the field staff.
• The Quantity Survey of the Work
• The Unit Pricing of that Work.
• The General Conditions Cost Managing that Work
• The Application of the Overhead (office cost) Recovery to Support That Work
• Assist Your Supervisor in Setting the Profit for That Work.
• Setting the Proposal Language or "Terms and Conditions" for Building that Work.
For the rest of the article, email us at mstevens@stevensci.com. with the title of the article. Limit 1 article per month
Continue reading "Construction Estimator's Job Description"
Posted by Matt Stevens at 5:23 AM | Comments (5)
Project Manager's Job Description
Given the many different types of contractors, type of work, regional differences, thus the need for flexible job responsibilities in construction, we could never write a definite job description for project managers.
Outlined below is a summary of general responsibilities of the project manager in managing the client, project, subcontractors and vendors. It is important for the project manager to understand his or her role and how these duties and responsibilities relate to other personnel on the project. These duties outlined below may be typically assigned to the project manager in one company while they may be performed by the field supervisor in a different organization. The point is these responsibilities must be performed. The project manager is ultimately responsible for accomplishing these tasks.
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Posted by Matt Stevens at 12:28 AM | Comments (0)
Engineering News Record (ENR) Book Review of "Managing a Construction Firm on Just 24 Hours a Day
At the risk of being a little self-promotional, I'd like to tell you about my new book, recently published by McGraw Hill, Managing a Construction Firm on Just 24 Hours a Day. It's gotten a good response and I firmly believe it can be a help to better run a construction contracting business.
Here's what Richard Korman, Senior Business Editor, ENR.com writes "If you want to clear your head about something in construction contracting, just pick up consultant Matt Stevens' new book, "Managing a Construction Firm on Just 24 Hours a Day". It is like talking to your older brother who has clamped a hand on your shoulder and is telling you the blunt honest truth about the costs associated with schedule compression or rightsizing your overhead. Yes, this book is full of takeaways and sample equipment forecasts. But where it really shines is in discussions of resource allocations and the uses and significance of CPM schedules. Stevens makes them simple. It is in essence the ultimate, easy-to-digest book about the financial management of contracting for an industry where the younger people have college degrees and the older set don't exactly want to focus on finance. I've never seen anything more accessible on getting and managing work profitably."
If you would like to read other reviews by industry professionals, click on the link here:
http://www.contractorsblog.com/archives/2006/01/book_reviews_of_1.html
Go to our secure E-store and order the book by itself or with 60 Excel Templates and five on-line course package. Click on this link:
http://stevensci.com/Merchant2/merchant.mvc?Screen=CTGY&Store_Code=SCII&Category_Code=BCF24
Posted by Matt Stevens at 9:53 PM | Comments (0)
Managing Construction People
Managing people well is half the battle in contracting. Some people say it is more. The business, as we have said, consists of people and processes. In managing people, older contractors make fewer mistakes in working with others. They have the experience (or scar tissue) to know how to do this better than their younger brethren. As might have guessed, this was written from conversations with dozens of experienced contractors over the years.
This article applies to everyone in your firm. If you are executive, some of these guidelines you already know. The stakes involved are all your projects worth many times more than a single job.
If you are a project manager, you typically control more than one project. Your leverage is not as great as the executives', but more than the project field supervisor or foreman.
If you are a foreman, people are important to your success. Good disciplined craftsmen who like your management style can make your professional life easier. It has been said that the quality of the foreman is directly linked to the level of gross profit a contractor enjoys. The field supervisor is a resource manager, taking the demands of the job and matching them with limited resources. At the end of a project, the foreman who thinks more as a manager will win more often.
For any construction professional to win more often, he or she must psychologically take off his tool belt and assume the role of business owner. The business is the construction project. The average construction project in the United States is about the same as the revenue of a small business. The foreman is responsible for it as small business owner is.
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Posted by Matt Stevens at 3:56 AM | Comments (3)
Unwinding the Green Building Market for Construction Contractors
The Leadership in Energy and Environmental Design (LEED) or Green Building effort is past due in this country. In the future, we may be second guessed by our grandchildren about our generation's wisdom. Slow as we may be, we certainly are trying to catch up and forestall man's effect on our living space, of which there is no replacement habitat for our 6 billion fellow beings.
Some contractors are progressively acting on the green building movement. They are showing real leadership on LEED. Everyone should be pleased as everyone wins. However, not all contractors, designers and owners are investing themselves in the effort. On a positive note, certainly more of them will each year.
I can only speak about the contracting community as it is where I spend my professional time.
Contractors sense there is irrationality in this new market. Many people are suddenly involved claiming to have real expertise in a movement which is less than a decade old. Construction firms are not sure who the experts are. That is, those to trust in stewarding contractor's on a efficient and effective path to building green work. Although, it is exciting that everyone predicts LEED will only increase in volume long term. Soberly, construction companies have been burned by popular business trends in the past when outsiders have not been as helpful as advertised but, certainly made sure professional billing was collected.
Most contractors are small. 65% are ten employees or less and 90+% have 100 employees and less. These companies very sensitive to big investments even though they (contractors) may be noble and forward thinking. Most professionals are solving for their financial security. Any national plan has to include addressing the financial focus and potential fiscal strain that LEED may require.
Here is one way to look at the Green Building Effort. This is the start of conversation that will never end in our lifetimes.
1. The first principle is to be local. When in the forest build from trees' wood. When an area of clay, use the ground as your building material. Contrast this common sense with moving materials hundreds miles and the resulting energy expense.
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Posted by Matt Stevens at 9:42 PM | Comments (0)
ENR's Business Forum 2007
I participated in ENR's Business Forum 2007 and was part of a panel discussion It was a very humbling experience. I think I was at the wrong end of the bell curve. However, I did show up and sit on that panel with several astute professionals from different parts of the construction industry.
The forum was conducted by Richard Korman, Senior Editor at ENR and he made sure there was plenty of questions. Keeping up to speed in front the audience of well respected firms such as Disney, Southern Company, Midwest Mechanical, Balfour Beaty and the like is not easy. Everything is amplified. With practice, I can see where people can become very comfortable.
The good news was ENR handed out my new book to all attendees. When I first walked into the conference, a stack of dozens of my books were next to the registrar. All this was luck and I like to be lucky. It doesn't take as much work. Certainly, ENR has helped greatly to get the word out. I am grateful for their kind actions.
Even a couple of people requested me to sign a book. That was flattering.
Posted by Matt Stevens at 4:38 AM | Comments (0)
Construction Productivity
Construction Productivity continues to be flat. From government data on Employment and Put-In-Place Construction, our industry's trailing 10 year trend has risen little and in the last two years has reversed itself. All other major sectors of the United States business community have increased their productive output in constant dollar terms.
It is a frustrating business fact that needs to be addressed. Smart contractors have ignored this national problem and focused on their individual company productivity. As a result, competitive gains have been made by contractors and the reward is theirs to keep. Although, this is on an individual company basis, it is sign that construction productivity is something that can affected.
Both General Contractors and Specialty Contractors win when the output / input ratio is high. Projects get built, clients seek you out, and profits increase.
In our presentation on Construction Productivity, we will explain and you will understand:
• The Construction Contractor's Business Cycle
• The Risk - Reward Curve for Construction Contracting
• What processes drive productivity
• The measures that confirm construction productivity
• Feedback allows contractors to continue to constantly improve.
The business is about construction. We will show you how to start the process of improving your company's productivity.
Posted by Matt Stevens at 10:42 PM | Comments (0)
National Association of Heavy Equipment Training Schools
http://www.heavy-equipment-training.com/directory/construction-school.cfm
Equipment Training - National Association of Heavy Equipment Training schools provides accredited training for heavy equipment and crane operators training courses.
Posted by Matt Stevens at 3:50 PM | Comments (0)
Amazon.Com Sales Rank for "Managing a Construction Firm on Just 24 Hours a Day"
Amazon.com Sales Rank: #21,965 in Books as of September 2007
Popular in these categories:
#3 in Books > Professional & Technical > Engineering > Civil > Construction > Management
#20 in Books > Business & Investing > Management & Leadership > Industrial
#31 in Books > Home & Garden > Home Design > Buildings & Construction
Posted by Matt Stevens at 8:12 PM | Comments (0)
Join Us for our Business Management Bootcamp For Construction
We offer a 5 day intense bootcamp on the business of Construction October 15th - 19th, 2007. Read the reviews below.
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Recent Reviews of our 5 Day Bootcamp:
Matt,
I wanted to write to express my appreciation for the Business Management Boot Camp seminar you put on through the Southeastern Pennsylvania Associated Builders and Contractors from 4-23-07 through 4-27-07
My personal experience in our industry has been one of coming up through the ranks of a carpentry company, from Apprentice, to Carpenter, to Superintendent and now into management. This is not an uncommon path for many managers in the construction business; however the shift in paradigms from the field to a management position was a struggle for me as I am sure it continues to be for many others.
Your course was excellent in bringing to light many of the issues I have had to struggle through as well as several of the necessary points of focus for new managers in the industry. Your passion for your topic is evident in your delivery of the course as well as in the text and tools you provide to the participants.
I found the course to be very informative and valuable, not only for small business owners, but new Project Managers, and Superintendents looking to take the next step as well. I anticipate sending others from our firm to attend your next offering of the course in October.
Thanks Again and I hope all is well,
Christian Kalbach
Manager of Field Personnel, Safety and Training
E. Allen Reeves Inc.
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Matt,
The boot camp format was excellent by taking repeated breaks on time I found myself paying very much attention while in the class. Being able to have a break every hour put me at ease. I was able to put my cell on vibrate and if a call did come up decide weather to leave the room to deal with it or wait for a timely break. I also was appreciative that you realized everyone there had business to take care and you did not take affront to anyone having to leave the class to take care of it. Maybe there could be some way you could communicate to potential clients although they will be away from work they will not be out of touch. It was the best format for a teaching situation that I ever attended. I was alert, interested and wanted to participate. I thought you had a very friendly and engaging personality. You clearly had a grasp of your subject matter. I felt you made the class at ease. We were a class and not a group of individuals sitting back and getting lectured all week and listening to old war stories. Sometimes when I go to these types of classes the moderator stands up on a soapbox bragging about there accomplishments. I felt you were very flexible to listen to others opinions and your comment about starting points for conversations for all you analytic info was great.
My favorite part of the seminar was the exercise with the critical path method. It taught me a great tool and it helped foster camaraderie with some of my class mates. Drawing on others experiences and expertise was a tremendous benefit. I love networking with people. My rule of thumb is that if I attend a class I have a goal to hopefully bring back one or two ideas that may help me in my own work situation. There were more than ten off the chart suggestions that I am going to try and introduce. If one or two actually take hold in my organization I will be thrilled.
Interacting with the others in the class gave me some insights that I may take home. For example one of my classmates suggested that doing a credit check on an individual could give you an idea about someone's character. His comment was that if you pay your bills usually you are a conscientious, serious candidate for employment. Feedback like this you just can't measure and is a tremendous side benefit of the class. I think because you set the tone of the class everyone contributed. I could go on and on with positive comments but I do have to get back to work sometime.
I want to mention that the setting at our association was great and John Judge's effort and hospitality was appreciated.
Tom Collinson
Collinson, Inc.
Contact us for more information at mstevens@stevensci.com.
Posted by Matt Stevens at 12:42 AM | Comments (0)
Partial Business Management Boot Camp Class - October, 2007
Posted by Matt Stevens at 9:20 AM | Comments (0)
Matt Stevens Will Participate in an ENR Panel Discussion About Project Profitability in Washington D.C.
Download attached flyer for information.
Posted by Matt Stevens at 2:14 PM | Comments (0)
MS Excel for Construction
Spreadsheets have been around since the 1980’s. They have been the first software most of us were exposed. Not much has changed to the look of spreadsheets since those years but the power has risen dramatically. Today, the uses are many. They are the base calculator for several software packages today. Spreadsheets are as common as cell phones in construction offices. They are simple in their layout of rows and columns, but powerful in the use of functions, commands, etc. Professionals in the construction industry use them from basic tasks such as number calculation to more advanced features such as database functions.
Excel® is an easy-to-use yet powerful spreadsheet program from the Microsoft Office® software group. It shares many of the features of Office applications with which you might be more familiar, i.e. MS Word®
In our Excel Class for Construction, we will look at some of those shared features and learn to navigate and compute in an Excel worksheet. We will also learn the buttons and toolbars in the software. Lastly, we will create formulas and thus spreadsheets that can be used in the construction industry.
Names of commonly used ones are Quattro Pro, Lotus and Microsoft Excel.
The proper use of a spreadsheet will produce a fast and accurate result.
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Posted by Matt Stevens at 3:57 PM | Comments (1)
Labor is the Greatest Opportunity
Labor is the greatest risk factor and the greatest profit opportunity for construction contractors.
Specialty contractors (also known as subcontractors) will tell you it is the single greatest opportunity for them to make or lose the most money. None of the other cost items compare, not material buyout, or subcontracting or equipment utilization. It all starts with labor productivity.
Studies for several years have pointed out that wasted labor time on an average project is over 30%. Multiply that percentage by a payroll of $1 million dollars and you will see why it is such a huge issue. 90% of projects that have cost overruns do so because of the labor cost of the job.
Analyze an average labor intensive contractor’s profit and loss statement. Calculate a 5% Increase in labor productivity (the labor cost reduces 5%) and the labor savings go directly to the bottom line. Conversely, decrease the labor productivity, the labor costs increases and you might breakeven or worse. This is an opportunity or a problem depending on how you look at it.
Both specialty and general contractors benefit from a focus on labor. The reason is obvious for specialty contractors. They have a large part of their costs of a project contained in it. General Contractors
benefit as they receive better pricing from specialty contractors as the fear of loss is lessened to these
contractors.
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Posted by Matt Stevens at 4:24 AM | Comments (2)
ENR Book Review of Managing a Construction Firm on Just 24 Hours a Day
Posted by Matt Stevens at 1:40 PM | Comments (0)
DuPont Chart - Free
A DuPont Chart is a way to show how finances work in a construction firm. It is a graphic that looks somewhat like the NCAA Basketball Tournament Playoff system. Many brackets on the left reducing to only one on the right. Since construction people are visually attuned, this is an effective way to show how several different variables affect the wealth of the firm.
Said another way, many financial factors determine the Return on Net Worth (or Investment). Understanding how many and which ones allow your managers to positively affect them.
If you would like an example of a Dupont Chart, please email us at clientservices@stevensci.com
We have a fully customizable template with MS Excel formulas that is offered as part of our Templates package (60 in all) at
http://stevensci.com/Merchant2/merchant.mvc?Screen=CTGY&Store_Code=SCII&Category_Code=MSEXL60
This form will help explan quickly the financial equation of a construction firm. We also have an Application for Payment, RFI, Change Order and the like.
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Posted by Matt Stevens at 9:05 PM | Comments (1)
There Are No Windfalls Left
We know our business is a tough one. However, it has not always been that way. A time or two ago, material prices were stable, people wanted to work, the economy was steady and legal/political issues were a minor concern.
We all have worked as labor in the field. Some of us remember how fun it was. Loud music playing on the radio, our shirts off, and after work time was ours. What happened? In the decades since, we have moved up in our responsibilities thus less fun. However more to the point, the business has changed.
Our industry has tightened up in the demands it places on us to make a profit. There are no windfalls left. We don't have the luxury of naive competitors since more information is available than ever before. Addtionally, the clients, subcontractors, and suppliers have become more sophisticated leaving us with less opportunity to make a profit.
Lets' look at the changes that have occur in the last 30 years or so. These points are compiled from several groups of contractors at different times. They were asked what has changed in the last 3 decades?
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Posted by Matt Stevens at 5:51 AM | Comments (0) | TrackBack (0)
Construction Return on Investment Calculation - Free
We will forward to you the calculation for Return on Investment for a construction project. This is a better way to price a job on the front end and perform a post - construction review on the back end. Send us a note titled "Construction Return on Investment Calculation - Free" to mstevens@stevensci.com and we will forward to you the narrative of the calculation within 4 working days.
Posted by Matt Stevens at 11:08 AM | Comments (0)
Closing Out a Construction Project - Bringing It Home
The close-out phase of the project is one the most important factors in determining how a project ends. Does it end with a strong finish and the owner is delighted at how quickly they received the finished project? Or did the last 10% of the job drag on forever and it seemed as though you would never finish? Customers remember most vividly the last 10% of the project. How you close-out a project will leave a lasting impression in the owner’s mind. Unfortunately, they won’t remember all the hoops you jumped through to get the job started in the dead of winter, but they will remember that it took three weeks longer than expected to patch the drywall or to broom rocks.
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Posted by Matt Stevens at 9:51 AM | Comments (0) | TrackBack (0)
Construction Contracting is a Tennis Match!
In the 1960's the name of the game for construction firms was to "get it done", deliver the project and then hash out the financial issues with the client. Contractors were comfortable doing this. Clients understood the ethic and appreciated the extra work this involved.
Since that time, owners have slowly changed but, change they have. They view construction firms as a resource which is to be managed. Owners understand more about the construction process than ever before. They involve themselves deeper in projects. It is their right; however, if they manage the details closer, we should expect a responsive and reliable partner. If not, we should reasonably expect to hold them accountable.
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Posted by Matt Stevens at 12:40 PM | Comments (3) | TrackBack (0)
The Rule of 72 in Construction
Which is more? $5 million or a penny doubled every day for a month? Surprisingly, the answer is the penny. This illustrates the power of the rule of 72. This is a simple financial rule that dramatically shows the power of doubling. It demonstrates the power of time with interest to produce large outcomes.
This solidly points to the importance of expense discipline and financial management for construction firms. Done with frugality, the reward is substantial wealth at a relatively early age. Done poorly and we work longer than we want to.
The math of this rule is simple. It should be t