My father had a sign in his workshop that comes to mind frequently. It read: If you’re so smart, why ain’t you rich? I’ve omitted a word from this message. Dad’s workshop was definitely not a politically correct zone.
The message here, of course, is that intelligence for its own sake is not as important as what you do with that intelligence. This is a lesson many of us learn the hard way when we leave school and enter the workforce. This is also a lesson that many companies struggle to incorporate into their business processes. The mantra “more information is better” exerts a powerful influence on business managers. But too often there is no explicit plan for how best to manage and make use of business information.
The amount of data involved in construction work has been growing continuously as projects have continued to grow in complexity. The first impulse of a contractor whose business is growing and who is facing a growing pile of data is to organize this data. Move bills, receipts, and invoices into an accounting pile, move job schedules, change order requests, subcontractor contracts, plans and specs into a project management pile.
This is a rational and useful impulse. Organization of data allows contractors to employ specific software applications to help staff work more efficiently. Accounting data can be routed to accounting applications to manage payables and receivables. Project data can be moved into scheduling applications and file sharing applications to help manage all the moving parts and people involved in a construction job. Personnel data can be captured in human resource management applications.
Building these virtual silos of data helps companies build a better base of knowledge. Project managers can look for scheduling bottlenecks and vendor performance issues. Accounting can keep a close eye on project cash flow. Purchasing can better reconcile receivables against POs. These are examples of companies able to make better decisions informed by more accurate knowledge. This, however, calls to mind another quote: “A little knowledge is a dangerous thing.”
In the world of business management, knowledge can be power. But as you electrical engineers out there know, for power to do real work, things (i.e., voltage and current) have to be in phase—or close to it. In business, this translates to making sure that information and action are in sync—that information drives action which creates new information to drive the next action, and so on. In a model where information for different functional groups is stored and processed in separate silos, this is far from guaranteed.
Consider the journey of a change order. Typically, beginning with a construction or project manager in the field, it has the potential of requiring action from many different people from across the company—and from other organizations. Project managers may have to adjust their schedules, accounting may need to adjust WIP projections, purchasing may need to secure more or different materials, and owners may need to issue approvals. For a typical change order to be executed effectively, all of these things probably need to happen, and all are interrelated. A set of information needs to be delivered to the right people at the right time with enough context to help them make decisions. In other words, information that is communicated and given context creates intelligence.
Context, and thus intelligence, comes from looking at a set of information in the light of all the other relevant information. Our virtual silos, so useful in organizing and structuring data, can also inhibit the creation of intelligence by keeping key pieces of information isolated. But no need to knock them down. The job of enterprise resource planning (ERP) software is to serve as a platform to connect and correlate information from disparate parts of an organization into a contextually coherent whole. Serving up a common user interface and accessing a common database, a construction ERP still provides different applications to different users—accounting has their set, operations have theirs, etc.—while also providing the ability to share common information between applications. In other words, the job of ERP software is to provide business intelligence.
So, will implementing an ERP system at your company help inform smarter decisions? Probably, depending on how completely all groups in your company use it. Will it make you rich? Well, that still depends on what you do with that intelligence, right Dad?