Flawless Business Fundamentals

We’ve all heard these seemingly simple concepts before: return phone calls promptly; execute bids quickly and methodically; keep open lines of communication amongst clients, suppliers and subs; maintain low overhead costs; don’t get caught up in debt that doesn’t return more money than it costs; develop staff; don’t allow the project to manage us rather than us managing the project; track costs and leads like a bloodhound; develop quality control processes. We’ve been taught these axioms before-yet now we are wondering why we didn’t pay attention. Why do we forget fundamentals in a boom time and beg for them in a tough market?  Successful businesses are built squarely on proper fundamentals.

A downside of an up-market is that many problems we might have with poor business fundamentals are masked by “easy” revenue. Even though profit margins may slip some, our project leads never seem to be on top of the project or the accuracy of our estimates is questionable, sheer dollar volume may hide the most insidious flaws in our organizations.

In fact, during the recent boom, just staying remotely close to schedule was the major concern for many contractors. Recently, we went through an economic period where even poorly managed construction businesses made more money than they spent on completing jobs. The demand for our services was at a never-before-seen peak exacerbated by easy-to-attain, free-flowing capital and banks that forgot about their own fundamentals (but that’s another story!). Many of us did not have to develop and implement sound marketing strategies to sell work, track costs and cash flow with a religious fervor or groom staff in the “way we do things here.”

It wasn’t long ago when the headlines read “Construction Labor Shortage” in newspapers across the country. This perceived lack of trained staff gave birth to numerous trade school training programs, unsustainable wage pressures and ever-increasing employee retention and development costs. Now, we are left asking what went wrong and how these mistakes could have happened on our watch.

Some things, such as capital markets, are beyond our control. Even well-run teams can fail due to these uncontrollable circumstances. But those with strict fundamental processes in hand have a much better opportunity for survival than those who play catch up. We can easily find our businesses in failing situations if the focus on fundamentals does not become part of our everyday business processes or corporate culture.

I would much rather discuss the intricacies of framing or complex trim work with crews and not repeatedly ask if they scheduled their subs, ordered materials or forecasted demand for floating “pool” labor and scheduled with the production manager. But business process discussions must share equal time. If we make these practices part of our everyday life, then we have just instituted time and money-saving efficiencies into our teams with very little expense in terms of cash outlay. Efficiency breeds profit and more competitive pricing capabilities-profit breeds growth and opportunity for all involved.

Proper fundamentals are not the sole provenance of any particular industry, but they are prevalent in successful organizations. If one were to ask a group of successful managers the secret of their success, many might hint that success came because of exceptional talent or skill or circumstances beyond their own control (“dumb luck”) – my sense is that most of these businesses could tie their success to performing a core group of business fundamentals 100 percent of the time and measuring their success daily, or at the least weekly, against established metrics.

I am often reminded of a funny story of the college football coach who was asked what he prayed for during the team prayer before the game. To paraphrase, in essence he said “…I stopped praying to win years ago, because the good Lord always seemed to be on the side of the team with the bigger, faster and better coached players.” I chuckle every time I read this spot-on parable. While superior strategy and training may allow a weaker team to beat a more physically talented group, very rarely will the better coached team, especially if they are bigger or faster, lose. This team understands the importance of fundamental processes and repeats them in practice until they become second nature under stressful situations.

As managers, our job is to develop these fundamentals for our organizations, implement them, measure our success with metrics, and correct as necessary. Teams that are expert in fundamentals can more than make up for a slight lack in natural ability. The key is to make these processes second nature and part of our daily practices, not something we talk about during down times, but something we accomplish daily.

Regardless of the particular construction sub-industry your business may reside (custom residential, restoration, commercial, institutional, etc.), there is no time like a downturn to develop fundamental processes for your particular organization and get them implemented. Require their use with incentives until they become standard. No two companies are exactly alike-but the successful ones understand the specifics that will allow them to measure results and succeed. No one, other than you and your accountant, can tell you exactly what your margins should be, how much money you are earning or losing, or what to charge for a given service, therefore, tools to help you forecast these questions and measure results absolutely must be in place.

The days are gone-at least for a few years or more-when unsustainable demand created artificially high sales prices that masked organizational flaws. The companies that are still around to see the next “boom” will understand and heed that (unknown to me) coach’s advice on how proper technique and fundamentals provides the foundation of excellence. Practicing for success allows us to better capitalize on opportunities and not become the victims of easy success. Let’s work and practice to make our organizations “fundamentally flawless” and not allow them to remain fundamentally flawed.