Contractors Survive And Thrive The Stimulus Recovery


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The Ultimate "HOW TO" survival guide to thriving through this economy...

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Contractors Survive And Thrive The Stimulus Recovery

  1. 1.     $urvive and Thrive the Stimulus Recovery! So What! The economy is a mess, banks aren’t lending, projects we looked HIRING RIGHT  at a year ago are shelved, cash flow and bonding is tighter than we can remember… Do not despair! Critical projects that can improve the competitive structure of our company are still necessary and can be an encouraging asset. While there is great scrutiny hitting all of our projects expenses and closer review of all of our overhead expenses and business demands, we all need to PLANNING  TIGHTENING THE  realize that our business must continue to UNCEASINGLY  BELT  invest in important projects to position for success when the economy does recover. The first of these is Team Development (Senior Staffing), then Integrated Strategic Planning (throughout our Team and including all external influences & strategic alliances) and Tightening the Belt on the Triple Constraints (improvements to cost, time, and scope management). WAIT! DON’T STOP THERE! Just because I suggested that you (a very important and busy Contractor and Business Professional) devote time and money to Business Development and Planning? Come on, let’s take a good look at the current ‘crisis’ and define where you want to be sitting as our industry revives and recovers from this luring doom… Just because you’ve successfully driven through tough times before, this ain’t your average set-back! Read on and I’ll share how we can not only survive these times, but thrive and succeed beyond industry expectations… WARNING: READING THE REST OF THIS ARTICLE MIGHT MAKE OUR BUSINESS THRIVE! The mantra last year seemed to be “Vote Right, then Wait and See”, the 2009 mantra seems to be: “Keep advancing without spending; approach life with a shovel in hand”. Of course, true professionals keep asking: “How can we succe$$fully deliver quality projects in the face of So, initially, I must such significant cost pressures and competitive bid wars?” demand that you stop complaining and talking about doomsday and the collapse of the economy and of our business! The next Important Project on our plate indicates our new ‘Mantra’… “Keep on Thriving into Recovery”… now that’s a good Strategic Plan! Hiring right is more important than voting right. Select your Team (especially executives and leaders) with greater scrutiny than in times of prosperity. Hire leaders that can manage leaders and motivate our entire business culture through a multitude of negative influences. Stop whining and stop spreading those negative thoughts amongst the Team. Search the heart and focus on the positive traits, NOT just credentials! Now is the time for some serious Team building processes through integrated planning and the development of a top notch executive business development team. The planning process will get us all on the same page and quickly identify the key, strategic leaders and any potential personnel risks. We’ll know soon enough who the real strategic thinkers are and where we need to modify our plans… Page 1 of 6   
  2. 2.     Don’t procrastinate, motivate! The key is for us to change the way we think, corporately. According to Patrick Below, a strategic planning expert and business consultant from Madison, Wisconsin, “Strategic Planning is more than SWOT (strengths, weaknesses, opportunities & threats) analysis, it means taking time to do in-depth strategic analysis, operational planning and results management to develop and integrate short term and long-term strategies that improve overall profitability.” Well, this is exactly what I’ve been preaching for years with regards to all business planning processes! I’m sure this has never happened to you, but too often business plans have a way of burning-up a lot of time, then ending up on some shelf only to be thought of in between “more serious” projects. The strategic plan that I am talking about will become our drive straight through this (and any future) economic mess… Using a term from DO NOT LET THE CURRENT ECONOMY OR our friendly City Planners and Developers, let’s call it our TIGHT CREDIT/BONDABILITY SITUATION “Master Plan”. Don’t waste time and money trying to do IMPEDE CONTINUOUS STRATEGIC strategic planning on your own. Many businesses have PLANNING! failed due to an immature plan, even in times of great financial mobility! Develop our Team, Strategize the Success, then together we will manage the “Tightening” of the belt… During last Tuesday’s 2009 Market Insights Webcast, hosted by REED CONSTRUCTION DATA and ASSOCIATED GENERAL CONTRACTORS, the slide below indicates the excellent increase in Institutional Projects, straight through the tears and fears of a collapsing economy! OK, so we all saw the Residential Building Trends nosedive from early last year and it’s clear that the market for Leased Space followed accordingly, but the rebound is in sight! I know it’s always darkest just before the storm, which closely sums up our current economic cycle. While America’s recession is expected to struggle well into 2010, most economists within the construction industries agree that the Institutional share of this downturn will start to recover before the end of 2009. Clearly, the leasable space and housing markets will lag into 2010 (and some believe into 2011, depending on what the Fed does to interest rates, the new administration does with a ‘Stimulus Recovery’ and how well Wall Street responds to those influences). Main Street and Wall Street remain disconnected, so we expect the rebound to be disjointed. I suspect that Wall Street will bounce back a bit faster than Main Street as Consumer Confidence remains low and it is likely to take several months of encouraging news from Wall Street to restore that confidence. Think about it, how much were you paying for materials last year? Probably the greatest, single source of relief (and surely our first) is the decline in materials prices. These prices reached ridiculous levels, yet we all kept spending the money and buying the overpriced goods! With the global economy now in this recession and consumer confidence flailing, investors are pulling their money out of risky investments such as commodities… -material prices are starting to drop already… John Mothersole, principle at Global Insight, reported in mid-October that scrap steel prices are collapsing at an unsustainable rate –approaching $300/short ton after costing more than $500/short ton earlier in 2008. Production of concrete has also been slashed, leading Mothersole to predict that this implies that today’s deflation of material costs may contribute to tomorrow’s re- inflation. Page 2 of 6   
  3. 3.     Of course, the lower-priced fuel was finally a blessing for the end of 2008, just as Wall Street dove for the floor… Regardless of your positions, our business felt a bit of relief from that inflated fuel cost for the past two years. Now, consider the prices of building materials coming back into reach, just as we hear of more and more contractor failures… 2007 2008 2009 Steel /short ton 575 900 600 *rebar 769 1,006 750 *structural 705 1,060 800 *plate Base Metals /metric ton 7,187 5,675 3,800 *copper 2,443 2,375 2,300 *aluminum Cement /ton 101.2 100.5 97 *portland cement (20-city average) There are STILL a lot of excellent projects in the funnel, right now! I know, there’s a lot less than we are used to seeing on the books, but there are still a number of excellent projects to fight over… Quit crying about the stiffening competition and the cut-throat bid wars; integrate strategic planning into our business culture and that environment will improve. Don’t worry about the unemployment rates; that simply indicates that there are a greater number of unemployed Teammates to select from! Hire them to lead you through this quagmire. I fervently believe that together we will see positive, construction start-ups increasing steadily by as early as this summer. I just snapped this list from the REED CONSTRUCTION web-site. These are just a sampling of a few, Northern California, funded projects bidding probably well before we see any “Stimulus Package” recovery from the Fed and certainly before California even gets a signed budget for ’09 SOUTHERN CALIFORNIA BID DATE PROJECT ESTIMATE PALM DESERT 2009-02-03 $64,902,300 JOINT HIGH SCHOOL 2009-02-19 $57,000,000 PIERCE ELEMENTARY 2009-02-05 $3,300,000 EL CAJON PUBLIC SAFETY CENTER 2009-02-05 $49,000,000 LA PALOMA 2009-01-29 $7,000,000 Given these economic indicators and the current climate, I will lead our Project Teams using seven sacred rules! I’ll call these “The S.U.C.C.E.S.S. of Tightening the Belt on Strategic Planning”, you might want to refer to this as your very, own, personal, BAIL-OUT: Scope Definition / Management: 1) Every project that is undertaken will   only focus on the most critical of deliverables and reduction of “Fluff” and “Gold COSTS  Plating”, especially during these tough, economic times. Every effort will be taken to ensure that each project is focused on delivering only those items of highest, immediate payback and that every meeting refocuses on the Master Plan. Work closely with business partners and the vision of the alliances to identify how to reduce   cash outflows and deliver on the critical needs. Construction projects inherently DELIVERABLE  include a high degree of risk in the interpreting a complete Scope Definition and estimating cost and time elements     within such a unique process. In addition to a quick study of SCHEDULE  SPECS  Page 3 of 6   
  4. 4.     the ‘apparent’ scope provided by the design team, the Contractor must, often times, be required to interface with technology licensures, designers, engineers, government agencies, artists and specialists that demand construction techniques or methods be varied to suit certain nuances of their specific and often uniquely intricate technology transfers or implementations. These commonly lead to changes in the definition of the actual scope of work before a contract is even bid. Fine-Tuning Scope definitions is cash-critical! Undercutting the Out-Sourcing: Certainly it is wise to surround yourself with leading 2) consultants, subject-matter-experts and professionals when times are flush and cash flow is great! However, times such as these recall that, “Cash Flow is King”; the return of Frugality! There are few consultants that are worth the value of a bill rate over $75/hr in this economy. During good times, you may be comfortable paying $100-$200/hr, but right now bring it in- house and/or stop the additional bleeding by using greater caution in this area. Here are some tips to reduce your resource costs: First, use in-house leadership and management whenever possible. Already part of your overhead costs, they should be leveraged since they have the most knowledge of our business internal environment--and can get a project running quickly (besides, there is a lot of excellent talent looking for a job right now and they might not be so cocky about $120K + Benefits). Additionally, if you have other in-house, professional resources like Engineers, Architects, or Business Analysts, use them to keep project costs down and market their skills as additional income generation (you may be really surprised at what ‘sellable’ talents are already on your current payroll; step out of your ‘bubble’ of corporate identity (why not bid as The Prime if licensed to do it? Why not become a reseller of a product you can market? Why not open a retail store in the office of corporate headquarters, if it works into our Master Plan?) Just remember that we are ultimately striving for profitable success. When you just can’t hire the talent in-house, contract local resources rather than large consulting firms to save on the overhead associated with their brand image (remember, it’s about tightening-the-belt”, not boasting and name-dropping your associates). Finally, look for opportunities to use offshore resources for stand-alone functions like software-application development or manufacturing. Leveraging the global talent pool has never been easier; use “LinkedIn”, “BLOGS”, and other world-wide communications systems to strengthen your alliances. Collecting Cultch (Salvage): In Old England, “cultch” was defined as unwanted 3) treasures that were salvaged; the term “One Man’s Trash is Another Man’s Treasure” comes to mind. Cultch is also defined as the sand that is used to irritate the muscle in an oyster to produce a valuable, cultured pearl. Our contracting firm, Cultch Enterprises, Inc.* , exploited that term by applying creative value-engineering to our projects and producing valuable, cultured pearls (mutually- satisfying results) all while recycling and salvaging our “cultch”… By thinking about reusing or recycling instead of building or buying, there are numerous opportunities to improve project costs. This is most easily noticed in the waste-filled construction field we so lovingly refer to as the Job Site! Train the entire Team to think like a Salvage King and a World-Class Recycler; lumber, steel, drywall, repairable tools and other ‘disposable’ assets… even small hardware and inexpensive items (the time to ship, carry, store, inventory, and reapply adds up quickly). Salvaging existing business parts for our projects is another great way to save additional resources (office supplies, office furniture, IT products & supplies…) It’s sort of like the thrift shop for project delivery (remember, it’s NOT about pride-filled name-brand purchasing right now!) For projects that require application functionality, such as software or IT projects, one option is to build enhancements onto existing applications rather than build a new one. When you are looking to update one application, Page 4 of 6   
  5. 5.     don’t build a new one, but simply put a nicer interface on top of the existing business, application and data layers. Consistency: Another opportunity for reducing project costs is through consistent 4) standardization. When we use consistent corporate architecture and environments that are already largely prevalent within our enterprise, we can lower our project costs by leveraging that existing infrastructure that is already in place. If we start wandering down that road of ‘exciting new technologies’ and ‘the latest and greatest’ methodologies, we will wander away from the Master Plan! Study that plan and only implement the strategies agreed to by the Team. Introducing new architectures, environmental changes and educational requirements just might apply the brakes to this fine-tuned drive through Economic Recovery… CAUTION: Do not ignore the exploitation and implementation of the many new methodologies/technologies that are inexpensive to install and train which provide a prompt and obvious ROI (such as webcams and Internet interfacing for multiple site management and out-of-town stakeholder communications, or on-line video conferencing to save travel expenses…) Electronics: Your in-house expertise will be enriched 5) through the use of mature, off-the-shelf software and proven electronic technologies. Let’s work to improve our use of what we have now… While the “latest and greatest”, cutting-edge stuff will give you something to chat about on the golf-course, it will clearly choke your productivity during a time where production is paramount (refer back to the whole idea of “Tightening-The-Belt”). Using “off the shelf” standardized technologies is much more suitable for maintaining a smooth, corporate environment and provides for greater ease in communicating between all the members of our Strategic Alliance; besides you can deploy much more rapidly and reduce research and educational costs along the way. Slowing down to install the latest graphics software, stopping to reload the newest PDA, or downloading all your meeting minutes into your new MP3 Player can wait until after this Economic Recovery. Obviously, we will keep in mind that there are new delivery models to investigate as opportunities to complete our projects more quickly and/or cheaply, but even ‘upgrading’ our current software might be better left for the next year of ‘cutting a fattened hog’. LEADERS DO NOT USE 6) Spiritual & Moral Fiber: BE GOOD! BE HONEST! BE PEOPLE, THEY SERVE POSITIVE! Spiritual leadership is the opposite of what most PEOPLE! people think. Spiritual leadership is servant leadership. Coping LEADERSHIP IS SERVICE! well is not a natural skill for everyone, but there are traits that will be noticed by workers and organizational leaders: - I am Positively Constructive (if not gleeful) when reacting to bad news or changes, - I am Positively Efficient at adaptation to change through rescheduling, collaboration with stakeholders, etc. – I Share my Eagerness and Ability to assist workers through communications and interactions to maintain maximum efficacy of performance. What would you do if the Stakeholders suggested that they may fire your Project Manager and offer you that position? Will you await the demise of your fellow worker, or warn him/her with compassion? Should your Sales Team call the competitor who’s contracted job you are bidding and explain that you are about to bid the job that they may lose? For many years, I have watched people abuse their positions of leadership! The titles of “Supervisor”, “Crew Leader”, Superintendent”, or “Project Manager” are given freely and somewhat haphazardly. The respect and true benefits of those positions MUST be earned through servant hood! The next time you see your Teammate struggling with something, solve the problem. When your subordinate asks an action question, ask him/her do explain what they would do (enforce their need to learn). When you see a subordinate that’s thirsty, go get them a drink! When they run out of gas, go carry the can for them! Fear permeates our environment today. We feel its paralyzing Page 5 of 6   
  6. 6.     presence everywhere. In our personal lives, in our professional lives, in our organizations, fear, (especially the fear of failure) is rising. We are afraid of the risk of making the wrong decision, of not performing, of looking ridiculous in front of others. Revive that entrepreneurial spirit and realize that our ‘failures’ are actually our paths leading to the doorway to success. Remember the immense failures of biblical characters like Moses and David and Peter. These failures prepared them and changed them so that they could succeed in the things that God called them to do. Be thankful for our failures and press into servanthood… LEADERSHIP IS SERVICE. Are you genuinely committed to serving your people with their best interests at heart? Our ability to cope well in the constraint-heavy environment improves our workforce’s ability to cope. 7) Success Minded: Success in living and working in today's quot;Information Agequot; requires successful thinking. The good news is that everyone is capable of increasing successful thinking. Successful thinking is using any mental skill to get results. Become a habitual study of these reminders to get better results with your thinking: *Increase your knowledge, daily, *Question Everything for Improvement, *Slow down, *Value principles and guard your heart, *Communicate with Caution & Care, *Re-think what you know, *Separate feelings from fact, *Dig Deeper, *Accept the Miracles that Appear, *Be positive, *Exercise, *Learn/Study/Grow, *Serve your quot;enemiesquot;/stay close, *Share suspicions, *Know where you stand, *Study thinking *Keep an open mind, *Laugh. Speak it Out! I specialize in visionary General Contracting Project Management, Construction Management, Team Motivation and Training. My passion is helping people learn to love their work. As an executive-level PMP, I have helped hundreds of successful leaders learn to enjoy life while maximizing productivity! I thrive on managing multiple, complex projects with a variety of environmental and organizational influences. I am an expert in Microsoft Project and most titles by Microsoft. I am an excellent communicator and electronically organized manager. To assure success with every project, we will propagate the execution of strategic planning and quality control, every day! While no one enjoys tough economic times and the stresses that accompany them, working differently and more frugally can be inspiring for our Teams. It allows them to operate more nimbly, focus on the critical few necessities and investigate alternative and innovative business models. Additionally, since time is money, it allows our Teams to work autonomously and act decisively. Hopefully, when our economy recovers, we will all remember these times where we worked more effectively and we focused our strategic alliances on the pleasure of thriving. This can serve as a blueprint for our future rather than returning to the era of gluttonous consumption without proper planning and leadership. -by CLIFFORD M. WILCOX Cliff is an Executive Project Manager living in Lincoln, California with his wife and three daughters. He offers business development, consultation and project management services through his local firm, “Greater Businesses International” and is actively involved in the Sacramento Chapter of the Project Management Institute bringing the professionalism of PMI Methodologies and internationally accepted principals to the Contractor’s of America.   Page 6 of 6