Competitive advantage in the engineering and construction industry used to be easier to get. With that advantage came solid profits and plentiful work. The market that evolved out of the most recent recession appears to remain hypercompetitive, and many would argue driven only on price. This new reality seems here to stay; companies can no longer expect easy growth and profitability for only mediocre performance.
On work bid, there is little or no time or budget remaining for rework, unrecognized scope or inexperienced trade performance. Many will find themselves outbid by competitors that created a great business model and excellent operations to match. The firms that adapt to the new market will emerge from the recession faster to market and will drive change to provide more value to customers. There are some business practices in construction many take for granted or assume are effective by “checking the box.” Techniques such as checklists can be immediately effective, but their value can diminish quickly without a long-term commitment, continued adaptation to customer needs and great leadership. As a result, some tactical techniques can create only further confusion across the company. Done correctly, effective business leaders know that sustainable operational excellence can create a lower bid and still allow room for a higher profit margin.
Market advantage seldom is gained by one or two well-implemented ideas. Rather, an organization that can rapidly adapt and implement multiple new ideas will create conditions for success. No longer is it one technique or approach that gives a company an edge over its competition, but rather advantage is gained by companies testing new practices and constantly evolving. In order to create this type of advantage, companies must be great at implementing ideas rapidly. From our work with clients through the recession, there are five steps required to achieve operational excellence:
- Align operations with strategy
- Create simplicity and effectiveness
- Lead effectively
- Develop best practices with the customer in mind
- Constantly improve
ALIGN OPERATIONS WITH STRATEGY
This allows focus and discipline on important issues, relating operational performance to the direction of the company. Most companies have many initiatives. Operational initiatives should not exist in isolation. Great companies focus on those tasks that tie in to the company strategy rather than lower return items that eventually resolve themselves. Tying operational initiatives to company strategy also allows for a natural motivation or rallying cry to achieve results. By doing this, the leaders can focus on what is essential while the company continues building projects and remains disciplined to follow through on the initiatives it starts.
CREATE SIMPLICITY IN OPERATIONS
This starts with achieving clarity in how we are performing today. It requires integrity in information across the company. In order for you to improve your physical fitness level, you must know where you stand today and be honest about how much you are working out. You will certainly hit a roadblock if you tell your trainer you are running 30-mile weeks, yet are not losing weight because in reality, you are running three-mile weeks!
Once this clarity is established, the field and office can communicate clearly around the truth. Labor budgets, cost code tracking and costs to complete are three systems that become most clouded. Each of these, when unclear, can create drastic consequences. Simple formats are understood easily and used often. The same applies to developing best practices. The simpler they are, the more likely they will be followed through the chaos of day-to-day operations. Reduce tasks to the vital core elements and execute them. This simplicity may come in the form of software. Too many companies are re-entering bids in the accounting system, wasting time and energy and potentially complicating matters with input errors and incorrect office staff understanding.
Getting direct reports to follow new best practices is no longer achieved by direct orders from the top of the company. Influence is more effective than imperatives. Influence requires great leadership in engaging others and creating a common cause or vision of the future, in order to motivate through and achieve the desired change. By understanding and connecting these initiatives with the individual motivations of each direct report, you can connect each of them to a desire to achieve the goal. Compliance for compliance sake is not effective leadership. Society has shifted from rote-rule following to a broader application and understanding of the fundamentals. This broader understanding allows for adaptations and continued improvements, refined and largely “directed” from the field.
Leading by seeking engagement from your company requires more energy, does not happen quickly, but has much longer and lasting effects. Building a vision for the future and clearly communicating it across the organization so that those implementing it understand the value of their efforts is essential to great organizations.
DEVELOP BEST PRACTICES WITH THE CUSTOMER IN MIND
Depending on the company and process discussed, defining the customer may be hard. Every best practice should have a clear purpose and customer identified. Establishing a goal will help keep the system simple and connected to “the bigger picture” and enhance effectiveness. Determining purpose, customers and goals can become complex with a number of best practices — accounts receivable for example. This can be a great discussion if done correctly. The discussion sometimes changes the orientation of the office staff to recognize how important a role they play in managing the customer. Accounts receivable folks are typically the last in the construction company to “touch” the customers and sometimes it is done in a less than cordial way. Another typical example is pre-job planning. Identifying the customer and purpose yields great insights for those executing the process and often takes us beyond the project binder handoff only.
The recession has created a search for improvements across the construction value chain. Vendors and suppliers of all types are eager to add value to the project by helping reduce costs. There are many systems in place that result in great benefit upon implementation. Some of these include GPS-automated grade and location systems, telematics, digital/remote time cards, Building Information Modeling systems, digital estimating, online plans and bidding collaboration rooms and more. Many of these are in use across peers today and are proven methods to improve productivity and reduce costs.
Aside from this, many clients of ours are working directly with vendors to modify tools in development. Some call these collaborative project sites beta or “pilot” sites. Project and vendor teams help design and improve the tools while gaining an advantage and providing input to equipment or software vendors. Equipment manufacturers are constantly seeking feedback and input to redesign their fleets. Software vendors are often looking for focus groups. Companies that are the first to implement these efficiency-laden ideas will gain immediate advantage in the market until competitors catch up, which often happens during the regular product release and fielding for the vendor when the product goes to market.
Operational excellence is a constant journey. Seldom do companies have either strategies or sets of customers that stand still. New employees and leaders cause a decrease in institutional knowledge over time. By maintaining a constant focus on improvement, adaptations to customers and strategy will happen and new employees will become trained as the older employees seek their input to revise and improve how things are done.
Every company has levers that it can pull to improve operations. These may include training, leadership, lean operations, automation, technology or many more. None of those levers is a magic pill that will make an immediate impact when operated alone. As an example, engaging project managers in training alone will not create great operations. Similarly, just providing safety training does not create a safer company. It is a good first step, but must be followed by leadership, reinforcement, accountability and more.
In the same regard, there is not any one-size-fits-all solution to developing best-in-class operations. Companies do not stand still. Generations transition, new competitors arrive in the market, geographic growth and expansion happens, customers demand different or new pricing, acquisitions happen. None of these changes lead to success unless we can execute effectively. Each set of customers, employees and services creates unique operational requirements that create opportunities for operational improvements. Knowing which initiatives and combination of levers to use for each context is critical to operational excellence. The principles above will assist in implementing change and creating an organization that can successfully adapt to the new and demanding environment.