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FMI Quarterly/December 2013/December 1, 2013

When Best Practices Hurt

workingplans11._imageMany companies have created initiatives to emplace best practices as a solution to the change around them. As the recession subsides and new work becomes apparent, hiring and growth create a demand for more structure in how we execute. A great set of best practices can help decrease organizational risk and improve profitability.

Like most good intentions, many times companies develop best practices and implement them poorly. Done incorrectly, morale decreases, project losses increase due to bureaucracy, and, ultimately, the company suffers from reduced profit. In some cases, companies spend significant time and energy developing their playbook, only to have it stagnate after two to three years and become only a memory. Best practices should be developed to become a communication tool and working document that synchronizes how we do things.

There are three major causes for how best practice initiatives can end up hurting the company and reducing ability to execute. These include a lack of tie-in to the company structure and strategy, focus on processes only and a general disregard for the people behind the behavioral changes and best practices that reflect a continuous learning environment and adjust over time. The proper implementation of best practices is designed to address these shortcomings and ensure lasting success. Each is discussed in detail below:

NO TIE-IN

Best practices must be customized to fit each company. Too often, we cut and paste a best practice from a peer contractor or another company and expect it will work. As no two construction companies are the same, no two best practices or standard operating processes should be the same, either.

Companies often vary by structural organization. This may be the difference between a matrixed organization and a functional task-organized company. At the project-team level, many companies have project engineers or project administrators; some have working foremen or area superintendents. In some cases, project estimators and project managers are the same roles; in others, the estimators conduct vendor and subcontractor buyout. These structural subtleties require a customized best practice and adjustments to roles and responsibilities.

In addition, businesses may have different customer sets. Best practices developed for a public works contractor (i.e., DOT work) will differ significantly from a private-work contractor (i.e., work for developers). Standards adjust for companies that build in one metro area or city compared to contractors that conduct work over several states. Job size may also be a driver of change in best practices. Companies that conduct many small jobs should have a different operational plan than those that build only a few large jobs. As companies shift their strategy over time, they must adapt their best practices to those changes.

A clear and cohesive method for managing the chaos of construction allows contractors the ability to expand geographically or grow their business profitably. Unfortunately, these same positive results can often lead to the undoing of operational best practices if left untouched. The same standards that led them to success must be revised and updated continually to remain relevant and valuable.

PROCESS ONLY

Best practices can be misinterpreted as forms, documents, checklists and binders. Many companies have standard operating procedures that are not used as a standard. The most important dimension of best practices is that the people follow them. Great leaders recognize the value of best practices is that behaviors are changed. Changing behavior is difficult and best influenced with leadership.

In too many companies, the senior leadership team develops best practices and thrusts them upon middle management. A best practice can be called “best” only when those who will be executing it deem it so. Although time consuming, this occurs when middle management and those executing the work develop the best practice with the support and guidance of senior leadership.

The true difficultly leadership faces in changing behaviors is to sustain buy-in while holding people accountable. Rigid enforcement does not work and can be just as ineffective as not holding anyone responsible in the first place. Change is tough and good leaders know to expect some resistance to it. At the same time, good leaders must be able to have tough conversations and provide feedback to those who will not comply with best practices. People need feedback to sustain behavioral change. Feedback includes quantified positive results obtained from using the best practices (e.g., improved profit margins, decreased waste, faster projects, etc.)

Great leaders reinforce importance of best practices and company values at every instance possible. When leaders are engaged so, too, are their followers.

ONE AND DONE

Best practices must continually adapt to keep pace with the learning organization. Typically, the first development of standard operating procedures takes the longest to create (Version 1.0). Version 2.0 is the first true refinement to ensure good fit and typically happens after six months to a year of use to work out the bugs, formatting and usefulness. Following that adjustment, successive changes should be minor adaptations that reflect lessons learned across project teams. For instance, after completion of a project in a new county, the company may add a bullet in the pre-job planning section to reflect the change in timeline for utility requests required in that new county. Done correctly, this addition will help prevent that mistake by anyone else in the company operating in new geographies.

Best practices do not remain stagnant after initial development. A best practice developed in a certain period and must adjust over time. Even when the company executes the same strategy, the best practice will change, as new materials become available, contract terms shift over time, municipal requirements adjust and means and methods become more efficient. “Written in stone” sets of best practices are a symptom of companies that do not continuously learn and change over time. Best practices should reflect these improvements and adjust appropriately.

Many companies gain customer feedback on their project performance. Some gain feedback from subcontractors and vendors. The end state of a well-executed set of best practices is a satisfied customer at an improved (lower) cost. Done correctly, we should regularly ask for feedback from our customers to ensure our best practices deliver value. This feedback on our performance may help adjust our best practices and identify methods to improve performance or address an incorrect customer perception.

As time progresses, natural attrition brings new employees and leaders to the company. These new ideas can help shape the best practices. Newer employees use best practices as guidelines to understand how things work. After some exposure, they are best suited to ask “why” questions and challenge the effectiveness of the operating procedures. This allows for continued improvement.

CONCLUSION

Best-in-class contractors recognize the importance of using best practices. Effectively developed and employed, construction companies can win more projects on bid day while making more profit than their competition. Common pitfalls described earlier must be avoided to ensure long-term success. Incorrectly done, the development of a company playbook may have a maximum life span of 18 months or less. Done correctly an organization can build a sense of ownership across the company and buy-in to continually communicate and improve execution.

 

 

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