A builder can reduce some costs, such as training budgets, with no negative impact on the bottom line, right? Wrong.
FMI Corporation, in collaboration with The Ironworker Management Progressive Action Cooperative Trust (IMPACT), developed the Job Profits Program (JPP), an internal training program for the ironworking industry that helps field supervisors understand how their efforts affect company profits and why those earnings are so important.
In today’s tight-bid and low-margin market, project managers, superintendents and foremen must be able to meet or beat estimates. This skill is crucial to the profitability of a firm, and it can make or break a company’s success. This article presents a case study of Bennett Steel, Inc., a structural steel service provider in northeastern Oklahoma, and highlights how the Job Profits Program has had far-reaching implications for the organization.
BENNETT STEEL: PLAYING TO WIN
As for many contractors in the nation, navigating the murky waters of the Great Recession has not been easy for Bennett Steel, Inc., of Sapulpa, Okla. “There were very few projects that came back with positive cash flow at the end,” says Harvey C. Swift, field operations manager for the firm. Founded in 1980, the company has grown from a 15-employee, two-crane company to a successful enterprise employing 100 to 200 workers, depending on the local market dynamics and the company’s current workload.
During the last few years, balancing those employee numbers with corporate profits has been a challenge for the steel fabricator/erector, headed up by Dave R. Bennett, company president. For help, he recently turned to the Job Profits Program for contractors, erectors and fabricators. Run by FMI Corporation in collaboration with IMPACT, the program is customized to fit a company’s specific needs and delivered in-house for field supervisors. In short, the Job Profits Program teaches field managers why profits are important, how lean profits are in the construction industry, and what specific steps field managers can take to improve profits.
Bennett and Swift both see Bennett Steel’s program participation as an integral piece of their company’s recovery and anticipated return to profitability. Within a few months of participating in the program, Swift says the firm’s steel erection division improved profits again. “Some of that is a direct result of the Job Profits Program,” Swift says.
BACK TO BASICS
The one-day Job Profits Program mixed both lectures and discussions with practical application through hands-on activities and exercises. Prior to attending, participants were asked to complete a productivity survey, the result of which drove content development to meet specific organizational needs and to identify opportunities for improvement for the company.
The agenda for this customized session included the following five distinct content sections:
- Field Management: Opportunities and Obstacles
- Impact of Productivity Changes on Financial Performance
- The Productivity Toolbox — Habits of Effective Field Managers
- Workshop: Utilizing the Productivity Toolbox to Improve Job Profits
- Making the Personal Commitment: Your Action Plan
Each content section provided value to the participants as an entire group and for specific individuals within the larger group. Participants learned about the role of a foreman and superintendent in managing job profits, becoming a low-cost producer by working smarter, identifying weaknesses in a company’s current field management practices, and keeping score and measuring profits, among many other things.
Swift says both he and Bennett also benefited from a 30-minute, post-program conversation with the instructors who led the effort. In addition, as the pair was exiting the training site that day, Swift says he and Bennett concurred on at least one key point: For the target audience, the experience was worth 10 times the actual cost of the program. “Dave said that this program — as opposed to any other training session that we knew of — stood the chance of having the greatest impact on our bottom line,” recalls Swift. “He was very impressed with the whole experience.” Another program participant confirmed this reaction and said, “This is something we have needed for years.”
MEASURING THE BENEFITS
As one of the most sought-after steel erection service providers in northeastern Oklahoma, Bennett Steel is focused on providing clients with the highest-quality construction services, delivered safely and on time. According to Bennett, these missions are accomplished through several avenues, including the firm’s core values and beliefs, which are honesty and integrity, safety and quality, experience and education, and training and leadership. By achieving these goals, Bennett Steel, Inc. also improves its surrounding community by bettering its employees’ standard of living.
Bennett Steel’s employee base is highly skilled, trained and drug-free. Each journeyman ironworker is a qualified rigger and signalman. Every ironworker has completed an OSHA 10-hour course within the past five years. “Our clients and their customers directly benefit from our trained and skilled drug-free workforce,” says Swift.
In assessing the positive effects that The Job Profits Program has had on Bennett Steel’s workforce and on company growth over the last few months, Swift says much of the improvement can be traced back to its field supervisors’ mentalities and attitudes. “They look at things from a different perspective now,” he explains. “They put more introspective thought into tasks and decisions, and they also seem to have a better grasp of how their activities affect job margins.”
Perhaps even more importantly, Bennett Steel’s field supervisors came away from the program understanding the effect that their individual activities have on the company as a whole and on its bottom line. As one program participant put it, “The class was very interesting. It was a real eye-opener.”
“That awareness is going to wind up paying us huge dividends,” says Swift, who adds that the company has yet to determine the solid, quantitative results of the program participation. “As we get the data to support these assumptions, I have no doubt in my mind that we will see those types of results.”
What Swift has seen since the training event is an increase in collaboration and interactivity among field supervisors and their employees as well as between the field supervisors themselves. Whereas in the past, small groups would “huddle up” for meetings and attempt to tackle their tasks at hand, these days Bennett Steel’s workers talk more openly about their agendas, bounce ideas off one another and elicit valuable feedback in a team-based environment.
“Instead of using the daily huddle exclusively to manage the activities of the day,” Swift explains, “supervisors are out there asking for feedback and talking to employees about issues (both positive and negative) that may have been overlooked. Our field supervisors are also asking workers about what they need to be able to achieve their individual goals while also contributing to the greater good of the company as a whole.”
For example, Swift says preconstruction or pre-job planning meetings now include in-depth, interactive discussions around the “bell curve” of peak manpower rates, the need to ramp up human resources and how these two elements relate to the number of man-hours budgeted for a specific project, or an activity within a certain project. “I’m hearing things now that I wasn’t hearing just a few months ago,” says Swift, “like, ‘I need more planning time to be able to give you an accurate answer,’ or ‘I need to know what my budgeted hours are and how they’re broken down.’”
Swift says supervisors are also making more suggestions and offering feedback that in the past they may have kept to themselves. These days, those comments are out in the open and factored into the larger decision-making process. If a field supervisor says he needs a specific piece of equipment to get the job done, and if Bennett Steel would be better off renting that equipment rather than using its own resources, the issue now is discussed openly to determine the best plan of attack.
Finally, Swift says the Job Profits Program experience has also made Bennett Steel’s supervisors more cost-conscious. This is a particularly big gain for a firm that, for the last 2 1/2 years, has been struggling with tight profit margins. “Our field supervisors are more sensitive to the minimal profit margins on our projects,” says Swift. “That’s something that really didn’t click until someone from outside of the company explained it to them using quantitative data and examples.”
POSITIVE PROGRAM FEEDBACK
After sending its project managers, crane supervisor, field supervisors, shop supervisors, foremen, safety director and controller to the Job Profits Program, Bennett Steel’s leadership team started to listen for feedback on the experience. Swift says he was pleased to learn that the input was largely positive and that participants admitted that they came away with newfound knowledge that they were not previously aware of. Comments such as, “The program was very entertaining and informative; I would like to put a twist on some of this for my crane program,” confirmed participants’ enthusiasm to apply new concepts and make changes. After reviewing the feedback, Swift says he and Bennett zeroed in on several common threads. For starters, they learned that their employees did not realize just how small (less than 5% percent in most cases) a construction company’s profit margins were.
“Most of our supervisors are tradesmen who don’t necessarily understand how that small profit percentage translates into dollars and cents, particularly when it comes to gross profits versus net profits,” says Swift. “That point was driven home for our supervisors, and now they have a greater respect for what the profit margins really are.” From the program, supervisors also learned the value of using a score card or other tracking mechanism as they work their way through a project. This level of accountability helps employees understand what their limitations, budget levels and targeted time frames are on specific projects.
Bennett Steel is developing a formal score-carding process that supervisors use on every project. “Using the score card, supervisors can retrace their steps back through the entire project to see how they’re doing, where they can change their strategies, or where they can organize the activities concurrently instead of consecutively,” says Swift. “This allows them to take different steps to positively impact project outcomes.”
Swift compares the score-carding initiative to a similar process used in professional sports like baseball, football and soccer — all of which use careful tracking, scoring and reviewing to win games. “You can’t expect the team or the coaches to perform and win the game if they don’t know where they stand on the score card,” Swift points out. “And while a basketball team can change the strategy in the game to affect the final score — like playing a strong defense against a slower offense — ultimately, if you don’t have a score card, you’re not going to know how to change your strategy to play more effectively or win.”
INVESTING IN YOUR HUMAN CAPITAL
Virtually everyone agrees that investing in employees is an effective growth strategy and paramount to assuring long-term organizational success. However, when economic times toughen and revenues slow, reducing discretionary expenses to help bolster profit margins (because direct job costs cannot be reduced as easily) becomes common practice. After all, a contractor cannot just decide to erect three walls instead of four to cut wall-material costs by 25%. But the builder can reduce some costs, such as training budgets, with no negative impact on the bottom line, right? Wrong.
Contractors cannot reduce costs, such as training, without affecting production, because it lessens the job site manager’s ability to convert raw building materials and labor into finished products. Using training to increase productivity and add value on the job site is vital during tough economic periods. New skills and knowledge can be acquired through multiple avenues, and significant organizational growth occurs when training is strategically aligned with business needs. “I have always believed that training was one of the most valuable ingredients to the recipe for success, and this program (JPP) brought real value to my firm in the training category,” says Bennett.
The Job Profits Program was created to help contractors become more competitive and efficient in an environment where every dollar and man-minute counts. Ethan Cowles, senior FMI consultant and JPP instructor, adds, “The Job Profits Program is the first step in bringing awareness around productivity and highlights best practices on how to make people in the field successful and more efficient. The program is not intended to change behavior overnight, but instead presents an important step towards transforming a corporate culture that integrates both field and office staff in a more collaborative way.”
Kevin J. Hilton, CEO of IMPACT, concludes, “In this hypercompetitive business environment, we have to arm our contractors with every competitive advantage that they can get. And that’s why we’re pursuing the Job Profits Program and other programs with FMI, which will help our contractors become more competitive and in turn, employ more ironworkers.”
Sabine Hoover is a senior research consultant with FMI Corporation. She may be reached at 303.398.7238 or via email at email@example.com.