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FMI Quarterly/March 2015/March 1, 2015

Productivity Sells

ManDirectingCrane_imageDifferentiate your services in a sea of work-hungry bidders.

Ask any general contractor and they will tell you that their best subcontractors can flat-out perform. Trade contractors that can deliver on their promises rise to the top of general contractors’ buy lists. Skeptics say the buyout process is all about the almighty dollar. But as the construction industry emerges from the recession and as markets begin to loosen up, performance shines through as a true differentiator for trade contractors.

Improving labor productivity is commonly viewed with the internal focus, “How do we improve margins by being more efficient and decreasing direct costs?” After all, increasing productivity is the purest, most effective way for labor-intensive contractors to improve profitability. However, in this article, we present the argument that a continuous focus on improving productivity is a key component to a well-rounded business development effort for subcontractors. Whether general contractors connect superior execution to the concept of productivity is a moot point. General contractors easily perceive when a sub is being productive; the evidence is unavoidable.

Site Logistics

To effectively install work correctly and the first time out-of-the-gate, strategic placement of materials on-site is critical. Trade contractors that lack a site logistics plan on every project expend countless labor hours searching for the next widget to install or simply lose time trafficking from one side of the site to another. Additionally, loosely organized material increases the exposure to material loss, theft or damage. If we agree that site logistics are important to a subcontractor’s productivity, what is the value proposition to general contractors? How does it help the subcontractor sell?

The method in which subcontractors receive and store materials on-site directly impacts the ability of other trades to mobilize their materials into place. Also, haphazardly stored materials present safety issues for everyone involved in the project. Then there is the issue of job-site cleanliness. For some clients, GCs and owners, jobsite cleanliness is paramount (particularly for those who work in occupied space). Effective management of site logistics helps you sell future work to general contractors that value these factors.

Planning

In a world where fewer and fewer general contractors tout self-performance capabilities, the detailed production planning onus is increasingly levied upon subcontractors. A good schedule tells a GC client when to expect work packages to be completed, but it does not explain how those activities will be performed. A plan, on the other hand, showcases a methodical, purposeful and reliable approach to installing work. For example, a general contractor’s superintendent can rest easy at night knowing exactly how many of a subcontractor’s crew members will show up at the job site tomorrow. But good planning does not happen by accident. Trade contractors that plan well have consistent, standardized processes that ensure integrity around their planning practices. Internally, well-developed plans help subcontractors avoid resource-related delays (the No. 1 cause of productivity loss). Externally, a subcontractor that professionally plans its work is a reliable partner for a general contractor in a project endeavor. Particularly for critical path trades, excellent planning practices are greatly appreciated by general contractors who would otherwise be constrained by schedule summaries. If you can become a trade contractor that your clients depend upon for reliable plans, you are likely to find yourself on your client’s list of favorites.

Managing Change

Contractors that are good at planning are also good at managing change. Without a plan, a contractor has great difficulty in knowing whether it is deviating from the intended course of progress until it is too late. Subcontractors that don’t plan are constantly forced to go to their GC clients, hat in hand, with excuses and empty rhetoric about project unknowns. Conversely, subs that plan well can identify changes in assumptions early and often. They are armed with details that foster better and more frequent communication with their clients.

Early identification of project challenges allows subcontractors to manage issues and provide solutions to their clients before those challenges become catastrophic. Left unchecked, unmanaged change can quickly throw a project schedule into a death spiral. Subsequently, a blame game ensues, trust between parties is lost, and, often, relationships are irreparably damaged. There is a difference between managing change and documenting change. Trade contractors that plan well and who are proactive in change management are able to present their clients with a set of solutions rather than a bag of problems. Yes, change orders can be a source of profit for contractors, but unmanaged change can also be disastrous. Proving your ability to proactively manage change on your projects will win trust in the hearts of your clients.

Finishing

Across the construction industry, margin fade at the tail end of a job can be staggering when compared to other project phases. The closeout phase is the most treacherous part of a project for subcontractor productivity and, ultimately, profitability. Untimely and inefficient closeout of projects is also the No. 1 source of dissatisfaction for construction owners. Driving productivity in the finishing stages of a project is a win-win for all parties of a project team. World-class trade contractors have defined processes for avoiding margin fade at the end of a job and closing out projects in a timely manner. Finishing jobs on time and under budget is what clients are striving for as well. If your team is superior to the competition in executing the closeout phase of projects, you will stand out against the rest in the minds of your clients. A strong closeout gives you an excellent opportunity to end the project with a positive impression.

Prove it!

Great subcontractor execution easily wanes in the mind of a general contractor, especially in a price-driven market. So how do you prevent all of the goodwill built through superior execution from going to waste? You have to be able to prove it through documented processes and systems that allow your company to be productive on every project – not just on the last project. Otherwise, all of your productivity efforts can be passed off as episodic or just plain luck. Do not be afraid to showcase your methods for driving productivity to clients. Explain the processes and systems that you have built to:

  • Ensure strategically planned site logistics
  • Plan efficient work installation packages
  • Proactively manage change
  • Effectively close out projects

Productivity is the key to differentiating your services in a sea of work-hungry bidders. A contractor that excels at project execution provides superior customer service to its clients. Additionally, a productive work site exudes a level of competency and professionalism. Superior customer service keeps clients coming back time and again. If your business model relies heavily on repeat sales, hone your focus on improving productivity. In doing so, you will quickly rise to the top of the bid invite or qualification list, get second looks at opportunities and win more work. Productivity may live in operations, but productivity sells. Q

Tyler Paré is a consultant with FMI Corporation. He can be reached at 813.636.1266 or via email at tpare@fminet.com.

 

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