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Industry Focus. Powerful Results.

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Industry Focus. Powerful Results.

FMI Quarterly/September 2017/September 1, 2017

Positioning to Win From the Inside Out

As we move along in 2017, construction spending is robust and the near-term outlook for the industry remains positive.

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We find ourselves in one of the longest sustained economic expansions in the history of the U.S. engineering and construction industry. As such, we think it is a good time to focus on a few strategic items that executives often overlook, but, if acted upon, can make a positive impact on a firm’s performance regardless of market conditions.

One such organizational discipline is to proactively engage the company’s board of directors in the firm’s strategic plan. Through its active involvement in setting the organization’s strategic direction, the board can help shape and refine a company’s strategic plan and share ownership of it. In this Quarterly edition, our subject matter experts share six practical steps for leveraging and engaging boards more effectively on strategy and provide a framework for high-performing boards to consider.

Another often overlooked tool in the context of corporate performance is the practice of strategic divestitures, or the sale of a division or a subsidiary that’s no longer performing well or no longer essential to the organization’s strategy. Our authors illustrate how divestitures often lead to more strategic focus and increased shareholder returns over time and provide insights on “how the best divest.”

Or consider this: In our trillion-dollar industry, industry participants price and bid between $3 trillion and $4 trillion worth of work each year. That’s because contractor “hit rates” average between 25 and 30%. As a result, many contractors fall into the trap of “chasing more to win more,” which costs the industry millions of dollars of unproductive time each year. To minimize this loss, we discuss ways leaders can make smarter and more disciplined choices about customer and project selection.

Finally, we have long observed that contractors don’t starve to death; they die from gluttony. They get too much work, too fast, with inadequate resources, and then get into financial trouble and run out of cash. When markets are strong and companies are taking on more work with fewer resources, it’s essential that firms remain disciplined in all areas of the business and not overextend themselves beyond their capacity to execute well. As the industry continues to adapt to new labor market trends and competitive pressures, the companies that have solid internal processes and structures in place will continue to prosper in the current up market and be better able to withstand the next industry downturn.

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