Even at the best of times, managing a business is never easy. You may in fact spend many a sleepless night worrying about cash flow, profit margins, deadlines, overdue receivables or where to find the crew for that job you had not expected to win.
Enter, then, the worst of times—the biggest downturn in commercial construction memory—and the task of managing your business takes on shades of the impossible.
Time to panic?
Hardly (not that it would do much good).
Stay the Course—Only Trim Your Sails
You have built a successful business by developing relationships with both customers and employees. Whatever you do, do not change this.
"I try to keep things consistent,” says Greg Vangellow, president of R.W. Dake & Co. Inc. in New York. "Sure, I keep project managers more aware of tighter margins and situations, and I expect them to exert tighter control, but there is no need to apply a management style du jour. Consistency breeds confidence, even during a recession.”
Robert Aird, president of Robert A. Aird, Inc. in Maryland, agrees. "These days I run a tighter ship,” he says. "I now impose tighter and specific deadlines to things I need done.
"ASAP no longer means anything. You need to be clear and specific about when, precisely, you want things done; don’t leave things up to your employees.”
He goes on to explain, "I press a little more than before. When conveying information, I make extra sure that the communication is received, fully and correctly, and I want to see in their eyes that they understand what’s needed and wanted, and by when. If in doubt, I ask the employee to repeat it back to me to show that I have been duplicated.
"Communication is two-way; it has to be clean and clear. In these times we cannot afford to be mis-duplicated or misunderstood.”
Brian Mead, president of Commercial Builders, Inc. in Florida, runs a tighter ship as well: "I am obviously trimming costs as much as possible, letting ancillary or luxury items go.
"I now expect more from employees. Supervisors, for example, now also have to perform work; we cannot afford to have them only supervise.”
Mikel Poellinger, president of Poellinger Inc. in Wisconsin, says, "Yes, tighter indeed. We’re cutting all the unnecessary stuff. Also, to differentiate ourselves and to provide extra value to our customers, we now make hard commitments to complete our projects on or before deadlines.”
Stephen Eckstrom, vice president of California Drywall Co. in San Jose, has turned to technology to help him navigate: "We have deployed a software solution that has allowed us to trim our back-office staff. This not only provides a better view of how we are doing financially, but also gives us project management tools such as online status boards.
"Using PeerAssist LLC products (http://www.peerassistllc.com/), we now have a better handle on things. We can spot problems while they are manageable, allowing us to run a much tighter ship.”
But with seas this rough, how do you keep your cool?
"Who says I’m keeping cool?” quips Vangellow. "My hair is turning gray and falling out.
"Actually—and joking aside—I’m making very sure that we keep our cool and don’t act rashly, even if situations seem to call for panic or anger. We now use a 24-hour cooling period before we act on any important decision. I may draft a reply, or a response to a problem, but before I present or submit it, I sleep on it. This has saved us a few times.”
Ambrose Bierce, the 19th century American author, put it this way: "Speak when you are angry and you will make the best speech you will ever regret.”
"Also,” adds Vangellow, "I work out nearly every day, which allows me to blow some steam and clear the system as needed.”
"I have been doing this for over 25 years now,” Mead says, "and I’ve seen a few recessions. I know how to keep a level head; it would be very unproductive to panic.
"As for projects, these days I look for work that is truly worthwhile. I’m not even looking at projects that have more than three GCs bidding it. I’d rather turn over a few more rocks to find negotiated work.”
Stephen Angell, president of Cape Cod Plastering, Inc. in Massachusetts, has a good approach to keeping cool: "I only aim to control what I in fact can control, and I don’t worry about other things. This keeps me sane.
"I can control what I bid and how I perform the work; I cannot control banks and insurance companies, nor taxes, nor the government, so I don’t worry about them. I focus on what I can deal with. I focus on what I can control, and do these things as well as I possibly can.”
Eckstrom says, "The truth is that with the help of my software solution, I can now see that my estimators and project managers are doing their job effectively, I don’t have to worry about how things are. I can see clearly.”
Steve Birkeland, owner of Artcraft Wall & Ceiling Contractors in Minnesota, sees some light on the horizon, which keeps him positive: "We have recently landed a few nice projects that will start up soon, and these, more than anything else, keep me on an even keel with hopes for the future.”
Employees—Your Greatest Asset
Times like these breed uncertainty and insecurity, not only among managers but also, and perhaps even more so, among employees. What can you do to show that you do appreciate them, that they in fact are your greatest asset?
"We celebrate small victories. Even if we don’t win a bid, we can at least celebrate a job well done in getting the right numbers together in a timely fashion,” Vangellow says.
"Also, we have a grill in the back, and in the summer we have weekly cookouts where we gather for an extended lunch and where we fuse as a family. These are also occasions to informally keep everyone abreast of how we are doing.”
Aird sees eye-to-eye with this approach. "We have get-togethers, picnics and other functions to foster that community feeling.
"And,” he adds, "I keep an open-door policy—always have. Any one of my employees can walk right in and ask questions or vent, especially if the problem is of a personal nature. When it comes to company or procedural problems, I tend to refer them to the chain of command.”
"The best thing I can do for my employees,” says Mead, "is to ensure that they have a paycheck each Friday. That’s how I demonstrate that they are needed and wanted.”
Tom Russo, CEO of Division Nine Contracting, Inc. in Arizona, also takes a personal interest in his employees. "I treat them as family, especially our administrative people—as brothers and sisters. We are all here to keep the company alive, we share a common purpose.”
Kim Sides, president of Sides Drywall, Inc. in Alabama, utilizes the slowdown further to train his employees. "These days we provide a lot of retraining, on safety and the basics of the trade. We also provide training to aid their careers, which sends a clear message that they are wanted and appreciated.”
Eckstrom approaches his field employees a little differently than office employees. "On the field side, we now have an incentive program in place that rewards them for beating the budget.
"As for the office, we constantly communicate, and I keep them well briefed at all times about where we stand and how things are going.”
Carrot or Whip?
When things turn dire, a knee-jerk reaction might be to whip out the whip (pun intended), but is that really all that productive?
"I’m not a whip guy,” Vangellow says. "Although at the end of the day, everyone knows that there is a score board—how we did as a company, and how they did as employees. They know that their contribution to the bottom line will affect the year-end bonuses.
"But the whip does not really work. You don’t develop relationships that way. The whip may work once, but rarely twice. I want my employees to be here because they like to work here, not because they have to come here to earn money—how good a job are they going to do?”
"Carrot, always carrot,” Aird says. "I have always tried to lead by doing, by setting examples.”
"Me, I use both, in moderation,” Mead says.
"We must work as a team,” Russo explains. "It’s a mutual understanding. We all do our jobs. You can’t whip people into that view.”
Sides says, "Each individual is different. Most respond well to carrots, but some seem to need the whip now and then.”
Angell is more of a carrot guy. "It’s all about presenting the project to them and making sure they understand what is needed and wanted.”
"I’ve never been real aggressive,” Poellinger says. "I tend to go for mutual understanding. But I’m also not a real carrot person. I expect a professional relationship. I expect people to know their jobs and to perform them professionally.”
Eckstrom says, "Carrot. Definitely carrot. If you manage with a whip, the second the economy turns they’ll leave you and you’ll spend lots of time and effort to hire and retrain.”
Birkeland agrees. "When you treat people well,” he says, "they respond.”
There are only so many hours in the day, and you cannot do everything at once. You must prioritize.
What should be your top priorities these days?
"My priorities right now,” says a Connecticut contractor, "is procuring new, profitable work. Also, I have a lot of attention on receivables. Even customers who have been with us for 25 years, are falling behind the payment schedules.”
"My priorities,” says Birkeland, "are to maintain my crew and to operate as efficiently as possible.”
Eckstrom has these priorities. "We have to be profitable to survive as a company, so we look at everything from revenue growth and reduction of overhead.
"Also, we try to not be a low-priced commodity. We try to add value, though that is tough right now, since a lot of jobs are just on price now. Still, my view is that some of the best jobs are those you don’t win, that competitors won at cost minus 20 percent. How they can stay in business boggles the mind.”
Poellinger’s priorities are "to retain my employees, to maintain company image and efficiency. We must live within our means, therefore, we are delaying some maintenance and ordering material more frugally. We have to do whatever it takes to keep the ship afloat.”
Angell says, "I now only focus on our specialty. I focus on the jobs with least competition, and only on profitable jobs.”
"Right now,” Sides says, "I have to make sure that every job can turn a profit. Some guys are bidding below cost just to keep the lights on. That will not save the day.”
Russo agrees: "My main focus is to track down profitable work.”
That’s a sentiment that Mead shares: "My number-one priority these days is securing profitable work. That means trying to bid work that has previously been negotiated.
"Today there can be five to seven GCs bidding private work, which means 20 or so subs. I skip those projects as I have to make a profit. I’m not an employment agency; I have to make a profit.”
Aird’s priorities are to provide two things: "First, a realistic picture of where we stand, so all employees see what is happening with the business, the economy and the job ... while also imparting an optimistic outlook. I am the bearer of both bad news and encouragement.”
"My top priorities,” Vangellow says, "are to look long term, to look two, three years ahead. How do we sustain our current volume? How do we develop new relationships should our current customer-base dry up?
"Yes, I have to deal with current issues, of course, but I must spend a certain amount of time on longer-term planning, a strategy that will see us through.”
The downturn is still in its trough. Some AWCI members report some light on the horizon, or "a crack in the curtain” as one contractor put it. But, by and large, things have yet to turn around, and the consensus is that we won’t be heading back toward normal until early next year—and even then we won’t be seeing the high business levels we saw just a few years ago.
One comforting thought, however, is that those competitors who are still underbidding you with their cost minus 20, or even 30, percent bids cannot stay around for much longer. They will go away, probably sooner rather than later, and this will leave more projects for the rest of us.
Trim your sails as tightly as you can. Value and care for your employees. Ensure each job will turn a profit. Set your sights on the distant (though nearing) shore.
And you will bring the ship home.
Coeur d’Alene, Idaho–based Ulf Wolf writes for the construction industry as Words & Images.