April 8th, 2013 by Nolan Borden
The construction market has taken its lumps over the past four years, tempting a normally optimistic industry to get gloomy. However, for the first time since early 2008, the industry is seeing signs that suggest the worst is over and the market is gradually recovering.
The most recent ENR Construction Industry Confidence Index survey shows the industry’s growing hope that recovery is at hand. The first-quarter 2013 CICI surged to a record 64 points on a scale of 100, which represents a growing market. The vast majority of the 376 executives of large construction and design firms responding to the survey believe the market has stabilized. Only 13% of respondents believe the market currently continues to decline, while 32% believe it is growing. This contrasts with the 2012 CICI for the fourth quarter, when 30% believed the market continued to decline, while only 18% believed it was growing. The CICI measures executive sentiment about the current market and reflects their views on where it will be in the next three to six months and over a 12- to 18-month period. The index is based on responses to surveys sent out to more than 3,000 U.S. firms on ENR’s lists of the leading contractors, subcontractors and design firms.
The latest results are based on a survey conducted from February 26 to March 11. Survey participants are not unanimous in believing the recession is over, nor are industry execs ready to declare that happy days are here again. But there is a general feeling that the worst is behind us. “After four miserable years, construction is finally starting to rebound,” says an executive at a midsize subcontractor in the Southeast. However, recovery will come in fits and starts, he cautions. Several participants worry that federal budget fights may stall a market that seems to be taking off. “The fiscal cliff has everyone in turmoil, so money is on hold for many capital projects,” says a contractor executive in the Northeast.
One construction manager worries that three of its federal projects may be halted because of sequestration. CFMA Survey Also Upbeat The CICI findings parallel the soon-to-be-released results of the latest Confindex survey from the Construction Financial Management Association, Princeton, N.J. CFMA polls 200 CFOs from general contractors, subcontractors and civil contractors. While a Confindex rating of 100 indicates a stable market, higher ratings show growth is expected. “Our Confindex rose to 129 from 114 [on a scale of 200] for the first quarter,” says Stuart Binstock, CEO of CFMA. He notes that all four components making up the Confindex grew sharply in the first quarter. The current business-conditions component of the Confindex surged to 147 from 123, while the outlook for the year-ahead component rose to 139 from 118, Binstock notes.
“The politics in Washington does not seem to have thwarted our members’ optimistic outlook,” he says. The positive jump in the CFMA and CICI indexes caught some by surprise. “The economy grew only 0.1% in the fourth quarter, and taxes are up—usually a negative market indicator,” says Anirban Basu, CEO of economic consultant Sage Policy Group Inc., Baltimore, and CFMA economic adviser. However, he says there is a growing sense in the industry that the demand for new work is there and that the market will show real gains this year. One positive industry trend is the availability of project financing, Basu observes. “Banks increasingly are willing, even anxious, to lend on projects,” he says. However, budget concerns on the public side, along with worries about federal budget sequestration, are putting a damper on the industry’s overall confidence in project financing, he says. “But the availability of new credit on the private side counterbalances public budget constraints,” he notes.
The easing in project financing can be seen in the CICI survey. ENR’s survey found that while 56.4% of survey respondents said project financing availability has been unchanged from six months ago, 31.9% said credit for project financing was actually easing from the level it was in mid-2012. This compares to last quarter, when only 19.9% found project financing to be getting easier, while 15.9% found financing was getting tougher. Among the individual sectors, the CICI survey shows that respondents are very confident. Applying the CICI rating formula, the ratings for all markets grew except for the water, sewer and waste market, which remained flat. Further, all markets but one are now above 50, which is the CICI’s benchmark rating for expectations of growth.
The entertainment, cultural and theme-park sector stands at 45. Spurred by shale-gas development projects and pipeline work, the petroleum market’s 78 CICI rating was the highest-rated sector, according to the survey. Another market that remains strong is the multi-unit residential sector, with a CICI rating of 74. Other strong markets included power (with a CICI rating of 69), hospitals and health care (68), and industrial process-manufacturing (61). Overall, construction executives are optimistic about market prospects for 2013. However, many CICI survey respondents worry about the economy and how national politics may affect it. Basu notes that there will be another round of debt-ceiling debates that will culminate on May 19. He says the debt-ceiling showdown of 2011 sent industry confidence into a tailspin. “Things are in place for a meaningful recovery this year, but there still is time for Washington to mess things up.”
Prospects by individual sectors by firms working in those markets
April 30th, 2012 by Nolan Borden
Have you noticed the construction business is a lot like the circus? You spend your days juggling, taming lions, fire eating, sword swallowing, getting shot out of a cannon, walking tight ropes, dealing with clowns, cleaning up after the elephants and working with monkeys.
With today’s pressure to do more with less, how can you get it all done? Where do you start? Using technology and computers, creating a website, training, finding good help, getting paid, dealing with customers, getting bids out, keeping up-to-date with code, chasing lien releases, dealing with government regulations, handling cash-flow and payroll, ordering materials, meeting with subcontractors, negotiating contracts, checking field measurements, coordinating crews and keeping jobs on schedule. How do you get it all done and still have time to focus on your priorities?
The year was 1985 and I was trying to get my business to work. I had six people on my management team, ten project managers, twenty-five field superintendents, and seventy-five men on our tilt-up concrete crews. My goal was to have a profitable company run by my employees. But I was still trying to do too much myself and make every important decision. I continued to work with my estimators on every bid, presented every proposal, attended every job meeting, supervised every concrete pour and was too involved in every aspect of our business. I even got involved in the little decisions like purchasing office equipment, hiring, firing, tools, change orders and buying coffee for the office staff. Sound familiar?
Is It Easier to Do It Yourself?
No matter how hard I tried to let go and delegate, I just couldn’t. It was easier to do it all myself than to trust my people. My actions drove me nuts and my employees crazy. It became difficult to get good people to stay at our company as I was micro-managing and trying to control their every move.
One evening I took my family for a “happy” meal at McDonalds. I noticed the boss wasn’t there, the employees were teenagers, customers were happy and the food was consistent and relatively edible. I thought: “How do they do it without the owner supervising and making every decision?” I asked a server to show me their secret. He took me behind the counter where they have pictures clearly displaying how to build hamburgers and other menu items.
Good People or Good Systems?
Wow! A huge company runs smoothly using simple pictures of the finished product. This guarantees consistent quality. Plus the owner doesn’t have to be on-site all the time supervising the construction of every customer’s order. If McDonalds could do this in their company, why couldn’t I do it in mine and build an organized and systemized operation. Systems would reduce my dependence on finding great people.
Systems Are the Key!
I started to understand and realize that systems are the key to building an excellent company. A disorganized company controlled by the owner will never become excellent. Systems allow you to produce the same results on every project every time. Systems will get everyone doing business the same way. You won’t have one superintendent handling change orders one way and another doing them differently. Systems will insure little things are taken care of without you reminding people to do them the way you want them done. Systems will allow you to focus on the important tasks that will make you the most money. Systems allow you to deliver consistent results to your bottom-line and your customer’s project requirements every time without you being there and making every decision for your people.
As a construction business owner, you want to count on the same things every time on every job. You don’t want to rely on great people to remember what you tell them to do. Whether it’s pulling rebar into the center of a slab during a concrete pour, starting a project correctly, or handling change orders or timecards properly, you want everyone on your crews and in the office doing things the same way in your company. Systems are the only solution to get your company where you want it to be.
Keep Systems Simple!
I noticed excellent companies have simple systems. For example, at hotels, all rooms always look the same when ready to occupy. How do they do this? Simple. The supervisors explain during their training sessions what is expected to the housekeepers by displaying a clear picture of a finished and ready room. They don’t care how the final result is accomplished, just that the room is perfect when completed. This simple approach can be applied to every part of your business.
As I comprehended this concept, my personal goal became to replace myself with systems. I finally realized that great people, excellent estimators, fantastic superintendents or great project managers were not going to make my company perform the way I wanted it to. Why? When your company is not organized or systemized, your company is constantly out-of-control and relies on you to put out all the fires and make all the decisions. Your great people can’t deliver without you telling them what and how to accomplish things. In this condition, you spend full-time running around handling problems and directing traffic. Solid and simple systems are the only answer to building an excellent company that’s not dependent on you making everything happen smoothly.
How much money are you losing by relying on your people to do their best and not following company installation and operational standards? Create systems to:
- Produce the same results every time
- Meet customer expectations
- Consistent performance
- Be organized and in control
- Eliminate field problems
- Increase quality workmanship
- Improve safety
- Finish projects on-time
- Increase profitability
- Maximize return on time
Perfect Systems Produce Perfect Results
With systems in place, monitored and trained, you free up time to concentrate on real business growth opportunities like converting repeat customers into loyal customers, seeking business joint ventures, looking for ways to maximize your bottom-line profits, motivating and inspiring your key people and finding time to enjoy the benefits of business ownership.
For example, as a tilt-up concrete contractor we pour hollow metal door frames into the exterior concrete wall panels. At one point, several months after the doors were installed, the frames were sometimes discovered kinked and the doors didn’t always swing properly. We discovered some foremen were not bracing the frames consistently prior to the concrete pour. The weight of the wet concrete was causing the frames to bend without proper bracing. We were relying on our foremen to know how to install frames. We didn’t have a company system in place to insure door problems wouldn’t occur. A simple fix was to create a pre-pour door frame installation and bracing system for everyone to follow. With continual problems like these, we were throwing money out the window fixing problems and running around every jobsite making sure our foremen were installing the frames properly.
Where Do You Start?
The problem with getting organized and systemized is where to start. It seems like a monumental task to organize and systemize your company and crews. But to make it happen only takes a commitment of time. I recommend you make a commitment to dedicate four hours a week to systemize your company. Work toward creating a three-ring binder of company systems for every important task performed in your business. In most cases, most of your employees need twenty systems or ways you want the company to always do things consistently. This will eliminate 90 percent of all problems and crises that occur every day. This will free you to spend time on the highest return items.
Sit down and create categories you want to systemize. Start with the most important areas to your operation. These might include:
- Field operations
- Project management
Next, take each area and make a list of the top ten or twenty things you want accomplished the same way every time. For example, consider simple things like filling out timecards, installing formwork for concrete foundations, job start-up checklists, pre-project bidding requirements, getting paid promptly, jobsite management, truck and equipment maintenance schedules, tool inventory, crew training or shop drawing submittals and approvals. Your goal is to eventually have an outline for each system on one piece of paper, written or drawn, showing a clear picture of the end result desired to meet your company, customer or project specifications and standards. The best systems are team designed by the people who actually do the work and do it best.
Create a “DO” Manual
To organize and systemize your company requires time, which will produce consistent results and get everyone doing business the same way. Create a “DO” manual of pictures, checklists and guidelines as your company minimum standards and procedures. Build a three-ring binder of standard systems for every aspect of your company and field operations. Focus on the important things first that will make a difference in your bottom-line. Make a goal to create one system a week and you will be very organized in a year.
7 Steps to Create Systems
#1) Identify Area to Systemize-Start a “Fix-It List” identifying everything you need to fix or systemize in your company. Keep your list handy and as problems occur or things go wrong, write them down. At your weekly or monthly manager and foreman meetings, pick the top priority items you need to fix and make it a goal to create a system for these items. Choose items for each part of your operations so that every part of your business will improve simultaneously. I recommend at least fixing one or two things every week. This will take no more than one or two hours per system to draft a guideline or checklist to implement.
#2) Assign System Team-After choosing a system to create, pick three or four people to work on the company standard. Let them choose a convenient time and location to work together for a few hours. Involve those who actually work within the area being systemized to give input. For example, your team might include a project manager, foreman and journeyman when systemizing a field standard. Let them get together during working hours and draft the company standard of how you do the work task.
#3) Draft Standards and Guidelines-Good systems are simple and use checklists, details, pictures and diagrams of how to accomplish the desired end result for each system. Draft systems on standard size paper and three-hole punch them to insert into your company “DO” manual and binder.
#4) Formalize-Assign a staff person to be the keeper of your company systems. Have them meet with each systems team to officially convert the team’s draft into a formalized company system or standard. After completing the system, distribute them to everyone in your company.
#5) Try It-Let the team who creates a system try it and work out all the bugs for a few weeks before implementing it company wide. Encourage them to recommend changes and improvements to the formalized system so the final system will insure perfect results every time.
#6) Training and Implementation-At regular monthly meetings, have the team who created the system present it to the entire company. Distribute the new systems to the attendees and have the system team show everyone how to do it the company way. Sometimes the best place to train a new installation method is out on the jobsite. The key is to train everyone and insist everyone do the system per the company standard-no exceptions, including yourself. If someone protests, let them put the item back on the “Fix-It List” for further revision. If you get dissenters, let them speak their ideas, but insist everyone follow the system. If they still resist, let the dissenters join the system team to modify and revise it to accommodate everyone’s ideas. Your company “DO” manual will become your training manual. Cover every system at least twice a year as part of your ongoing company training program to insure everyone understands and uses the standards.
#7) Follow-Up and Evaluate-After six months, revisit the new systems to insure they are still being used and working well. Review them again and ask for feedback or improvement ideas.
The beauty of systems is you don’t worry about every detail on every project. Your people will do things the same way-your company way. This allows you to spend your time on important matters as little problems go away. To get started, create a “Fix-It List” today and you’ll be organized sooner than you think. Consider starting with some of these company field systems to improve your quality, schedule and bottom line:
- Job start-up checklist
- Project quality checklist
- Project safety checklist
- Four week look ahead schedule
- Project goals and objectives
- Procurement checklist
- Subcontract scope checklists
- Subcontract tracking log
- Shop drawing and submittal system
- Change order checklist
- Field start-up checklist
- Pre-job field start-up meeting agenda
- Time card procedures
- Field paperwork system
- Weekly field meeting agenda
- Project review system
- Standardized project budget
- Quote comparison spreadsheet
- Request for information log
- Change order logs
- Fast pay checklist
- Weekly team meeting agenda
- Monthly management meeting agenda
- Equipment maintenance checklist
- Truck equipment inventory
- Standardized punch-list
- Job close-out checklist
An excellent company does things consistently and is organized. An excellent company doesn’t rely on the owner to make all the decisions and tell everyone what to do. Systems are the only way to insure excellence as your company grows. Without company systems, your company will only grow as big as you can handle the pressure, people, customers and problems. This will limit your ability to make a profit and get your business to be what you want it to be. Make a commitment to replace yourself with systems and get on the road to entrepreneurial excellence.