Being able to produce the work in the estimated time for the estimated cost is the challenge. Improving productivity must be a way of life in any company, especially construction, where management is difficult and production is so varied.
Some of the major factors that affect productivity are:
a) Job planning: Studies have shown that most production losses are the result of poor planning by management. Poor use of tools, material acquisition and instruction to employees results in a great deal of wasted time. High quality job site management can be the single most important factor in improving production.
b) Employee education: in order for employees to be more productive, they have to know how. It is our jobs as managers first to educate ourselves and then to educate our employees about how to increase production rates over the long term. Investing in long term employees may seem costly or risky, but the rewards can more than offset the short term costs.
c) Production reporting: For managers and employees to improve production, they have to see when things are going right as well as when they are going wrong. Most people will be self corrective if they are made aware of problems in production and are commended when they are doing well.
d) Acknowledgment: Nobody likes to go unnoticed when they have done a good job over and over again. Managers need to recognize top performance both in words and deeds.
e) Research and Development: By researching new materials, tools and production methods, a forward looking company can improve its equipment use and cost of doing business.
Financial Management:
Many otherwise profitable businesses fail because of poor financial management. Many others could recover from losses and be profitable with good management. The need for accurate accounting and quick decision making is always greatest when a company is growing or shrinking. The wide variability of the construction industry makes long term management particularly difficult.
Some of the areas that management must address are:
a) Cash flow and lending: Many companies fail when they extend themselves beyond their ability to manage cash flow. By taking on more work than they can support, they loose discounts, are forced in to more expensive management like deferring payroll tax payments and loose their reputation with suppliers and subs. Often money could have been borrowed ahead of time to support payments, but managers wait until it is too late. Developing long term lending relationships is vital to a growing company.
b) Debt risk management: Decisions about buying equipment with loans must be made carefully or payments can quickly eat up cash reserves when work slows down. It can be especially difficult to sell equipment when there is an overall shortage of work. Often hiring or renting equipment will be a better choice than purchasing.
c) Asset protection: Management must protect cash from embezzlement and theft from both inside and outside of the company. Systems that prevent loss are easy to put in place and can prevent catastrophic losses.
d) Cost containment: Many businesses are successful for a time, but become bloated with overhead and expensive procedures. Others fail to cut back on overhead when revenues slow and are eaten up by costs quickly. Since managers are the decision makers, they often cut productive employees when work slows rather than other managers. Failing to respond quickly with adequate cost cutting can result in failure of an otherwise successful business.
e) Bonding and insurance management: Being able to obtain bonds can allow a company to obtain more profitable work. Accurate, up to date accounting is vital in obtaining bonding on short notice and sureties are becoming more and more stringent in this regard.
Insurance costs, especially workers’ comp can cut heavily into profits and must be managed carefully so that the company is adequately covered without undue burden.
f) Accounting: Accounting fees can be very substantial for a busy company. It is very common for companies with poor records to spend large amounts of money for tax reporting and audits by government agencies. Many companies end up doing their accounting over for entire years when they fail to do an adequate job the first time.
Since management decisions are made on accounting data, having inaccurate, old or incomplete data can result in business failure.
Strategic planning: While we are often taught that the most successful companies are able to create and carry out long term market planning, the truth is that the most successful small companies are the ones that are able to change quickly and are always looking for new opportunities. A well managed company will not hesitate to change plans if an opportunity arises. Long term plans can also face insurmountable obstacles as market conditions change.
Strategic planning should therefore allow for changes and not be an obstacle to changing directions quickly if necessary. The company that can adapt to a different business climate will stay in business when its cumbersome rivals are long gone.
Conclusions:
Long term profits are dependent on the company’s willingness to work closely with clients, employees and suppliers for the mutual benefit of everyone.
Those individuals who can provide leadership in the area of management with integrity and mutually beneficial long term relationships will prosper even in the worst economic conditions.
Please contact us if you would like to learn more about instituting a comprehensive training process. Thank you.