High-Performing Contractor #101
Feb. 2012 Issue 101
This e-newsletter is dedicated to supporting High-Performing Contractors and all contractors who are working to become one. Written by Dennis Sowards
This is the 101 issue of this newsletter and the second of six issues that shares the best of past articles. This one focuses on Strategic Planning.
Keep it Simple: One company’s approach to strategic planning – three pages that describes:
Page 1: The Company’s mission. Vision and 3 –5 breakthrough goals (Tells what they plan to do.)
Page 2:The 12 month tactical plan and key performance metrics (Tells how they will do it.)
Page 3: A balanced scorecard showing the monthly performance against best benchmarks. (Tells how they are doing overall.)
A simple three page document sets the stage for a major company’s future. Who is this company? It is Bank of America, with revenues of $ 10.8 billion annually. If they can define their strategic plan in three pages, why can’t we contractors do it?
Most contractors question the need for a strategic plan. At best they already have a business plan submitted to the bank, so why a strategic plan? One owner even suggested that “strategic” is a bad word among contractors and to be avoided. A study by the Construction Financial Managers Association (CFMA) found that contractors who “regularly engage with the big–picture, long term vision and mission for their company are larger and more successful than their peers who do not.” Examples cited in the study are:
Do have a strategy Do not have a strategy
Return on Assets 4.8% 4.6%
Return on Equity 16.8% 12.7%
Months of Backlog 9.3 7.2
Some contractors feel that strategic planning is only for the large companies, but this is somewhat a chicken & egg issue. Did the plan lead to growing large, or does being large drive the need for a plan? Small contractors who do strategic planning do not go through as extensive of a planning process as larger companies but still develop a plan and implement it. The reality is that any organization will do better if it knows where it is going, and the numbers prove it.
The report said ‘no time’ was most often the reason given by contractors for not doing strategic planning. In construction, we are always too busy to stop and sharpen the saw. How does a company overcome the time crunch? The answer is almost too simple. Just do it! We all have the same 24 hours of time - big or small company. There is never enough time to do everything we want to do. Making time for creating a simple strategic plan will save time and resources in the long run. What do I mean by a ‘simple’ plan? It is one that answers these three questions:
• Who we are? (Our purpose for existing.)
• Where we want to be in a few (5 to 10) years? (Our strategic vision.)
• What actions we plan to take this year to move towards the vision?
Whether you use all the terms of strategic planning (vision, mission, strategic intent, values, etc.) or not isn’t as important as having simple and meaningful answers to the questions and often communicating those answers to your employees. A simple plan need not take months to develop and several 3-ring binders to document. It can be one to two pages. Managers become leaders by setting and communicating the direction the company is to go. Companies become more successful by having and following a strategic plan. So what’s in your plan?
Doing effective strategic planning is one characteristic that separates the men from the boys. High-performing contractors do strategic planning, most other contractors feel they are helpless victims of their market’s economy and can’t plan.
The strategic planning process is not complicated nor does it require weeks of off-site meetings and endless documents. In a nutshell, it can be described as “PDCA.” PDCA stand for
• Plan – plan what we want to do
• Do – do it – take action
• Check – Check to see how we are doing
• Act – Make adjustments to make sure we are still on course
The strategic plan should be simple. It starts with the strategic purpose of the company. This is the vision, mission and scoreboard for the company. Some people call this their True North, meaning the true focus of the company when making any decision or taking a course of action. The next part of the strategic planning process is identifying two or three Key Actions to do in the next year to move towards True North. These Key Actions need to be clearly defined and measurable. By measurable, I mean, we know when we have accomplished them.
The Do part of the PDCA process is the real work because something must happen or change to make improvement. This is doing the Key Actions. Sub-tasks may need to be defined for each Key Action. For example, if the action is to start doing work in a new city, the sub actions may include:
• Setting up an office and staffing and equipping it
• Visiting local contractors and owners to introduce the company
• Developing relationships with local union leaders to ensure that you can get the skilled workers when needed
• Understanding local licensing, codes and tax requirements
One person will probably be the lead on this Key Action but he would need to delegate various sub-tasks to the appropriate knowledgeable experts within the company.
Reality checks need to take place at least quarterly. In the Check part of the PDCA process, two basic questions are asked:
1. Are we following our plan?
2. Is it working?
If we are deviating from the plan we are most likely deviating from True North.
Act to make adjustments may be needed just like detours are sometimes required while traveling to a destination. But the detours to our Key Actions must be done within the context of the where we are going and in a consensus building approach. Random efforts by maverick project managers cannot be allowed. If our vision is to be the best mechanical contractor in the southwest and our goal is to expand into the Tucson market in 2007, looking to bid a job in Orlando, is not heading us to True North! The job in Orlando may look very profitable and there may be strong personalities that want to do it, still it is a great deviation. Companies need to stay the course.
The strategic planning process can work to elevate an average contractor to a good performer. It will take a good performer and make it a great one. Contractors who feel they don't have the time or resources are kidding themselves. It is an investment they cannot afford to miss.
Where is your True North? Does your team know what it is? Are you headed there? PDCA it.
One company has set its strategic plan around what it calls the 5B’s. They are:
Best people and workplace
Best customer service
Best financial performance
Each year this company sets actions in all 5B’s that will help them become the best. They have established definitions on what being the best in each area means, and measures to gage how they are doing. Not that one must have a catchy way of saying it, but high-performing companies and individual workers need a reason why they should improve.
What is your plan?
ALL OF THESE ARTICLES SPEAK TO THE IMPORTANCE OF HAVING A STRATEGIC PLAN - DO YOU? WHERE WILL YOU GO IN 2012?
**************** Learning Opportunities
You may be interested in attending one of these training seminars by Dennis Sowards:
Feb. 21, 2012- Eliminating Treasure Hunts – Applying the 5S’s for Lean Construction - Sponsor – P.I.P.I. & 469 JAC – Phoenix, AZ - contact Cathy Mayeux at firstname.lastname@example.org for details.
March 22, 2012- Advanced Lean Techniques– Sponsor: P.I.P.I. & 469 JAC – Phoenix, AZ - contact Cathy Mayeux at email@example.com for details.
April 11, 2011 – Delivering Excellent Customer Relations – For Service Technicians - Sponsor – P.I.P.I. & 469 JAC – Phoenix, AZ - contact Cathy Mayeux at firstname.lastname@example.org for details
April 26, 2012- Designing and Achieving World-Class Performance in Construction- Sponsor – P.I.P.I. & 469 JAC – Phoenix, AZ - contact Cathy Mayeux at email@example.com for details.
May 9, 2012 – Lean in the Service World- Sponsor – P.I.P.I. & 469 JAC – Phoenix, AZ - contact Cathy Mayeux at firstname.lastname@example.org for details
May 24, 2012- Job Planning That Really Works- Sponsor – P.I.P.I. & 469 JAC – Phoenix, AZ - contact Cathy Mayeux at email@example.com for details.
If you are interested in bring one of these workshops to your company or association, please contact Dennis Sowards.
**************** Thought for the day
Show me how you measure me and I'll show you how I behave.
- Eli Goldratt
For more information about the High-Performing Contractor assessment process contact Dennis Sowards at 480-835-1185 or at dennis@YourQSS.com (see www.YourQSS.com)
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