The Garrison Report #2003-5

A Refreshing Approach to Business

Last month I ranted against reverse bidding because that approach doesn’t work for anyone. The good news is there is an alternative, but it requires a fresh approach to doing business. Today’s customer is more demanding, is better informed and has more choices; therefore, today’s successful contractor must satisfy those customer demands by providing greater value. In fact, Robert Tucker has coined the term “The Value Revolution” to describe this situation.

For contractors to provide greater value to clients while obtaining greater value for themselves in the form of increased profit margins, they must learn to work better with project stakeholders. I suggest that every project develop a Strategic Goal©, which I define as a project outcome that is mutually agreed on and that creates a win-win environment for all stakeholders.

In theory, this is a great concept. The problem is it requires a strong commitment and hard work to achieve it. Unfortunately too many companies don’t have the required commitment. That’s OK because it creates a great opportunity for those companies that do have the ability to define their Strategic Goal© and the commitment to follow through and deliver it.

I’m sure many of you have been exposed to the concept of “partnering” on projects. The problem is too often partnering has fallen far short of expectations. But partnering is at the heart of the Strategic Goal©. However, partnering is not a two-day seminar at the beginning of the project. Worse than believing a two-day seminar is the answer is the belief that only the project personnel need to attend the seminar. A common problem that occurs when only jobsite individuals attend the training is that the senior management of the various stakeholders are not part of the commitment. Since senior management wasn’t even part of the partnering process, they continue to operate in the old manner. They continue to focus on the issues most important to their companies instead of the Strategic Goal©. When this happens, it doesn’t take long before the process reverts to old way of doing business.

When I work with contractors, I love to ask the following question: When you have a project manager’s meeting, what is the first question you ask your project managers? The usual response, whether it’s the project managers or senior management answering, is, “Where are we on the schedule and budget?” That is the absolute wrong question. The first question should be, “What have you done for the customer this week?” If you ask that question, do you think this will change the attitude on projects? You bet it will.

 

Why a Strategic Goal©?

The reason I suggest this is because there are three parts to quality: bricks and mortar, service and relationship. In reality there is very little difference between any decent contractors in the bricks-and-mortar aspect of the project. Service offers some variations, but the schedule part is pretty consistent among good contractors. In other words, good contractors tend to finish on time. But there are many other service aspects that separate contractors. For example, keeping mud out of the street, especially in an urban setting, is a big deal. Owners get this written into the specification, yet the effort in this area is often lacking. After all, every day the contractor doesn’t worry about it, the contractor saves the daily costs associated with that task. When the owner complains, the contractor cleans up the street. While this approach might create short-term cost savings, it wreaks havoc on the relationship between contractor and owner and may cost much more than that little savings. But the relationship facet of a project is probably the most important aspect of quality.

If you disagree, consider the following. One of your customers complains that the door to the president’s office warped, so you send someone to replace the door. Two weeks later does the president even remember you were there? Of course, if you specifically asked the question, he would answer yes. But in general, he has forgotten because the problem has been solved and is off his radar. However, if your superintendent called him a jerk, when do you think the president will forget?

How many times have you heard this: “We finished on time, on budget and delivered good quality, yet he went to someone else for his next job.” What happened is while the contractor delivered what it believed was important, the contractor and customer didn’t connect on the relationship level. Of course, some owners don’t want to connect at that level, but then they will never be loyal, so they’re not a good choice for a customer. Successful contractors seek out customers with whom they can develop strong relationships. Even contractors such as road builders, who bid most work, can experience cost improvements if they learn to build strong relationships with the various departments of transportation.

A strong relationship is at the heart of the Strategic Goal©. That does not mean that the schedule and budget aren’t important. I never said they weren’t. If you don’t deliver them, you will not accomplish the Strategic Goal© either. Most contractors deliver those two important items but miss the opportunity to set themselves apart from their competitors by establishing strong relationships.

In many smaller communities, this concept is alive, but it’s known more affectionately by the name “the old boy network.” Those outside the network complain it isn’t fair, but the reality is that most people would rather work with people they like and trust. However, I’m suggesting that the Strategic Goal© takes this relationship to another level. It’s no longer about getting work from your country club buddy; we are talking about developing an in-depth business relationship that is mutually rewarding. When you accomplish this with a client, you build a wall that protects you from competition.

Keep in mind that most customers hire contractors because they can’t do the work themselves. If they can’t do it, how can they really tell you what they need? Often they can’t. Therefore, it’s up to the contractor to understand the client’s needs and business so it can provide services beyond pure construction. This is how you build a strong relationship. Your efforts must be designed to increase your customer’s profits because that is how you add the greatest value. Once you start adding this value, your relationship will change from a contractor-client relationship to a trusted resource. In this role you have no competition.

The concept of the Strategic Goal© is about creating repeat business, which is the most profitable. I’m not suggesting this approach is easy, but it’s an easier way to increase profits than to figure out how to make a profit from highly competitive bid work where there is little or no profit margin. Instead we must seek out clients who are receptive to a win-win environment for all stakeholders.

This report focused on why you need to develop a Strategic Goal©. Future reports will explore how to develop these critical relationships. In the meantime, if you have any questions about this topic or need immediate help in implementing a Strategic Goals©, please feel free to contact Ted Garrison at Growing@TedGarrison.com to learn how he can help you can take advantage of this powerful tool to increase your company’s profitability.


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