The Garrison Report #2005-8

High Performance Is the Path for Successful Contractors!

The reason that high performance is so important is very simple: high-performing contractors make higher profits! This claim is supported by a Harvard Business School-funded case study as reported in Corporate Culture and Performance by John P. Kotter and James L. Heskett. The study revealed that businesses that focus obsessively on meeting the needs of customers, employees and owners while developing leadership through the company, outperform the competition in four critical areas:

  1. Revenues increase 4 times faster.
  2. Job creation is 7 times faster.
  3. Owner equity grows 12 times faster.
  4. Profit performance is 750 times higher.

While the author assumes everyone appreciates the benefits of high performance, the real question is simply this: What is high performance? Most contractors claim they provide high performance; however, typically clients have a different opinion. Unfortunately for the contractor the only opinions that matter are the clients'.

The problem starts with quality. The author declares that quality consists of three essential elements. The first is the bricks and mortar, and most contractors do a reasonable job in that area. After all, contractors can be forced to go back and fix any defective or unsatisfactory work. Service and relationship are the other two elements that make up quality. In these two areas there is a substantial difference between contractors. However, contractors who master them differentiate their companies from their competitors and experience extraordinary benefits. When conducting interviews with contractors' clients, the author has heard statements that illustrate the importance of service and relationship. One common statement is, "They are the best contractor in town, yet if they improved their close-out procedures and communications skills, they could substantially improve their performance." The highest-performing contractors listen to their clients.

The key to adding value is better understanding of the concept of client . The author's preferred definition of a client is "someone under the protection of . " How long would you keep your attorney, your financial planner and your CPA if you didn't think they were protecting you? How long should a construction client keep his contractor if it's not protecting him? Yet how many construction clients think their contractor is out to protect them?

Instead of protecting the client, contractors often find themselves in conflict with the client. This serves no one. And yes, the author understands that many clients create many of the conflicts. However, instead of protecting the client from himself the contractor retaliates in an effort to level the playing field. But instead of jumping into the gutter with the client, the contractor would be better served by protecting the client.

The confrontational approach has a fundamental flaw. There is no such thing as a successful win-lose situation, regardless of which side of the equation you are on. The reason is the loser will sabotage the process until it finally ends up in a lose-lose situation. Therefore, the only sustainable relationship is a win-win-win environment that includes clients, employees and contractors.

Of course, contractors must use their heads and avoid potential clients that will exploit them. But they need to aggressively seek out clients who understand value. However, as in any relationship, each party must be willing to give more than half. Relationships that are not always balanced; therefore, good partners are willing to give more than 50 percent at appropriate times.

Cooperation is the spirit of the Best Value Procurement Approach. This approach works, because it delivers the greatest value to the client, doesn't exploit the workers, and rewards the contractor for the high performance delivered. Of course, the author realizes that not every prospect will buy into the concept that it's better to create a win-win situation. Some customers will insist on hammering the price in an effort to get something for nothing. The alternative is for contractors to seek out clients who understand the concept of value. Contractors who do that are rewarded with higher profits and growth and have happier clients.

Dr. Dean Kashiwagi, in his book Best Value Procurement states, "Quality contractors earn more profit because they are more efficient, are not price based, perform work properly the first time, and are requested by [clients] who want work done right." The author doesn't want to mislead you; he is not suggesting this approach is easy. It takes hard work, but it is certainly better than the alternative of competing on price. When a contractor is trying to figure out how to do it cheaper-cheaper-cheaper, instead of how to do it better, he is not a high-performing contractor- at least not as defined in this article.

Contractors should adapt Tony Alessandra's platinum rule, "Do unto others as they'd like done unto them." Kashiwagi says contractors should always be asking themselves, "If this project [were] your own house or building, would you accept the things that you are suggesting to me?"

The choice is yours, but when you find clients that realize you're entitled to make a fair profit for the value delivered and you treat them the way they want to be treated, your business will soar to new levels.

 

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