The construction industry is coming off the ultimate paradox – amazing profitability and record volumes across most sectors all while experiencing an unprecedented pandemic, affecting every aspect of society worldwide. Given all the turmoil, business leaders can easily cast a passing glance at operations and think, “Hey, we’re making money, right?” and move on.
Yet too often leaders confuse profitability and productivity. While we would like to think that a profitable organization is a productive one, market conditions may provide a distortion to real performance.
Productive organizations are ones that are profitable during both the good times and when the economy takes a downward slide. Below are five reasons why focusing on operational excellence matters now more than ever:
- Operations Evolve: Think about the smart phone. How often are applications and programs updated and changed to provide better functionality and enhance performance? Think about that same analogy relative to a construction business. What version of operations are you using? Often planning methodologies and processes become stagnant, unused and even relegated to a dusty three-ring binder, leading to deficiencies in planning and ultimately margin erosion.
- Consistency is Key: How many different versions of operations exist in your business? For instance, is there a standard way your company builds a project, or does it depend on who you work with? A consistent operational model allows for replication and provides more consistent results. Variability in operations results in margin erosion, missed deadlines and often client dissatisfaction.
- Training Only Gets You So Far: Training is critical to every organization. Operational training is also more effective when it’s combined with the right infrastructure. When done without investment, training can cause frustration when employees don’t feel like they have the resources to implement what they learn. Training married with a framework of operational excellence can yield significant dividends.
- Technology is Only a Tool: The industry is ripe for innovation. There are amazing software tools to improve every aspect of a business from job costing to estimating to human resources. However, software is just a tool. The same way an exercise bike by itself does not create healthier behaviors or weight loss, the new computer program or killer app will only be effective with the right behaviors and strategy to support them. A great deal of money could be spent with minimal return on that investment, leading to further margin losses.
- Sustainable Results: For most contractors, financial performance has been strong. What happens in the event of a market slowdown, a recession or a once in a lifetime catastrophic event? Creating a platform of operational superiority is the ultimate hedge against a market shift. In great times higher productivity means greater margins. In declining times higher productivity could be that edge on bid day or the ability to remain profitable when the competition is feverishly slashing their staff.
Investing in operations is more than just overhauling processes and procedures. It also includes integrating your training programs, technology and project management to create efficiencies. Even if you’re making money, there’s always room for improvement and that extra margin could be what carries your company through potential market downturns. To learn how to take a strategic approach to creating best-in-class operations that improve margins and employee engagement, join us for our Leading Operational Excellence course November 4-5 in Atlanta.