McKinstry: The High-Tech Mechanical Contractor
High technology to many mechanical contractors means power tools. It's not an industry renowned for cutting edge innovation. Computers have of course made their way into the activities of almost every contractor. But it is rare to find one using more than a small fraction of their capabilities, and rarer still to find one pushing the envelope in figuring out ways to extend their use.
Then there's Seattle's McKinstry Co. Spurred in great measure by its technology-centered business environment and association with clients such as Microsoft, the company has been on a high-tech push for the last several years to transform itself into a new kind of mechanical contractor.
Founded in 1960 as a residential plumbing contractor, the company has a longstanding reputation for breaking new ground. Co-founder George Allen was a mechanical engineer and something of a pioneer in bringing design-build to the mechanical contracting industry. With annual revenues of around $100 million over the last five years, McKinstry ranks high among the industry's volume leaders but has never fallen into the trap of getting big for bigness' sake. Its revenues have gradually increased as the company embraced the quaint notion of paying homage to profitability.
Managing field labor has always been regarded as the key to success in mechanical contracting. The leaders of McKinstry take a longer view. The turning of wrenches and crackle of welding torches are the culmination of a series of white-collar functions. No matter how skilled your fitting crew might be, they won't be very productive if the pipe arrives on the job before the hangers or it's the wrong material. McKinstry's strategy is to employ computer technology to streamline every administrative, engineering and contracting operation imaginable in order to extract cost out of the system and enhance performance.
Along the way they are riding technology to reduce their dependence on the volatile construction market and put the business on a more even keel with greater amounts of service work, as well as a facilities management venture that has been broken out into an entirely new business called "essention." (See next page)
McKinstry CEO Dean Allen gave a presentation at last year's MCAA convention in Maui outlining the company's high-tech activities. My notes of that session include some of the following "gee whiz" elements:
- At the time the company had about 550 PCs in use in the company for approximately 300 employees.
- McKinstry invested $1 million in technology during the year 2000, slightly higher than the high six-figures it spends in most other years.
- That investment breaks down to approximately $4,000 a year per office employee in IT technology and training.
- At the time they were operating 26 in-house data servers.
The PaybackDirector of Information Technology Jack Maloney oversees this effort. He has an extensive IT background, but also brings considerable construction savvy to the job after a decade-long stint with a large general contracting firm. I asked Maloney why the construction industry has been so slow to adopt new technology. "I think a lot of it is the mentality about overhead. Contractors see technology as costing a lot of money and don't see what they would get out of it in return."
And what exactly is it that McKinstry gets in return for spending as much as a million bucks a year on IT development?
"The real gain is in efficiencies," said Maloney, "plus the elimination of mistakes. Everyone in this business has seen many projects go down the drain because someone made a human error. That's far less likely to happen with the systems we have now, with all the checks and balances."
I can sense heads shaking in disbelief. "No way, no how, could I justify spending a million bucks a year on any danged computers! We get along fine with what we have."
It's a valid point of view. I recall a program at last year's MCAA convention on CAD-CAM in which the audience was asked for a show of hands if they had moved beyond CAD to the realm of 3-D modeling. I think one or two hands went up. Although everyone gets dazzled when shown demos of 3-D CAM technology, in most cases it requires contractors to invest megabucks upgrading their computer systems to handle the RAM-hungry programs. Most mechanical contractors fail to see enough tangible savings to make for a reasonable payback.
The bean counter hasn't been born who can quantify all the savings from subtle efficiency gains and problems avoided. McKinstry's management takes it partly on faith that technology will pay off. The other part is they have a track record of profitable operation amid all the razzle-dazzle investment. It seems reasonable to conclude it's more because of than despite their infatuation with fancy computer systems.
For instance, think of the time and aggravation that gets prevented when a 3-D model reveals points of impact between the piping and ductwork prior to setting up the job. "If you can eliminate that problem before it hits the field, the foreman gets freed to do his job of running his crew rather than figuring out where the runs are supposed to go," pointed out Jeff Hatcher, the company's plumbing detailer and lead foreman. Having a correct model also leads to more prefab. Savings here are dramatic in an era when the vast majority of jobs are fast-track.
Keith Nugent, McKinstry's sheet metal detailing supervisor, showed off a computerized library of standardized fittings that you won't find on off-the-shelf CAD programs, and told of how that makes his job a heck of a lot easier and more accurate. He added that McKinstry's modeling capabilities results in it taking the lead coordination role on most of its jobs. How much is it worth to a subcontractor to be the one determining which runs go where?
Knowledge WorkersThe "Knowledge Base Integration Graphic" above shows in schematic form the company's "McKNet" intranet system, whereby employees throughout the organization are connected to a vast array of information that enables them to achieve peak performance in their jobs. Don't feel bad if you can't make heads or tails out of the diagram. The key thing to understand is that it represents fully integrated database systems, whereby information gets put in one time, and is automatically posted to various other applications. Depending on their jobs, each employee can access up-to-date information on engineering drawings, estimates, project status reports, purchasing records, internal and external communications, their personnel records or almost anything else useful to know in the day-to-day conduct of business.
John Waters is McKinstry's leader of software development, the fellow responsible for overseeing all this integration, including whatever new software needs to be written to support it. Wherever possible his team works off Windows 2000 or some other standard platform so as to hold down development costs and minimize complexity. Nonetheless, McKNet is not something the average company can obtain from Computer Discount Warehouse. Plenty of custom code had to be written to get it working.
Waters said the key to McKNet is extensive cross-referencing and integration of data. People log on to the intranet via their company I.D. card profile, which automatically determines the level of access.
Each project, for instance, has its own Web site with folders for drawings, correspondence, submittals, etc. Many of McKinstry's larger projects are being managed over the Internet. Larger projects, such as the Seattle Seahawks new stadium now under construction, entail an ISDN line to navigate through the Internet. Smaller projects might make do with dial-up connections. From these Web sites a project manager can extract a wide variety of useful information, such as the estimated cost to complete from any given stage of the work. He can even find a street map of how to get to the jobsite. Project managers and other authorized individuals can access those documents as needed, but employees not associated with the project would be denied entry. Sensitive employee information is available only to human resources personnel, and so on. Again, all of this is automatically cued to the employee log-on.
"It's all part of what Dean Allen deemed the 'Knowledge Worker Concept,'" Waters explained. "The idea is that everybody within McKinstry would become a knowledgeable worker versed in different products and services. They know where to go to get questions answered, and to find people capable of getting that information in a quick and easy user-friendly environment."
Navigating McKNetThink of how things work in most companies. Let's say you need design criteria for a given project component. In most companies that would require a stroll over or phone call to someone in the engineering department, who may or may not be available. If available, he would need to consult the appropriate catalogs, cut sheets and/or code books. Think of how much time it takes, and if you don't have in-house engineering staff, you have to call an outside firm for whom your inquiry is low priority.
If/when s/he calls back, you may not be there. E-mail inquiries may compress this process, but it still relies on communication between a party that has information and another one seeking it. In the real world, you run into both personal obstacles (the person from whom you are seeking information may be too busy to accommodate you, or maybe is simply an uncooperative jerk) and practical ones (the person may be out of the office, or may not have the information). Think of how much time everyone wastes each day on phone tag, researching critical information, dealing with difficult people and other time-consuming tasks. Lapses in communication cost money, even if the amount is hard to measure with precision.
A staggering amount of information is loaded into McKinstry's system. This minimizes the amount of time employees spend running in circles trying to obtain routine information. The aforementioned design criteria would likely be available simply by accessing the appropriate section of McKNet, and all employees receive training about how to navigate McKNet.
Another aspect of McKNet is the "mapping" of almost every operational process, i.e., breaking them down into step-by-step procedures. As one example, McKNet offers a "Facilities Service" section. That is, if an employee is having trouble with a computer, piece of office furniture, burned out light or anything else, s/he can request service to fix or replace the item. Service desk recipients can call up a map for the task that reads in part: "1. Contact end user to determine method of resolution. 2. Assign technician. 3. Update contact sheet ..."
For brevity sake, I've chosen a very simple task as an example. Some of the processes get very complicated and may require dozens of steps.
"The key to the system is that everybody is able to take advantage of everybody else's data entry. So we don't need to add database managers. That's how we make it cost-effective," said Waters.
Another key to the system is that it is driven not by the techies thinking up snazzy new programs to write, but by McKinstry operations staff telling the techies what they need to better do their jobs. "Many requests are generated by our customers," said Waters. "They say, 'It would really be helpful if you could provide me with this or that.' Then the project manager comes to me for a cost estimate, and we decide whether developing such a program would be cost-effective."
McKNet continues to evolve. Areas under development include automated purchasing, which essentially involves creating an extranet system in conjunction with favored suppliers. When finished, the system will enable McKinstry buyers to send out a requisition using the supplier's data, and which in turn will tie into McKinstry's purchase order system.
The company is also in the prototype stage of developing wireless data entry via personal digital assistants (PDAs). The first stage involves time card entry for service orders. "Going forward, we will see tons of wireless technology used in construction," Jack Maloney predicted. "And that's where we'll really start seeing efficiencies."
When you perform work for some of the world's largest and most sophisticated high-tech companies, as McKinstry does, it's a big advantage to be able to speak the same language and be on the same page technologically. McKinstry's efforts have gone a long way toward altering people's perceptions of mechanical contracting from that of a "grunt" business to something that belongs in the modern world.
'A Great Place To Work'The image most people hold of high technology is of cold, calculated logic overwhelming human factors. McKinstry manages to attain a noteworthy balancing act between high-tech worship and the human touch. There is an esprit among the many staffers I interviewed for this story that led several of them to volunteer, without any prompting, that the company is "a great place to work."
A lot of this stems from a management initiative called "Preferred Place to Work (PPF)," which attempts to put in place employee policies designed to recruit and retain top-notch people. The approach is not paternalistic, but focused on enabling employees to reach maximum potential in their chosen fields through opportunities in training and development, rewards and recognition, cutting edge technology, seamless corporate communication and a safe and comfortable working environmnent.
It appears to be working, as staff turnover is said to be in the 3.5 percent range annually, far below that of the typical construction firm or any other company for that matter. This writer's wife happens to be a human resources executive, and she described that turnover rate as "unheard of low."
McKinstry's attractive facility certainly comes across as the kind of place a talented person would like to work. Among other amenities, the company operates an in-house cafeteria for employees with company-subsidized meals available at rock-bottom prices. The building also houses an on-site health club with gymnasium, a library, computer lab and plenty of conference rooms that can be reserved via the McKNet intranet. Employees may take both job-related and personal development classes through "McKinstry University." It features a curriculum of several dozen courses each quarter, taught by McKinstry staff and outsiders. Employees help select the topics
McKinstry's PPF program has won several awards from local business groups. Most important, it has enabled the company to advance its high-tech initiatives by recruiting some IT people of a caliber not often seen in the glamour-challenged construction industry.
Essention -- Facilities Management Made EasyMany contractors attending the 2000 MCAA Convention in San Diego sat through a mesmerizing presentation by McKinstry CEO Dean Allen and a Microsoft executive detailing how they had collaborated on a Web-based system to manage all the documents and drawings associated with Microsoft facilities projects. It was presented as a glimpse into the future, although even by then it had become the routine way of doing business between McKinstry and its most famous client.
The system has since evolved into a business unto itself. Formed last May, the company is called "essention" (all lower case). It is funded by McKinstry and CarrAmerica Realty Corp., a nationwide real estate investment trust. CarrAmerica had seen the system operate successfully with its facilities in the Pacific Northwest and now is in on the effort to deploy it nationwide.
The key to essention is a computer program called InfoCentreT, which is tied to the Internet and contains detailed information about building components down to drawings, manufacturer model numbers and itemized reports of previous repairs. Clients of essention are assigned individual toll-free numbers hinged to a call center in essention headquarters across the street from the McKinstry Co. building in Seattle. Customer service reps are on duty 24 hours, 7 days, and guarantee clients response to their problems within 15 minutes.
The CSR has certain protocols to follow, deemed "escalations" in essention lingo, in response to different types of inquiries. These escalations are prearranged with clients to include preferred maintenance providers of various services, and of course are available to the CSR with a few taps of the keyboard. Mechanical, electrical, lighting, elevators and any other building systems may be covered by the agreement, whose pricing is determined by the level of service requested, along with building size and other factors. Jim Shulkin, essention's director of marketing, said the pricing generally computes to pennies per square foot.
The attraction of the service to building owners and managers is multi-fold:
1. Rapid response to problems. Those of you who rent or lease facilities, compare essention's guaranteed 15-minute response time with what you've experienced when calling in a complaint to property managers.
2. Vendor management. essention will dispatch whichever vendors clients prefer on a prearranged basis, or select them for the customer where no preferences exist. Also, essention will hold those vendors accountable for their work. According to Shulkin, there is no bias toward McKinstry when it comes to mechanical service providers. If the customer has a longstanding relationship or feels more comfortable dealing with some other mechanical contractor, that's who will get the call.
3. Archived information on building systems. Having blueprints, design documents, as-builts, equipment manuals, performance histories and more in a single knowledge base adds value to any property, as well as eliminating hassles.
4. Cost control. Improved efficiencies in maintenance and repairs lead to tangible savings. Property managers also gain intangible benefits by being able to manage more square footage without an increase in personnel or resources, and improving tenant retention, which is the name of the game in today's commercial property markets.
"It's a great concept. Our clients are really getting something for their money," said Shulkin, who joined essention at the beginning of last year following a Web-based software background.
As of this writing essention had about 300 buildings under contract. Eventually the service will grow into a building monitoring system to detect problems even before they arise.