Value Engineering University, Part 2
In these next four columns, we will share with you many value-engineering ideas uncovered throughout nearly 70 years of extensive construction experiences.
When you take the time to read these articles and ask for advice, you are searching for a better way to run your company. You are automatically enrolled as a lifetime student of the Value Engineering University.
Let’s start with profit-oriented cost-savings do’s and don’ts. The very first question I ask a contractor during consulting is, “Where is your written chain of command posted?” Unfortunately, the answer usually is, “We don’t have it written down, but everyone here understands I sign their paychecks and that means I am their boss!”
This is the single biggest cause of discontent, low morale, poor productivity and turnover in our great industry. No one can answer to two bosses! One will tell an employee what to do and the other will chide or discipline the employee for doing it - often in public. Clearly defined responsibility eliminates costly “assumed authority.”
Just as a stool cannot stand without three solid legs, your company also must have three legs to survive and prosper:
- 1. The first leg is a chief
executive officer who establishes realistic goals and workable plans to attain
them. He or she must make critical decisions and assure every vital obligation
is fulfilled or delegated.
CEO also stands for Consider Every Option, which signifies you are constantly searching for our Value Engineering University’s better way.
2. The second leg is practical job knowledge, costs, methods, codes, and the ability to bid and perform whatever building trade you enter. This requires extensive expertise regarding customer relations, employee relations and effective team building do’s and don’ts. You must be aware of OSHA safety regulations, mandatory safety training, hazzard communication certification and MSDS sheets available to you.
3. The third leg is legal and financial requirements and pitfalls to survive and prosper in one’s endeavor. This information can be studied at a library or on the Internet. Consultants can be utilized, as can an attorney and financial advisor as you get farther down the road.
Written Chain Of CommandAmerica has a lot of contractors who have never heard about that three-legged stool and all those fundamental rules, restrictions and legalities.
We all know experienced craftsmen who make extra money doing after-hour moonlighting and then decide they could make even more wages by contracting for that extra-hour work. Fortunately, many decide to do it the right way and become reputable contractors. We have many examples of so-called “Mom and Pop” contractors where the mother, wife, sister or daughter joined forces and capably covered those other two legs on their three-legged stool. Most of those companies evolved into very successful competitors.
A very simple and effective method for organizing your business, regardless of size, is to create a detailed checklist of every item, duty or requirement with the designations by whom and by when. You then need only to do it or delegate each item.
Your written chain of command designates who works for whom, but many employees are not fully supervised. They need a detailed job description with a scope of work for their supervisor to assure they know what to do and provide verification that it has been done. You also need a performance file to record above- and below-expected performance. Your employee will be very proud to see his value-engineering responses in his performance file. This guarantees recognition and effective wages and promotions.
Streamlined BiddingOne of the biggest gambles and the possibility of major financial loss is your bidding process. You must allow ample time to carefully read and understand all the bid documents. You should file a Request for Information for any questionable item. Involving your field personnel and knowledgeable office staff will encourage value-engineering input. Proposing any of their better ways could very likely result in your negotiating a profitable contract.
When you are awarded a contract, you need to schedule a hand-off meeting to turn over all the critical information to your jobsite foreman and project management team. Here again, you need a by whom-by when written checklist to ensure that purchases, submittals and shop drawings are processed on time.
It is critical that your jobsite foreman attends every jobsite coordination meeting. Your project manager or traveling superintendent also may attend when feasible, but your foreman needs to be involved in any schedule changes or commitments.
Your office should monitor and process all field orders and changes along with keeping a detailed, daily log for each job. Collect your monies fast and pay slowly and deliberately. When you cannot pay on time, you owe that supplier a phone call to resolve a reasonable solution in order to maintain a good credit rating.
With today’s advanced electronic booking systems, you must be diligent about embezzlement. This generally occurs with employees you ordinarily trust, especially anyone who handles the incoming mail.
Effective Wage SystemThe biggest question that very few contractors know how to answer involves determining wage or salary levels for employees. Only employees’ immediate supervisor can feasibly match their wage with their performance. Field employees are measured constantly by foremen who should be paying the most to the best performers. Office workers and management personnel should have a detailed scope of work that their supervisor can use to judge accuracy and timeliness. Any above- and below-expected performance should be documented in each employee’s personnel file to accurately adjust wages, salaries and promotions. You do not want the negative reputation of “hiring at the top.”
Your bottom line on each individual employee’s wage is what would it cost to replace him or her? If that employee should quit, you will unfortunately find out. Keep in mind every individual wants and deserves recognition, appreciation and respect. Your employees should never have to ask for a raise.
Always Show RespectEmphasize every employee’s importance to your company’s success and profitability with flattering titles:
- Your lead man should be called a foreman.
- His supervisor should be a project manager or traveling superintendent.
- You can utilize expeditor, service manager, safety director, administrator, etc.
- Anyone in a top management role should receive a vice-presidential title.
Business managers recommend using the most flattering title that would not be silly. Titles do not cost a penny, but just think how much more the employee will be respected by others and effective in his performance. It will be very appreciated by him/her and also his or her family.
Maintain good morale in your office and on the jobsite with a friendly, smiling attitude. This helps to convey a feeling of good will with employees, which, in tum, is noticed by other trades. Any sign of a grievance should be privately discussed before it becomes a full-blown problem and/or spreads to the other employees.
You will be greatly surprised of the affect of flex-time options when offered to every employee. Also consider utilizing the virtual office concept with any office staff and/or management team member. That is a workable solution where the employee works from home and everybody wins.
These value-engineering suggestions will not only be appreciated by your employees, but also by your associates. There is definitely always a better way - better for the employee, better for management and better for the contractor.