How to Solve Recurring Problems in Your Construction Business
As a busy remodeler or custom home builder in the residential construction industry, you know that time is something you never have in excess because your days are spent working IN your business, battling fires instead of stepping back to work ON your business to help it grow.
And more often than not, you've uttered the words, "I need a system for this, so I don't have to do it."
But figuring out how to actually take a step back and implement processes that alleviate the burden on you as a business owner can be difficult because you may not only wonder where to start but also what the actual issues are that caused this situation in the first place.
The Difference Between Upstream and Downstream
Most of us are, by nature, reactive in that we choose to fix a situation after it happens rather than plan proactively to prevent it from occurring. That means we're choosing to handle an issue "downstream" when it becomes a problem instead of taking steps upfront—or "upstream"—to prevent it from happening in the first place.
However, dealing with a situation after it becomes a problem is costly and time-consuming and builds frustration among all project stakeholders.
Figuring out how to avoid those issues with upfront work can help save you time, money, and headaches.
To figure out how to do that, you need to look at each facet of your business and ask yourself these questions:
What is the task that needs to be done?
Who is the task closely connected to?
How do we solve this upstream?
How do I get team members to do the heavy lifting and keep them accountable?
Answering these questions helps you figure out where your business can use processes to solve potential issues in construction projects before they happen. That's working upstream instead of downstream.
You Can't Be the Center of Everything
When you start a residential construction business, you do everything yourself because you have to. As your business grows, you take on more internal team members or hire trade partners to complete projects. But the task of running everything still falls to you because you're the one with all the knowledge of how things work and how you want things done.
So it often feels like if you take a day off, the entire company must, too - because letting go of the reins and delegating to your teams leaves you with fear and doubt about the results. These are common problems for carpenters-turned-business owners who struggle with letting go and handing over responsibility to less-experienced team members. But growing a residential construction business relies on leveraging other peoples' time, whether it's your internal project team or specialty construction professionals, so that you can focus on running the business.
So, why do business owners have a hard time removing themselves from the epicenter of every detail?
You Think It's Faster to Do It Yourself
You didn't get into business to have it run you. The only path to growing a sustainable business is to hire good people with the right attitude and the tools to solve problems upstream.
But, it can be frustrating to watch team members struggle with a task and want to jump in and just do it yourself because you know it would be done faster - or better.
That's because, as a business owner, you have all the knowledge about that task in your head; after all, you've done it a million times before. The theory is that it's easier for you to simply do the task instead of extracting the information, figuring out how to systematize it, and then teaching your project managers or other team members how to do it.
The answer is that while you have the intricate knowledge of ongoing projects, client communications, and the pulse of day-to-day operations all within your control, you might have to be absent for one day, week, or month. During that absence, your projects and your business still need to move forward, not grind to a halt because you aren't reachable.
Cause and Effect
Often, as business owners, we find ourselves managing daily fires – putting out one problem after another. But what if we could shift our perspective and look as far upstream as possible to solve problems before they even occur?
To truly do this, we need to explore the concept of cause and effect. In the cause-and-effect relationship, one or more things happen as a result of something else. A cause is a catalyst or an action that brings about a reaction.
Like implementing repeatable systems to ensure your teams do something the right way the first time so they don't have to do it over. And making sure that the task is assigned to the right person upstream in the workflow so it doesn't flow downstream to someone else who doesn't have the critical information required to complete the task.
Let's work through an example of one of the most common issues I see in remodeling businesses.
What is the issue: Keeping my accounting (Profit and Loss and Project job costing) up to date.
Who is responsible: Bookkeeper first, team members second.
How do I use this information: Business owners need this information to keep their high-level compliance accounting, such as their Profit and Loss Statement, up to date, as well as their project-level job costing so they know how they are performing financially on projects before it even hits the PNL.
Cause: Most companies do not assign the responsibility for coding time tracking, material point of purchase receipts, and trade/vendor invoices at the source of the person incurring these expenses.
Effect: Without assigning responsibility for this task at the start, the company's bookkeeper will struggle downstream to properly categorize and reconcile transactions due to missing receipts and not being able to produce timely financial information for the leadership team.
Upstream Solutions
In the above example, we see that not assigning full accountability for coding transactional information at the source causes a pile of problems downstream. Very often, the backlog of this missing information has dramatic effects on a company's profitability due to incomplete financials leading to the same estimating mistakes.
Instead, let's explore how to solve this problem using the upstream methodology.
What is the issue: Keeping my project costing information up to date.
Who is responsible: Team members.
How does the company benefit:
The bookkeeper now has the exact information available when he/she is ready to perform their work as the information is coded-at-source.
The company's PNL is updated more frequently, with a reduced lag time and higher accuracy.
The company now has a fighting chance of having real-time job costing reporting, provided it is using the right construction project management software system to perform this function.
Solution: We require each team member to:
Complete fully coded time tracking daily.
Ensure they have submitted fully coded and separated point-of-purchase material receipts as well as vendor/trade invoices, if applicable, based on position.
How:
We will need to implement digital technologies and a set of rules for our team to follow. (Need help with technology implementation? Click here to join the program).
We will create a scoreboard visible to the entire team and tie a bonus pool to these metrics. For example, if you have a over 95% completion rate of timesheets on time and less than 5% of receipts flowing downstream to the bookkeeper that is either lost or receipts without coding, consider providing your team with a quarterly bonus.
Here is an example of the "rules" you would use for the task of coding material receipts:
Let's explore a few other examples of upstream solutions and their cause-and-effect relationship.
Construction Checklists
As a professional remodeler or custom home builder, there's nothing more frustrating than seeing the same errors repeated on job sites and knowing that your profit is shrinking as a result of rework.
The residential construction sector is a complex industry, and it's easy to miss a step in a process when you aren't following a list to ensure that work occurs in the correct sequence and no steps are missed.
This is where Construction Checklists come into play.
By implementing a standard operating practice of using a checklist for each task on a residential construction project, you can ensure that everyone in your team follows the same steps before completing the task, minimizing the chance of creating recurring issues downstream.
Stop Using Paper Timesheets
Typically, teams fill out their weekly timesheets the following Monday - after they've completed their week, and they do so with a "loose idea" of their actual hours and task descriptions. This becomes a "midstream" process in that it hasn't flowed through to the bookkeeper yet, and the delay isn't as significant, but there is a better upstream method possible: Digital time-tracking software.
Using digital time tracking software prompts team members to fill out and code their hours and tasks closer to the time period they are working in, so it's done in real time. This means that when the information flows to the bookkeeper, it's complete and accurate and, therefore, becomes an upstream process.
With the right system set up, this can be updated automatically into your job costing to help you glean real-time information about project progress and project timeline impacts. Most importantly, it helps you estimate projects better without severe lag time in your project financials.
Paper Notebooks vs. Digital Note-Taking
Many of us are accustomed to keeping physical notebooks, where we can jot down notes from client meetings, phone calls, and that never-ending to-do list. While this method has its merits, it's downstream in the sense that the information is confined to the notebook and not easily shareable. It means that only you have access to this, and you'll need to take another step in order to translate this to whoever is affected by it.
For example, if you're in a meeting with your client and the project architect and you write a bunch of notes down on paper, you need to retype them as an email, text, or in a document editor like Google Docs or as a To-Do list in your project management software to share that information with your team.
On the other hand, from a very basic level, using a digital note-taking application allows for the ability to split digital text across various digital mediums like text, email, document editor, and your pm software. This is upstream thinking, which reduces the chances of communication problems down the road.
Using Purchase Orders
Purchase Orders are a financial control tool that can save you a lot of stress, money, and client frustration if implemented. In basic terms, they are an agreement between construction companies and trade partners about the scope of work, what's included and excluded from their work, and the fees you agree to pay them for this work.
When executed upstream in the workflow before the trade is hired, you now have a source of truth to revisit when something doesn't align during the execution phase. In addition, you have a much better sense of where the project's finances are headed earlier in its timeline, which has a few positive effects:
You have a clear understanding if the project is on or over budget.
You can make informed decisions about shifting in-house tasks to trade partners who might be able to execute less expensively.
You can use this information to better estimate a project you're working on today instead of waiting until you reach that phase to discover the costs involved.
For more about using Purchase Orders in your residential contracting business, click here.
Allowances and Pre-construction
In our line of work, projects are often started before all the final costs are included, especially for design elements like fixtures and finishes. However, you need to provide the client with an estimate that is as close to accurate as possible and minimize your risk of cost overages.
That's where construction allowances come in.
While allowances are a helpful tool in creating estimates for projects with unknown costs, it's imperative to use them wisely and not as a replacement for a solid upfront pre-construction process. Including too many allowances in your estimate increases the chances of being quite off-budget when the final selections come in. This can create a loss of profitability in fixed-cost contracts, project timeline delays, and client frustration.
But the real problem that using too many allowances signals is that you'll be making it up as you go along in construction, creating a ton of downstream challenges that will keep you operating in fire-fighting mode.
The best solution for avoiding downstream issues with allowances is always using a clear and systematized upstream pre-construction process that slows things down so you have the right time and space to create a very accurate estimate.
This aids in creating a properly reflective construction schedule that minimizes delays, avoids the need to constantly put out fires, and eliminates difficult conversations with frustrated clients.
Your Job is to Lead, Not to Execute
As business owners of construction firms, it's on us to lead. That means recognizing people aren't "born ready" to tackle every new challenge - and do it perfectly. Rising to a new position is a journey, and people gain that readiness through first-hand experience.
In the surgical world, it's called the "See one, do one, teach one" method, and it's used because the first-hand experience of seeing, doing, and teaching is how you perfect your craft.
Your job is to provide team members with the:
Theory or "why" we're doing something
System for "how" we'll do this
Understanding of who is accountable
Knowledge of how the task is tracked and measured
Picture of what success looks like
Mentoring your team empowers them and makes them more vested in their work, so you can step back and focus on growing your business - or take a well-earned vacation every now and then.
So, how do you accomplish that?
Make Your Teams Accountable for Their Work
Something I often hear from business owners is that they don't feel their teams take accountability for their work and that they don't think about or feel the gravity of daily operations like you do as a business owner.
They often express feeling let down by their teams because there isn't a robust system of accountability in place. And when things go wrong, it becomes a giant game of pointing fingers instead of reflecting on the lack of properly structured systems to follow.
As a residential construction business owner, you must ensure your teams have the tools they need to do their work right, so they can be accountable for it and avoid errors and issues downstream.
So, what if we turned the lens inward and questioned why accountability is lacking? Is it the team's fault or a symptom of a larger problem in our leadership approach?
If I want someone to take accountability for something, but I constantly feed them information on a need-to-know basis and step in and manage tasks listed in their position agreement, then how will they truly know how to perform independently?
There are four ways you can do this:
Acknowledging and accepting your role in developing your team and creating the repeatable upstream systems your business needs instead of expecting team members to "step up" on their own.
Creating clear roles and accountabilities for each part of your business that identify the specific outcomes you want and the guidelines for achieving them.
Meeting with them regularly to review the WSR (Weekly Status Review) to help guide them as they learn new things and show them how it relates to their outcomes.
Creating clear metrics for tracking success on each part of a team member's role and gamifying this using a bonus pool system that rewards them for achieving their goals. For more on bonus pools, click here.
Thinking Upstream Means A Mindset Shift
Implementing proactive strategies in your construction business means starting with a mindset shift so that instead of merely reacting to daily challenges, you ask yourself:
How can I prevent this from happening in the first place?
When should this task happen in the workflow?
Who should be responsible for this task's full completion?
What do I need to implement to have this result?
The short answer is that you need to remove yourself from being the center of your residential construction business, implement strategies that provide team members with standardized upstream methods to ensure quality control and encourage a culture of accountability amongst your team.
Reactive thinking is about solving problems, but proactive thinking is about the root cause of those problems and preventing them from happening. This needs to be your focus as you think about every mistake or issue that comes up in your construction business. There is always a more upstream approach that can be developed to avoid the downstream chaos.
The BUILD AND PROFIT SYSTEM is a battle-tested program I created that has helped remodelers and custom home builders like you learn how to incorporate repeatable systems into their construction businesses to ensure they work efficiently and profitably.
Click below to join the BUILD AND PROFIT SYSTEM now.
