Greg Wilkes (00:01):
The construction industry can be a tough business to crack from cashflow problems. Struggling to find skilled labor and not making enough money for your efforts leaves many business owners feeling frustrated and burnt out. But when you get the business strategy right, it’s an industry that can be highly satisfying and financially rewarding. I’m here to give you the resources to be able to create a construction business that gives you more time, more freedom, and more money. This is the Develop Your Construction Business podcast, and I’m your host, Greg Wilkes.
Greg Wilkes (00:42):
So, how long has your construction company been established? 1, 5, 10 years? Maybe longer? If you’ve lasted longer, you’ve done really well because it’s a really unforgiving world. Construction. The industry is tough, and the margin between success and failure can be really thin. You don’t normally see companies that last many years. But is there a way of building a construction company that lasts beyond your tenure, maybe one that lasts beyond you and can be given to your children as a bit of a legacy? Is that possible? Well, I believe it is, and one of the writers of this book that we’re going to review today, Jim Collins, he wrote a fascinating book on what makes a company go from good to great, and what makes a great company is one that lasts, one that’s prosperous and lasts beyond your lifetime. Have you ever thought about that?
Have you ever thought about what kind of business you could create that goes beyond you? Well, that’s what we’re going to dive into in this podcast, and what Jim Collins does is he analyzes some of the best companies in the world. Now, sometimes when you’re looking at these principles, you think, well, okay, yeah, Jim Collins was analyzing some of the biggest corporations. How’s that really going to apply to me in my small construction business? But actually, the principles that he shares in this are not only timeless because it’s a reasonably old book, but they’re also practical. They’re practical for you in your own construction company. So when I read this, I read it a while ago, actually, I’ve always wanted to do a little bit of a podcast and a review on it because the principles in here can be really useful for you. So we’re going to dive into what these principles are, and there are actually seven principles that we’re going to look at.
We’re going to look at leadership and why leadership is so important as you start to grow your company. We’re going to look at how you need to bring the right people on board and how that’s absolutely crucial for you. We’re going to look at analyzing the brutal facts about construction and accepting that things aren’t always going to go the way you want them to. We’re going to have a look at what he calls the hedgehog concept and understand what makes you the best at what you do, what makes you different from other people. We’re going to look at discipline, how that’s important, and having a culture of discipline in your company. We’re going to look at technology, and then we’re going to look at what he calls the flywheel and doom loop, the idea of relentlessly pursuing one consistent strategy and direction rather than jumping from one idea to the next.
Now, each of these points will help you set the standard of the DNA of your business. When we say DNA, we want it to become a part of your company going forward. So whether you are just starting out with your construction business or whether you’re a seasoned owner of a family-run firm, you are going to really find your place in this journey, and we really want to show you what the principles are to go not just from a good company but to a great company. So get ready. Let’s dive in. So the first thing Jim Collins talks about is leadership, and leadership is so crucial because leadership isn’t taught really in construction. What we often find is you start an apprenticeship, and then maybe if you go out on your own, you start off as a one-man band, or you might have a partnership with someone, and that can go on for quite a while.
You’re not used to having anyone work under you, and then all of a sudden, you can start expanding, and you might have 2, 3, 4, 5 people under you. They might just be site workers. Then you end up in an office, and you’ve got admin support. Then, all of a sudden, you are bringing on project managers, you are bringing on leaders yourself. And it’s really crucial that not only do we analyze our own leadership style, but think about the leaders that we want to bring on board for our business. Now, Jim Collins talks about different types of leaders, and if we want a company to be not just good, but great, he talks about not just bringing a leader on, but bringing on a level five leader. And level five leaders are slightly different. They’ve got an unusual blend of personality and he says they need to have two things.
They need to have both personal humility and a strong professional willpower. So they might not be the most charismatic person in the world, but they’re incredibly ambitious for the success of the company, not for themselves. And that’s really crucial. Now as I’m going through this, you might think about your own leadership qualities or you, depending on what stage of business you’re at, you might be thinking about some of the leaders that you are bringing on, some of the management team that you’re now starting to bring on, whether that’s project managers or operation managers, depending on the size of your business. And what a good leader does? A level five leader is, they tend to attribute the success to factors other than themselves. So they’re not taking the glory and they give the glory to others, but ultimately they do accept full responsibility if there is poor results.
So that’s what makes a level five leader. So, how would this work for you in your business? Well, maybe as an owner, you might stay out of the limelight slightly and shine the limelight on your skilled workers, or your project managers, or the collaborative efforts of your team. So when you get a project that’s completed really successfully, instead of taking the credit as the owner, maybe you then start to acknowledge the team’s effort. Imagine how they’ll feel when you do that rather than taking all the credit yourself. At the same time, we’ve got to think about the other side of it. When you face a setback, or something goes wrong, then a level five leader will analyze what went wrong. And without pointing fingers and blaming everyone, they’ll look at what the lessons can be learned from that so that you can improve future projects.
That’s what makes a level-five leader. So that’s quite important to think about because sometimes we’re always out to protect ourselves whether we know it or not. And if something goes wrong on a project, let’s imagine a customer’s ringing you screaming and shouting and saying, oh, they haven’t turned up, or they’ve done this wrong. What the first inclination can be is to say, I told them not to do it that way, or I told them they should be there on time, and we end up going in defensive mode to protect ourselves. Whereas, actually, a level five leader wouldn’t do that. It would be thinking about how they can protect their workers rather than protecting themselves. So if you find yourself doing that regularly, maybe you just need to stop yourself a little bit and think, well, actually, how would a level five leader handle this?
Or how would a level five leader respond? And if you’re seeing your project managers do it, then that could be something that you review with them too. But ultimately, what you are looking for as a level five leader is someone that doesn’t take the glory but does accept the responsibility. That’s a humble level-five leader. What else would make a good leader? Well, a leader would be maybe one of the first ones to the site in the morning before the project gets started, surveying the site, not just because he wants to be the first one there and accept all the credit, but he’s genuinely interested in the project being successful and wants to make sure that he’s there to make sure everything else is going to run nice and smoothly. And that’s someone that workers can potentially look up to. Also, a leader would be in the trenches with the team, not just directing from the office, but if needed, they would get their hands dirty to ensure that a task is completed.
Now obviously, you’ve got to have a balance here because we’re not saying that leaders need to get themselves on the tools, but what we don’t want as a leader is just to be sitting behind the desk barking orders. Clearly, in construction, you’re going to need to get out on site now and again, be with the team, be with the trades, and show people how things should be done if needed. Now, another person who was really good at this, it was another book I read, was Sam Walton from Walmart. Now, he used to do the same. He used to ensure he was in the trenches, and what in the trenches meant for him being someone at Walmart wasn’t necessarily stacking shelves or being behind the counter and selling goods, but he made sure that he walked his stores all the time. He’d walked the floors of those stores, talked to the checkout staff, talked to those who were filling the shelves.
Now Walmart, we’re talking thousands and thousands of stores across America, but he ensured that he was on that factory floor that was being in the trenches for him. We know Elon Musk does exactly the same at SpaceX and Tesla, okay? He might not necessarily be building the rockets and the cars, but he’ll walk the factory floor, talk to the engineers, and make sure he knows exactly what’s going on. That’s what we mean by being in the trenches. We don’t necessarily mean that you’ve got to pick up your hand tools and your skill tools. So that’s the leadership piece, and maybe you can think about how you can personally apply that as the leader of your company, but also how you can instill those values into anyone else who comes to work for you in that leadership position. So what was the next point? Well, next he talks about first who, then what.
You may have heard this phrase before where he mentions getting the right people on the bus and the wrong people clearly off the bus before you start figuring out where you’re going to drive the bus. And this is really crucial, and in my experience, this is one of the most important things. If you’re going to grow a really successful company, it is about the team that you hire around you. And clearly, what Jim Collins is telling us here is that these big corporations, when you think they’re recruiting thousands and thousands of people, it was really important that they got the right people on the bus, particularly in leadership positions. And one of the quotes he mentions in the book, which I think is fantastic, he says, “people are not your most important asset. The right people are.” So, just let that one sink in for a second.
So when you are hiring, it’s more than just bringing in people just because of the skillset. What he brings out in this is that it’s crucial to bring on board individuals who also fit your company culture and share your company’s values. So sometimes that might mean you select a candidate who is more of a cultural fit over one that might have a slightly better skillset, but maybe has questionable teamwork skills. So, that’s important to think about when you are interviewing and hiring people. Now, you need to have a balance here, obviously, because when you’re bringing tradespeople on, obviously, you need a good skillset in that. But we might be talking more here about again, leadership positions and people that are going to be sitting in your office, but at the same time, if you get the wrong tradespeople on board, they can really infect the team and bring productivity and everything down.
So, it really does apply across the board. He mentions how important it is to have good team chemistry when you’re bringing the right people on the bus, and that is really crucial, isn’t it? You do need good chemistry, especially when you’re running these big construction projects. Construction projects are so collaborative, aren’t they? And you really want a smooth construction project to go well both onsite and in the office. So if you’ve got a team that communicates well and works well together, then obviously, that’s going to significantly reduce errors and increase the efficiency and productivity that you have on-site. He also mentions having flexibility with these people that are on board and can they be flexible in their roles. This is really practical when you have a small business because sometimes the reality is a team member may have to jump and be versatile and handle a different task and step into a different role.
If someone’s on holiday, someone else might have to jump in and help you with the payroll, or help you with a valuation, or speak client potentially, even if that isn’t their actual role. So that’s really crucial too. When you’re bringing people on board, you need to make sure that they are flexible and are willing to adapt if needed, especially in a small business. One of the big benefits of applying this principle of getting the right people on the bus is that you do improve your employee retention, and that’s really crucial. You don’t want to have high turnover rates of staff, but when you bring the right people on, and they’re the right cultural fit, then generally they stay for the long term, which is really important. The problem in construction is that the industry as a whole does actually face really high turnover rates, but if you can stand out from the rest and you can improve your employee retention, that’s obviously massively going to reduce your recruitment costs, and you are just accumulating that wealth of experience that comes with those long-term employees.
So, bringing the right person on board is absolutely crucial. Now, if I’m honest, I made a huge mistake with this when I was scaling so fast. I didn’t always bring the right people on board because I was desperate to fill seats, so I didn’t always have the right people on the bus, and because we were bringing on so much work and I needed more project managers, then I was literally just hiring whoever was available. And maybe you’ve made this mistake too, and they weren’t necessarily a cultural fit. I remember one person I hired who was extremely eccentric at the interview, and we couldn’t work out if he was a genius or a lunatic, and fortunately, he was the latter. He was an absolute lunatic, and he ended up costing me a 500,000 pound project as a project manager, and that was absolutely awful. So you’ve got to bring the right people on board, and it’s going to save you a lot of pain if you can do that.
And don’t get it wrong. Don’t just try and bring people on that just fill seats. You really do want to take your time with your recruitment. And one last really crucial point that he mentions on this point about bringing the right people on board is making sure that you are hiring or your recruitment is an ongoing strategy. It’s a continuous strategy. It’s not just a one-time event. So you don’t just wait for when you need a position filled. You always want to be on the lookout for good talent, especially for people who are going to be able to contribute to your growth and stability, even if that job opening isn’t there. So bear that in mind. Always be on the lookout if your employees mention anyone that they know would be a good fit for the company, then make sure you keep their details for the time when you are ready to hire and keep communication channels open with these ones who could eventually come on board.
The third point that he brings out is confronting the brutal facts. So he talks about the importance of confronting brutal facts of reality whilst you still have an unwavering faith that you are going to prevail in the end, and this is one of his quotes. He says, you must maintain unwavering faith that you can and will prevail in the end regardless of the difficulties, and at the same time, have the discipline to confront the most brutal facts of your current reality, whatever they might be. So that’s really interesting because we have to face in construction brutal facts about this industry. This industry is tough. It’s got its own unique challenges. We have problems like a labor shortage. There’s a massive skill shortage in the UK, and in Australia, where I live now, we’ve got problems with fluctuate material costs. There’s problems with health and safety.
A director can be liable for health and safety accidents if he’s not done things in a responsible way. So these are the brutal facts. We’ve got to mitigate risk of people trying to knock you all, not pay you. So these are the facts and the harsh reality of the industry that we’re in. So we don’t want to sugarcoat these issues, but we need to address them head-on. Now, some things that can make you aware of your reality is data. So if you know, for example, that you are having a lot of accidents on a site, then that needs to be clearly addressed, doesn’t it? This brutal fact means that you do need to invest in better safety training and equipment. You’re not just going to make excuses about the person who potentially had the accident. So we can use data if we’re noticing we’re seeing particular trends in certain things, then we can use data to help us make decisions on that.
And data doesn’t necessarily mean that you’ve got to have all this stuff on a computer and really advanced technology-wise. We know we’re talking here in this podcast for just small construction businesses, but data can just be that in the back of your own mind that these things aren’t going very well. A second part of facing the reality is having honesty and candor and a culture of honesty within the company. What we don’t want is to be so brutal and harsh with our employees that they’re afraid to tell us anything. So they hide their mistakes. If they’ve built something the wrong way, they’re going to cover it over. Or if there is an accident, they won’t tell anyone because they’re afraid of what’s going to happen there. It’s really important that for good ideas to come about and new perspectives, we’ve got to have this culture of honesty and candor in the business, and that needs to be encouraged at all levels, right down from a laborer all the way up to project managers and directors in the business.
If there are flaws in the plan, then they need to be mentioned, and this input is going to save you time and money too. Also, part of the brutal reality is learning to accept your mistakes and learn from those mistakes. Mistakes are fantastic learning opportunities, but only if you have a thorough debrief on what went wrong, and what could have been done differently. You’ve got to use those insights to improve your processes and training. So rather than just accepting a mistake or whitewashing over a mistake, try and learn from it and what lessons you can then apply going forward so it doesn’t happen again. He also talks about the Stockdale paradox, which was quite interesting. This was named after an Admiral Jim Stockdale. Now, Jim Stockdale was someone who survived captivity in the Vietnam War, but the two qualities that Jim Stockdale had was realism and optimism, and he mixed both.
He managed to balance both those things, realism and optimism. And that’s absolutely crucial because as a construction leader or owners, we need to be optimistic about our projects and that they are going to be completed successfully. But we also need to be very real about the challenges that you are going to face ahead. And that means that you prepare for the worst case scenarios on any project, but you still strive for the best outcome. So that’s important. If you know for example, there’s a risk that the project’s going to run over time, then you need to prepare for that reality. That might be the worst case scenario, and you might have penalty clauses associated with that. So, of course you strive for the best outcome, but you also need to mitigate and prepare for the worst case scenario that could happen on that project too. The next principle he talks about is the hedgehog concept.
Now, this was taken from Greek mythology, and it’ll probably take me ages to explain why he called it the hedgehog concept. So, I’m not going to say that in the podcast. But what the principle behind the hedgehog concept is, is that you don’t jump around from thing to thing. What you do is you focus on the one thing that makes you really good as a company. So this is understanding what are you the best at in your business. What drives you economically? What are you deeply passionate about? So this is really what is your USP, and also what is your niche? What can you do that’s better than any of your competitors? And you really want to be able to dominate in that space if you can really niche down and do something better than anyone else. So think about that practically. Have you really understood as a company what it is you are the best at?
And if you’re not, if you’re just very generic, then you really need to hone in on what your strengths are and then make sure that that particular strength, you are the best at it. You’re better than anyone else, and you need to demonstrate why you are better at it than anyone else as a selling point. He also talks about integrating this being the best at something with what drives you economically. So okay, it’s brilliant. If you are great for example at plumbing, but that’s your worst service offering. That’s the least profitable thing that you do, then actually that might not be the one thing that’s going to transform you and bring your single profit driver. So it’s really important that you understand what is your most lucrative service offering that you have in the business, and then streamline costs and maximize the ROI in these areas and make sure that becomes the one thing that drives you economically.
And something that can also help with this is if you actually have a passion about it. So let’s imagine you are really passionate about sustainable building practices, and you want to be green, then that’s really good. You can exude that passion throughout the business, or maybe you are really good at architectural heritage or something like that. Well, this can inspire teams, and this obviously attracts like-minded clients and gives you something a little bit different as a brand in your market. One other important point was about not jumping from thing to thing, but being consistent over time and understanding what your one thing is or your hedgehog concept is. Doesn’t happen overnight. Sometimes it can take a while. In fact, in the book it says it can take about four years on average for good to a great company to get their hedgehog concept. So clearly, patience is key.
As a construction business, you might have to continually refine what it is that you are doing, what is the one thing that you’re really good at, and stay passionate about it, and it might take a while for you to actually understand what it is. The next big point he mentions is having a culture of discipline within the business. And one of the quotes he uses is that a culture of discipline is not a principle of business, it’s a principle of greatness. So how does that apply? How do we have this principle of discipline? So, one of the first things we want to look at is how you have disciplined people in the company. That means you’ve got people that are willing to take responsibility for their actions. They don’t need micromanaging. They’re pretty disciplined as individuals themselves and can work effectively. That’s important. You want to have disciplined thought, too.
So you’re all going for the same thing. You’ve got this mindset of continuous improvement, and you’re always looking to improve the business and the effectiveness of the business. You want disciplined action. So, you need structure and processes in the business that everyone adheres to. So if you can do that, if you’ve got a set way of doing something, and you are disciplined, and it’s done the same way every single time, then that means your projects are going to be completed really efficiently and effectively. If you’ve got these clear policies in place for safety and quality control and project management, if they’re consistently followed in a disciplined way, then you’re going to get the same outcomes every single time and be really streamlined. One other point he mentions on discipline that’s absolutely crucial is having a lean operation in the company. Now, this is fine when you are a one-man band, or you’ve just got a small business, but where it gets difficult is when you start adding extra layers of management into the company, and naturally, it can start, meaning that there’s unnecessary bureaucracy in the business, and this can slow down your decision-making and action.
So, you want to maintain a lean operation. And if you can do that, there are clear lines of communication, which means you can have swift responses to any changing conditions on a site. And that’s absolutely crucial because if we have delays in construction because there’s too much bureaucracy and too much decision-making, then that really slows projects down and can be extremely costly for you as a business. So, part of your discipline is keeping a nice lean operation. The next point he brings out, which is one that’s really close to my heart, is the principle of technology and using technology as an accelerator. So clearly. Now, this book was obviously written a while ago, but technology is massively on the move at the moment. Construction sometimes is a little bit behind, actually a little bit of a dinosaur in adopting technology, but it can’t get away from what’s actually happening at the moment.
So we really need to think about the role technology has in your own business. So, at the moment, we’re seeing things that probably don’t apply for you so much, but things like BIM, your Building Information Modeling, that might be more for architectural stuff, but we’ve got drones, things like that. We’ve got project management software, we’ve got AI. All of these things are absolutely key that we adopt this technology not just for the sake of adopting it, but making sure that it helps us be more efficient and more lean as a business. If you’re a company that’s still operating on Excel spreadsheets and writing handwritten notes and things like that, you are really going to be left behind. So it’s absolutely crucial that you start adopting technology to keep pace with what’s going on in the world, but also you want to use it as a little bit of a competitive advantage too.
Can you deliver a little bit faster than other people? Can you deliver it with a higher quality because you are using technology? Or are there specific apps that your clients can log into which your competitors don’t have? That can be really useful so your clients can see the progress of a project. So really think about how you can use technology to boost your business forward and make a bit of a difference in that area. And as a minimum for a construction business owner for technology, you’re going to need things like a good CRM system, which I’m always talking about for your sales, you’re going to need a good project management suite or system that manages all of that. If you are using stock, you need a good inventory system that can track all of that automatically. You need a good health and safety system, and there’s plenty of software out there that can help with that.
You obviously need good email and back office systems like storage. So when you’ve got your drawings on site, people know exactly what the latest drawings are, and they’re saved on a cloud file. So the thing is, now with technology is making it a lot easier for us, but you do need to adopt these things as a minimum in your business no matter what size you are. And the last point that he brings out in the book is what he calls the flywheel and the doom loop. So, the flywheel effect is about relentlessly pursuing a consistent direction over time, building momentum until you really get that breakthrough. Whereas a doom loop is characterized by frequent shifts in strategy, you jump in from one big idea to the next, and that really leads to a lack of direction and failed initiatives. The problem is with construction business owners, especially if you’re entrepreneurial, is that you can often be chasing the next shiny object and the next new thing.
So we’ve really got to watch that we don’t go into this doom loop of constantly jumping and shifting strategy, because that’s so frustrating for your employees. Whereas if you are nice and consistent, you’re following directions, you know exactly where you want to go, and you’re continually focusing on small continuous improvements in that area that can really help streamline the business. So, have a look at where you can make improvements continually. For example, in your operations, can you continually improve your onsite productivity? Can you continually look to improve your customer service? Or can you continually look at your supply chain and getting better prices on your materials or speed it up, how quickly your supply chain can deliver or getting a better quality supply chain. All these incremental improvements, they create a compound effect over time, don’t they? And this reminds me of what we often hear from Dave Brailsford, who was the team manager of Team England and Sky Cycling.
He was always talking about these marginal gains, and it’s a very similar concept. You just want to go for these small marginal gains all the time. And those marginal gains, they add up to huge gains over the course of a year because they have a compound effect. So they’re the seven points there. I’ve just briefly gone through all of them, but it’s a fantastic book. I highly encourage you to actually get it, download it, and read it, or buy the hard copy of it and take it on holiday with you to have a read. It’s a fascinating book on the principles of what makes massive corporations go from good to great. And we obviously want the same for your construction business, and you can clearly see how practical it is not just for big companies, not just big corporations but for small construction companies too.
So I hope that helps. I’d love to hear about some of the principles you are trying to apply in your business. If you’d like to talk to us about joining our mastermind and how we are helping construction companies go from one to 5 million applying some of these strategies that we’ve talked about here today and many more, we’d love to talk to you and show you how we do that. So reach out to us, book a 10-minute call in and we’ll talk about the number one pain point in your business and how we can get you unstuck and unblocked and get you moving again. Take care everyone. See you on the next one.
Greg Wilkes (29:54):
If you’d like to work with me to fast track your construction business growth, then reach out on www.developcoaching.co.uk.