Rethinking the Recipe for Success

October 30, 2000
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WAIKOLOA, HI — The business climate is changing and doesn’t allow for “business as usual.” Contractors are rethinking their fundamental approach to organization, finance, project management, and planning.

“Will your company be a casualty of outdated management practices or a leader in shaping the new marketplace?” asked Hank Harris Jr., vice president and director of FMI.

Of course, the attendees of Harris’ talk, “Characteristics of a Successful Hvac Contractor,” at SMACNA’s annual convention leaned toward the latter, moreso than the former. To help them along, Harris provided a litany of what to do, as well as what not to do, in order to be successful. Many of his suggestions, he admitted, were common-sense ideas, but he did say that many contractors couldn’t see the forest for the trees.

“These are the best of times, yet many of you are not earning the profits you should be getting,” he said. “Instead, we’re all running around with our tongues hanging out. We’re so busy. We need help. We have to stop and look around us in order to get better.”

Harris zeroed in on five areas: organization, finance, marketing, project control, and planning.

“There are many reasons why a contractor can go broke,” he said. “They could grow too fast or they lose leadership or key people. Bad luck sometimes comes into play or that they are just unfamiliar with the work or geography. They could have incompetent estimating or production or management personnel. They could have flawed strategy or poor management information systems. Everyone has to be aware of these factors.”

From an organizational viewpoint, Harris recommended that a contractor focus on training, both formal and on-the-job; have a logical incentive-based compensation plan; have tenured, proven field superintendents; and suggested promoting superintendents from within.

When it comes to organization, a firm should have a leader “that everyone will follow off a cliff,” he said. Plus, that leader should be a full-time contractor.

“Do not overextend the staff at any level,” he said.

Financially speaking, Harris suggested managing cash flow on a daily basis. The idea here, he said, is to have adequate capital “to withstand bad luck.”

“Manage overhead on a ‘need to have’ basis. Have a detailed, monthly operating budget and cash flow projection for the next 12 months. Also, have an above-average track record of profits.”

In his eyes, a successful contractor should pay his bills on time. He should not have excessive debt, nor let owners-general contractors hold his money.

Regarding marketing, Harris suggested that contractors have superior estimating skills and systems, plus have their focus strategy on profit, not volume.

“Take care of customers at all costs,” he said.

Harris asked that contractors continually look for creative and innovative construction techniques.

“Have a field-oriented, production-oriented, hands-on culture,” he suggested. “Focus daily on improving productivity.”

While he conceded that this might be difficult to do, he asked that contractors not put their children into management positions if they are not qualified or interested.

“Do not put children into ownership positions unless they are actively involved in management,” he said. “I can’t stress this enough. By all means, have a detailed listing of strengths, weaknesses, opportunities, and threats, with action plans and assignments for each area.”

For more information, contact Harris at FMI, www.fminet.com.

Publication date: 10/30/2000

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