Bowman Associates:
When you need traction

 “We know what to do, but we don’t always do it.” Does that sound familiar? If so, and you want to start doing precisely those things that you know you need to, you’ve come to the right place!The statement “We know what to do, but we don’t always do it” was a theme that came up when I was studying transactional competence, and it really hit home for me as I applied what I was learning to another business of mine. As I gained more insight and understanding about this topic, what became apparent when looking at my own businesses was that this lack of doing what I knew I should be doing was costing me considerably!Having recognised the importance of effectively tackling the issues I had previously neglected to deal with properly, I felt motivated to share what I’d discovered with others. So in response, I put together my business offer at Bowman Associates to help other business owners and managers, who also find this costly statement to ring true and who want to take action and gain traction.Exploring the realityAs I contemplated my observations, I wondered if these issues were happening to others and so I crafted a questionnaire, and having been involved with Christchurch’s construction sector for several years, set out to interview businesses across a broad selection of construction firms in my existing network. Talking to people in over 30 businesses, I asked them about their issues in these seven key areas: – Winning work– Scheduling work– Resources– Staff– Suppliers/customers– Getting paid/making money– Personal impact Common theme, common issuesJust as I had found in my own experience, a common theme that emerged when reviewing my findings was that, people knew what they should be doing, they just weren’t doing it.% of businesses that experienced these common issues:81.8% Commitments/managing expectations78.8% Marketing/differentiation72.7% Right staff/jobs to right people66.6% Stress63.6% Right attitude60.6% Productivity54.5% Competing on price54.5% Cashflow / marginsThe common denominatorWhile the business owners I spoke to all expressed these issues (in various ways), there was also an underlying issue that wasn’t spoken about, which was the impact that these issues were having on the bottom line. And as nobody was easily able to quantify the cost of their issues, I kept digging.What I found was that margin erosion – and by this, I mean Contracted Target Margin, less Actual Margin - was present in the list of every business I spoke to. From the feedback received, this margin erosion is costing businesses somewhere between 7-10 percentage points of margin.To put this into perspective, it is not uncommon for builders to operate on margins of 7–15%, with the larger construction companies operating on as little as 3-5%. Therefore it is not at all surprising that many of New Zealand’s larger construction companies have experienced difficulty, or worse – failed!And this is not just a New Zealand problem. A substantial paper by management consultants, McKinsey & Company, published in February 2017 outlines that the construction sector is a USD$10 trillion industry, within which productivity is an issue, showing USD$1.6 trillion as being ‘wasted’, and 52% of value-add being fragmented in Specialised Trades, where productivity is lowest. This USD$1.6 trillion ‘wastage’ is equivalent to margin erosion of 11.4%-16%. That’s 60% higher than my findings!

When it comes to getting things done in business, all too often we overcomplicate processes. There’s a variety of reasons we do this, but this apparent complexity addiction can– despite being avoidable - insidiously erode our margins.The problemLet me give you an example. With my background in property development and construction, an obvious choice for me is the all too often onerous Building Consent process.If you’ve ever had to, you’ll know it’s a complex process with many moving parts. For instance, there are up to 32 different sections that can need addressing and things can get really complicated, really fast.Some years ago, a client of mine purchased a large block of industrial land with a view to developing half of it for two specific customers. At the time, the thinking of geotechnical and structural engineers (as a reaction to the earthquakes), was particularly conservative. Consequently, the foundation design was overdone and the cost to build higher than expected. When it came time to develop the second half of the site (3-4 warehouses), they were determined to drive the foundation cost down by using a lightweight building instead of heavy concrete tilt panel construction.The problem was that they were building right on the boundary and so fire rating was going to be an issue as was the weight of the buildings. Having sought out a structural engineer experienced with timber construction (because timber is much lighter than concrete or steel), that engineer then suggested a suitable fire engineer and architect. This was the first time the client had worked with any of these parties.The final design called for a fire sprinkler system and having had no experience with such systems, the client relied heavily on the consultant team and builder.So what were the issues?Looking back, the issues with this project were:– Coordination between consultants– Construction planning by main build contractor– As-built design documentation coordination by main build         contractor– Council thinkingCoordination between consultantsThere was one key area relating to a mezzanine wall consisting of glazing. The fire report called for this wall to have a specific fire rating (without the fire engineer specifically saying how that should have been done). The architect assumed this to be fire rated glass and the building consent was approved accordingly. The problems started when the builder presented the client with an estimate to build this – it was far too expensive. Between the builder and the fire engineer, because there was already a fire sprinkler system, they decided a window drencher system would be a more cost-effective solution. The architect was advised of these changes but at no point did he or the fire engineer signal an amended building consent would be required. As it later transpired, their assumption was that the solution still met the requirements of the fire report.Construction planning by main build contractorThe builder knew from the onset that a sprinkler system was part of the build and that this would require a separate water supply, and from their previous experience, that they would have to apply to council for that connection. The problem was that they left it until near the completion date to apply! The council subcontract such water connections to a sole supplier and when their estimate (cost and time) was received it was unacceptable on both counts. The client couldn’t do anything with regard to the timing but it was news to him that a separate “back-flow preventer” device was required. Both the fire engineer and fire system installer knew this (and probably the builder) but nobody thought to mention it as it wasn’t part of their brief.As-built design documentation coordination by main build contractorWhen a build is complete, typically, the builder applies to council for the Certificate of Code Compliance (which is the final audit by council), to show that a building has been built in accordance with the issued building consent. This requires the gathering of various documentation produced by those involved (known as producer statements – so that council can off-lay the risk to those that did the work) and the requirements of what council requires is clearly set out in the building consent documentation. In this particular case, the subcontractors took several months (after numerous follow-ups by the builder) to provide this documentation. Both the builder and the subcontractors knew the documentation was required but gave no consideration for their ultimate client. When pushed about the timing, the builder implied that it was Council that was dragging the chain because they were being ‘nit-picking’ and kept asking for new requirements. Subsequent investigation would suggest that the council requirements are clear; it was the sloppy documentation and in-adherence to stated requirements that was at the heart of this issue.Council thinkingIn the final throws of the Code Compliance process, the client was advised that the certificate would be issued the next day. The next day, however, they were told that consent would not be issued because the building was not compliant! Technically the council was correct because the mezzanine glass (see (i) Co-ordination between consultants above) was not fire rated glass as stated in the issued building consent. It did not matter that the independent fire system certifier had signed off on the system as being compliant and that the fire engineer had stated in writing that the window drencher system would produce the same result as the fire rated glass. All concerned (including council) agreed that the installed “system” would do the job.Council was adamant that it had to be as per the issued consent because that was their statutory requirement to ensure that it was. The parties were at an impasse and so the client met with the council fire engineer to discuss a way forward. To his credit, he finally agreed there were alternative solutions that were not as cost prohibitive. My client’s frustration was that this issue took so long to surface during the code compliance process (last day over an approximate two–month process).The impactThe impact of this issue came at more of a cost than simply client frustration though. It added an additional six months to the project. That’s six months of lost time, which added up to an additional $100,000 in interest paid.You may be able to relate directly to this project, but even if you’re not dealing with huge projects and big numbers, I’m sure you can think of a process in your business that has become overly complicated?What does it look like and how can you streamline things to avoid your margins being unnecessarily eroded?There’s a simple solutionThis might seem simple, but it works. The trick is bridging the gap between knowing and doing. You might know what you need to do, but are you doing it? – Make sure there’s someone with the overall        responsibility/authority appointed to coordinate and oversee a project or process – Put together a plan that includes clear milestones and indicates where action needs to be taken – Talk in simple terms. Likewise, translate processes in simple terms – Rather than being combative and blaming others for things that go wrong, collaborate. While most of us want to play our part in the work that we do, simplicity, a common goal, and a well-communicated plan can make a massive difference. So go on, review some of your everyday processes and check that you’re following those simple steps. Your bank balance (and shareholders!) will thank you for it.If you need some guidance, please get in touch and I’ll be happy to help.