The construction industry has been problematic from the day human beings moved out of the cave and into a tent. These problems have continually eroded the contractor’s reputation and profits. How does one go about removing these problems while reducing costs and increasing profits? It is time for the construction industry to change the way it does business.
‘We are the damndest industry. I have never seen a business that wanted people to spend $150,000 and then never hoped to see them again.’ The quality movement has been successful in many industries (auto, electronics, and printing). Construction industry leaders have already adapted to the more competitive market filled with a more demanding homeowner by pursuing improvements in the way they conduct business and meet the needs of their customer.
The customer of today does not judge the quality of their home and/or construction experience by comparing it to other homes. They now compare the contractor’s quality to the quality of the car they drive, the one hour service they receive from their dry cleaner, or the fact they can access bank account information 24 hours a day. That’s where they got the idea it was acceptable to call the contractor in the middle of the night!
The following questions will help you change the way you do business. How often do you miss the completion deadline? These delays are often caused by the way your business (or the business of your trade contractors) is run. The first question that needs to be answered here is “What is it that causes projects to be late?” If you begin to track the reasons for late completion dates, you can then begin to focus on removing the cause of the problem rather than fighting the problem itself
The second question is how often are jobs over budget? Again, this leads to determining what causes the job to go over budget. Is it poor estimating, or plans that do not detail enough information to accurately calculate costs? Removing the first cause is done through training on how to conduct estimates. Removing the problems with plans involves discussions and training with the designer or architect.
Do your framing and final punch lists have the same problems you had three years ago? If so, you are putting out fires and dealing with problems rather than removing causes and preventing problems. The contractor needs to begin to measure and track where problems occur so they can remove that cause.
Do you accurately know how much you spend each year on warranty and call-backs? If not, you do not know what the cost of poor quality truly is. Oakwood Homes of Colorado pursued quality improvements and within three years dropped their hard costs by 6% while more than doubling their gross profit.
How often have you changed trade contractors over the last three years? In order to land jobs the contractor often receives multiple bids. Builders feel they need to do this to stay cost competitive. A frequent comment at the roundtable discussions taking place at national and regional construction conferences is “I need to get other estimates to keep my subs honest?” This leads one to the question “If you don’t trust them, why do you use them?”
This turnover, and the resulting learning curve by both parties involved, makes it difficult to continually improve the construction process and quality of worked performed. Del Webb in Phoenix now has a punch list that averages less than one item per home because they have developed long-term relationships with their trade contractors.
Leaders today not only measure the cost of quality, they also regularly survey their customers, and those of their competition, to determine how well they do in their customer’s eyes.
In 1989, Fleetwood Enterprises found less than 75 percent of their customers would refer them to a friend. Today, after six years of quality improvement efforts, that number now exceeds 95 percent. That is a competitive advantage in the marketplace that directly drops to the bottom line.
Improving how you conduct your business is a long-term commitment. To do this the contractor must involve everyone on the job from designer to landscaper. Industry leaders have shown the rewards to be less headaches, increased customers satisfaction and rising profits even in increasingly competitive markets.
Jim Kress has over 15 years experience in the construction industry. He can be reached at 383-7712.
