While many people make resolutions to do better in the new year, I encourage leaders of construction companies do the same. Here are five resolutions you should consider implementing.
Five tasks you should take on in 2023
Do more to empower your team. The construction market has continued to undergo significant changes over the last year as it relates to how companies interact with workers. The number of retiring baby boomers far exceeds those taking up the trades and continues to drive a shortage of qualified personnel. Increasing uses of technology to fill gaps and offer more efficiency are also impacting how employees work. Since the available employees are being asked to accomplish more, train them and give them the power to make decisions and execute their plan. This invests people in the process, allows for more efficiency and lightens the load of all. In addition, develop a good employee engagement program and stick to it. The obvious is still true: employees who know you care tend to be more loyal.
Improve your document management system. In the immortal words of the character Daniel Caffey in A Few Good Men, “it doesn’t matter what I believe, it only matters what I can prove.” Too many disputes are still decided on who has the better proof and not who is right. Many construction companies don’t manage their corporate and project files well enough. I’ve worked on more than one case where the dispute centered on an issue that was not properly documented. All project records that seem of little value suddenly become important if a potential lawsuit arises. Disagreements discussed in project meetings should be in meeting minutes. If you are delayed, put in a change order for more time to make a record of the request. There are any number of other things that should be documented and often are not. Develop a system for preparing the right documents in real time and make sure you have a plan to store those records so you can easily find them when a dispute arises.
Plan better for increased material costs. Inflation has been one of the biggest issues in the construction industry over the last 12 months. Material costs soared early in 2022; and while they have come down some recently, they have still not dropped to pre-pandemic levels. The volatility in the commodities markets do not suggest a big change in 2023. Additionally, large fluctuations in those costs between time of bid and time of purchase are also hurting profit margins. Plan accordingly by adding cost escalation clauses in your contract and, if possible, by buying materials in bulk and storing them until needed.
Stay on top of payment issues. The economy remains tight despite all the allegedly good news coming out of Washington, which results in smaller profit margins and problems with cash flow. While many companies can pay their bills, there are timing issues preventing them from having enough cash on hand to pay them in normal turnaround times. Adjust how you handle accounts receivable and accounts payable as a result. Include contract clauses that allow you to identify payment problems earlier (quicker payment terms for example), permit recovery of fees and costs if you must go into collection, allow you to stop work if certain payment disputes arise, and extend the time to pay your own bills. It’s important to be able to identify when you have a problem, stop digging to avoid making it worse and have the tools to maneuver through a payment issue. Don’t let payment problems linger either. Small payment problems become big payment problems.
Have a transition plan. At the risk of overstating the case, the transition of construction companies from one generation to the next has become a crisis. Too many companies close their doors because they had a bad succession plan or none at all. This process takes time. Current leadership has to identify successors; map out a plan for transition; read the successors into what is going on presently so that they have enough institutional knowledge to be effective when they take over; and allow them to work with the safety net of the current leadership team. It’s often not hard to accomplish, and paralysis causes too many people to wait until it’s too late. If you think all or large parts of the leadership and/or ownership team will be retiring in the next five years, it’s time to get started.
This list is limited to some of the biggest resolutions. It’s not exhaustive, and there are no guarantees that any and all problems will be solved if these things are done. But my own experience suggests that implementing one or more of these ideas will make a marked difference in your company’s performance in the next year.
Josh Quinter is a commercial litigation attorney, with a focus on construction law. He is also a member of the board of directors and a department chair at his law firm, Offit Kurman. Active in a number of construction trade and business organizations, he presently serves as the president of the Mid-Atlantic Chapter of the Metal Building Contractors & Erectors Association (MBCEA), serves on the MBCEA national board and is the organization’s general counsel. Contact him at jquinter@offitkurman.com, or for more information, go to www.offitkurman.com/attorney/joshua-quinter.
