Relationship management is a core competency for contractors
Maintaining good relationships is important no matter what business you’re in, but in the construction industry, two relationships are key to business performance. Owners and executives need to pay particular attention to the relationships they have with project leaders as well as those with subcontractors.
In the current pandemic-induced crisis, and when significant projects complete, many businesses let senior project leaders go. It’s the nature of the industry. Along with that goes knowledge, experience and lessons learnt. The loss is typically greater than the story the numbers will tell.
People’s skills are often more versatile than we think
So, if possible, a more constructive approach would see businesses consider redeploying otherwise ‘surplus’ leaders to business improvement projects – projects which look at new ways of working, introducing new technology, or even helping other project managers relieve pain points. It is likely the result will be that there is more to win than lose by taking this approach.
Case in point, a tier-one construction firm redeployed their project director and technical lead to spearhead their improvement and innovation team. The outcome – within three months, was that they were ready to deploy technology that was, only months ago, out of reach.
This firm suddenly had solutions to problems that were offering benefits to other parts of the business, and by now, I am confident they have solutions that could change the game for the firm entirely. These senior project leaders, with their know-how of the company and industry, their curiosity, coupled with the rigour and intensity of project work, equipped them with an ideal combination of expertise and insight to work on vital projects. The ROI on something like this is simply off the scale.
Subbies want good relationships too
Similarly, with subcontractors, there is more scope than one might imagine there is to develop more effective relationships.
The first step to take is to actively invest in the relationships with your contractors, focusing a little more on the human dimension, using your ‘soft skills’ to build goodwill. If you help your subcontractors grow, they will help you grow. It’s that simple.
The question is, other than being genuine, how do you do that?
Ultimately effective ongoing relationships require us to establish and maintain trust. Trust forms the basis of any relationship or contract.
Next is the need for transparency, which many companies are, understandably, very cautious about. Yet caution should not stop you from exploring options – it is not always the financial parts of a contract that keeps contractors engaged. Sometimes it is about the visibility of future work, new sectors, innovation and overall, the quality of the partnership
The Australian economy has to become more collaborative if it is to remain globally competitive.
In all of this, privacy and confidentiality must continue to be respected by all parties. Increasingly we are seeing businesses that share their work volumes with their contractors, keeping them informed of potential work while maintaining the secrecy of bids and new projects until competitive threats and risks abate.
Ongoing relationships create competitive advantage
More mature firms are more inclined to deal with their key subcontractors as partners. In a partnership approach, you would be engaging with contractors to solve problems together.
I have a vivid memory of a tier-one firm that involved their contractors in resolving project quality issues after effectively giving up trying to solve the problems internally. Within a day they had resolution plans, immediately commencing a downward trend in the number of complaints related to defective work.
Another way to enhance relationships is to involve contractors in the development and testing of field applications. The insights and knowledge you gather from such activities are priceless. By contrast, many organisations and third-party development firms seem to shun this approach. Maybe the honest feedback on how to make an application better for the end-user, the contractor, in this case, isn’t part of their deliverable?
There are many opportunities for firms to engage contractors, such as participation in brainstorming sessions, in planning reviews and of course in safety reviews. You will be thanking yourself when the targets start converting to results.
Communication experts will tell you that an ideal business relationship will have open channels, and allow for honest, effective feedback to be provided.
Feedback from the ground is always insightful and often rich. You learn so much from the interactions with contractors since they are exposed to things that could potentially delay projects or cause cost overruns. They also have know-how that can directly improve processes and ‘buildability’. Contractors are exposed to so many projects and are specialised, so we go to them for exactly that. It is a waste if we are not getting their feedback on a project. Their experience and feedback need to be tapped directly at regular intervals.
It is not wrong to ask subbies if they are adequately supported by your supervisors and field staff and if the technology you’ve rolled-out has eased their workload.
At the same time, there must always be a regular, more formal and symmetrical communication forums, to garner feedback and have open, constructive discussion too. In such conditions, discussion can focus on performance against KPI’s, areas that can be improved, and other contract-related matters. This is good practice, and, critically, you don’t have to wait for a crisis to have these conversations – things can always be better than what they are today.
Don’t fall for the lure false economy
There is however one thing that needs to be done well before this – selecting the correct contractors.
Too many times the contractor selection process is not as robust as it needs to be at the subcontractor level. Maybe this is because of the shortage of competition between projects. Or maybe, it is because of the relatively high search and transaction costs involved. Who knows why, but certainly we know that it makes a big difference having the right contractors on the team.
How do you get there?
Having a basic criterion that extends beyond the technical capabilities to cover areas such as safety and quality management, governance and HR is essential. This is still light when we compare with manufacturing where most businesses require their suppliers to have an ISO certification at least. The rigour of the selection and on-boarding process payback pretty quickly. Ask any project director, and they would tell you that a diligent and organised contractor ends up being more productive overall. Once you have good contractors on-boarded, you can focus on making the good contractors great, instead of making the not-so-good ones acceptable.
The reality is that the subcontractor model works quite well in Australia. It allows businesses to adapt to changing workloads quite quickly and allows construction workers to move between projects of their choice. However, companies lose out in quality, safety and delivery in the early parts of most projects, thus making a case for them to hold on to their contractors.
The industry could mandate basic operating requirements for contractors that factor in safety, quality and delivery performance. Such a change cannot be introduced in an environment of skilled shortage by individual businesses.
More constructive relationships represent opportunity, and much more frequent, more serious conversations need to take these issues forward.
By Shivendra Kumar
Shivendra Kumar is a master of business theory. But more than that, he is a master of practical implementation, having earned his stripes developing and managing business improvement programs with some of Australia’s leading engineering firms, including Downer and Siemens. His track record is one of solid, measurable productivity improvements, process innovation and revenue gain. Shivendra has also coached many executives and project teams, in real-world application of best-practice methods, ensuring his insights and know-how are passed on to others. Underpinning his extensive industry experience are qualifications in engineering, and a PhD focused on rapid product cost improvement techniques. He is the author of two books on business improvement techniques, The Competitive Contractor, and From Paper to Profit.