In Uncertain Times Make Your Business Sure
If we want to be insulated from the ebbs and flows of the market, we’re probably in the wrong business – even though there isn’t another industry we’d choose to commit to. Construction is continually exciting; it drives the economy. At the same time, it’s also heavily affected by capital spending, government budgeting and regulation, labor availability, and consumer confidence – in short, just about everything at play in the economy’s ups and downs. That means that far beyond our control there are simply fat times, lean times, and we-just-don’t-know-yet times. So as the industry holds stable in its slow recovery, and while owners and economists can’t guarantee what 2017 will bring, electrical contractors have the opportunity to make themselves sure about the future of their business by investing in the future now.
Choose to March Ahead
Among the handful of key concepts that Jim Collins and Morten Hansen discovered in “Great by Choice” that seem to determine whether organizations thrived or floundered in uncertain times is a behavior they call the “20-Mile March” – the discipline of staying disciplined.
Imagine two people set out hiking from one coast to the other. The first might have a 40-mile day when the terrain is easy but an eight-mile day through the mountains; then, he might take a day off if there’s sleet coming down, try to make up for it the next day and end up overexerting himself and have to rest. But let’s say the second person commits to 20 miles every day, rain or shine, even when the conditions could let her do more. Who will get there first? Collins and Hansen’s research suggests that companies who commit to a consistent 20-mile march consistently come out on top. Why? They stay consistent in good times and in bad, so they’re never catching up. They respond but don’t react.
Let’s look at the idea in the real world. Toward the end of the 1990s, companies could sell accounting software as fast as they could say, “Y2K.” Everyone was concerned about making sure their system would still work when the digits rolled around to “00,” so businesses that didn’t even need it yet were buying it in a hurry. Of course by the time January 2000 came, everyone who was going to purchase software had already done so. What followed was a long, long drought.
But it wasn’t demand drying up that knocked out a bunch of software companies – it was the market picking back up. Most saw the rough road ahead and immediately began cutting staff and scaling back development. That’s like the first hiker coming up on a mountain and lightening his pack to be nimbler. Very few took the opposite tack, retaining talent and increasing R&D spending. They loaded up their packs with more provisions, thinking the industry would bounce back in a few years and they’d be ready for it. So when contractors began to buy software again, the companies that had slowed down and weakened their position were headed down a mountain without enough food for the journey. The crazy ones, the ones that lumbered steadily up to the peak not sure how high it went or what exactly lay on the other side, were able to continue strong – and tell the tale 15 years later.
It’s the same story for different industries at different times – even for an industry as responsive to the market as construction. Construction is less insulated from fluctuations than many other industries, and it often demands greater responsiveness to adapt operating budgets to changing market conditions. But the principle of disciplined forward progress can guide contractors just as well. It’s an exercise of boldness in the face of uncertainty that allows thriving companies not to slow down, even when the market does.
Contractors should use uncertain times to invest in (1) technology, (2) marketing, and (3) human resources.
1. Invest in Technology
When revenues threaten to lag, it can seem like the least appropriate time to make technology purchases. After all, if the household budget takes a hit, that isn’t the moment to preorder the newest iPhone. However, with ERP software and job site technology becoming increasingly integral to managing jobs competitively, contractors should think of the right IT spending as less about having the luxury of the latest gadgets and more about making proactive investments in their business. Technology spending shouldn’t be frozen during uncertain times, but it should be strategic. While wearables might be able to wait – such as an upgraded IT infrastructure – a more efficient CRM package or cloud-based project tools can help ensure smooth rails to run on once projects pick up steam.
Slower activity in a business’ life cycle can also be ideal for controlling the implementation of new technology. Once schedules are less overloaded with project deadlines, key staff can direct attention to generating all-important end-user buy-in, putting together a training strategy and adapting and designing internal processes. Companies whose payrolls are below peak levels can also take the opportunity to pilot a smaller initial roll-out phase that allows leaders to learn lessons working with a core group before managing the change with full rosters. These early adopters will be instrumental in training additional labor as they come aboard.
2. Invest in Marketing
Similarly, while many contractors may be bidding less until the view ahead is clearer, it’s important to maintain healthy backlogs and not fall “out of sight, out of mind” with owners. Just like investing in technology, continuing to invest in marketing rather than scaling back completely can poise construction companies to receive dividends later. It’s sowing seeds for future rain. Effective, leveraged marketing efforts to stay in front of potential customers while they wait for the wind to shift, and building up brand recognition while competitors scale back, can keep companies at the top of a contact’s list once RFPs start to flow again.
Inbound marketing initiatives – as simple as blogging, social media, or newsletters – can offer no- or low-cost avenues for active brand building, even when project loads aren’t fully active. What’s really invested here is attention and intentionality, sharing your expertise in the trade, making yourself known, and keeping your business memorable.
3. Invest in People
The shortage of skilled labor in construction trades continues to make headlines every month, at the same time that multiple states are seeing cuts in construction positions. Electrical contractors know the high value of trained electricians today, and any measures they can take while labor demand eases will yield crucial benefits once projects enter full-swing. Companies can take the opportunity to direct resources into recruitment and supporting apprenticeship programs. By identifying high-potential talent and creating environments in which they can thrive, contractors will set themselves ahead while others sleep.
But while construction companies rise or fall with craft labor, the right leadership and the right back-office staff is just as critical to success. This also may not seem like the right time to make major hires, but if a contractor finds the right person, someone who can go far with the company and take the company further, then the contractor needs to recognize the cost in letting good talent get away. Once businesses are busy and offices are hurting for that additional bookkeeper or sales manager, the temptation is all too great to make a hasty hire and settle for someone who doesn’t fit the culture, doesn’t share the vision, and generally doesn’t have buy-in to what you’re building.
Finally, contractors can develop a plan for improvement, assessing where the company is now in its benefit offerings, incentives, and employee relations, determining where it wants to be a year from now and taking steps toward becoming an employer of choice that helps to draw especially high-demand trades. At the same, this is just as much about retaining the industry’s best people as it is drawing and developing new members to your team.
However electrical contractors decide to push themselves forward into what may feel like the uncertain beginnings of a new year, what is important is that they don’t slow down. Investing in technology, investing in marketing, and investing in people are just three major ways that companies can not only keep themselves sharp but also prime themselves for growth once the market begins to move more easily. Those construction businesses that do their best to keep their 20-mile march are sure to emerge through any stretch of any uncertainty surer and stronger than ever before.
Fred J. Ode is the founder and CEO/chairman of Foundation Software in Strongsville, OH, where he manages the company’s vision and development. He is also the CEO of Foundation’s sister company, Payroll4Construction.com, a payroll processing and reporting service just for contractors. Fred is a speaker at various conferences, trade shows, seminars, and other industry events.