Murdough John M. - Managing the profitable construction business the contractors guide to success and survival strategies

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Copyright 2014 by John Wiley & Sons, Inc. All rights reserved

Published by John Wiley & Sons, Inc., Hoboken, New Jersey

Published simultaneously in Canada

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ISBN 978-1-118-83694-1 (cloth); ISBN 978-1-118-83704-7 (ebk); ISBN 978-1-118-83713-9 (ebk); ISBN 978-1-118-85245-3 (ebk)

Construction professionals need this book. The construction industry contributes to a significant part of our nation's gross domestic product every year. The industry comes very close to the pure free market system our forefathers envisioned with little barrier to entry but also little barrier to failure. In good times contractors do not have to be the best strategic managers, but this is a cyclical business and in difficult times they have to be strategic, decisive, and unafraid to make tough decisions. Until this text, there has been limited published guidance available on effective strategies and processes on how to prosper in the highly risky construction business.

In this work, Tom Schleifer has given away his secrets and has gathered two coauthors who were willing to do the same. I have known Tom Schleifer for many years and over those years I have come to respect his vision of the industry. He has the combination of hands-on experience as a successful contractor and the experience of a long career as a construction consultant, researcher, and educator. In his work as a management consultant to the surety industry, Tom has probably seen and assisted more financially distressed construction businesses than anyone in the industry. This experience gives him a unique perspective on how to manage a construction business successfully. He wrote the seminal book Construction Contractors Survival Guide, which has been acclaimed by thousands of contractors and is a reliable guide to industry credit grantors.

Tom is commonly referred to as a turn around expert because of the number of construction companies he has rescued from financial distress. He applied his knowledge and experience as a consultant to the surety industry and later became a sought-after private consultant. Tom is also a sought-after lecturer for industry organizations around the country and in his current role as a research professor at the Del E. Webb School of Construction at Arizona State University, he has been a driving force in developing research and models of the industry that are both revealing and realistic.

Tom is known for telling it like it is. Anyone who wants a crisp clear view of the construction industry and the strategies required for success should definitely read this work.

Terry Lukow
Retired CEO Bond and Financial Products, Travelers

The construction industry continues to become more sophisticated, has fully embraced and implemented computerization, and continues to employ new technologies, particularly in long- and short-range communication equipment. The industry has also moved closer to becoming a commodity, which is the primary reason profit margins are low compared with the historic norms of 10 and 20 years ago. Lower margins increase risk by allowing less room for errors. Profit enhancement over the next decade will result primarily from productivity improvements.

Management decisions alone determine whether an organization will succeed or fail in the construction business. Many construction professionals believe that they lose money or fail because of weather conditions, labor problems, inflation, unexpected rises in interest rates, the high costs of equipment, a tightening or shrinking of the market, or simply bad luck. Actually, none of these are primary reasons for contractor failure. They may contribute to failure once a bad management decision is made, but they are not the basic cause of failure. Failure to obtain a profit or even survive is often attributed to factors or conditions over which management has no control. This is not the case.

Surviving or even thriving in the industry does not imply management can drop their guard. Growth, expansion, and basic ongoing operations usually involve change. And change has risks associated with it, which can make or break an organization.

Unfortunately, past success is not an indicator of future success. When a company expands in size, takes on larger projects, or goes after projects of different kinds or in different territories, it requires management decisions to reduce the risks inherent in such change. An enterprise may be doing fairly well, or even very well; however, the stress to an organization of growth or change can cause a weak component to become a fatal component. Change itself has to be managed to minimize risk.

One problem is that construction professionals don't talk to each other or share information freely enough to create and share a body of knowledge on how to manage a construction business. They meet, converse, socialize, make jokes, and tell stories about each other, friends in the trade, and competitors, but they don't tell each other about how they run their businesses. They don't talk about mistakes that cost profits, postpone deadlines, or worst, jeopardize entire companies. There is an unspoken code among construction professionals, but virtually everyone knows it or learns it soon enough: Learn the essence of the industry, acquire the essential information not taught in classes, and secure knowledge of the business on your own through personal experience. Once gained, that information is yours. You've paid for it. You've earned it. It's your personal property. Let others earn it and learn it the same way. Because of this attitude, the industry reinvents the wheel every day.