If You Don’t Know Where You’re Going
You’re Probably Not Going to Get There
In an informal study of several thousand contractors of all sizes and types throughout the country, less than 40% claimed to do any type of formal corporate planning at all, and many did not formalize their planning process with anything in writing. This is a shocking statistic. The importance of effective and efficient comprehensive corporate planning and its impact on the success or failure rate of construction businesses continues to be understated in the industry. While more companies are planning each year, the construction industry cannot count itself among mature, sophisticated industries until that number approaches 100%
This blind spot for practical planning has its genesis in some long-held, unexamined beliefs shared by construction industry management. Some of these “beliefs” came to light in our study. Do you see yourself in any of the following beliefs?
- You are so involved in the planning of the work that you neglect planning for the business entity.
- You believe that a smaller business does not benefit from a business plan.
- You think that planned numbers are “pie in the sky” goals, not achievable everyday objectives.
- Financial planning is not realistic in the construction industry where competition and markets are shifting constantly, and the successful smaller contractor must be versatile, responsive, and “quick on his feet.” Business planning is too confining and ultimately unrealistic.
- The success of your company depends on your aggressive posture while driving your business forward, not on some academic exercise hatched in the accounting department.
Planning is Not About the Future
Business planning, when done properly, is an essential management tool for all construction concerns, both large and small. It is not just a financial “guestimate” or “wishful thinking” or a “budget” that must be adhered to. It is so much more than that. Professional business planning is a mental discipline that can be broken down into eight distinct functions:
- ORGANIZATION – All construction business activity comes down to three functions: 1. Getting the work – 2. Doing the work – 3. Accounting for the work. Once a construction business is broken down into these functions, and time and energies are budgeted to treat them separately and properly, the company is fairly well organized.
- GOAL SETTING – It is critical to the efficient operation of any construction enterprise that corporate goals be set in advance. Once the resources of a company are committed in a certain direction, changing that direction drastically can be difficult, expensive, and often impossible.
- FRAMEWORK – In addition to identifying future opportunities and threats to be exploited or avoided, effective planning provides a framework for better decision making throughout the company.
- GUIDANCE – A business plan provides guidance to the managers of a company for making decisions in line with the goals and strategies of the business owners.
- COMMUNICATION – Improvement in communications among all levels of management about goals and objectives, strategies to achieve them, and detailed operational plans.
- DECISION MAKING – Planning is not making future decisions. Planning is concerned with making current decisions in light of their future impact. It is not what should be done in the future, but rather, what should be done now to make desired things happen in the uncertain future.
- SIMULATION – One of the greatest selling points for comprehensive corporate planning is that it allows the contractor to simulate the future on paper. If the simulation doesn’t work out, the exercise can be erased and started again. While no one can predict the future 100%, the probability that certain events will have a predictable cause and effect relationship is strong. The more planners know about their business, marketplace, and competition, the greater is the likelihood that they can simulate quite accurately the outcome of certain moves.
- EMPOWERMENT – When a construction enterprise begins to execute within the mental disciplines above, the days of assuming a business is helpless in the face of market forces are long gone.
Managing a construction enterprise without practical business planning is like navigating at sea without charts or a compass. It doesn’t matter how big or small your craft is, you’re not going to get where you intend to go without navigating. The captain who “feels” his way across a vast sea always believes he will arrive at his intended port until, to his surprise, he doesn’t. Every construction enterprise failure I have witnessed over the past 30 years has been a “surprise” to the management. The ancient Chinese proverb applies: “If you don’t know where you’re going, you’re probably not going to get there.”