Planning for 2020
Formal strategic planning is not popular with construction company CEOs. Ironically, engineers, designers, project managers, and supervisors are some of the most sophisticated and effective planners in all of American industry. Construction business managers, on the other hand, discount the value of formal business planning. They have long-held beliefs that formal strategic planning is not appropriate for the construction industry.
As we transition into a new year, let’s take a look at some of those beliefs. Then, let’s go on to examine the trendsthat are the context of good decision making. Finally, let’s look at the role accurate data plays in the planning process. It is my hope that these last blogs of 2019 will encourage top management to take a closer look at the benefits of formal strategic planning by examining:
- How Beliefsprevent industry leaders from embracing strategic planning.
- Why identifying Trendsis the contextual foundation of effective construction industry business planning.
- The role accurate current Dataplays in the present decision-making process that affects future outcomes.
No Plan at All
“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…
One third of middle managers questioned indicated that while their company had a formal written business plan, the organization did not follow it closely or the contractor changed direction from the plan without notice. Not following a plan is the same as not having one…” (Managing the Profitable Construction Business, Thomas C. Schleifer, Ph.D.-Kenneth T. Sullivan, Ph.D.-John M. Murdough, CPA, Wiley, 2014, p.14)
Is This You?
Let me share some quotes from construction CEOs who attended one of my planning seminars in the past that reveal certain unexamined beliefs.
- “It’s almost impossible in the construction industry to plan the top line a year or two in advance with any accuracy because unexpected opportunities open up all the time, and we have to respond quickly in order to get the business. You should estimate future revenues, for sure, but not waste time writing a hard and fast long-range plan.”
- “As far as gross profit is concerned, you never really know what a job will cost until you’ve lived through all the variables. I mean, you can set a goal, but you probably won’t meet it. Construction is just too complicated, and projects take too long to really plan costs with any degree of certainty. Don’t get me wrong, you need to have a budget, but it’s not cast in stone. There’s too much risk in construction.”
- “Versatility is a key skill in the construction business. You need to respond and react quickly to changing conditions in order to stay competitive. I don’t feel comfortable spending too much time and money contriving elaborate plans just to veer off the plan at the first opportunity. You know what I mean?”
- “I’ve been running this company for thirty years with the plan in my head. I know where we’re headed and discover how to get there day by day. Sometimes we make mistakes. That’s to be expected. We just take a breath, back up, and change course. But my plan for the company is alive in my mind, and I’ve got a pretty good idea where we’re trying to get to. I make the guys follow budgets, of course, but the long-range plan is pretty much in my mind.”
Or Is This You?
Try the following beliefs on for size. I think you will find that you agree with them at the same time you agree with the apparent contradictory beliefs of your colleagues quoted above.
- Contracting businesses have no reverse gear. If someone drives too far in the wrong direction, they cannot simply back up and restart. Once the resources of the company are committed in a certain direction, changing that direction drastically can be difficult, expensive, and often impossible.
- When we all agree where we’re trying to get, our decision making is more coordinated throughout the company.
- A business plan that everyone agrees on provides guidance to our managers for making decisions in line with the goals of our owners.
- A clear plan helps us all communicate better across all levels of management. Everyone knows what everyone else is working on.
- Planning is not making future decisions. Planning is concerned with making current decisions in light of their future impact. It is not about what should be done in the future, but rather what should be done now to make desired things happen in the uncertain future. Decisions can only be made in the present. Yet, decisions cannot be made only for the present. Once made, decisions have long-term irrevocable consequences.
Most construction CEOs operate from the first set of beliefs, but when they realize the second set of beliefs don’t contradict the first, but rather complement them, they begin to look at long-range planning a little differently.
Read more about Strategic Planning.