Back in the day when I started as a contractor, construction was still considered a custom product and my brother and I enjoyed sufficient profit margins despite our inexperience and limited management training. In other words, we were working with 10 to 15% profit margins, and made money despite our inexperience and management immaturity. Now, however, construction has just about become a commodity, and the margins are too slim to tolerate youthful, seat of the pants management styles. In the past two weeks I discussed (1) capacity and (2) experience. Managerial maturity (3) is the third risk variable that determines profitable project selection.

Project Selection

As I have said so often in the past, “there are no bad projects - just bad matches of contractors to projects”. Construction is the business of selling construction services to one client after another. Each contract is so different that it is like starting a new business every time we sign a new contract. Project selection, therefore, is far more than “taking anything we can get” or “beating the competition to the punch” or “finding more immediate cash flow” or “just trying to cover the overhead”. It should not be “buying growth” or “we can build anything” or “let’s take a stab at something new” or any one of a hundred reasons contractors sign the next job. Sometimes “a project is just there and we need more work”.  Profitable project selection requires the careful matching of a construction organization’s capacity and expertise to the unique requirements of a given project. The determination and ability to match a company to a suitable project takes, what I call, managerial maturity.

My Management Immaturity

When we started out as youthful contractors, we had the confidence and independence it took to start our own business and work only for ourselves. After a little success, I began to believe that if we could make money at this volume of work, we could make two or three times the profit at two or three times the volume. My project selection process was simply to take more work in our local market, a lot more. This youthful attitude, I eventually came to understand, was my management “immaturity”. My youthful cockiness:

1. Refused to recognize risk we couldn’t handle.
2. Therefore, I never evaluated risk.
3. Also, I never recognized the limitations of our team. I thought we could build anything if we set our minds to it.
4. Only after costly mistakes (ample profit margins prevented them from becoming fatal) did I recognize any of my own limitations.
5. I resisted hiring anyone smarter than me.
6. It took me years to learn to let go and delegate as our company grew beyond our ability to be everywhere and see everything.
7. I admit when I was a contractor, I never stopped trying to solve all problems. Only after I studied the industry as a consultant did I see this failure in other contractors and realize how a mature manager learns to focus on current critical problems one at a time.
8. When I was a young contractor, I considered my stubbornness a virtue. Eventually I learned that the mature manager display a willingness to change. This is the key to managerial maturity and long-term success.

Managerial Maturity and Project Selection

It bears repeating that: “There are no bad projects - just bad matches of contractors to projects.” 

• A realistic appraisal of your company’s capacity and expertise to profit from the current type of project under consideration is critical to your company’s long-term success.
• It takes managerial maturity to conduct a realistic self-appraisal.
• That’s why managerial maturity is the third risk factor in the project selection process.
• In a construction company, the CEO’s managerial maturity is an essential part of the company’s capacity,and capacity is nothing more than the present status of accumulated expertise.

Integrated Management Skill 

I hope you see how project selection is a critically integrated construction management skill that increases profit and diminishes risk.

• An important element of capacity is the experience a company accumulates over time.
• The ability of top management to evaluate each proposed project as a fit for the current status of their company’s capacity and experience is the chief determinant of a project’s potential profitability.
• Mature management recognizes risk, recognizes its own limitations, and is humble enough to hire the skills it lacks and delegate authority to competent employees it has hired.