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May 2009 >>
Today's Challenges Require a Focus on Tomorrow
In an economy that demands careful scrutiny of every expense, construction executives understandably may be focused on shrinking project opportunities.
Across the broad range of company planning, the best advice is: Think strategically rather than transactionally.
What does this mean at a time when projects are limited and competition is cutthroat? It means now is a good time to prepare for a future—however distant—that will follow today’s turmoil with a building frenzy designed to catch up with unaddressed needs.
Here are three strategies construction executives should consider.
Make Wise Restructuring Decisions
Do not simply downsize in a reactionary way because prospects for new projects have evaporated and the company needs to reduce staff and expenses. Companies that only focus on the next job and their competing bidders, and then the next project after that, are more likely to fail than ones that create a strategic plan to guide their decisions.
Construction executives can use this time to re-evaluate past strategies, assess what has worked well and what has not, and then recast their company to play to the strengths that will be most useful when opportunities arise. Prepare now for the future by reviewing activities that could be considered marginal and ensure all employees are performing at their highest levels.
Develop an approach that allows the company to emerge from today’s economic turmoil as a strong contender, not just as a struggling survivor.
Be Wary of Debt
Much of the headline angst today revolves around the difficulty small businesses are having obtaining financing. Be cautious about taking on debt. Companies that manage their balance sheets to optimize liquidity are in a much better position to ride out volatile economic times.
Construction executives should focus on creating as much cash as they can. No company ever got into financial difficulty because it had too much cash, while too much debt can spell a company’s doom. Limit borrowing as much as possible, and pay debt down as quickly as possible.
Strengthen Partnerships
Now is the time for construction executives to take their interactions from the transactional to the strategic when it comes torelationships. This means developing a relationship that relies not just on today’s sale (transactional), but also on past history and ongoing plans to achieve success (strategic).
In addition to having a strategic plan, construction executives must share it clearly and compellingly with those they rely on for support. A company’s suppliers, whether they are surety bond underwriters, bankers, cement providers or specialty subcontractors, are more likely to be flexible when they see value in the partnership that goes beyond a single transaction—especially if they believe the company is making smart decisions geared toward future success.
In the near term, governments of all sizes are preparing to invest in infrastructure projects to stimulate the economy. Eventually the private sector economy will pick up as well because the growing population will continue to drive demand for new homes, buildings and roads.
Today’s construction executives have every right to be worried about survival. But companies that sit back and make short-term decisions based on today’s market conditions will not thrive like those that look to the future and position themselves to take advantage of the opportunities that will open up on the other side of the economic downturn.
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Friday, September 3, 2010