Greed in the Construction Industry

Greed in the Construction Industry

In this entry, I am going to talk about greed in the construction industry from a business and individual’s point of view. It is something that I think a lot of people have not thought about. It is an issue that the industry needs to address.

Since January/February this year I have been passively looking for quantity surveying jobs passively. I am not rushed in looking for a position that will just work me like a slave. However, I have seen a pattern in the companies that I have been interviewed (yes I interview them more than they interview me, I’ll explain in another entry).

Every business except for one consultancy has been too greedy that their projects are in shambles, and they cannot resource it correctly. They are expecting us to try to help solve their problems and getting the team together. For example one of the companies told me their CEO wants to have a turnover of £5billion in the next ten years, and they are currently on 0.5billion.  That perticular business had no system in place to run the NEC contracts, no commercial structure and I was told that I might be working more than the contracted hours on a regular basis. What baffled me is that they admited that each of their projects had their set of processes and systems to get things done – nothing was centralised or coordinated.  How can a business who can barely manage £0.5billion want to reach for the stars in the next ten years.

That is greed.

Another company I interviewed had a commercial manager who did not know the contract and he did have have the experience to deal with the issue. All of his projects were in a mess and they didn’t have a procedure in place to employ someone fulltime. They could only take someone on board via freelancing then start the employment procedure to get you on the books. They even mentioned that they were having difficulties with the client that they had to avoid issuing Compensation events (variations) to not offend even more.

I was bewildered by this.

That company won a framework with a public employer and they were in a situation that their quality of work was so awful that they didn’t want to offend the Employer by issuing claims. I would blame the greed of that company for this particular situation.

Why cannot a business just focus on delivering the goods and not about the money?

I help run my father’s business at Icelabz  providing engineering surveying services and measured building surveys to domestic client. The one thing we strive to do is to hold back on taking too much work. I personally would rather have a lot less clients than too many without the right people in the business. I do not want to run a business that is greedy from the core and out there looking for money and really destroying the integrity of our business.

This is not something I’d stand for because this causes an imbalance and consequential issues.

For example; if a business took on too much work that they could not resource the quality of work would suffer or they would have a high turnover of staff which breaks the business’s structure and procedures apart like a tornado. This is probably what happened to the businesses I interviewed.

They lost sight of what they stand for and they do not deliver any value but pain and disputes. Companies like consultants and lawyers benefit from this because they end up with poor quality issues, poor staffing, or even a dispute. I know at least one major contractor in the UK that relies heavily on the latter to recoup costs from their poor projects on a regular basis.

greed photo
Photo by ohhhbetty

Routes businesses are taking to cope with the greed

I mentioned that a high staff turnover the business will break, here is an example….

If a business has 100 permanent staff who runs the business’ process in and out on a daily basis now decides to take on a project that they cannot resource. They need at least another 50-60 staff to cope with the work load. The business now has two things they can do, (1) have their current employees work longer hours, or (2) engage freelancers.

Option 1; work longer hours

Let’s say that the business starts the new project with their current resource of 100 permanent staff but the managers asks the current staff to add 1-3 hours to their 10 hour days. After a while these employees would eventually burn out. They try to find the right people but the market is booming and the demanding salary is much higher than their budget. the business keeps looking while their current staff burns out.

They might engage younger and inexperience staff to do the role required, this puts a strain on them, the business and current staff as there is not a lot of time to baby sit the required 60 staff. the inexperience staff make a lot of mistake and do not follow the business’ procedures and ends up delivering a lower quality service (or product).

The permanent (burnt out) staff hands over their notices and leave the business as they cannot cope with the work load and inadequate staff running these projects. The business’ margin run very thin due to poor quality and high staff turnover. They eventually lead the company to a loss, and the process may continue carrying the loss to newer projects.

The business fails

Option 2; hire expensive freelancers

Now let’s say the business decides to choose option (2) they engage 30 more freelancers to cope with the work load but the cost of engaging them is a lot more than they budgeted for directly employed. So their projects are running thin on their margin. With that in mind, they are still short of 30 staff which they cannot afford.

The business stretches out the working hours of all the permanent staff to cope with the lack of 30 staff; some decide to leave because they are stressed out or burnt out. the business now needs to replace them with more freelancers. their margin on that “new project” is now running so thin that anything that would go wrong on that project would put the business at loss.

Now that the business has more than 40% of the staff on a freelance basis; the processes and quality of work suffers. This causes a mistake on site which delays the project and causes the business to make a loss due to an LAD. The management now puts a lot more pressure on the projects and staff to deliver reports and try resolve the situation by working overtime. Some staff leaves due to the pressure and the project are now nearly run by freelancers, and the end margin is now forecasting a loss.

This continues, again and again, the business keeps on trying to win more work to compensate for the losses. But the losses are carried forward until it is paid off, project after project. The business ends up losing its integrity and structure with soo many staff turnover that it is in a constant mess. It relied soo much on internal staff handover and training that when the business lost all their core staff, all the procedures and training went when they left.

The business fails.

Of course, these two examples are extreme, but you can get an idea how a business can run losses due to greed and inadequate resourcing. I have seen two companies close to these situations.

What can businesses do?

If these businesses took time, catered to their employees, their values and did not focus on taking on more than they could resource maybe it would be a different business.  Of course it may be hard to implement because you have to balance work coming in, resources and onboarding but there are a few things that could have been done to manage situations like these. See below some ideas that I’ve seen that works.

Iron clad procedures

Why can’t they prepare and setup iron clad procedures to do almost everything on site. I know of two international company who have really strict procedures for payment, procurement, delivery, record keeping and recruitment. It is so stringent that each process would need 4-8 people to sign off a piece of paper to get something ordered. They use payment to individuals or supplies as a control mechanism.

Processes are important – write every step-down and teach it – that’s the basics of writing a quality management system. Why do clients want businesses to have ISO 9001 or any QMS in place? it’s not to look pretty or anything like that, but to show that you can consistently deliver your product or services to a set standard every time.

I know for a fact that businesses out there pay for an external party to fill a template for them for the ISO 9001 auditors. Passing the ISO 9001 or any audit is simple as long as you can demonstrate the paperwork. But if you faked all the paperwork by paying an agency to produce them what good does it do? Without these certifications, a lot of companies would not be certified to work with public bodies, yet these are pretended. There is something wrong here that needs to be addressed but do it right.

I know two companies who really pushes and ensures the procedures are updated and followed. Even to the extent that one of them put £10m down to nail their procedures so that its followed and implemented. They know where to invest their money in even though they don’t make a massive turnover the quality of work delivered is brilliant. They don’t win all the prestige jobs, but they surely leave a good mark behind.

Using permanent staff for critical activities

I have seen a couple of business who value 3 critical profession on their project that they rarely allow freelancers to take on these roles. The construction manager, project manager and all commercial staff must be directly employed. With these roles filled in by direct staff they ensured the business and project’s procedures were not affected.

Training

procedures and training goes hand in hand, you cannot setup procedures or systems without teaching your employees how to do it. You need to place the same amount of effort in training as you do to write down your procedures. This not only retains staff but also grows your business to deliver higher quality services.

Recruitment of employees is too relaxed

I have seen companies offering jobs to the wrong individual taking on more than they can chew and eventually failing. So the best way to look at it is to really restrain yourself from employing someone to just fill the spot and really qualify the candidates.

Take time to qualify them to see if they are the right fit for the job and also saying no.

greed photo
Photo by CarbonNYC [in SF!]

Greed by employees

Another factor I believe is affecting the projects are the employees themselves (especially young and inexperience ones). Due to the high demand of staff in the construction industry and short supply of good staff. The salary of the market is too tempting for employees to jump ship for the higher pay.

Agencies are not helping as you’d get the odd calls asking “are interested to move or are you currently looking?”, your typical response would be “not interested”. However, the persistence and potential offers of “what if we added another £10-20k and we find you a senior role?” will tempt a lot of people. This is very common, especially with commercial staff.

What this does is gets the interests of young and inexperience quantity surveyors to move up the career ladder without any good training or the right experience.

For example I worked with a freelance “Snr Quantity Surveyor” making £40/day more than I did. However, he could not put a subcontract together, he didn’t understand procurement or tendering, he couldn’t do a take off or deal with issues with the subcontractor. He was only good at excel and processing payment. How did this happen? How can someone claim they are a Snr Quantity Surveyor when they do not understand the fundamentals of Quantity Surveying?

I would blame both him and agencies to jump ship too early and move up job titles as they seem fit. Is this greed?

With these offers and the market screaming for quantity surveyors, these agencies are flooding the market with crap quantity surveyors. I even had a discussion with an agency regarding this last week, and he agreed with me that there are too many inexperienced quantity surveyors in the market which have driven the price up. They keep floating between projects every 1-3 months and not delivering but charging a lot. The companies are then forced to re-hire an experienced staff but to weed out the crap from the good leaves them to pay twice the going rate.

Now when these young Quantity Surveyors move companies, it puts a strain on the existing business as the market value for a quantity surveyor is creeping up every six months due to higher demands.  That particular company could potentially not be able to afford a QS at the same level as the one that left and would end up employing someone who is less trained. This cycle could potentially affect a projects margin, and there is little a business can do but to pay for the price or offer enticing options to their current staff.

So what could they potentially do to keep staff engaged?

Provide an incentives? Or just keeping staff happy?

I am not going to go into the details of keeping staff engaged, but I will give you my opinion of what I feel would keep me in a job.

Two things; Growth and training.

As you are aware Quantity surveyors are weird and quirky, we are problem solvers by nature, and we just have to deal with the mess and all the variables that come with it. It makes us different and sometimes difficult to be understood. I believe if a business provides me personal, career and financial growth with the business I’d be more willing to put the effort. This means more opportunities to build and grow with the business. If we make £1m saving we want to be recognized for it, therefore a bonus scheme would entice us, the financially savvy guys.

If the business is thinking of changing the commercial structure or procedure, I’d like that they seek our opinion to get us involved to grow and partake in the business’ growth. We do not want to be working day in and out without recognition or to be heard. Listening to our wants and needs and taking them on board would show that the business cares.

Training, this is a given. We want to be given the opportunity to become better in all aspects. This means sending us to project management, engineering, financial, construction or planning courses. Don’t just think we don’t need any training especially if we have been around for a while. Even management or experienced quantity surveyors would benefit from these training. This not only up our skills but shows that you care and listen to our needs. I don’t know of any individual who doesn’t like to take 5-8 hours off from their day to day to learn and get better.

These are my ideas and what would somewhat attract me to a business but so far I haven’t been able to see this.

So what do you think?

Are you one of them greedy businesses or quantity surveyors jumping ship around or can you see the employment pattern like I do?

What do you think you can do today to try get out the greed?

Photo by anirvan

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