How to Spot a Trojan Horse in Your Construction Business

0:00Jason Schroeder: Ten years in the ready mix business, ten years of losing money, and they kept going. Herb Sargent shares that story today, and it raises a hard question for every contractor. How long will you keep defending a decision because it was yours? The next project you're excited about could be a Trojan horse. So could an acquisition or a new business line. You see the opportunity, your team sees your enthusiasm, and the questions that could save you a fortune never get asked. I'm Eric Anderton, and today on Construction Genius, I'm joined by Herb Sargent, board chair and former CEO of Sargent, and Scott Pieper, founder and CEO of Mobilization Funding.

0:39Jason Schroeder: We're talking about how experienced contractors talk themselves into bad decisions, why taking another job can make a cash problem worse, and how to develop leaders who can make sound decisions without calling you every five minutes. If you want to tap the deep wisdom of a couple of individuals who've been in the construction industry and around the construction industry for decades, this episode is for you. Let's dive right in. This is Eric Anderton, and you're listening to Construction Genius, a leadership masterclass. Thomas Edison said that genius is 1 % inspiration and 99 % perspiration. If you're a construction leader, you know all about the perspiration, and this show is all about the 1 % inspiration that you can add to your hard work to help you to improve your leadership.

1:39Jason Schroeder: Herb and Scott, welcome to Construction Genius.

1:41Scott Peper: So I got to ask you, Herb, how's retirement life for you? Well, my wife would tell you I'm not retired because I got involved with a friend, Benjamin Holmgren, and a few peer groups. So I'm busy with four peer groups and doing some coaching besides that. So it's been busy, but we're enjoying it. Yeah.

1:58Jason Schroeder: Well, the only question that is, is your wife happy about you not being retired or would she rather have you around more?

2:04Scott Peper: Well, I think there's, you know, everything's good in moderation, right? So there you go. There you go. Beautiful. No, I think I think I would drive her crazy if I was underfoot 24 seven. So I think we've struck a good balance. There you go. That's beautiful.

2:18Herb Sargent: You certainly weren't retired the last two days.

2:20Jason Schroeder: No. So I want to dive into our conversation here. And as we were prepping for this, Herb, you brought up this idea of the Trojan horse and that immediately caught my ears because, you know, everyone's been watching the Odyssey this last few months here. Actually, I haven't yet got out to the theater to see it. So one of these days I got to do that. What happens when the opportunity you're most excited about in your construction business turns out to be a Trojan horse?

2:46Scott Peper: Well, there's a lot to overcome there, you know, and it's what it is. is you see it as an opportunity. You don't, and this is my experience, I guess. I see things, I have seen things as opportunities. And it's been more than one, by the way. But maybe we don't pencil them out. Maybe we don't do all the proper due diligence to fully understand what's being wheeled into our midst. And, you know, like the Trojan horse that was wheeled into the city of Troy when everybody went to sleep, opposing soldiers came out and let the opposing army in. And that's, in effect, what kind of has happened with us.

3:22Scott Peper: You know, sometimes it's a project. Sometimes it's a bad hire. Sometimes it's a bad acquisition. Or sometimes it's a bad adding on, bolting on another operation. But really what it boils down to is not having penciled things out or prepared the right kind of exit strategy. or having prepared, like, this is how far we're willing to lose before we give this the heave-ho. Jim Collins has a good way of putting it. You know, let's fire musket balls before cannonballs and gauge our sights first. And frankly, you know, in our world, we haven't done the best at that. We've gone right to the cannonballs and started firing those.

4:07Jason Schroeder: So can you give us, I know you, obviously, You've been in the industry for years as an owner of a business. Can you give us some examples of that or maybe the project example, for instance, from your own experience?

4:19Scott Peper: Yeah, a project we had, you know, a design-build project we're all excited about. And it ended up being a fairly significant loser for us that, you know, that it was the kind of thing that we didn't have to have at the time. We had plenty of backlog. We didn't have to have this project. But we chased it anyways. and it ended up being kind of a, I guess, a millstone around our neck for some period. Now, we've survived that and survived it well, but looking back, we look back at the kind of things we could have looked at to have done more due diligence around it. Another one that I'll talk about in our history is we were acquired back in 1988, and I don't know that we did the due diligence around our acquirer.

5:07Scott Peper: And within a month of being acquired, our parent company went through severe financial crisis and had to sell to a larger company. So it can kind of happen to you both ways.

5:20Jason Schroeder: It's interesting. Going to the project example, was that driven by an individual and everyone kind of went along with them? Or was it sort of like a team situation where we all agreed that this is going to be something we should go after?

5:33Scott Peper: I would say it was driven by an individual who put a team together. And we looked at it like, okay, this is a good opportunity. But as a design-build project, we carried more liability into it than we would have in a typical design and then bid process.

5:52Jason Schroeder: With the design-build process itself, was that something that was unfamiliar to you guys at the time? It was a new way of getting a project?

5:59Scott Peper: We have done some design build work, but not any major design build work before. And I would say that we are not, at the time, we're not terribly well-heeled at how to structure the design lineup, the design capabilities in the contracts there between geotech and design and then the building.

6:23Jason Schroeder: Okay. Scott, as someone who is an outsider coming in and advising your clients, what do you do to help them to avoid sort of the group think that sometimes can happen where, you know, the shiny object comes up, everyone sees it. Maybe the influential leaders in the business say we should go after this and everyone just kind of lines up behind them.

6:41Herb Sargent: You know, it's a good question. One of the things we see a lot or one of the things we look for a lot in a business when we're underwriting them or determining whether we can help them or not in terms of our loan program or what they're going to do from a construction basis project is helping them assess the risk, particularly around the cash flow. And if this is their first time doing a government project, although it's the same scope and they've never done that before, we start to expose them to the risks of government projects. And that might be, hey, how good are you with your paperwork internally?

7:14Herb Sargent: Have you done projects this much where you had certified labor. Do you know what, are you using certified labor? Do you have a good company to do that? Has your payroll company ever managed that? And if they say something like, well, what do you mean by certified labor? You know, you can help them immediately by introducing them to what types of administrative duties they're going to have. Another great example is we had a tile contractor, flooring contractor. They did lots of flooring. I mean, massive amounts of square footage. But, you know, they never did. And they did it sometimes in like medium to condo buildings, you know, less than 10 stories.

7:52Herb Sargent: But now they moved to an office. They were in New Jersey. They moved an office to Miami. And they're going to start doing 30 and 40 story condo towers, you know. And I'm like, OK, well, how are you pricing out those floors? Walk me through your pricing. Well, we have one square footage per price. I'm like, well, that 30th floor, I'm telling you right now, is going to cost you more than that first floor is. Like, so what'd you do? Did you take an average or not? They're all the same. And so I'm like, okay, well, what about the crane? How many cranes are on that side? You're going to have to get, you know, your flooring up to that floor.

8:23Herb Sargent: What's your program? What's your process? And I started to expose them to some of the things that you're going to have from a risk perspective that if you haven't figured it out or you're not thinking through these things, they're going to come with a significant cost difference. And if you're not planning for that, you're going to end up in a spot where you are just stuck. And so those are the kind of ways and things that we can help people prevent. Those are the things that we look at, making sure that if we're going to help you and you got a good bid and you're telling us what your costs are and we're going to help you with the cash flowing of this project, whether it's via a loan or just our cash flow tool, well, then we want to make sure we really can add a value.

8:57Herb Sargent: And that's something we've learned.

8:59Jason Schroeder: I was chatting with one of my clients yesterday and they made a very good point that someone shouldn't make lonely decisions. And Herb, I want to come back to this idea, though, of avoiding the Trojan horses and specifically put yourself back into the boardroom, so to speak, where you guys are kicking around a decision. How did you, as the CEO of the company, keep open lines of communication so that people would feel comfortable challenging a decision that was being kicked around saying, hey, I don't think this is a great idea, even if that meant challenging you in the way that you were thinking?

9:33Scott Peper: Yeah, I would say we've gotten much better at that. And these lessons that we talk about, the Trojan horse type lessons are more historical, I'd say, five plus years ago. Yeah. We've gotten much better at the board level. And maybe, you know, some of these things are part of what has brought those kind of conversations so that we want to have them at the board level, too, so we can have those external directors start to ask the tough questions, which they do. But, you know, back in the day when we learned these lessons, it was, I would say, we were much less intentional. And that's the thing where I can separate the lessons that we have, the field tested, you know, from losing lessons to winning lessons, or when we got much more intentional about the way we looked at opportunities and the way we evaluated opportunities.

10:26Scott Peper: And so some of these things were more when we were not, I'd say, as well governed as a board. Hmm.

10:34Jason Schroeder: So it sounds like then if you're going to be able to evaluate these opportunities, whether it be a project, an acquisition, even a hire, you have to have some sort of process in place to help you to take all the information in and make rational decisions then.

10:49Scott Peper: Yeah, I think, you know, I'll always go back to this unintentional versus intentional, or you could say undisciplined versus disciplined. Yes. And having discipline around what makes sense for us to to chase, whether it's, whether it's a project type, uh, if it's outside of our standard bailiwick, right. That we don't have a lot of experience in, or if it's a, an acquisition that we're looking at, uh, which is, that was what was written in the book. It was an acquisition that we made that was, uh, kind of like, you know, I guess, I guess we need to make this acquisition

11:23Herb Sargent: because if we don't, there's going to be other consequences. So we kind of fell back into a corner on this one.

11:29Scott Peper: And I'd say the homework we did on what that would mean to us was weak, quite frankly. I think at the time we probably had a higher opinion of our ability to just evaluate on the fly. That's a big lesson we've learned is the due diligence is really the big beat, the discipline, penciling things out in the right way and proving them out. And then also, So one of these things, we were in the ready mix business for 10 years. We lost money every single year at it. And there was finally a point we should have set, like, this is as low as we're willing to go in this, and then we're out. But instead of doing that, we kept betting on it.

12:12Jason Schroeder: Interesting. Yeah, that idea of betting on it. Scott, when you're working with companies and what Herb is describing is occurring, how do you recognize it right away? that idea just the idea think about this idea where he said you know we're betting right so when as soon as you say betting i think of gambling and and you know in business i know we need to take risks but you know the house always wins when you're gambling if you know

12:36Herb Sargent: what i mean yeah i think it's when you hear a contractor talking about we're stretching we got to take this next job on i got to keep money coming in that's a real quick sentence for me that something's off you know because and they very well maybe need to have money coming in But it doesn't mean that it's a good strategy necessarily. What are you avoiding? By bringing money in and taking a project that you know isn't necessarily perfect for you, what decision are you also avoiding making? And it might mean, it might be, well, I'm going to have to let half my people go or I'm going to lose these crews if I don't keep the game going.

13:10Herb Sargent: Yes. And a lot of times what that looks like in the exact setting I'm talking about is they're running their projects too lean. They're way overbilled. But they haven't, they've saved, instead of saving that money, meaning it's not theirs, they got to overbill, which is good, but they haven't preserved it to finish the job. Yes. They've used it to start others. You now have a series of jobs you're halfway through that have no profit and no cash flow on them. And so you have to take more work to get finished them. That's usually what that means. That's a very dangerous scenario to be in for a long period of time.

13:44Herb Sargent: And if you're going to finance into a project like that, where mobilization funding might come in, we can help companies that are in that spot. But if we are, what mentality are they in? Are they in this is how it works, man? This is how it goes. This is all this is ever going to be. That's how the construction goes. Or are they like, hey, this is what we did, man. We got overbilled. We had a bad project. We got overbilled. We had to spend that money. our line of credit is maxed out we now have two really good profitable projects and i want to make sure i execute them properly so i'm looking for some help to cash flow these totally different scenario at person b versus person a you know and so those are the kind of things i think we would hear and how it would show up in our world more panic driven you know it's interesting maybe ego

14:30Scott Peper: might be the right way i mean that if i go back to to the things that i'm talking about the trojan horse is really our ego is the Trojan horse. And our ego tells us that we can make money at Ready Mix. Let's go into this thing. If somebody else can, we can. And if we can get this electrician on board with us, we can make money with him. If he made money, we can. A lot of electricians make money. That's our ego talking, right? And I think our ego tends to tamp down and snuff out that part of us that ought to be asking the tough questions.

15:03Jason Schroeder: So I like that that line of thinking there, because on the one hand, our we need our egos in the sense of our own sense of self and our willingness to take risks that are appropriate and our willingness to even persevere when things are going badly. But how do I over time? And this is what I'm asking you guys is over time. How have you seen your ego change in a positive way so that it's not hindering you as much, but it can more be utilized to be a benefit?

15:35Herb Sargent: Two things in particular, and I'll speak for myself. My ego hasn't changed, but my level of humility has moved up to realize I know I don't know everything, number one, and I must learn. I can't just think it's going to be good. My ego used to tell me, do it. Everyone else did it. You can do it too. My ego now tells me the same thing, but it says, what don't you know? My humility comes in and says, what don't you know that you're going to need to know? And instead of my ego saying, I'm going to guarantee this outcome because someone else had it. My ego also tells me because someone else did it, so can I.

16:13Herb Sargent: But what do I need to know that I don't know about myself? I'm looking at mirror and what help do I need? What resources do I need? What am I really confident that I can produce in this X, Y, and Z scenario, but what am I not confident I can, and where are the gaps? I think that's the nuanced difference between the two.

16:33Jason Schroeder: I like that. I like that very much. Herb, what would you like to add or expand on there in what Scott just said?

16:38Scott Peper: Yeah, I would say the ego. We can tell ourselves we have to have a job. We can tell her this is the right job. And one thing that I've come to believe is estimators can be good insulators from between the job and our ego. And what I mean by that is that estimator doesn't necessarily, his job is to tell us what it's going to cost. Yes. And then we have business decisions to make on how hard we approach the job. And so I think rather than us diving into the plans and specs on a project, for instance, and going, wow, this is our kind of job. This is a sergeant job. We've got to have this job. If we can use the estimator position as an insulator from that ego piece, and so we're not diving into the cuts and fills on the job that get us all excited.

17:32Scott Peper: We're looking at the cost, and I mean, we still do look at some details, but also just what's helped us tame our ego on these things is these lessons. You know, it's actually sitting down and talking about these lessons as a team. And part of it is also having to talk to a board and our bonding company about, you know, we've got to answer questions. Our bonding company, whether you like to look at it this way or not, we're renting their balance sheet when we go to work on a public project that's bonded. And we've got to answer tough questions to them. So that drives us to explore and understand what mistakes were made and to try to make sure that we don't repeat those in the future.

18:24Jason Schroeder: All right, quick break to talk about my book, Construction Genius. This is what I want you to do. Go to Amazon, search for the book, read all of the five-star reviews because there's a ton of them, over 50 to be precise. and the reason I want you to read them is because real people wrote those reviews who've actually read the book and it'll give you an idea of why you should go and buy a copy right now on Amazon and here's the deal if you purchase 10 or more copies for your company and then send me an email eric at constructiongenius.com I'll come in via zoom and do a one-hour q a and a bonus training session with your team at no charge.

19:04Jason Schroeder: I normally charge$4 ,500 for an hour of my time. And again, for you, I'll do it at no charge if you buy 10 or more copies of my book. And the reason you should buy it is all in the title. It's effective, hands-on, practical, simple, no BS, leadership, strategy, sales, and marketing advice for construction companies. So if you're in the construction industry, this book is for you. So you can get it on Amazon. You can also get it on audible in the audio version as well, narrated by yours truly. And I know you'll really enjoy it. So go out and get the book. And now back to the interview. One of the qualities or characteristics of youth is this high sense of ego for a lot of people.

19:49Jason Schroeder: And I think there's a tremendous benefit to that, but also it needs to be mentored. How do you, with the experience that you both have now, work with younger people to help them not to tamp down or squash their egos, but to direct them appropriately?

20:07Scott Peper: Well, in our world, I mean, we try to talk about these lessons. You know, we have a new president, CEO, Eric Ritchie is his name. And you've met Tasha, I believe, our CFO. Yeah. And we're all about talking about these lessons. And one of the things we try to do at every every year, we have a superintendent foreman meeting and we have our superintendents bring in their biggest lessons of that year. And, you know, then we share more of a corporate lesson. Right. That's a project level lesson. And we'll try to share Eric and Tasha try to share kind of the corporate lessons that we've that we've learned.

20:44Scott Peper: And we've tried to really connect mentorship to these younger people. I mean, we've got a very young company now compared to where we were 10, 15 years ago, you know, like 60 percent under 40 years old, 25 percent under 25 years old.

20:59Herb Sargent: Wow.

21:00Scott Peper: And so much younger company. So that's the question you asked, a really important one for us to address. And it's I think it's done with that mentorship. And we've got a good workforce development team that helps with that. But asking the right questions is really the key, I think. Not telling them that, you know, I don't think we can tell them, listen, your ego's running out of control. I think we have to ask them, you know, what kind of things might happen here that we don't currently anticipate? Have we talked it over with the entire crew? You know, so you get the whole crew's input into where a crew wants to go.

21:41Scott Peper: You know, what a foreman might want to do or a superintendent want to do. And we've gotten so much better at that. And I'd say in the last five to eight years, it's been a really important part of how we've grown. And the way Eric leads, frankly, is a big piece of that.

21:57Jason Schroeder: Is there a particular, think about that for a moment. What is it that Eric is doing differently than what you did that is having a positive impact on the business? As you observe it, having been out of the day to day for a little bit here.

22:13Scott Peper: I think conversations, we've placed a premium on conversations that we had not in the past. In other words, we had maybe, we had rules. This is the way we do things. And, or this is the kind of equipment we use in this scenario. And when you have those rules, I'll just give you a quick example. You know, a superintendent goes to a regional manager and says, I'd like to have X piece of equipment. and the regional manager says, if I got you that, I'd get fired. So that's the end of the conversation, right? And the conversation should be, I would like to have X piece of equipment and the regional manager should say, wow, X piece of equipment, can you explain to me why that matters to you?

22:57Scott Peper: And the superintendent explains it and then the regional manager says, okay, but do you realize that that comes at a 15 % rental premium and it also has 20 % less capacity? So does that still make a difference to you? Can you do that? And now we're learning. Now we're transferring knowledge up and down the line versus, hey, no way we can do that. And I think that's one of the things that Eric and the people that have come in under Eric, he's got two COOs under him, one for New England and one for Virginia. And I think he's really, really done a great job promoting having those kind of conversations versus saying, we know, and you're going to do it our way.

23:39Jason Schroeder: Yeah. Interesting. Scott, as you're working with your clients, and again, you have this tremendous perspective that you're afforded by your business of not only seeing their finances, but the people associated with their financials. What do you see with the companies that manage the silos between, let's say, estimating project management and the field? What do the best companies do in terms of managing those silos effectively?

24:04Herb Sargent: Yeah, that's a great question. The best companies are communicating, for sure, always, and not just once. I'll give you a good example. Well, first and foremost, what's the quality of the reports and information that they're using to make decisions is the first piece. And then from the quality of information, who do you have utilizing that information making decisions? Because you can have really quality information. And then in Herb's example, if it's just him or Eric making a decision and no one understands why or how they got to that decision or why this set of data was important to them or it was even used, no one's learning anything.

24:44Herb Sargent: Right. And so now you just you're you have a you can have a very effective project manager who's just taking orders and executing, but doesn't doesn't have any will to see what might be going on or why the plan could go off course until there's a real problem. Right. Whereas if they understand and they're bought in and they understand the data and information, they may see a couple of degrees of separation moving and get it back on track quicker. The second thing is, you know, we have a big focus on cash flow, and I think the whole construction industry does. If you don't manage cash properly or you don't manage your costs and expenses, you don't make money, right?

25:18Herb Sargent: Right. If you don't manage cash flow, it's even worse. You could go out of business. I think how well does, if they even do, your field and project managers communicate to the accounting and the finance team? And in what type of cadence? not only in execution to schedule, but also in cost. Are you communicating to the accounting team that, hey, we're moving at two or three weeks ahead of schedule, and that means I'm going to be buying this first chunk of material sooner? Well, the project manager, if they don't know any different, they just assume that the company has money all the time just sitting around.

25:54Herb Sargent: And the accounting team is thinking, I'm going to use this cash differently. Well, in that example, all of a sudden you could have a project that's moving ahead of schedule, but there's not enough cash or trade credit, for example, with your supplier. And now you just lost the three weeks that you just spent two months building because you can't order the material on time or the lead time misses or something. So that communication between cash inside the office and what's happening in the field, especially as you do more projects, is really important. And so the quality of those discussions around that, the data that they're using and who's making them and deciding and how that goes will tell you a lot about a company and how well they're going to execute it on.

26:32Jason Schroeder: That's interesting because based on what you just said as well, Herb, is there's a real need to educate our people as to how money works within a construction company, where it comes from and how it's used effectively. And I would imagine that in a lot of companies, the thought isn't I need to teach my superintendents about that and my project managers and my estimators. And if I did teach them, then that might reduce a lot of the conflicts and also some of the requests that are unrealistic that come to the owners of the business on a regular basis.

27:06Scott Peper: You know, I agree with Scott that that information is so important, but it's how quickly it's transmitted. You know, it's like firing the synapses in the nerve. If we've got this wide chasm, the way information flows or the way people communicate or the way the culture works in a business that inhibits that firing, that's, to me, that's a little bit more of a problem. And then trying to get people to transmit those lessons up and down because the important piece of a company, and we just turned 100 this year, is we need that continuity. We need the transfer of knowledge from, you know, the old guys like me to the younger ones coming in.

27:54Scott Peper: And that kind of addresses a little bit of the question you asked before. It's really a continuity of lessons and having those nerves be close enough so that they actually fire. And I think also as an ESOP, as you know, I think everybody has a little bit more interest in the enterprise, you know, at an enterprise level. while the foreman is in, you know, his immediate project is to get pipe in the ground, to get dirt moved or whatever. Also understanding that what they have for an impact in the overall enterprises is an important aspect of it. I don't want them to worry. I don't want them to be burdened about finances.

28:36Right.

28:37Scott Peper: But I want them to know they have an impact. And part of what, you know, the message around Aesop, my early days was, you know, the Aesop is going to mean something to you someday, you know, it's going to be important to you. And I wish I had come up with a different message. The message to me really is, you are important to the Aesop. You are now partners with the rest of your people. And the Aesop really, we look at it like it's the culture, but it's really not. It's just a mechanism that distributes value to the employees. And so understanding that, having our people understand that in a way that makes them appreciate the idea that there is an enterprise above us that we have to care for.

29:21Jason Schroeder: That's interesting, right? Because in an ESOP scenario, being able to communicate that what you're doing today not only ensures your paycheck in two weeks, but it's going to have a much longer impact on your retirement, a direct impact on that. That's something that is important to communicate, I would assume.

29:40Scott Peper: Also, I think it's important that we know we inherited something, you know, not just money, but we inherited a way that we do work and understanding that we can take a shortcut today that will cost us in the long run, or we can do things right today, always that doesn't necessarily guarantee the future for us, but it certainly does a lot better job than if we take shortcuts.

30:05Jason Schroeder: It's interesting. We had this conversation earlier about mentoring and the thought came to me that when it comes to knowledge transfer, how much mentoring do we have to do of the older generation to encourage them to transfer their knowledge while acknowledging that at times that can be a threat to them because there's a cliche in construction. The old guys don't want to teach the young guys because they're afraid that they'll get their jobs taken away?

30:31Scott Peper: This is a great question. And we had that problem. We had, you know, one individual that I can recall, we're at a superintendent's meeting and the superintendents were complaining about this operator, for instance, and he was literally the best operator we have, but he hated the young

30:51Herb Sargent: guys.

30:51Scott Peper: And so I went and sat down with him and I actually made a little bit of a tour inside our company. This is probably six years ago, six, seven years ago. And this one particular guy, though, I mean, a great guy, 30 something years of the business. And I asked him, you know, how are you getting along with these young guys? And I, you know, I got a really curt answer from him. And I said, you know, what do you think, what do you want your legacy to be? And he goes, what do you mean? I don't worry about legacy. And I said, well, let's just map it out. Your legacy today is you worked here 35 years and you retired and you got a plaque.

31:29Scott Peper: Or your legacy can be, I worked here 35 years, I poured into the people that I work with, and my impact, my legacy here is here for another half a century. in that person and then the person that they've learned to mentor. And it was about a year and a half later, I was on a job and I saw that he was working with another very, very young foreman, you know, 23 years old or so. And I said, well, I'm just going to check into this and see how this goes. And I talked to the young guy and I said, I said, how you like working with Stevie? He goes, I love Stevie. We're going fishing after work today. And so, you know, just that conversation, helping them understand that they can make a difference and they have a legacy that they can.

32:17Scott Peper: I mean, a lot of people don't worry about their legacy, but I think, you know, people you mentioned, an ego can be a good thing. And understanding do have a legacy. And I don't think he'd ever thought about it that way.

32:31Herb Sargent: Herb's created a culture where it's not a threat, you know. Yes. There might be fears that that project manager, older project manager had or older leader. And you realize like, hey, pour into them. This is not a threat to your existence here. This is a threat to the existence if we don't do this on the whole organization. The benefit is the organization continues to live on along with your legacy and what you've taught. You're so valuable to us. Matter of fact, I want you to transfer what you have to these younger folks. I can put them in a classroom with others teaching, but I want to teach them right here with you.

33:07Herb Sargent: You're the one that makes this work.

33:11Jason Schroeder: Think about the last time you promoted someone into a leadership role and it failed. Why did it fail? I can tell you one reason. People know how to build projects, but they don't know how to build and lead teams of people. Construction comes with its challenges that only insiders truly understand. Generic leadership training doesn't cut it. You need a program to train your leaders built specifically for construction professionals led by an industry expert. And my online course, The Shift, is exactly that course. It has five modules. It'll teach your people how to control their calendars and reduce stress and embrace chaos and accomplish their critical tasks.

33:54Jason Schroeder: It will teach them the three essential messages they have to communicate every day in order to motivate and lead their team effectively. It'll show them how to build and lead a high-performing team, give them a framework for running effective meetings so they'll be able to solve problems in less than an hour, and also give them a higher perspective on their leadership. That will enable them to work on the business and on their teams and not get stuck in the weeds micromanaging. So go out to my website, theshift.constructiongenius.com, read all about the course, and then enroll yourself and your leaders in the course, and I guarantee that it will transform your leadership.

34:35Jason Schroeder: If it does not, you take the whole course and you didn't get benefit from it, you just send me an email, eric.constructiongenius.com, and I will cheerfully refund you 100 % of your money. I'm really confident this course will transform your leadership. So again, go out to the website, theshift.constructiongenius.com, learn more about the course and start taking it today. Yeah, it's interesting. I was thinking about how, you know, we may look at people who've been in our organization for a while and our first thought may be, well, they'll never change. I'm glad they're here because of what they provide, but they'll never change.

35:10And yet one or two conversations can have a massive impact if they're if they're gone about the right way. Yeah.

35:18Scott Peper: Yeah. I mean, it wasn't in this is a 15 minute conversation, but I think it had such a listen. I'm not trying to take credit for for breaking a dam here or anything, but just I think that's one of Eric's strengths is helping to underpin the idea that we all have a legacy in this business. in that, I mean, he says that we have an internal podcast. He says it all the time that, you know, we're not going to take this knowledge with us. We need to leave it behind. And Tasha has a way of putting it that the best bodies of water aren't, you know, aren't reservoirs, they're rivers that flow. And if we're going to be that kind of a person, we need to have, you know, our brain needs to flow into the next person.

36:02Scott Peper: And otherwise, it just stagnates.

36:05Jason Schroeder: It's interesting. Talking about that idea of flow and stagnation, Scott, as you're looking again from the outsider's perspective, how do you know when the owner of a construction business is the bottleneck?

36:19Herb Sargent: I guess the easiest method and way is at some point, every owner is the bottleneck if your organization continues to grow. And so the real question is, does the owner realize they're the bottleneck and how are they managing through that? You can't just wake up one day and say, I'm the bottleneck and say, well, you know what? I'm not going to be anymore. And you just let the whole world run loose. You might realize it today and build a plan over the next year to not be the bottleneck. And that might mean, which first next leader do I need to hire? Are they amongst my team today? Yes? Okay, great.

36:58Herb Sargent: how am I going to cultivate them to this new role? When can I put them in that role? No, they're not here. Okay. I have to find them. And so in the meantime, you're still the bottleneck, but you're, you're aware of the risk of that and you're maneuvering it. So there's, again, it's a different mindset as to like, which bot are they an owner with a bottleneck? And I'm, I'm part of the solution to help them fix it, which oftentimes happens. So you know what, I'm the bottleneck. I got to approve every expense. I got to approve every project. I got to approve every single invoice that goes out. And I also don't have enough time for that.

37:28Herb Sargent: And And now the whole world's falling on fire. And I've gotten behind on a job and I got three new ones starting. Okay, what do you need? I'm going to need some working capital and this is what we're going to do. So we built some cash flows and we picked two projects. And they offload the execution of that project onto our team with the right capital. And there's so many systems in place, the way it works, they can feel comfortable with that. Now they can hire and execute and train a new leader and spend that time. and in four months they realize they're not at the bottleneck anymore and they've now uncorked it, right?

38:01Herb Sargent: That's one way.

38:02Scott Peper: The other way is they're the bottleneck, but they're not.

38:06Herb Sargent: And you see them just hair on fire. There's a dump, the whole dumpster's on fire. They're standing in the middle of it. They're telling you it's not hot. They're telling you that the fire's not close. Everything's fine. Everything's cool.

38:17Scott Peper: But the phone goes, you watch their phones blowing up every three minutes.

38:21Herb Sargent: Yeah. Yeah. You can't get a time with them. You can't get a focus. And, you know, if it's really that important, it's really that critical and we can't get in touch with them to solve a cash problem, then, you know, the rest of their team can't either. And so what happens to the project manager when they're calling? What happens with the accounting group? Everyone's just sort of trying to make it happen on their own. And that's where all businesses get at some point. And you break through that. Our businesses are different. And frankly, Iowa is no different. it. And it wasn't until you invest in that next level of team and leaders, which frankly is the hardest part of business, in my opinion.

38:55Herb Sargent: I mean, you can get a construction business to doing a few million dollars a year. You're making some money and you're doing well, but you want to take it from a couple million dollars of revenue to 10 or 20. You're taking more risk at that point than you are when you even start because you have more to lose, number one. Number two, you have to take the money that's in the business and invest it into people that are going to help you grow further. And you have to do that before you even have the revenue necessarily to handle it, which also means you can't even take the fruits of your own labor out in terms of payments or distributions or things like that.

39:33Herb Sargent: That's a hard thing to do. And so we see a lot of companies like that, and there's all different kinds. But to answer your question, that's kind of where it shows up. It's not like if it's their bottleneck. It's had they realized it, or where are they in the cycle of uncorking that?

39:48Scott Peper: Yeah. One of the ways that I was approached about that by, let's say, a surety company is, can you tell us about your succession plan? And this is me when I was$10 million, maybe going to$20 million. Can you tell us about your succession plan? And I'm like, oh, I'm 35 years old. There is no succession plan right now. I'm just working by the tail off. Yeah, and I'm white knuckling. Well, can you tell me who you're developing to come in behind you? And it doesn't take long, I don't think, to sort out. I've been involved in peer groups, and I can almost tell the people. You know, I can watch them during the meetings, and if they pick up the phone every five minutes and they check it out, I can tell who's dialed in to having to have say in every single thing.

40:37Scott Peper: And that is the bottleneck, right? Yes. And then you have some that you can almost put the phone in a locker before you start the meeting in the morning and they check at a noontime. And it's hard to tell people. It's hard to convince people. They need to be really intentional about starting to develop people in ways. you know, like, let me vacate the premises for half a day. You're in charge. And let's tell what winning looks like in that scenario. And then let's do our debrief after that. And what I've learned is, as we've tried to do that, and Eric's really pushed this too, is that those people that you give a half a day responsibility to step up, become better at the role they're already in, because they all of a sudden have experienced all the stressors of that next position.

41:28Scott Peper: And then within some period of time, they're moving up into that role. And so that pressure of the owner having to make every decision, you know, I was fortunate that I had some really strong leaders when I was CEO that I didn't have to make every decision, but everybody doesn't have that. Yeah.

41:46Jason Schroeder: And that would be a practical way to temper someone's ego as well as to give them a little more responsibility and let them feel that for a bit. Sure.

41:53Herb Sargent: Yeah. You know what else that does though too. Not everybody wants to necessarily grow to the next position, but they feel like they're supposed to, or they feel like they have to. And so when you give that role to someone and they feel it and touch it, they're like, you know what? I'm good. And then they appreciate the role they're in so much more, which also makes them much more effective.

42:16Scott Peper: Yeah. Yeah.

42:18Jason Schroeder: That's excellent. Going back to your own experience, Herb, in the business, what was something that you held onto for too long that once you let it go, you realized what a benefit it was to give to someone else.

42:34Scott Peper: So, I mean, just speaking about being a bottleneck, I mean, I did realize I came to the conclusion back in the late 90s for me, you know, I had about 60, 70 people and I was on every job every day. And I just one day it just hit me that I am the bottleneck. We're not going any further. Yeah. And when I finally made that connection and I found the right person to come in as kind of a VP ops that could help me. And I knew the guy well, so that helped to trust it in and letting go of having to to to get in, approve every invoice going out, letting go of every submittal going out, letting go of that operational piece.

43:21Scott Peper: And if I take kind of the military approach, there's tactical, operational, and strategic. And if I can just begin to migrate up out of that operational role into the more strategic role and see further ahead, I call it altitude. So I'm climbing now as a company we're climbing, but as the pilot, I can see further ahead versus looking at the ground all the time.

43:47Jason Schroeder: How long did it take you to source that person? And did you have to get sort of more than one attempt at it before you found the right person?

43:55Scott Peper: No, I found the right person. And he actually had been my former boss in my former company. And when I say it didn't take me long to find it, I did talk to him a couple of times before he joined us. But it took me a couple of years to get there and also maybe to get my head around it completely. to get to the point where like, okay, my ego, I've got to let my ego rest a little bit and be able to turn loose in this stuff. Because frankly, it's kind of cool to be the guy with the answers. Yes, it is. You know, to be the guy that, the person that they come to and you're the hero and that can be kind of cool.

44:36Scott Peper: But you got to relax that after a while because that is the bottleneck. when you're the person that has to have all the answers, that is the bottleneck.

44:47Herb Sargent: That's interesting. Scott, as you're working with people, how often do people get discouraged because they

44:55Jason Schroeder: make a hire with what Herb is talking about, with that intention, and yet it doesn't work out? And then they get frustrated, and it seems like they're a year or two, three years down the road, and they're still the bottleneck, and the main reason is because they just don't do a good job hiring. It's not so much.

45:13Herb Sargent: It can be both. It's the wrong perception of what's going on, how it works. Maybe you didn't give the person enough time. Maybe you thought if you think that once you hire the person, that is like, okay, your problem is solved now. Yeah, yeah. It goes away. That's the beginning of the process, not the end.

45:29Scott Peper: Yes.

45:30Herb Sargent: And so part of that, those are all just lessons you learn over time. Do you have good mentors? What's your capacity to learn? Do you listen to them? Or are you someone who has to touch everything and run through the gauntlet yourself before you learn every lesson? Well, it might take you longer. One of the reasons why it's so nice to read a biography is if you can learn from other people's mistakes, which is what Herb and I try to do with this book, frankly, you can skip lessons and decades of years of time that you can expedite your own process. And so I think what we see oftentimes is that it's not that frustration.

46:05Herb Sargent: It's more, did you train them? People don't suck. Some people might. They might suck at what they're doing because they don't have the tools or the resources or the knowledge. Like every book will tell you, you hire on character, hire on capacity, hire on someone's ability to fit and do well and what they want to do. And then you teach and train them the skills. And so the people you hire don't scale your business. your systems and your processes scale your business and your, the people running them execute that. Once you realize that, then you also realize that you have systems and process problems and that when, when someone moves on or promotes or leaves, you can, you know, promoting someone creates a vacancy too.

46:48Herb Sargent: Well, someone else is taught and trained and they have a simple process to follow and they can learn that they can mold right into that too. And your business can scale. So it's the people that realize that Eric, to answer your question, do better, obviously. And so where are they in that learning lesson? A lot of people throw labor and people at problems and they also don't prune the labor tree either. And I'm not talking about field labor necessarily. I'm talking about like your office labor.

47:16Scott Peper: Yeah.

47:16Herb Sargent: Your overhead, your leadership. Yes. A$10 and$20 million business requires different skills than a$5 million business and a 50, 60,$70 million business requires different skills. And if your people aren't growing and learning and adapting those skills and you're not teaching and training them for those skills, then you're going to have to flip your whole leadership team anyway. So you got to learn that these systems processes, which training is one of them, is critical.

47:45Jason Schroeder: That's great. So let's talk about your book because one thing I love about books is, you know, Herb, I was thinking about the conversation you had with that one gentleman that changed this whole perspective. And books are great because it's basically having a conversation with the author, engaging with the author and the authors about what they've learned. So tell us about the book, how it came about and what's in it, why people should read it.

48:05Scott Peper: So the book came about like I did with you many years ago. Scott and I connected on LinkedIn and he had a podcast going. I joined his podcast and he said, wow, if this lasted three or four hours, we could write book yeah that's literally how it came about and so we came in and we we got in the studio here and we just had a conversation about different lessons he asked me 100 questions i asked him questions and um and we kind of teased out what we thought were the important lessons that that were kind of principled that are that are kind of portable that could apply in a number of different areas and, you know, for instance, the intentionality around avoiding the Trojan horse.

48:50Scott Peper: I mean, that can be applied in your own personal life in many ways. And so we had a conversation and boiled it down, and we just felt like there was enough there, enough meat on the bone to be able to share it with others. And, I mean, I give Scott and his team credit because they've done the lion's share of the work here. I was kind of the guy that came in with a lampshade on his head and talked.

49:16Jason Schroeder: That's great. That's great. And Scott, who would you say should read this book without question? Without fail, you've got to read this book.

49:24Herb Sargent: If you're at any phase of a construction company and you're a leader or an owner or you're leading the company and you want your team, what we just talked about, your project managers, people learn, and you want to distill knowledge to them without having to do it all yourself, yourself, you should buy this book for your whole team and read it. Anyone in construction that either has a desire to lead a team, run a project, or start their own or managing their own construction company should read it. And the reason being is because each chapter is an individual story. You don't have to read this book cover to cover.

50:00Herb Sargent: You can look at the table of contents and you can say, you know, I have a succession problem and go to the succession chapter. I have a project management problem. Go to the project management chapter. I'm thinking about buying or acquiring

50:11Scott Peper: this company and go to the Trojan horse chapter.

50:15Herb Sargent: I have a problem with training and development. I'm growing and scaling too fast. How do I know if that's true or not? Go to the scaling too fast chapter. So you can read each little chapter as its own lesson. You hear a great story, which you can cement into your brain, what the story was, why you can learn the lesson. And then it shows you action steps as to why and how that occurred. The A, you're normal. This is a normal process. Things happen. But here's how you get your way out of it. And here's how you can avoid it.

50:43Jason Schroeder: That's great. That's great. And we'll have links in the show notes to the book. I know it's going live on Amazon on November 3rd, 2026. So if you happen to be listening to this before that, then you can pre-order it. But after that, you can get the book there on Amazon. And Scott, Herb, how else can people get in touch with you if they'd like to engage with you a little bit more?

51:02Scott Peper: Well, primarily I'm on LinkedIn. It's Herb Sargent on LinkedIn. And I've typically been pretty active on there. Not so much lately, but I'm kind of trolling. So it's all good. There you go.

51:15Jason Schroeder: Yeah.

51:16Herb Sargent: You can also find me on LinkedIn individually, but our website, mobilizationfunding.com, also our YouTube channel at Mobilization Funding, and the Mobilization Mindset Podcast is all also on our YouTube channel and our website. That's the best places to find us on our team.

51:35Scott Peper: I've got a podcast going with a friend from Australia called Starbucket Sergeant, and And we just talk, we have questions that come in and we just, we don't necessarily answer the questions, but we discuss the questions and try to tease them all apart. And this guy is, I think it works well because I'm kind of retired and I'm an old guy out of the business. He's in the middle of the business in Australia and it's a lot of fun.

51:58Jason Schroeder: That's wonderful. Yeah. So again, we'll have links. There's a tremendous amount of resources here. And Scott and Herb, I really appreciate you guys coming on and sharing your wisdom.

52:07Herb Sargent: Thank you, Eric.

52:07Jason Schroeder: Here's a question I'd like you to take into your next leadership meeting. Which decision are we still defending because we don't want to admit we got it wrong? Give your team time to answer, especially if you pushed hardest for the decision. Then pick one opportunity you're considering. Have someone challenged. Thank you for listening to this episode of Construction Genius. Hope you found that 1 % of inspiration to help you in the next few days. If you like the show, please give us a five-star review on iTunes. Share it with other construction leaders who you think would benefit. And always remember that the show is brought to you by Kick-Ass Meetings.

52:46Jason Schroeder: I've been working with construction leaders since 2004, teaching them how to run extremely effective problem-solving meetings that gets their people collaborating.