The $20 Million Job You Should Walk Away From

0:0020 million dollar project lands in your lap. You want the revenue, you want the backlog, but you also know that there are three or four red flags. Maybe it's a client you don't completely trust. Perhaps it's a type of project you haven't made money on before. Or it's in a location where you don't have the relationships, you don't know the subs or the people that you need to execute it. But it's 20 million dollars. So you start talking yourself into it. And then there's the superintendent you're planning to put on the job. Technically, he's excellent. He knows this type of work. He's got the experience.

0:40You know he can build the project. But increasingly, his behavior is going against the values you've said are non-negotiable in your company. Your people see it, and they're getting frustrated. it. They're skeptical that you're going to do anything about it. And somewhere in the back of your mind, you're hoping this new project might turn him around, give him a fresh start, put him on a job that plays to his strengths, and maybe he'll get back on track. But in your gut, you already know there's a problem. And now these two decisions are connected. If you turn down the project, you lose$20 million in potential backlog.

1:25If you let the superintendent go, you lose the technical expert you were counting on to run the project. So what do you do? Do you take the$20 million project and do you keep the superintendent? We're going to answer both of these questions today on Construction Genius.

1:47Eric Anderton: 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.

2:16Building a successful construction company comes down to three things. Number one, do the right work, the right project for the right client in the right location. Number two, have the right people in the right seats in your company doing that work. And number three, have the discipline to actually do number one and two. I've got a friend who's been in construction for about 30 years, kick-ass project manager and estimator. A while back during a booming economy, he got laid off because his company got hammered financially on a project. Think about that. A really good construction professional loses his job because the company made a bad decision about the work it took on.

3:05You can be really good at construction and still get your butt kicked by the wrong job. So let's start with the work. Again, right client, right project, right location. You need to know your niche. And when I talk about your niche, those are the three things I'm focused on. Client, project, location. There are a lot of things you should consider under each category. I've got all of them in the niche analysis spreadsheet that I offer and use with my clients. Today, we're going to focus on three under each. First, let's talk about the right client. Number one, they pay on time. You've paid your people, your subs, and your suppliers, and you shouldn't have to chase money 60 or 90 days later.

3:54You want clients who honor the agreements that you've made and pay on time. Secondly, they have a strong design team and quality design documents, and they get you involved in the design. So don't just evaluate the owner. Look at the architect, the engineers, and the documents you're being asked to build from. Bad documents create RFIs, delays, rework, and arguments, and your team inherits those problems. The design team matters, and the quality of the documents matter, and you having some input on that matters as well. Number three, they're fair and ethical to work with. How do they bid the work?

4:33Are they always shopping your number? Are their contracts reasonable? How do they handle legitimate change orders? When there's a conflict on a Tuesday morning, are they willing to sit down and resolve it? Or do they immediately go to level four and lose their minds? You learn a lot about a client when something goes wrong on a project and money is involved. We all know construction is a relationship business. And when you're developing a relationship with a new client, sometimes the smartest thing you can do is to date them before you marry them. What do I mean by that? Do a smaller job. That's where you learn how they pay, how they handle change orders, how good their documents are, how they communicate, and what happens when something goes wrong.

5:19I'd rather learn those things on a smaller project than take on a massive project and lose my shirt. So that's the client. They pay, they've got a strong design team and good documents, and they're fair and ethical. Now let's talk about the right project. First, we've built this project before. There's a difference between being capable of building something and being really good at building it profitably. Construction has enough risk when you're doing work you know well. When you move into unfamiliar work, you introduce more risk. That doesn't mean you never do something new. It means that you recognize that unfamiliarity as risk and then account for it.

6:01Secondly, we have a good profit history on this type of work. Look at your actual numbers. Don't tell me how much you like this type of work. Don't tell me how much revenue it brings in. Look at the jobs you've actually completed. If you've done 10 of those jobs and lost money on eight, what makes you think that the next job of the same type is going to be different? Your history gives you information. Pay attention to that. And notice, we're talking about profit, not revenue. There are plenty of contractors walking around bragging about their backlog, putting their banners on projects all over town.

6:42But they'd be much happier if half that backlog disappeared because they never make any money on it. You're in business not to collect projects. You're in business to execute projects profitably. And then number three, we have the people and the resources to execute the project. You've won the job and that's awesome. Now somebody's got to build it. You've got to have the PM. You've got to have the superintendent. You've got to have the labor, equipment, and supplies. And they have to be available when you actually need them. So you have the PM and the superintendent with the chops to run the job from beginning to end.

7:19Don't win the job and then start trying to figure out how you're going to man it. So that's the project. We've built it before. We've made money building it. And we have the people and the resources to execute it right now. Lastly, let's talk about the right location. Three things here. Firstly, we understand the market. Permitting inspections, utilities, local agencies, competition. If you're moving into a new market, don't underestimate how much the local contractors know that you don't. They know the inspectors. They know the building departments. They know how things work around here. And they know how to get things done.

7:58If you don't have those relationships, who's going to make the introductions for you? Secondly, we have the labor, subcontractors, and suppliers. Putting those things into an estimate is easy. Having quality people available when you actually need them is another matter. You need labor, subs, and suppliers you can depend on to execute the work. And then thirdly, we can support the project operationally. Distance matters, travel, hotels, road time, weather, and management coverage all cost money. A job 100 miles away looks different when your super is leaving home every morning at 4.30, stuck to the windshield, costing you money, getting him frustrated.

8:46Eventually, that can cost you people. And when your competition comes along, they might just be able to swoop in and take away your best superintendent. And weather matters as well. A dirt moving job in Sacramento in October is completely different from the same job at the same time in Seattle. All of that affects productivity and profitability. So that's the location. You've got to understand the market, have the resources, and be able to support the project. And that's where the three for three test comes in. Put it all together here. Right client, right project, right location. Ideally, you want all three.

9:22The vast majority of your work should be three for three. Two for three is okay. One for three should be rare. Maybe it's exactly the type of project you're good at for a client you know and trust, but it's outside your normal geography. That's fine. You've got to take those risks to build your business at times and to keep your clients happy. But at least you know where the risk is you go into the project with your eyes wide open and you price accordingly. If you're one for three, you better have a really good reason for taking that job. And that's why you need a real go-no-go process where you sit down with the key members of your team and think these things through.

10:01Don't just go by your gut. Step back a little bit, bring in your best people, and analyze the project and the opportunity. Doing so forces you to identify the red flags before you sign the contract, staff the project, and commit yourself. And there's a huge difference between asking, can we get it, and asking, should we take it? Now, let's come back to our$20 million project. And let's think about the second thing, the right people in the right seats. Now, you've got the right work. Who's going to build it? Most struggles in an organization come down to the wrong people in the wrong seats or good people sitting in seats that don't fit them.

10:45Before you evaluate the person, you've got to define the seat. So for a moment, don't think about Joe who's been sitting in a seat for 12 years. Forget about Joe. Define what the company actually needs from that position. Let's take a foreman as an example. Why does that position exist? You've got to be able to define that in one sentence. Let me give you an example. Ensure efficient project execution by managing on-site operations, leading the crew, upholding safety standards, and delivering timely, budget-compliant, high-quality results. That's why the position exists. We're defining what you need from the position before we evaluate the person in that position.

11:30Then you want to define the outcomes. Three to eight specific observable outcomes someone must achieve in that position. So for a foreman, that includes timely project completion. The work gets done according to the project schedule. Quality control. The work meets the required standards and rework is minimized. Safety management. The foreman maintains a safe job site and makes sure the crew follows your safety expectations. Effective crew leadership. The crew knows what they're supposed to do, they're productive, and problems get addressed. These are observable outcomes. You can look at the foreman's performance and determine whether he is producing them.

12:17And that's important because subjective expectations create lousy accountability. And then you also want to define the behaviors. This is where your values come in. How do you expect this foreman to behave while producing the outcomes. Perhaps one of your values is accountability. What does that actually look like? Maybe it's telling the truth when something goes wrong instead of hiding it. Maybe it's owning the problem instead of blaming estimating the superintendent or the client. So you have to define what your values mean and your values should be non-negotiable because somebody can hit every one of the outcomes and still be wrong for your company from a values perspective.

13:00They can be technically excellent and still behave in ways that are unacceptable. And that's exactly what we're dealing with, with the superintendent from the beginning of this episode. He knows how to build the work and he may be producing the outcomes you expect, but increasingly his behavior doesn't match your values. And that's why defining the seat requires both. What do we expect them to accomplish? How do we expect this person to behave while accomplishing those objectives? If the behavior doesn't fit, you've got a cultural mismatch. And longevity does not equal fit. And technical ability does not give someone permission to violate your values.

13:45So if you've got someone and you're thinking, I think I might have the wrong person in the wrong seat, you have three options. Either you train them and maybe they're a fit for you. Values-wise, they just need to up-level their skills. So you train them for the areas that they're deficient in and they become the right person for the right seat. Or you move them. Again, they're a good fit values-wise. They're just in the wrong place technically. And so you move them to the right seat for them and they stay on the bus. Or you remove them. You fire them. They're wrong for your company, and there's no seat where they can succeed while living out your values.

14:24Train them, move them, fire them. Doing nothing is not an option. And hoping the next project somehow fixes them? Yeah, right. That's not going to happen. All right. So you've defined right client, right project, right location. You're focused on getting the right people on the bus of your company, in the right seats. And the last thing we got to focus on now is discipline. And really, that's the most important point. You already know most of what we've talked about so far. Nothing I've introduced to you here today you haven't heard before. Your problem isn't knowledge. Your problem is discipline.

15:02The test isn't the obviously terrible project. That's easy. The test is the$20 million project you really want. And the test isn't the barrel-scraping employee who can't hammer a nail and is a total jerk. That's easy too. The test is the technically excellent superintendent who can build the job, but whose behavior is damaging your company. That's where discipline shows up. Everyone is watching you. They're watching which jobs you chase. They're watching which clients you put up with. They're watching who you promote, and they're definitely watching who you refuse to fire. Your values aren't the words on the wall in your office or on your website.

15:49Your actual values are the behaviors that you tolerate. So let's go back to that$20 million project. We started with two questions. Should you take the project? Well, in this case, the answer is no, you should pass. The$20 million don't make the red flags disappear. It just makes them easier to rationalize. If the job doesn't fit your definition of the right work, have the discipline to walk away. And should you keep the superintendent? Assuming you've clearly communicated the expectations, coached him, given him an opportunity to change, and he's still consistently violating your values, you have to let him go.

16:34Don't fall into the trap and take the wrong project because you have the superintendent. And don't keep the wrong superintendent because you want to take the project. These two bad decisions start reinforcing each other. And you begin to convince yourself you need him because of the project. Then you convince yourself you need the project because you've got him. That's how you end up doing work you shouldn't be doing with people who shouldn't be doing it. Okay, so that's the whole thing there, right? Right work, right people, and discipline. Have the discipline to say no to the wrong work. Have the discipline to let go the wrong people.

17:14And have the discipline to stop making exceptions when you already know the answer. I've only given you three criteria today under right client, right project, and right location. There's way more criteria. And if you want the niche analysis spreadsheet that I share with my clients, just shoot me an email, put niche analysis in the subject line, and my email is eric at constructiongenius.com. I'll send you a copy so you can go through the complete analysis with your team. And the next time that$20 million project lands in your lap, ask two questions. Should we take it? And do we have the right people to build it?

17:53Thanks for listening today. I hope you found this episode useful. My encouragement is this. Share it with every single person in your organization, because this particular episode will help you build the construction company of your dreams. And please give the show a rating and a review wherever you get your podcasts and share this episode with other construction professionals that would benefit from listening to what we talked about today. Appreciate you listening. I'll catch you on the next episode.

18:23Eric Anderton: 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. I've been working with construction leaders since 2004, teaching them how to run extremely effective problem-solving meetings that gets their people collaborating, taps into their creativity, and to get yourself a free copy of the Kick-Ass Meeting Report, go to www.ericanderton.com slash kickassmeetings.

19:05Eric Anderton: Grab yourself that free report, read it, use it in your business. You'll find it extremely useful. And thanks again for listening.