Establishing a culture of financial acumen for field leaders

By Gregg Schoppman, FMI Corp.

Even today, there is still a reluctance to share information with the field.  The information in question is the budget. For a litany of reasons, “the office” is fearful of the superintendent of foremen possessing job cost information. Additionally, there is a contingent of field leaders that are equally reluctant to have this information. Ask some field leaders about their general conditions or their labor budget and you might hear, “You’ll have to ask the office because that’s not my job. I’m just building the project.” That would be like asking a blue-chip quarterback if his team is winning, only to hear, “Hey, I just throw the ball, so I have no idea if we are winning or losing.” Organizations must first confront the first challenge of creating a scoreboard that is transparent, believable and most importantly realistic.

Establishing the Currency

One of the most interesting aspects of construction budget creation and controls is the currency. Up to this point, many readers have assumed that the information being shared with the field is all about dollars and cents. Certainly a team that is building multi-million dollar structures with millions of dollars worth of equipment and materials can/should be trusted with seeing the budget. However, consider the following scenario – A field leader is told they have $125,000 to complete a particular trade package versus that same field leader being told they have 1,500 man-hours to complete that same trade package. The currency for the field is not about euros or dollars or pesos, but rather the actual denomination that those leaders use on a daily basis.

Financial management is multi-pronged. For instance, it is important to think about the graphic below:

The dollars on a project are inextricably linked. However, for a field leader, they are largely concerned with the top line of the graphic. However, from an estimating and project management perspective, there may be an “over simplification” to create budgets that manage costs, schedule of values, and billings simultaneously. If this can be done, outstanding. However, there is often a push to crowbar everything into a one size fits all bucket. For instance, consider a highway project. In many cases there could easily be hundreds or thousands of pay items. In many cases, those same pay items might be labor codes that have dollars or hours attached to them. The field now has a menu to choose from that should correlate to a job feedback report that they should see. Without proper forethought and strategic thinking, there is little hope that the field will recognize the importance of seeing how each element intersects with the other. Budgets have to be created that speak to the field and in their currency of choice – hours.

Addressing the “Why”

Let’s go back a moment. Why do firms NOT share budget and job cost information with the field? Below is a brief list:

•  The “Games” – Money is shuffled from job code to job code so even if the field did see a job cost update, it might lack integrity due to the games being played
•  Fear of it falling into the wrong hands – What if the budget/job cost information is left in the job trailer and someone sees it?
• Fear of a team slowing down – What if the team sees they are doing well and they slow down because they might work themselves out of a job
• Stacks of money – If the field knew how much money we make, they would want more money

These are definitely some of the reasons why, but consider this – would a sports team shut a scoreboard off so the team playing the game couldn’t see the clock or performance statistics?  It certainly doesn’t seem realistic, so why do construction organizations think keeping the team most connected to the work in the dark is a viable idea? The arguments against these theories are below:

• The “Games” – Integrity is not just a corner office trait. Project managers that are shuffling money might have larger issues and there is certainly a pervasive lack of distrust created when this occurs
• Fear of falling into the wrong hands – With most of the information being electronic, this is a bit farfetched. Secondly, have you seen your cost reports? Some of your own people can’t read them so who is to think a competitor, owner or trade contractor could decipher them?
• Fear of a team slowing down – It is only natural to want to engage in “job prevention mode.” However, the organization has an obligation to drive strong internal communication so this doesn’t occur by sharing what is on the horizon.
• Stacks of money – A little education goes a long way. The construction industry is largely a 3-4% net profit margin business (translates – low margin, high risk). Teach your teams this nugget so there is not a misconception about bloated profits.

Focusing on the Behavior

Assuming the company has the right tools and structure, reinforcing the behaviors becomes a great deal easier. If there are no guardrails, it is no wonder that field leaders will assume the mantra, “That’s not my job.” In reality, there is no job more important to the field leader than budget management. Who else will drive daily productivity and cost management, if not that field leader? Organizations that have the infrastructure have a greater ability to drive individual accountability. Furthermore, they more than likely spend the time educating all team members – office and field – on financial acumen. In the end, being better builders means being well rounded and exceptional at putting money to the bottom line. For if you aren’t lighting up the scoreboard, are you really a great builder in the first place?

About the Author

As a principal with FMI, Gregg specializes in the areas of productivity and project management. He also leads FMI’s project management consulting practice. He has completed complex and sophisticated construction projects in several different niches and geographic markets. He has also worked as a construction manager and managed direct labor. FMI is a unique and fast-growing firm of professionals passionate about creating a better future for engineering and construction, infrastructure and the built environment throughout North America and around the world. For more information on FMI, please visit www.fminet.com or contact Schoppman by email at gschoppman@fminet.com.