Profiles in Success

Success is boring. There is no need to run for the exits when someone cries, “Success!” It doesn’t sell newspapers. Then again, who wants to hire a contractor or anyone else who doesn’t know how to succeed, who rarely gets the work done on time or who loses money on every job? Success should be celebrated more, talked about, touted as a crowning achievement in one’s career or the life of a company. It shouldn’t be a secret. And it shouldn’t be boring. But it can sometimes cause fear, because it always hints at its loss, at success that can turn to failure.

Success must become part of a company’s culture; and if anyone thinks it is boring, consider the alternative. Contractors who succeed must overcome the fear of failure and conquer risk. Now, the question is, how do you define success?

FMI set forth to research the subject, with a view toward codifying ingredients of success in the construction environment. When contractors fail, it is usually unambiguous; they run out of money and go out of business. Is success then a mirror image of failure or does it have different metrics?

FMI studied why contractors fail. [“Why Contractors Fail: A Causal Analysis of Large Contractor Bankruptcies” FMI Quarterly, Issue 2, 2007]. In that study, we discovered that failure — failure to the point of going out of business — was the result of several things going wrong simultaneously, leading to a chain reaction from which the organization could not recover. Failure was the end of the story for the organization. Some companies that failed had long records of success until things started going irretrievably wrong. While we found many successful contractors experience setbacks at one time or another in their history, they characteristically turn setbacks into learning experiences for building future success.

To gain a deeper understanding of success, we studied how contractors define success for their own firms. We conducted interviews with contractors and FMI senior consultants to identify a list of common attributes used to define contractor success. Those attributes formed the core list of attributes used in our subsequent broad survey. Responses to the online survey were made by 356 CEOs and top executives of construction firms from around the country and included a wide range of contractor types and sizes as measured by annual contract revenue. FMI’s aim for this research is to bring some organization and clarity to the variety of ways contractors define success.

If we had hoped to find one dominant definition of success, we would have been disappointed with our results. However, from our long experience working with contractors, we expected that contractors would offer varied definitions of success. Our expectations were met. Yet there were more similarities than differences when we began comparing and analyzing the responses.

We used both open-ended questions and forced-choice preferences chosen from our attributes of success. From those responses, we grouped similar replies into five Contractor Success Profiles. Because of the resulting attributes, we named these profiles the Humanist, Freewheeler, Bottom-Liner, Generalist and the Tactician. All of the 356 responses fell into one of the five Contractor Success Profiles because they shared common factors in their definitions of success. The five Contractor Success Profiles are not entirely separate and distinct from each other. To varying extents, the profiles overlap somewhat with each of the other profiles. However, each profile emphasizes different attributes, such that they present identifiably different perspectives of success in the construction industry.

On Successful Contractors

There is a great deal of literature aimed toward leading readers to success. Many of these publications are of the quick-fix variety; however, a number of widely read books focus on success in business or how to build “high performing,” successful companies. From our interviews, it became apparent that many construction executives were familiar with certain literature and, at least selectively, applied the teachings of these works for guiding the success of their companies. However, few of the business models studied in the mainstream “success” literature specifically cover contractors working in the construction industry.

We focused our study strictly on contractors to discover if there are unique aspects and approaches for achieving success that define this industry, even though there are clearly models applicable to many industries. We avoided the temptation to create a model of success that would predetermine what the successful contractor looked like. We asked construction executives to tell us not only how they define success for their companies, but also how successful they think they are at achieving success. How we asked the questions changed the levels of success reported by the participants.

Rating their companies on the idea of being an “overall success,” only about 19 percent of respondents felt they were 100 percent successful. However, in a question offering only a yes/no response, 95 percent rated their companies as an “overall success.” In other words, almost all contractors studied considered their companies successful; yet few said they were 100 percent successful. This leads us to our first conclusion for contractor success.

First General Conclusion

Contractors are reluctant to declare overall success for their companies. The reluctance to declare success for their companies was detected in interviews as well as from responses to the online survey. Thinking of success as the pinnacle of a life’s work or the goal of a business implies that, once achieved, there is nowhere to go but down or out of the business. In this context, the achievement of success would be the end of the story or nearly so. In a few responses, we even detected an element of fear when viewing success as an ultimate achievement. As one contractor noted in our interviews:

“What is scary is that, once you have accomplished a level of success, you get this idea that you could lose that success. There is more at stake and more people who count on you to do well. Oftentimes you feel this pressure. It is harder, but a lot of fun.”

— President, General Contractor, $230 Million

A more positive and common aspect of our first conclusion is that overall success is not a specific event or terminal destination, but rather something that is achieved over a long period. This is the idea of success as a journey, with the road toward success including continual improvement. On that basis, a company is never 100 percent successful, but rather views itself as being on a positive track toward success. For instance, one response reflects what we heard from many contractors in our study:

“Yes, we feel like we are a success, but we do not feel like we are perfect nor are we done trying to be even better. We are constantly working on how we can improve.”

— President/CEO, General Contractor, $65 Million

Second General Conclusion

Profitability is not the leading factor in defining success for contractors. This may be a shocking conclusion for some of our readers. Participants told us achieving above-average or higher profitability ranked 10th from a list of 15 attributes of success with only 49 percent of respondents selecting “achieving above-average [or higher] profitability as an ultimate achievement” for defining success.

How could profitability not be the cornerstone of any success definition? After all, profitability is how we keep score, isn’t it? For successful contractors, profitability shows up on the scorecard, but it is not the sole measure of success, nor for many is it a highly weighted attribute of success. Successful contractors understand they must do many things in order to achieve sustainable and respectable levels of profitability. We noted many comments similar to the following:

“The company must be profitable, but more importantly, the company must be a place where the employees feel a sense of family and belonging, and they have a personal stake in the success of the company. The employees should feel like their contribution is the reason for the company’s success.”

— President, General Contractor, $200 Million

“The company must meet the following: satisfied customers; repeat business; and excellent, happy and productive employees. The company must have the highest integrity, a safety culture and we must give back to the communities where we work. And we must be profitable.”

— CEO/Chairman, General Contractor, >$1 Billion

Third General Conclusion

Values play an important role in defining and achieving success for contractors.

Looking strictly at profitability can be misleading when judging the level of success for a contractor. Values are based on much more than the value of money. The values that build a strong organizational culture serve not only as the foundation for building a strong, profitable company; these values are also the reward as well as the measure of success.

Ideals like a “sense of family,” “quality employees” and “integrity” frequently trump profitability. Success defined by values and a values-based culture crosses generations, often stemming from the values of the company’s founder(s). The value-based definition of success embraces many important aspects of community and business, for example:

“Success is the continuous re-creation of the business as a strong, prosperous and diversified organization through which lives the values of our founders.” — CEO, Civil Contractor, $85 Million

“It is important to me to develop a business with a culture that embraces our core values, which include safety, integrity, professionalism and responsiveness. We get a lot of satisfaction from seeing our employees develop and being part of a community and contributing to its success.” — CEO, Electrical Contractor, $30 Million.

About FMI

FMI is one of the largest providers of management consulting and investment banking to the worldwide construction industry. Reprinted with permission from FMI Corp. For more information about the rest of this success survey, visit www.fminet.com, or call Kathryn Robinson at (919) 785-9211.