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Is Your Construction Company Paying Too Much for Insurance?

WHAT YOU NEED TO KNOW ABOUT PAYING TOO MUCH FOR INSURANCE

One of the things every smart company must have is insurance, it’s simply the cost of doing business. Why do we need it? It’s simply to protect you by reducing the risk to a company if something goes wrong. Most contractors have general liability, worker’ compensation and some commercial auto insurance. When you purchase an insurance policy, the underwriter of the policy will have a range of questions that helps the underwriter understand how risky your organization will be to insure. The underwriter is the company that will guarantee payment in case of some damage or loss, they take on the financial risk for liability to your company.

WHY IS THE UNDERWRITER IMPORTANT?

The underwriter and the insurance broker (if you are using one) determine the cost of your insurance policy. You guessed it, the more risky your organization is, the more your policy will cost.

WHY AM I PAYING TOO MUCH?

There are several reasons you may be paying too much, but two big areas are safety and type of work.

SAFETY CHECKS, NOT JUST FOR OSHA

Having a great safety record pays dividends. It’s not just the safety meeting logs that OSHA wants to see, it’s the daily safety check your underwriter may want to see in an audit as well. If you have a daily safety check that your insurance company can audit, it could reduce your insurance costs. Sometimes it’s hard to keep up the required safety meetings, but it’s worth it. You must have safety meetings and safety checks documented. If you use construction software, the software should provide a place to document safety meetings and daily safety checks. We think its important enough to include in our products.

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THE TYPE OF WORK, IT’S IMPORTANT

The other big area for insurance, especially with subcontractors, is the type of work you do. Was that job commercial or residential? The difference could be thousands of $$$ dollars a year in the cost of your annual insurance policy. It costs more for residential construction contractors insurance than it does for commercial. Why? Because it’s riskier to the underwriter. If you can’t document the split in business between commercial and residential business you do, then you have to pay the higher residential price. If you use construction software, it should include the ability to generate a report that tells your insurance company the split between residential and commercial projects you do.

WHAT’S ALL THIS MEAN?

Save money on your insurance by keeping a good, well documented safety record. Make sure your paperwork clearly defines which projects are residential or commercial. Documenting all of this takes time, many have streamlined the process by using software to keep everything together. When your organization grows, it’s worth examining products like ours that can help you grow for less by enabling fewer people to do more.

Please give our software a try, we think TrenLot can help you save money, run your organization more smoothly and be more profitable.

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Capacity Planning in Construction: How to balance your project pipeline and people

Capacity planning is at the core of good project management, having the right resources scheduled at the right time can make the difference between a profitable project and a loss. Keeping everything together is challenging, but it’s required to keep your projects and company profitable.

By its definition capacity planning is “the process of determining the production capacity needed by an organization to meet changing demands for its products”. For construction, this means the existing process you have to determine what resources you need to complete all projects. Capacity, generally speaking, means labor and materials.

If you are a sub-contractor, this means you need to forecast the labor you need to complete when scheduling a project. Managing crews and be challenging with understanding accurate labor costs, keeping accurate timecards, and assembling & scheduling the right crew with the right certifications/credentials. Most of the time materials have a reasonable lead time to delivery. That said, a poorly trained or misinformed framer can make a costly mistake and short cut hundreds of feet of boards on a project, increasing the materials cost. Things like this happen and can put project profitability at risk. Not tracking these kinds of things make it even more impossible determine if a project if profitable or not. Tracking performance is a key part of capacity planning.

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If you are a general contractor or are a sub-contractor managing other sub-contractors, this means you need to work with sub-contractor schedules and material delivery forecasts. It goes without saying (which generally means it needs to be said), the more effective and timely communication you have with your sub-contractors and vendors, the more likely you are to develop a realistic project completion date.

At the beginning of a project, we can schedule resources—things like crew/team time and materials or other contractors. With business booming, work for many contractors’ ebbs and flows with their bid conversion ratio. The age-old contractor challenge: when you don’t have enough work, you drop your prices to make sure you have work in the future… when you have too much work, you increase the price you bids because in the event you win the job you will need to hire more people to execute the project.

Why is capacity planning important in construction? The obvious reason is to reduce the risk to your company by developing a strategy that handles the increase or decrease in your project pipeline. Here are a few things to consider in your capacity planning strategy…

What’s forecasted in your future? Filling the project pipeline is the front office activity of sales and marketing. Forecasting sales for your business can be one of the most difficult things to do. Some contractors view their forecast as simple as winning one out of ten bids, so the more bids you participate in, the more work you will have. Forecasting you project pipeline can be a much more detailed process. Suffice it to say that your sales team matters and needs to be included in capacity planning. If your sales people aren’t used to forecasting the deals they are likely to close, train them up.

Your people matter in capacity planning. You will likely know how much your people can handle. You should be tracking how your people perform with a good understanding of their capacity. Some people can indeed do more than others, but with the right tools and training everyone can do more. Managers often have a good feel for how much labor they need or sub-contractor availability. Managers need to be part of the capacity planning process, they can often identify likely issues with vendors, material delivery. Also, they will have valuable input on other variables, such as an opinion on the weather and how it may impact a project schedule.

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I’m oversimplifying this, but there are basically two approaches to capacity planning, being proactive and being reactionary (technically there are 4, so I’m oversimplifying here). It may sound strange but both are valid strategies.

Getting ahead of a short-term labor shortage can save you in terms of customer relationships, company reputation, and the ability to complete a project. On the opposite side, investing in recruitment and a vendor diversification plan that you ‘may’ not need costs money. Adding people, vendors, and new sub-contractors as you need them is a conservative strategy that ensures you are paying to acquire only the resources you need. This ‘Lag Strategy’ (adding resources only after existing capacity is peaked out) can be detrimental to a project’s schedule costing more to complete the project the longer it takes. Finding the right balanced strategy is what you will need to determine in what’s right for your organization.

SO, HOW DO I DO THIS CAPACITY PLANNING THING?

Ideally you would use tools that are collecting the information you need, such as bid tracking conversion rates, employee management, project management, budget management, communications, document management and others. For the construction industry, some of the construction management software like ours or others help with capacity planning. There are software developers that just focus on human resources capacity planning (though they generally have a focus in IT projects). You don’t need software to determine capacity planning, but it makes it a lot easier. There are lots of resources, tools, and books that focus only on capacity planning. Here is a simplified approach:

Start with your forecast. Talk with your sales team to figure out a realistic sales forecast. This means they need to look at each deal and determine how likely (generally as a percentage) your company is going to win each bid. Besides, and arguably as import you need to know when the award will be made. You need to know what bids you’re most likely to win and when those projects deadlines happen.

Once you have a realistic (or as realistic as you can make it) forecast, you can overlay forecasted projects with existing resources. Managed growth is good, unmanaged growth is risky. Analyze the current snapshot of your organization and compare it to 30, 60 and 90 days out. Depending you’re your business, you may need to look 6 months to a year out for some resources, such as heavy equipment purchases and other resources that may be required for growth.

Identify the things you need and make a plan that include how and when to acquire it. For people, there are two basic ways to get the expertise you need, acquire them (hire, generally expensive) and train them (takes longer but you tailor their training to your company needs). If you need to hire a key project manager, it could take up to 90 days to find the right one. If you need sub-contractors in 30 days and your existing subs are too busy, use your sub-contractor evaluation and approval program to find and approve new sub-contractor resources. If you don’t have a vendor evaluation process, you should create one.

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You need to task someone with the responsibility of always keeping an eye on capacity management and provide regular reports. Armed with knowing what you have and what you need, it’s easier to decide on when to take action to add the resources you need to handle growth.

Once you have a good understanding of what you need to add the resources you need to complete forecasted projects, you need to decide that suites your company’s situation and needs.

THE BASIC STEPS:
  1. Task someone with the responsibility of capacity planning.
  2. Generate sales forecasts on a monthly and quarterly basis.
  3. Implement a system for measuring the performance of existing resources specifically to understand existing capacity.
  4. Compare forecasted project resource needs to your company’s capacity.
  5. Identify under and over capacity in your organization with forecasted capacity needs.
  6. Create a plan to acquire or adjust the necessary resources your organization needs.
  7. Decide on when to implement resource acquisition.

Does Your Company Have a Culture of Safety That Reduces Costs and Increases Profit?

Every manager is responsible for setting and enforcing business culture expectations. At the top of every successful company’s priority list is safety. Setting a company culture starts at the top and starts with clear policies and procedures that are supported and enforced down the line. Having the right tools to keep clear communications between the office and field are a fundamental requirement for promoting safety. Even with State and OSHA safety requirements, it seems inevitable that accidents happen that could have been avoided. Construction deaths from injury are up from 937 in 2015 to 991 in 2016 according to the Bureau of Labor Statistics.

The slight uptick in deaths resulting from injury in construction, it’s fairly normalized with the increased number of total hours worked multiplied by average hours (more hours were worked by more people in construction in 2016). That said, it’s comparable to the 951 people who died from “Contact with powered lawnmower” in 2016.

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SAFETY IS REQUIRED!

OSHA and State(s) require safety plans and regular safety meetings, generally 1 meeting every 10 working days or once a month depending on industry. These are great opportunities to help set your company’s culture with an emphasis on safety. One way to support your focus on safety is to create a simple reward plan for following safety policies that result in zero injuries. Part of promoting safety is to keep everything together and organized.

THE REWARD PROGRAM

A safety incentive program should include everybody, from the back office to the field. The program reward can be something everyone gets, such as a lottery scratcher ticket. Every month, when there are no injuries, everyone on the team gets the reward. It may seem like a simple reward, but companies that have implemented a program like this have seen solid results. Some employees get upset when they don’t get their incentive reward—they are vocal with others to ensure the safe record. Obtaining this buy-in from your people will help automate accountability and profitability. Teams that have a vested interest toward a common goal will often self-police to ensure everyone is on the same page.

If you want to keep your team more engaged with safety, consider a slightly more elaborate and fun way to keep people involved. A friend of mine uses Safety Bingo to promote safety. Every month, each crew member is given a safety bingo card (you can get a free bingo card template here) At the end of each work week all crew members are given the bingo number or word. At the end of the month, the person that gets safety bingo gets a $100 tool. You would be surprised at how proud of a new quality tool some people can be. It’s a small price to pay to promote a safe work environment. The alternative of increased insurance rates and potential business loss is likely more expensive in more ways than one. One safety issue can send a project into a dizzying financial tailspin and damage your company reputation.

BE CREATIVE

There are plenty of ways to be creative and effective with your safety incentive program. Create a program with rewards that suite your company culture. Rewards don’t always have to be monetary, they could include special recognition for safety contributions.

The bottom line is that when everyone in the company in mindful of safety, everyone benefits. Safety mindfulness as part of a healthy business culture influences all aspects of operations, including the bottom line.

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How to Make Your Office and Field Crews More Productive

Over the last 20 years, the construction industry sector has only managed a 1% increase in productivity (McKinsey). You are probably losing money right now on one or more projects. We can do better with the right tools and smarter scheduling.

Most of us use the philosophy ‘use the right tool for the job’ as often as we can. It means we want to be efficient at getting the job done right the first time. Even with this focus, 26% of construction workers say they are frustrated by the lack of tools they need to do their jobs better (TINYpulse). When it comes to managing crews and teams, this simple philosophy can be modified to ‘use the right person for the job’ equipped with the right tools of course. According to KPMG, over 50% of construction professionals report one or more underperforming project in a given year. Understanding the resources your people represent helps you focus on ways to reduce possible project losses by proactively managing people and equipment resources.

Like a well-organized tool chest, every tool has its place and is easily accessible. To get that well-organized crew tailored for each job, you need to track experience and expertise levels, certifications, and credentials that have to be continually renewed.

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According the National Association of Home Builders, 56% of builders report they are suffering due to the effects of the skilled labor shortage. With a

tight labor market, if you’re not jotting down the experience and expertise of your crews, now is the time to start. This doesn’t just apply to field workers, it’s important across all business. With so many new labor entrants needing to be trained and brought up to speed, communications between the jobsite and the office are more important than ever. Real time communications on the job site is challenging enough with the right people. Having the wrong people complicates work quality and can draw out the time it takes to complete a project.

There are many reasons to track experience, expertise, and certifications, including:

  • Job site requirements, such as current CPR certified
  • Transportation requirements, such as current DOT card
  • The equipment an employee has been trained or certified on
  • Job side badging (and background) for specific customers
  • Expertise level with construction processes and/or equipment
  • Renewal dates for key certifications, such as Journeyman card or contractor licenses
  • Continuing education requirements to renew key certifications
  • Certifications by state and renewal requirements
  • Optimize crew assignments

Many customers require training and badge certification to work on the job site. Companies like Apple, NVEnergy, Google, and others all have classes and background checks your workers have to go through to be allowed on their construction sites. It’s not uncommon to mistakenly send out a crew to NVEnergy to work on a job only to have them rushed off to a class for four hours before they can work. Unbadged crews generally result in being turned away at the construction site, leaving you scrambling to find the people that have the badged credentials. More time and money wasted because the list of credentials was either not up to date or not looked at.

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SMART SCHEDULING

In nearly every environment today, someone on your team needs to have some kind of certification on the job. While tempting, a list like this is not something you can just risk keeping in your head. Required job site job documents could be something as simple as a current CPR training certification or more extensive DOT card. If you’re like most of us, you have a list of people and their certifications in an Excel spreadsheet somewhere that someone is supposed to maintain. The problem is that list often gets lost in the daily work grind and often not kept up to date. Excel is a good tool, but it’s a like an island you have to travel to to visit. Out of sight, out of mind is generally a bad policy in this instance.

KEEP YOUR COMPANY RESOURCES CURRENT

There are some tools you can use online to help remember key events, such as renewing a DOT card or attending continuing education classes to keep your certification up to date. The most accessible tools are part of an email subscription you already have. Google email (or G-Suite), Office365, and iCloud all have reminder features that you can setup to remind you when an team or crew member needs to renew one or more certificates. Much like the an excel spread sheet, you must manually update these reminders and remember to enter in new ones.

MANAGE YOUR RESOURCES

The right tool for the job in this case is an integrated system that tracks employee certifications and allows you to search and find the right experience level, certifications, and credentials and assign them to a crew or team. These ‘integrated’ tools allow you to assign people to jobs/workorders based on the job requirements. This way you won’t accidentally create a crew without the requirements. Modern construction software should include a way to track certifications, renewals, expertise level, and training on equipment and processes.

The expertise and credentials of your employees are one of the most significant advantages your have in competing for and executing successful projects. With a 21.4% industry wide turnover rate, its hard to find and keep skilled labor (Bureau of Labor Statistics). Keeping track of your people’s experience can help you focus on who you want to keep.

Sending the wrong people on a job can impact project profitability. Don’t get caught with the wrong people on the right job, find and use tools that work best for you.

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How Technology Can Reduce Complexity and Increase Profit on Construction Projects

It is said a picture is worth a thousand words, it’s truer in construction. What’s the first image that comes to mind when you hear the words ‘construction site’? The mental picture summoned up generally looks something like an excavated site with people working on it wearing helmets and goggles. This mental image reflects the external characteristics of the contractors working on the site, the business and operation engines behind the businesses are much more obscured. Behind this image are project managers and superintendents that manage the workflow, many with spreadsheets and good old-fashioned notepads. These front line managers often don’t know if a project is on track to be profitable until the accountant runs the numbers at the end of the month.

Every construction project has its own set of unique challenges because of complex operations ranging over the project life cycle. It’s rarely possible to keep track of everything that happens on a work site. Many factors arise that serve to distort communications and operations, such as weather, site location, cell phone reception, Internet access, missed emails, scheduling conflicts, and many more. It’s not if something goes wrong, it’s when. There is no way to eliminate problems on projects, it’s impossible. What you can and should do is to work towards implementing processes and policies that reduce the risk as much as possible. One of the way we can keep projects safe and profitable is by using technology to automate some, most or all areas of operation. Two key areas are bidding and planning. Both areas have lots of options in the market, you are bound to find one or two that work for you.

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STREAMLINED BIDDING

Bidding is the first major cog in the business engine, without successful bidding a company will go nowhere. Bidding ranges from simple to complex depending on the project and if you are a General or Sub Contractor. Whether you are bidding to residential consumers or the Federal Government, you need a successful strategy that includes the ability to quickly create bids in order to be responsive to your customer.

There are many Sub Contractor specific bidding tools that enable you to use pre-defined values for common tasks, such as the time it takes to install an electrical panel and run 1,000 ft of wire on 20 drops. These tools make it fast and easy to create bids. Using bidding software can reduce the time it takes to create bids so you can get more done in the day.

It’s not enough to crank out bids fast, you need to track bids whether successful or not and compare them to your job costs. Tracking your contract budgets with bids over time gives you the data to make better decisions on bids. For example, do you have the resource capacity to execute the project, how much do you need to sharpen your pencil to get the business. Tracking project costs to the contract budget tells you which ones had the most profit, change order costs, how much labor it took, what loss rates were on materials used, and many other metrics you need to be more successful.

Tools like Excel are great, they work well and are easy to use, and with a little effort you can customize a spreadsheet to meet your needs. The challenge with spreadsheet driven bids is that they are not connected to anything else that automatically tracks the difference between the bids and the costs. The most effective way to streamline bidding is to use software that fits your needs. Use some software that works for you. You don’t have to use ours, but I hope you give it a try.

PLANNING

Planning your project is critical, but if you are like 99.999% of the rest of us that work on projects, you know that nothing ever goes according to plan. Plan, then plan for the plan to change. Keep it simple, flexible, and adaptable. There are a range of tools on the market to help with planning. Nearly every contractor I talk to about how they use software for planning tell me the same thing… they use it to set up the main project plan, then never touch it again after they print out a hard copy to pin on the construction trailer wall. Tools like Microsoft Project work well and are widely used today. Most of the Gantt Chart based project management tools in the market are not connected to anything and cannot dynamically update as things change. Updating projects in planning software requires manual entry on an ongoing basis with any project, which means it generally doesn’t get done.

Dynamic project management takes project planning software to the next level, but it requires technical connections among project partners and software companies. In short dynamic project management factors in the fact that projects change quickly and we need to adapt quickly to manage them. You need an adaptive process coupled with predictive tools, such as automated critical path analysis.

Using the right software will reduce complexity and increase profit margins in your organization. If you don’t know if your projects are on track to be profitable or not, you need to take a close look at software tools that work with your processes that automatically track project costs and budgets. Don’t wait until the end of the month to find out project costs are out of control.

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5 Effective Ways of Managing and Motivating Your Construction Workers

Motivation is the key factor for generating higher production levels. A motivated workforce influences operational efficiency, especially in production-intensive industries like construction. The construction industry is fundamentally labor dependent, it’s essential to keep your team well-managed as well as maintain high levels of employee motivation.

Listed below are 5 of the most effective ways a construction company can motivate and manage its workers.

RECOGNIZE

The most common form of employee motivation is appreciation and recognition. It’s a natural human need to be recognized and feel valued. Appreciation doesn’t always have to be in the form of monetary rewards or raises. It can be something as simple as saying ‘Good Job’ or ‘Well done’ whenever a worker has produced quality work or put in some extra effort.

Such acknowledgment accounts for intrinsic motivation which leaves a greater impact on the worker than other motivational factors. Another way of recognizing hardworking staff members is by naming employee of the month or employee of the day. This not only encourages the worker to keep doing better but also creates a healthy workplace competition.

REWARD

Even though monetary rewards aren’t the only form of praising an employee, they are effective ones. Bonuses and raises act as a strong motivational tool, especially if the worker has worked extra hours or done additional jobs. Apart from bonuses, rewards can also be in the form of gifts, vouchers or a company-organized day out. In general, it can be anything that shows the workers that their employers notice their hard work and their efforts never go unnoticed.

EMPATHIZE

Simply recognizing and rewarding employees is never enough to ensure a fully motivated workforce. Employees expect their employers to be concerned of their well-being and value them as an important part of the organization. This can be done by being respectful towards your workers and showing them your concern in significant personal events like birth of a child or demise of a family member.

SPECIFY GOALS

It is impractical to expect your staff to know exactly what their tasks and goals are when you hire them. Everyone needs to know what exactly is expected of them. Employers must set smart and achievable goals for the workers and clearly brief them about them. The best approach is to discuss these goals with the employee beforehand. This would promote ownership in the worker towards an assigned task. However, if goals aren’t clearly defined, it results in poor performance and hence substandard production.

TAKE CARE OF THE NEW GUY

Let’s face it, the numbers on new people entering the construction profession aren’t as good as anyone would like. There is a labor shortage, we need good skilled people. It can be rough starting a new profession, how a younger person experiences their first weeks on the job will influence their decision to make construction a career or not. Don’t tolerate any hazing new people, instead give them the support they need to learn how to thrive in construction.