Speaker 1 (00:00)
Good morning and welcome to Management Under Construction. I'm Brad Wyant
Speaker 2 (00:04)
And I'm Dee Davis. And today we are going to talk about supporting your employees, your people, your business through times of growth and times of reduction. No matter what industry you are in, your business is going to go through times of rapid growth and times of unfortunately rapid reduction. It's due to all kinds of reasons, the economy, change in technology.
It could just be a natural business cycle. For instance, construction and real estate very closely follow each other cycles. And it's roughly about a 10 year growth and reduction cycle that those businesses go through. Sometimes it's a little longer, sometimes it's a little shorter, but it's roughly about a 10 year cycle. And when you reduce, you may reduce back down to pre-growth levels or maybe not.
Maybe you grow and you stay bigger, but you still see a slight reduction. It's tough as a business owner to go through growth and reduction cycles. It's tough to manage and it's tough as an employee because there's a lot of stress and anxiety that happens when businesses go through either rapid growth or rapid reduction in business. A few little fun statistics. I did some research on how likely businesses are to fail.
in the first few years, we hear people talk about this all the time. So I just thought it would be really fun to do a little bit of research into what the actual stats are. The first five years, I think everybody knows that that's the most critical for any business. If you can survive the first five years, you're more likely to continue to survive. The actual stats are failure rates for businesses are about 20 % in the first year. And these are averages from the Bureau of Labor Statistics across all industries. 50 %
⁓ will fail in the first five years and 65 % will fail, by year 10. So if you can make it to year five, you gotta, you got a shot at surviving. These averages vary considerably based on industry. Retail and food service might be a little bit different than consulting or construction. I found this really interesting. The most likely business to survive.
The category is agriculture, forestry, fishing and hunting.
Speaker 1 (02:26)
which I gotta imagine the majority of that is agriculture. I can't imagine that there are more fishing and hunting businesses that are starting up than farmers. It's amazing that they have this high survival rate, 50 % at 10 years. That's pretty impressive.
Speaker 2 (02:43)
It is pretty impressive. And I was really kind of shocked by that. You really want to start a business, small agriculture, maybe large agriculture has a tendency to struggle over time. was thinking fishing and hunting, type businesses that take people out on adventure. Those kinds, I would imagine that's what they mean. They're maybe more tourist based, but yeah, 50 % survival rate at 10 years, which is, kind of a fun stat.
Construction is the second most likely business to fail in the first year. And I don't know that anybody in construction or who's ever started up a construction business finds that very surprising. It's a high risk, high reward industry, and it requires a ton of capital in the beginning to get off the ground.
Speaker 1 (03:27)
for a fishing guide is a bad trip, a bad Google review. mistake for somebody in construction is a crane falling over, something massive like that. The degree to which things can go wrong, perhaps there's no other industry except maybe nuclear power plants that gets more aggressive than how bad it gets in construction when it goes wrong.
Speaker 2 (03:46)
Yeah, there can be a significant difference. I'm sure something really bad can happen in one of those adventure industries. Somebody gets eaten by a bear. don't know. Another stat that I found really interesting is the commonly stated belief that restaurants are the most likely business to fail is wrong. Restaurants are actually no more likely to fail statistically than any other business. They follow the average curve, which I thought was really
interesting because I've always wondered about that. You hear that all the time. Restaurants are the most likely business to fail. They all fail in the first year. But have you ever seen a restaurant open and close in the first year? I mean, it's pretty rare actually. That's our little episode of Mythbusters for today. The reasons that businesses fail are many. These are self-reported reasons by people who have had to close their businesses. Self-reporting is an extraordinarily unreliable
method of reporting anything, but here it is. 42 % of business owners said that the market did not need their products or services. And I'm guessing that's either you just didn't do your research to begin with, or you had fad type of product that peaked and then immediately died. 29 % said they ran out of cash.
And I find that statement very interesting. No, no one in this whole list said that they got into too much debt for their business. A statement was I ran out of cash. To me, those are two very different statements. I would look at those very differently. Ran out of cash to me means my own money that I saved up and invested in my business versus I went out and took a $2 million bank loan and now I can't make the payments.
Speaker 1 (05:28)
But it's so tautological. If your business has no more cash, yes, it has failed. Why did your business fail? Because it ran out of cash. That's the definition of business failing, that it is not useful.
Speaker 2 (05:39)
23 % said that they did not have the right people running the business. And I'm thinking to myself as the business owner, would that not be you? Some businesses don't do that. Some businesses open and hire other people to run. I don't think I could ever be that kind of business owner. I've thought about it. And honestly, the risk to me is exponentially higher when you're just trusting total strangers to run your business. Lack of 17 % said lack of a business model and 14%.
said poor marketing. I think all of those are to a degree true, but I think there's also a multitude of reasons why any business fails. mean, think about like Rockbuster. Did they have a bad business plan? Of the list of things, what was it? It was technology that knocked them out. Netflix killed them.
Speaker 1 (06:26)
So to take a small diversion, fun story about Blockbuster and Netflix. And any of my business school friends who are listening are like, oh my God, Blockbuster and Netflix again. It's one of the most researched business cases in all business school. But this is the most insightful part of that story, in my opinion. Netflix pitched Blockbuster before Netflix became as successful as they were. They sat in the room and said, look, this is our idea. This is where we think the market for at-home video viewing is going. We think we can get
these things into people's houses this way and we have these other ideas and so on. The blockbuster executives were like, okay, you have a point there. That could be where this is going. Our stores have been pretty profitable. We find that people buy more things when they come to the store like chips and popcorn and things like that, but this could be the future. Tell us about your late fee structure. And Netflix goes, oh yeah, that's the thing. We don't have late fees. And they were like, all right, you can get out of here. You obviously don't understand our business if you don't think that you need late fees.
But that was the pain point that Netflix had observed within the market that they were going to solve for their customers. And that was the great marketing that Netflix executed on that was Blockbuster's failure in marketing. Understand your customer. What are their pain points? Parents who are too busy to take kids to the movie theater, but are just busy enough to get a DVD at Blockbuster on the way home from work, probably are really frustrated by
wanting to buy late fees and don't want to have to pay them. Netflix coming along and solving that problem, Blockbuster was gone because Blockbuster was deeply associated with late fees. That was the big failure there.
Speaker 2 (08:04)
at Blockbuster two different times in my life. Yeah, absolutely. I worked at Blockbuster in Vista, California as a second or a third job while I was going to school. And then later when I lived in Texas, I was staying home with my kids during the day and started working at Blockbuster as an assistant manager at night at the Blockbuster right down the street from my house. I actually really enjoyed working at Blockbuster. It's not like it paid well. was, it's a
you know, high school kid, college kid kind of job. But yes, late fees. my goodness. Did they love those late fees? And yes, of course who doesn't hate paying late fees? Everyone, everyone. Spineth Netflix came out. I signed up for it and I got the DVDs mailed to my house and it was great. They missed out on an opportunity. Obviously. I bet those executives were just sitting back, shaking their head going, man, man, did we miss out on an opportunity?
Speaker 1 (09:00)
some of them still to this day are like, don't understand why we failed. We thought we had a great model. We thought we provided good customer service. And that's the thing, if you don't understand the principles of marketing, you can really get yourself into trouble. So the 17 % you quoted of bad marketing, I think that's, it's probably a lot higher than that.
Speaker 2 (09:17)
the worst way to get data is through self-reporting. It's about the only thing I was able to find because it's very difficult to pin down any one reason why a business is growing or not growing. You could be experiencing growth just because of something political that happened. Maybe there's an incentive out there that's related to your business and all of a sudden your business becomes the latest thing and boom, you go crazy.
That had nothing to do with you. You just happened to be in the right place at the right time. Same thing for retraction or annihilation in Blockbuster's case, newspapers. Well, the internet killed newspapers, we know that, but there was a lot more to it than just the internet. Could newspapers have done something different? Possibly, hard to say. So it's difficult to pin down any one reason. And of course there's always projection. It's a terrible...
feeling to fail at a business and it's always easier to project out and say, I had bad people running my business. Then it is to admit that maybe you didn't have a great plan or listen, whatever kind of business you have, you're going to have periods of growth and retraction all the while you're going to have employees that are relying on you for a paycheck every week. And they want to do some place to come to work every day. It's all this discussion about business growth and retraction is really.
coming down to you as the business owner and your people. And how are you going to manage through periods of growth and periods of retraction so that you don't lose all your great people that you've worked so hard to get. As an employer, you have to step back a little bit and recognize that in a period of extreme growth, that you're not prepared for this. Your business isn't prepared for it. Your people aren't prepared for it. Your systems are not prepared for it.
So imagine, let's say you're a business that does a half a million dollars of business a year, relatively small business, and all of a sudden you can do five million dollars of business this year. How do you scale from a half a million to five million? How do you scale from 50 million to 500 million, or whatever your numbers are? I'm talking about that kind of rapid growth in scaling. Your staff, your reporting systems, your management systems.
None of it's ready for this. Your risk is exponentially growing ⁓ and scaling your business and not being prepared. I have a client that is going through some huge, huge growth right now. They're used to doing maybe five, 10, maybe up to $50 million projects on their campus. Well, all of a sudden they're having explosive growth. They're doing 10X on their campus, anything they've ever done before.
That is a frightening prospect. It's not one big project either. It's multiple projects. And every single one of those projects is complicated and bigger than they've ever done before. Even if you have great people and you've got great teams and great systems, what works on a $5 million project does not work on a $500 million project. It just doesn't. It doesn't even work on a $50 million project.
As an employer, you have to step back and realize that your teams are not ready for this. What did this client do that is a little bit different than what I've seen any other client do in this situation? I've worked for a lot of clients that are scaling and in pharmaceutical world, when you're scaling, you could be scaling up from product development, your PD stage into actual manufacturing. You could be scaling from.
teeny tiny little benchtop manufacturing to olding size production manufacturing, you could be taking something that you're doing and making it 10 to 50 times more volume, i.e. more money than anything you've ever done before. That kind of scale in any kind of business growth is absolutely terrifying. So what this company did that is different than what everybody else that I've seen do.
is they took a breath and they said, wait a minute, we've never done this before. How can we best support our people through this growth? I have to be honest in all my years of business, I have never worked for somewhere that has done that.
Speaker 1 (13:43)
speaks volumes to the character and the foresight of an organization that can say is the number one thing that we need to focus on during this time are people. That is huge. It's tremendous.
Speaker 2 (13:55)
It is. Normally clients come to me and they say, Hey, we want you to go run this big, huge project because that's what you do. This client looked at my resume and said, we see you have all this big project experience. That's fantastic. We see that you also do coaching and training. How about you provide coaching and training for our people to support them and help us understand how we can best support them, understand better what kind of support they need to scale.
from smaller projects to much bigger projects. I have to admit, I just sat there with my mouth open. I was so flabbergasted at the foresight of the people that I was sitting in front of. It was flattering, to be honest, to be asked to do something like that, to take a big step like that, and such an unusual step to say, what kind of support can we give our people? Normally, what companies do is,
They dive in head first, go hire a whole bunch of consultants and contractors, and then they just start cracking the whip on budgets and schedules. We got to be done. We got to be done. Are you done yet? Hurry up, hurry up. Why aren't you going faster? How much over time? How many more people can we get? And the focus is all on driving that project as fast as possible to get to the end. And we've talked about this in previous casts, Speed to Market. We've talked about that overwhelming
pressure that is put on project teams to just get to completion as fast as possible. People that are doing that work, if they're thought of at all, it's kind of an afterthought. Well, here's the thing about big jobs, they're long. Right now I have a job that's like 3 million bucks. It's a quick hitter. I'm going to be done in the first quarter of next year.
And it hasn't even broken ground yet. And I'm going to be done. It's that fast. I'm not used to jobs going that fast. I'm used to being on jobs for years. This is, this is a marathon, not a hundred yard dash. When you're talking about scaling and doing really, really big jobs. And you have to remember that when you're running a marathon, you can't come out of the gate like a hundred yard dash. You will not be able to sustain that kind of pace.
Speaker 1 (16:08)
But if you develop the kind of people who can bring marathon runners approach to their problem solving, if you develop people who can become capable of going from that $50 million to that $500 million project, they will be able to do anything and they will be able to overcome any obstacles that you throw in their way. That as a linchpin, as a keystone implementation of, well, if we get one thing right, let's get
Are people prepared to handle whatever comes next? Such a better strategy than saying, well, let's get some software in here that can do some things that we never done before and try to get people trained up on it. Well, let's hire a bunch of people and see who works. If you just get your people to the level that they can achieve at to the maximum level for them, they'll be able to handle just about anything that gets thrown at them. It's a very cool thing.
Speaker 2 (17:01)
They will be transformed at the end of it because they will be transformed from small project people to big project people. And now they're going to know how to do both of those things and everything in between. They're going to have the skills and the resources and the emotional wherewithal to sustain through those marathon jobs. The jobs are longer, they're bigger, there's more risk, there's more pressure. There's far more that can go wrong.
on a big long job than on a small one. Whatever kind of business you're in, management tends to get very, very nervous because they inherently know that the risk is greater. Everybody knows they're in deep waters. They've never been in before. They're way over their skis for their skills and their systems. What I see management do in most cases is they start having layers of worry. Therefore, they start creating layers and layers of reporting.
that were never there before.
Speaker 1 (17:59)
We all know how much fun that is.
Speaker 2 (18:00)
Right? It's, a human instinct when we start getting nervous. well, I, need, I need information. need updates. I need this. I need that. And so now the project managers and the project teams are distracted with having to report to all these different people at all these different levels, multiple times in a month. Guess what? All the time that they're doing that and putting all that stuff together in 10 different formats, because everybody wants something different. They're not focusing on their job.
and managing the actual risk that you're worried about.
Speaker 1 (18:33)
And we see this all the time. I would go as far to say, having been put in that position multiple times, that managers who acquiesce to a structure that demands that they report the same data 10 different ways are not respecting the people that are doing the work. It is the job of a great manager to advocate for your people to say, no, no, no, the data is there. You reformat it. We're too busy doing the work. I am here to talk to if you need support, but me.
Achieving this for you is not in your best interest client. Me reformatting this a third time this week is not in the interest of the project. It's not what you're paying me to do. Move on. It's a very hard thing to say no to a client. It's the kind of thing that makes you queasy about, am I going lose my job? Am I going to get fired by this client? Am I going to lose them in future repeat business? But it's the kind of thing where you have to trust that the result that you will achieve by standing by your principles, by doing the right thing, by continuing to
put the work first and to manage the client relationship, which is the job of the manager, that's going to have the outcome you want at end of the day. It's like we talked about before on the podcast, when you tell people during the middle of the project that something's going to cost more money than they thought it was going to cost, and everyone tries to value engineer, everyone tries to save a little bit of time, there's a 10-day schedule add, we're going to try and shave a day off that if we cut some quality here, people will remember you for the result.
you deliver at the end of the project, not the day you save them by killing the quality at the end. Advocate for your people. Be their champion. Don't make them reformat data five times when they should be managing the work, when they should be doing what they're trying to do.
Speaker 2 (20:14)
means
standing up to your boss, but it's not just an external client. Sometimes it's your own internal management that's doing it to you. You have this department or this boss that wants to see this, and then you have somebody else over here. Everybody's got layers of management in these big organizations. That stuff can kill you. It is absolutely a massive productivity killer and it can, it just sucks the life out of the project. I'm spending
five days out of my month working on reporting instead of executing. Terrible plan. What this client did was they put their people first, which I just love. I'm so tickled about how this is being handled at the management level. They provided financial management and scheduling resources for all the project teams. said, okay, everybody's been doing their own thing all this time.
We're going to take a big chunk of this off your plate. We're going to provide a third party resource and this is not uncommon in the industry. We're going to take that off of your plate. You're going to have touch points with these people, obviously, because you have to provide them information and updates, but they're going to do the legwork for you. They're going to go in, they're going to check your schedules, they're going to update everything, they're going to make sure all the links work, they're going to produce the schedules, they're going to distribute the schedules for you. That's off your plate, project managers. Great. Financial management.
Same thing, you provide a certain amount of information to a point and then those folks take over from there and they'll provide all the output of all the financial management. Now, I've been on both sides of this. It's hard to let go as a project manager. I'm used to doing my own budgets, my own schedules. It's really, really difficult to let go of that if that's not something that you're used to letting go of, but it's one of those scalable things. If you don't let it go,
You're spending too much time on that one thing. Is it an important thing? Percent. Absolutely. You got to find a resource you trust that you know, understands and is going to produce a quality product that you can rely on. I've been in the unfortunate position of having a financial person who, good golly, I don't know any other way to say it, just didn't know how to do it. That's not helpful because now even though
I have to let them do it. I now have to spend a whole bunch of time checking their work because I have to make sure it's accurate. Otherwise my behind is on the line. You have to find the right people to fill those positions that have the right experience. But there's a lot of companies out there that this is what they do. They provide schedule and financial management for construction projects. I'm sure they could do it for things that are not construction projects too. Offloading that and taking that off
the plate of the project managers was a huge help. Then they provided professional coaching and guidance from someone who's experienced in the industry and has sat in their seat. I know there's a lot of coaches out there. That's like a thing now, by the way, everybody's a coach. Could I provide coaching to somebody who is in an industry I've never worked in, is in a business I've never worked in, maybe on some things, but I would never volunteer myself for that. But I am most qualified.
to provide coaching to people who do what I do. Construction and engineering project management, that's what they did. They went and found somebody who happened to be me that has the skills and the resources to do that. I can talk to these people in detail about their projects and I can ask questions that are a little bit more focused on what it is that they're doing because I've built that before. I've sat in that seat before. I know.
where the hazards are buried.
Speaker 1 (23:58)
To those of you listening to this podcast who realize, as we all do eventually, that coaching is a much better gig than playing, whatever industry you're in. I mean, let's talk brass tacks. The construction industry is a punishing place to work. It can be 12-hour days, it can be 14-hour days, it can be that week's months on end. Getting to the position that Dee is in now, where you're coaching people to deal with those kinds of problems and making them perform at their best, is a much better gig than...
being the person who is performing at their best, even if you're performing very well. Finding an area where you can do that is more about finding where you can best serve other people than it is about just serving people well. Being a good coach and being the right coach for that industry, very different things. D to choose the area that is her subject matter expertise here, as opposed to saying, I can coach anybody. I can do anything. That is bad marketing.
go after the thing that you not only know a lot about, but can coach well. That's a much better strategy for somebody in that circumstance.
Speaker 2 (24:58)
being entrusted with a client's business, with their future, with their growth, that's an amazing feeling to have somebody come to you and say, hey, we need this kind of help. I'm just so impressed with any organization that can look in the mirror like that and say, wow, we need this kind of help. I worked with another organization last year, same thing, they're an installing contractor.
They looked in the mirror and said, we need your brand of help. And I am continuing to work with them last year and this year. So it's really, really cool to be the one that's called for this kind of stuff. But what's even cooler is to be that organization that can look in the mirror and whoever you're calling, whether it's me or it's somebody else to say that I need help scaling this business is, amazing. The other thing that they did was they hired a project director. They've never had this position before.
They've got all these different little projects going on all the time on their campus. They all kind of are in their little own silo and report to different managers and department heads. They decided we've got all these different projects going on in the campus. Some of them are dependent on one another, but they're run by completely different teams. We need a project director to pull it all together. That project director then can shield the project teams from a lot of the executive level meetings that
they may have to go to if that project director didn't exist. Been there, done that. I've been an individual project manager who has had to go report to executive leadership on a regular basis. I have to go put all my stuff together, go do the presentation. I was in there for an entire day, every month. I'm doing that instead of being out there running the projects I'm supposed to be running.
Speaker 1 (26:44)
And when you can make the bureaucracy work for you, the way that you're describing, when you can make it so that the person in that role is shielding their people as the purpose of that person's role is to support by shielding, letting them do their work, advocating on their behalf, not requiring them to put together the data five different ways. So Dee, my question for you is, what do you think is causing this client to have this enormous foresight to make this, what will be pivotal decision?
as they approach this challenge? Do you think it's that they inherently are the kind of people who take a breath and think before they make these kinds of big decisions? Or do you think that there's some other factor influencing their presence to be able to have this realization about them? And what advice would you give somebody in a similar organization who needs to take this breath and needs to go advocate for the costs that taking that breath is gonna come with? How do you, in that position, say, this is the right choice?
making a training moment for our people by hiring this person, by hiring a project, a program director. These are the right choices for us to achieve our intended outcome. Even though they're gonna cost us more money today, they're gonna get us to where we wanna be. That's a very difficult argument to make, I think, within a big organization.
Speaker 2 (28:01)
I think it depends on the organization. think for these folks, they very much value their people. And the little bit that I do know about this organization is they're very loyal to their people and their people are very loyal to them. Most of the people have been there for quite a while. They love it there. They are really hard workers and they're good people with great backgrounds. The piece that they're missing is
that they've only done projects to a certain level and they just haven't had the experience yet. And they don't want to lose these people. And I think that is so wise. We've talked before about the cost of turnover on the podcast. The cost of turnover of losing somebody is two to three X, whatever you're paying them easily. I would say that mid project, the cost is way greater than that. And when you're talking about a construction project, because any key person,
that you lose mid project, it takes forever to get caught up. I have been the person who, who's asked to come in late to jobs many times, and it takes a solid month or two of very focused effort just to catch up.
Speaker 1 (29:18)
It's true for a lot of reasons. It's even true for the reason that the construction industry is so broken apart as we've discussed on this podcast before. Each project has a different way of doing things. Well, we run the Procore output through Excel in this filter, and then we do this, and then we put it in here, and then it folds into the big monthly report. Learning people's ways of working within any new job is going to take you that month or two, let alone learning all the people's names.
understanding who's really the person to talk to from that company when it comes to change orders, understanding who really is the guy in the field who knows what they're doing from that company, as opposed to the flash and the pan person. Those kinds of things take time in a big organization that has lots of bureaucracy, that has lots of requirements, that has lots of interesting relationships. Losing that institutional knowledge. We've talked about how it's three times salary, and that seems like a ridiculous number, but I think it's real. Organizations that...
have that kind of turnover, that they're losing out on a ton of value because they're not keeping their people. And that loyalty that you're describing here, that these people show to their managers, to their system, to their organization, and the loyalty that that organization shows back to them is a tremendously valuable thing.
Speaker 2 (30:30)
It is. And when you're talking about a campus like that, a specific place, there's all the intricacies of how that specific organization does things and how to get things done in that organization. But even key things like who's the plant manager? Who's the facilities person that I need to coordinate this shutdown with? Building that relationship with that person. That person's going to have not only their day job to do,
But in an organization like this where they've got all these different things going on on this campus, they've got all these different projects going on, all these different project managers demanding their time, their energy, their attention, and their cooperation, you have to have that relationship with that person. If you don't, you're not gonna get your job done.
Speaker 1 (31:15)
We said before the value of those relationships, you have to invest a little over time and a little more and a little more and a little more. And before you know it, 10 years later, you have a real relationship with that person, but you can't just hire somebody new every two years and expect there to be the same amount of productivity between those two roles.
Speaker 2 (31:30)
doesn't work that way. You can look at it from one of two ways. I think most organizations would have said, well, our people aren't qualified to do this bigger work, so we'll just replace them. We'll just bring in other people. We'll bring in big work people. And that is how most organizations solve that problem. This organization said, no, we're not going to do that. We're going to provide them something to help them grow so that we can keep all that 90 % of what you already have.
is what you need. They just need that extra 10 % of guidance and skill training and all of that and stress management. was the number one concern with stress management because anybody who's done a really big capital project knows it is very, very stressful. Raise your hand if you've sat in your car and cried.
Speaker 1 (32:19)
Raise your hand if you have gray hairs over those kinds of projects.
Speaker 2 (32:24)
Absolutely. I die. You can't see them, but believe me, they are there. It is one of the most stressful industries that you can be in. providing stress management and professional support for their project teams to take on larger projects, to take on more demands. just can't applaud this organization enough for doing this. It is such the right thing.
Speaker 1 (32:44)
do. I want to tell a story that's an example of the wrong thing to do that plays contrary to this in a beautiful way. I have a friend of mine who is in his symphony who plays the upright bass and I don't know if he listens to the podcast or not but shout out Dan if you're listening. And the San Francisco Symphony is currently experiencing a contract dispute between its players who are in a union and the symphony itself. And over the years the symphony's marketing staff have been cut
support staff have been cut and the pandemic certainly didn't help anything. That was out of everyone's control. To not be able to sit indoors to watch the symphony, to kill your revenue stream like that, that's going to have an impact on your business, certainly. So there's a lot of stressors here. But now that we're back to non-pandemic times, now that we're back selling tickets to things, they still don't have their marketing people back. They're not selling out shows. So the players are frustrated not just by the fact that their salaries have not returned
to pre-pandemic levels like every other symphony's salaries have. They're also frustrated that they don't feel like the symphony is getting publicized. They're not selling tickets. They're not seeing people out in the audience to listen to the music that they've spent their entire lives becoming as great as they could possibly be to play, to come out and hear them. When I think of that and the frustration, I want more money. That's not the whole thing. It's very similar to the...
of work that we do construction. Nobody chooses construction because it's the most money we could make. We choose it because we take pride in the art and the science that it takes along with the grit to create something that was never made before and will never be made again. There's an artist, there's no pride that comes along with this industry that I think a lot of people that stay in it get and a lot of people that don't never grasp. if you can't let the people who
do that work, be proud of it. If you can't create an environment where they feel the accomplishment that we come to this industry seeking, you're going to fail. You're going to have these problems. By supporting these people in this way, by giving them these skills, by letting them realize their personal goals through this training, hiring D is the best decision this group could have made. And they're going to get people who are even more proud of the work that they do, even more proud to be part of an organization that prides itself upon their excellence.
and the excellence of their output. And they're gonna get to stay on this campus and say, yeah, I got trained by somebody who really knew what the hell they were doing. I leveled up to be able to do work that I'd never done before. And there it sits, two blocks from my office or whatever it is. And they'll be able to tour people around these facilities that they've built in three or four years and say, this is what I had to do to be able to do that, to be able to get to this level and look at what that accomplished for us.
this will be the pride of this organization for the next five years after they're done with it, at least. It'll be a wonderful thing. And maybe, people from the organization will leave after 10 years and say, boy, that was the greatest accomplishment of my career. I want to seek that high again. I want to go somewhere where that need takes me. And if that happens, they will have lost some people to have created the culture that prides itself on that excellence, to be known in the industry as a
campus that produces these kinds of people because that's our culture, that'll come back around. People will come back to you when you have the need again. People will know that you're a good company to work for. It's the kind of success that only begets more greater success.
Speaker 2 (36:09)
Being
an employer that has a reputation for caring so much about their people. That's a rarity these days. You will hear people all day long bashing business owners and companies in the news and on LinkedIn for not taking care of their people, for not listening to their people, laying people off or not providing training, all these different things. To be a company that says, no, no, no, we're not going to be like that. We're going to do the opposite. We're going to take care of our people.
That's something we're going to talk about the flip side. We've been talking about companies that are exponentially growing and how to, how to help support and manage people that are exponentially growing. When your business retracts, which will happen. This is the nature of construction. There's there's that's why we're called project people, right? We're there for the duration of a project. And then we go away. Bye bye. We're independent contractors. They don't need us on staff. They're not going to need a.
five or $800 million project manager or somebody who can manage that kind of work if they don't have a five or $800 million project, right? Now you're back to your smaller ongoing work on your campus. You just need the people that you had before to continue managing that. So you're gonna have retraction to a point afterwards, or maybe there's a downturn in your market and your business is shrinking a little bit, whatever kind of business it is. Here's my advice.
worked for all different kinds of companies and all different kinds of industries in my lifetime. I started working when I was a teenager. I've worked in retail. I've worked in horse farms, real estate, construction. Everything has periods of growth and retraction. So you have to prepare yourself for both. Don't try to hide it. Nobody tries to hide growth because everybody's excited about that. But when companies go through periods of retraction and things slow down,
All of a sudden, everybody's got a secret that they don't want to share and they try to hide it from their employees. I think most people, you confronted them about why are you trying to hide that from people? Why aren't you talking about it? They would say, well, I don't want to freak everybody out. I don't want people to start quitting because they they're afraid that they're not going to have a job. I think honestly, there's a little bit of shame and a little bit of panic.
from any business owner who's going through a retraction period. I've gone through growth and retraction periods in my consultancy. Growth is way more fun. Let me just tell you, your people see it, even when you're trying to hide it from them. Believe me, they see it. And what happens when you don't talk about it or you refuse to acknowledge it with your people is they spend a lot of time and energy guessing about what's really going on. Am I going to get laid off?
Is my paycheck gonna clear? I've worked at places where every week it was a conversation. Do you think our paychecks are gonna clear? It's so slow. Do you think somebody's gonna get laid off? They're spending all their time and energy guessing because you're not communicating. That is not a good place to be.
Speaker 1 (39:13)
Yeah, how many hours do you think a week those employees are spending worrying about their paychecks not being productive when you need them to be as productive as possible? Because it's the down times. That's bad, but it gets worse.
Speaker 2 (39:26)
Absolutely. Almost every company I have ever worked for does this in a retraction time. The thing that I think is always funny is that as an employee, we're all looking at each other going, do they think we don't know?
Speaker 1 (39:39)
How stupid could they possibly be that they think we don't know? Yeah, it's like a rider who can see a little bit further across the horizon than the horse can and sees, no, there's a big army over there. That's not good. Horses may not be intelligent, but they are intuitive as hell and they will feel you tense and they'll say, my gosh, there's tension. What could it be? It's not good. It's very bad. It's as bad as it could possibly be. And they will imagine and imagine it while you're making the threat assessment,
dealing with it in your head and you're trying to figure out what you're going to do. If you're tense, your people know you're tense. If your business isn't operating well, they can feel it because they're the ones operating your business. Don't fool yourself into thinking that they don't know.
Speaker 2 (40:21)
I can't tell you how many times I've worked in an organization where I'm just like, do they think we don't see this? Come on, we're the ones in the trenches. It is so obvious to your employees. So stop playing management games. Stop playing executive level games where you think you're going to just hide it. I worked for a company. It was comical, really. It was so ridiculous. Their strategy was to just keep saying, my gosh, we have so much backlog.
Next year that starts next year. I kid you not. I heard them say that more than 10 years in a row. And from what I hear, they're still saying it. don't know if it's wishful thinking or do they really think people are that stupid or what, but you aren't fooling anyone. just stop.
Speaker 1 (41:09)
It's
not going to work. You effectively falsifying the truth, lying and saying, it's going to be better. People don't, people aren't going to believe you. It's not just managers actively being bad managers. It's also a fault that we can solve that has nothing to do with intention. One of the things I've observed, I'm sure you've seen this 2D is the big boss on any big project has a daily stand up because they want their team to be involved with each other. They want everyone to communicate and they say, okay.
Tell me what I need to know. Tell me what I need to know. And they go around and they get information from their subordinates. And they say, okay, great, break. Everybody go. Okay, well, that was a waste of my time. It's frustrating. You just stand there and tell people what you could have told them in an email. It's that Shiba Inu standing on the desk. This whole meeting could have been an email. During that time, you're gathering the information. You're sitting on top of the horse. Tell the horse what the horse needs to know. Tell your people what they need to know. Okay, so here's what's going on. The client is gonna do this in the next couple of months and the...
Bigger picture for the organization is we're going to be doing this in the next year or two in this region. But I'll have more for you when these decision makers get back to this, more to come. That 30 seconds of like, here's the 30,000 foot view, not only is information your employees don't have and want, telling them that grants them the personhood that they are important enough to be told that they matter, that they are part of your team, that you are here for them. It speaks volumes to your character as a leader.
to give that 30,000 foot view to your people when they give you the granular information. You know it, so it's hard to put yourself into the head of somebody who doesn't know it, because you've been in the meetings and you've been talking to those upper management people and you see the things, and sometimes it's bad and no one wants to tell bad news. But if you only tell people good news, they're gonna get to know you and they're gonna get to hear that in your voice and they're just gonna stop believing you.
Speaker 2 (42:57)
I think you bring up a really good point of being an information taker versus an information giver. If you're just saying to your people, give me, me, give me, give me, and you never give anything, you're drawing a line. You're drawing an invisible line that you're here to serve me. I'm the important person and you don't need to know any of this. I've actually heard executives say things like this. They don't need to know any of that. This is executive level stuff.
When your business is in retraction, keeping secrets is absolutely the worst thing you can do because your people will self destruct trying to figure out what is going on and speculating and huddling over here and talking. This is how they're spending all their time and energy, not doing work, not doing the things you need them to do. And they will start putting the resumes together. All those things you're afraid they're going to do, they're doing it anyway.
Speaker 1 (43:53)
And so what do we do instead, Dee? What is the right choice when your business is in retraction? How do you approach that as a leader? Let's say that the budget numbers have come up and you just, you can't afford it. All of a sudden there is a cash crunch in the business that was not anticipated and you've got some choices that you got to make. How do you come to your people with that kind of issue?
Speaker 2 (44:13)
You sit them down and you talk to them like human beings.
Speaker 1 (44:16)
What account? What? What? Talk to people.
Speaker 2 (44:18)
Yeah, imagine that, right? Business owner. It can really stink to have to give people bad news, but the bad news is coming. It's like playing ostrich if you don't deal with it head on. The bad news is coming. It doesn't change anything by not speaking it. And here's the thing, historically, companies that choose to speak it to their employees and say, look, here's the deal. Here's where we are financially.
I have this problem and I can do one of two things or I have these choices or here's the problem. What do you think? So let me give you an example. Business owner A has this cash crunch. It goes to his people and he says, look, we've had a downturn in business. We lost a contract. Something didn't come through, whatever the situation is. If I can't figure something else out.
I'm gonna have to let two people go. I have to cut X number of dollars out of the budget because I just don't have the cash. I can't afford to borrow any more money and pay interest on it. I have to cut this much money out of the budget. What do you guys think? This has historically resulted in your employees helping you solve your problem. You might have somebody on your team that is willing to take a sabbatical. You might have somebody on your team that says, you know what?
I was thinking I was going to have to quit pretty soon anyway because I have a sick parent at home and I really need to work part time. I really need to take a leave of absence. Your employees can help you solve your problem in a way that makes them happier. Maybe somebody's like, you know what, I'm just going to early retire or I don't really need to work. My husband just got this huge raise. My wife just got the...
started his business is doing great. I can just step out and now you only have one salary problem to solve. That way you guys can figure that out. Nobody has to lose their job. It happens more often than you think.
Speaker 1 (46:21)
And you can't come to this conversation saying, Hey, who wants to save me money by working less? You can't just drop that on people. have to say, Hey, look, this is the position I've gotten to. Here's what I see over the horizon. Here's why I think this is going to go better soon, but we have this immediate problem. You have to sell your people on the fact. And it has to be a fact that you are working hard. are breaking down barriers for there to be a better future. If that is not true, cards are on the table.
game's over. At that point, you just got to be polite, write each other's recommendation letters and call it a day. But if you truly believe that them helping you solve this problem will achieve your end goals, will get you to where you need to be to get through this hard time because there is something at end of the tunnel, tell them. Make the argument, but be honest. And your people will reward your honesty with their honesty.
Speaker 2 (47:15)
Yeah, absolutely. There've been a bunch of different case studies where stuff like this has happened and the business was saved. The employees were all happy. You don't have a bunch of anger and disgruntlement. If you just go in and go, I'm just laying these two people off. Well, now everybody else is wringing their hands going, Oh no, am I next? What's going on? I next? Somebody that I know called me the other day and said, my company just laid off 200 more people.
They laid off 200 people six months ago and they laid off 200 more people. But guessing that that company isn't really talking to their people. They're probably not telling them the plan. However many people are left are going, boy, what's going on? Am I next? What's happening? Those people less productive, less happy. Half of them were probably out looking for work. They're spending time doing everything, but working for you.
Speaker 1 (48:08)
Another great way to put this, let's say that you're in a position where things have turned a little bit, things are not as good as they could be, but they're okay. And you decide to lay off some people who are your worst performers. You just can't afford to keep them around. You're trying to make room in the company to bring other people on, whatever. Let's say you're just laying off a couple of your worst performers. Some people are going to get the sense, especially people that have been there the longest, that are going to say, those people were not people we needed. Other people might say, my gosh, layoffs are happening.
This is just the first round. What could possibly be happening next? And your best people who've only been there for a short time are going to say, time to get the resume going, time to get back on the street. Layoffs have started. This is corporate America. No one is safe. If you communicate to people, no, no, no, here's what was happening. These people just have not been performing for us over and over again. We're making room on the team to bring somebody in who can do two people's job. Oh, okay. And then they'll go back to doing their job. That happened to me at a company I joined where things had turned around little bit. And I was like, okay, we got to tighten our...
our belts a little bit. And they said, look, here's what we're doing. We're letting a few people go. We like them very much. We will speak highly of them externally, but internally, we to say, look, they just weren't cutting the mustard. We needed better people. And this is what we're doing. Everyone was like, okay. And then they kept doing their jobs. It was fine.
Speaker 2 (49:19)
Let's go
on with life and stop worrying, right? I mean, imagine communicating.
Speaker 1 (49:24)
And that's the thing. We see this time and time again in any industry. My parents have talked about it in sales. We've talked about it here. The people who are the best performers in the individual role, the best pipe layer on the crew getting promoted to foreman, not necessarily the right choice. He may not be the best communicator. He's going to have to grow into that role. Communication is the key skill of any great manager. If you don't have that, you're not going to succeed. And Dee getting hired into this role to bring these people up, communicating with them, teaching them to be able to
to be better communicators is only going to reap exponential benefits for this organization that she's been called in to work with.
Speaker 2 (50:00)
to bring up a book called the Toyota Way. If you've never read the book, highly recommend reading it. It's so valuable in so many ways. But one of the things they talk about in the book is that Toyota very notoriously, when the car market fell off a number of years back, Toyota not only had themselves in a position where they were cash positive, they weren't over
their skis financially. had a lot of cash in the bank. They didn't lay off a single employee during that entire recession. They didn't lay off one employee. They held onto all of them and used the time to train. They respected their employees enough to listen. They asked their two cents, what kind of training do you want? Do you need to do your job better? And then they went and implemented it and they spent two years doing nothing.
but skills training, management training, everything their people needed to be better so that when the market came back, they were better positioned to kill that market.
Speaker 1 (51:05)
And what car does everyone want to buy right now? The Toyota RAV4. What car does no one want to buy? The car that's getting discontinued? The Forescape. Who could have called that? That's crazy. That's nuts. I put it with that. That's so strange.
Speaker 2 (51:18)
going back to the beginning of the conversation where I think one of the big mistakes that I see a lot of companies make and why a lot of companies fold is because they get over their skis financially. They leverage borrowed money too much. want to keep expanding it. Whenever I see a company that's opening 50 new branches this year, think that's super, super scary. It's super risky. They have to be borrowing money to do that.
which increases your risk and you're just rolling the dice that things are going to continue to be as great as they were. Peloton made a huge mistake during the pandemic. I just face palming when Peloton did this. They saw a huge growth in their business during the pandemic because people weren't going to the gym. They were ordering Pelotons to ride their bike at home. They have a really great
video interface, have these live classes, recorded classes, you can do these scenic rides. I have two Pelotons. I have one at each house. love them. But here's the problem. The executives at Peloton, you know, they had to start borrowing money hand over fist to grow their business and grow their production. And the executives at Peloton did financial projections that assume that growth was going to continue.
Speaker 1 (52:36)
Because we're always going to be in a pandemic because we're always going to be in the right place at the right time. Sure. It was a good business model. Sure. It's a great product, but not knowing that you just got really lucky and projecting your business as if the success you had was not luck was just a market foundational principle. It's an insane choice to make is it's a very short sighted choice to make. Go ahead. It's hilarious.
Speaker 2 (53:00)
that's what I'm saying. There could be a market condition that you just fall face first into because you happen to be in the right place at the right time. Perfect example, Peloton with the pandemic and probably many other fitness-based organizations too. They fell face first into that, saw this massive growth in a very short period of time, and then were astonished that it didn't continue. There's always going to be a segment of people.
that would rather go to the gym. My brother-in-law is one of those people. Going to the gym for him is a social event. He's got friends there. He's got people he loves to talk to and see all the time. He's there for hours. I'm not that person. I'm the kind of person that doesn't want to get in my car and drive anywhere for fitness. I want to walk out my front door or go into my room behind my office. When I go to a gym, I go straight to do the things that I'm going to do and I leave. I don't talk to anybody.
Peloton is for people like me who are not interested in the social aspect of going to a gym, but there are so many people who are. They hedge their bet incorrectly, then went through a massive, a very fast retraction just as fast as they grew. It can happen. That was like a whiplash one. Use the retraction time if you possibly can, you know, just.
You know, don't borrow too much. Don't get too crazy. Use the retraction time to improve your business practices, to improve your systems, provide training for your people as much as you can. And for the love of all that is holy talk to your people and tell them what is going on. What's your plan is what your options are. Is there anything that they can provide? Because who knows your business better than your people.
They know your business, they know your customers. They can probably come up with some ideas that you never thought of that might just save your business. Put your people first, they will put your business first, and you'll be back into that growth stage before you know it. Thanks for joining us.
Watch us on YouTube at YellowstoneProfessionalEd.co. Don't forget to like, share, and follow us. Apple, Spotify, everywhere you listen to your podcasts. You can email us with questions, comments, and suggestions at hayd at managementunderconstruction.com. That's H-E-Y-D-E-E to get me or Brad at managementunderconstruction.com.
