Keys to Building the Profitable Contractor

The most frustrating part of the mechanical construction industry is achieving consistent, sustainable profitability. Few contractors can say they are profitable every year or that they have consistently great returns on the investment in their business.

Mechanical contractors should take a look at their balance sheets and identify their single largest asset, their most illiquid asset, their riskiest investment and, worst of all, their lowest-performing asset. Then they should ask themselves: Could I do a better job with my company and get more consistent returns?

I want to share what I consider the keys to building a profitable contractor. I draw on my success in the industry as well as the keys to profitability I have seen as I have worked with successful contractors across the country. My goal is to identify the keys and, more to the point, help make contractors more profitable by showing how each key can unleash the potential of their business and improve their return on investment.

My eight keys to profitability are: leadership, people, planning, best of class focus, a solid foundation, risk management, keep it simple and have fun.

Leadership

Companies without strong leaders are doomed to mediocrity. Who can name a championship team that did not have a leader? Think Unitas, Mays, Namath, Gehrig, Jordan, Orr and so on. Think of all the teams each of us have played on or followed and the importance of leadership to their success. Without great leadership there cannot be great success. I look at the companies that are role models in the business world, and all had strong leadership.

Why are leaders so important? They set an example, set the pace for the company and give direction to the team. Great leaders never ask team members to do anything that they themselves wouldn't do. They know how to make decisions and how to lead. They know how to put to best use the specific talents of those around them in order to get the most out of the team.

Empowerment is their mantra. They give team members tasks suited to their skills and provide the support they need to succeed. Successful leaders share information and resources because they know that with knowledge comes the power to succeed. They don't micromanage. They recognize that empowerment generates accountability, and it is everybody's task to get the job done right and at the highest level of profitability.

Leaders hold themselves to the highest standards of accountability, and when success is achieved, they share the credit with the whole team. Great leadership inspires great individual effort and teamwork. It creates a culture of getting it done right the first time with everyone working together.

People

It is said that people are a company's greatest asset. I agree with that, but feel the statement needs some fine-tuning. The key really is to put the right people on the right job.

Here is a mistake I used to make. I used to put my best people on the toughest projects. They would bring the job in for us, but the cost was high in burnout of key people. Then I learned to put my best people on the best opportunities for profitability. I learned how to maximize the potential of my employees. When I think of all the money I left on the table by putting the wrong person on the right opportunity, I paid a lot to learn that lesson.

In general, we need to know our employees better if we want to retain them. Times have changed, and these days most college graduates will have 10 or more jobs by the time they are 40. Such high turnover means both a big increase in employee training costs and a big loss of experienced workers.

Understanding and respecting the people who work for you and offering them career opportunities is the way to retain workers. If the “grass is greener” point of view moves people to change jobs, then an employer who gives his employees a clear path to advancement will have the “greener grass.” Of course, for this to work, employers have to be proactive. They have to have a system in place that offers training and they have to encourage employees to not just do a job but also prepare for a career.

At McCarl's Inc., we developed individual career plans that laid out the education and training an individual needed to get to the next level. Our McCarl Way University provided the in-house training for our team members to succeed.

The mechanical contracting industry was built on the concept of mentoring, which was called an apprenticeship. Newbies nowadays are not getting what our “gray beards” received in terms of on-the-job training. But we can fix that by putting into place a mentoring program. Contractors who pave the way for experienced workers to pass down their knowledge to newer workers will attract better job candidates, retain more employees and build a better, more profitable business.

F. James McCarl was president for more than 30 years of McCarl's Inc., a family business that he grew into one of the top 50 mechanical contractors in the U.S. McCarl's became a wholly owned subsidiary in 1999 of electric utility PPL Corp., Allentown, Pa. In 2003, McCarl became chairman of The McCarl Group (mccarlgroup.com), which helps family-operated businesses, mechanical contractors and nonprofits maximize their potential through strategic planning and risk management.

Read Keys to Building the Profitable Contractor, Part II