© 2014 FMI Corporation 0
The 21st Century
Equipment Manager: Fireman or Leader?
Presented by: Jim Schug Principal
FMI Corporation
CONEXPO 2014
Las Vegas
© 2014 FMI Corporation 1
© 2014 FMI Corporation 2
Who is FMI?
2
- Get In - Strategic Planning
Buyer Representation Acquisition Integration
- Get Work - BD Assessment
Market Perception Studies Presentation skills
- Develop People - Leadership Development Management Succession Executive Coaching / Peer
Groups
- Do Work- Productivity Improvement
Project Partnering Risk Management
- Get Out – Ownership Transition Seller Representation
Management Buyout / Valuation
FMI services span every phase of the construction firm’s lifecycle…
…to include:
60 years dedicated to the construction industry
84% of the ENR 400 Largest Contractors
60% of the ENR Top 600 Specialty Contractor
97% of the ENR Top 100 CM Firms
40% of the ENR Top 500 Design Firms
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Performance Problems Can Emerge When CONTEXT CHANGES, but Strategy Does Not
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• Competition willing to work for “wages”
• Project speed, complexity and change
• Competition has doubled or tripled for your targeted customers or projects
• Poor-quality documents
• Price pressures and tighter margins
• Delivery methods
Challenges & Changes
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• Workforce demographics and attitudes
• Finding A players
• Customer demands
• Technology
• GCs & CMs taking work at unbelievably low fees
• Little or no room for anything to go wrong
Challenges & Changes
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Question
If you improve your ability to run the shop by 5%...
how big of an impact would that have on the company? how big of an impact would that have on you?
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What Are Your Biggest Challenges?
1. Communication (field – shop, HQs – shop, shop – shop) 2. Implementing change 3. Personnel related 4. Equipment company vs. construction company 5. Scheduling 6. Cost management and control 7. Inventory management 8. Maintenance management system
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Introduction
“Things aren’t going to go back to the way they were. Today, every firm must adapt to the changed competitive landscape in order to survive.”
CEO, Skender Construction ”FMI Case Studies from Successful Contractors – post 2007”
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What Are Your Responsibilities ???
Procurement
Logistics
Equipment Maintenance
Shop Operations
Strategic Planner
Business Unit Leader
Financial manager
Record keeper
Compliance
Vendor Management
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Today’s Demands on the Equipment Manager
Documentation and Compliance
Budget Fleet Sizing
Field Management Vendors
Internal Customers Technicians
Equipment Company
Vs Construction
Company
Employee ‘Management Vendor Mgt
Lifecycle Mgt
Purchasing
© 2014 FMI Corporation 11 © FMI’s Center for Strategic Leadership
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Leader or Firefighter?
You will not react your way to operational excellence
Being reactive comes with big costs Labor costs Material costs
Equipment costs Overhead costs Emotional costs
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“You Might Be Reactive If…” (1 of 2)
Comments heard in reactive companies: “We don’t have time to plan” “Things change too much to plan” “We’ll figure it out in the field” “Our jobs are different” Blame lack of planning on customers and time constraints
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“You Might Be Reactive If…” (2 of 2)
Move field managers, crews and teams constantly
Constant phone and radio noise
Too many emergencies or last-minute needs from your shop or vendors
Large number of small purchases made in the field
Very little or no formalized processes
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Greatness Quotes
“There are three kinds of men: The one that learns by reading. The few who learn by observation. The rest of them have to pee on the electric fence for themselves.” - Will Rogers
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Career Equipment Manager (AEMP)
Standard One – Finance
Financial Management Procurement & Acquisition
Risk Management Warranty and Performance
Guarantees
Standard Two – Information
Benchmarking Life Cycle Cost Specifications
Technology
Standard Three – Policies
Employee Training Environmental
Human Resources Safety
Standard Four – Controls
Outsourcing Parts Management
Preventive Maintenance Shop and Facilities
Management
Standard Five – Customer Service
Service Marketing
Communications Improvement
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The Certified Equipment Manager
POC Jim Phillips: [email protected]
or call (970) 928-3404
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Prioritize Your Time and Help Your Team
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Time
HOW MUCH TIME IS SPENT IN THE FIELD WAITING
ON EQUIPMENT DELAYS?
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Impact of Equipment Management on Productivity
Crew
Information
Equipment
Manpower
Materials
Tools
Support
Provide Training
Feedback
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Construction Company Income Statement
AMOUNT % of Sales
SALES $ 50,000,000 100.0% DIRECT COSTS Labor $ 18,000,000 36.0% Materials $ 8,000,000 16.0% Equipment $ 12,000,000 24.0% Subcontractors $ 5,000,000 10.0% TOTAL Direct Costs $ 43,000,000 86.0% Gross Profit $ 7,000,000 14.0% Overhead $ 5,000,000 10.0% NET PROFIT (before taxes) $ 2,000,000 8.0%
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The Challenge
Percent Improvement
8-Hour Day
Percent Increase in Profitability
2% 9.6 minutes 20%
5% 24 minutes 50%
10% 48 minutes 100%
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Average Industry Net Profit (Before Taxes)
Source: RMA 2008 – 2013 Annual Statement Studies
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 Type of Contractor % % % % % %
Mechanical 4.00% 4.30% 2.60% 2.40% 1.50% 2.20% Electrical 3.80% 5.10% 3.90% 1.40% 0.70% 2.40% Drywall 4.10% 4.40% 4.70% 1.10% 0.10% 1.00% Paving, Residential & Commercial 4.30% 4.70% 1.60% 3.70% 2.50% 3.50% Road Construction 5.00% 4.90% 3.10% 2.00% 3.20% 2.30% Pipeline, Gas & Oil 6.00% 11.00% 8.20% 3.60% 8.50% 7.20% Structural Steel & Precast Concrete Contractors 6.00% 2.40% 6.30% 3.10% -1.30% -1.00% Roofing Contractors 5.80% 5.60% 5.10% 1.50% 2.50% 2.80% Site Preparation Contractors 4.80% 3.90% 1.30% -0.90% 0.10% 2.20% Glazing Contractors 3.00% 2.20% 3.80% 7.30% 2.70% 1.70% Foundation & Structure Contractors 4.40% 3.40% 2.00% 0.10% -1.50% 0.20% Other Heavy & Civil Engineering Construction 7.00% 6.00% 2.20% 3.40% 2.80% 2.50%
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How Field Employees Spend Their Time in the Construction Industry
Recoverable Lost Time (32%) Waiting for information, materials,
equipment, tools, manpower, or other trades. Rework on items already
installed.
Primary Time (42%) Installing units of work
for the first time.
Secondary Time (26%) Planning, scheduling,
material handling, lay-out, set-up, mobilization, etc.
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Building Blocks We Must Integrate With
Pre-Job Planning
Short-Interval Planning
Daily Huddle Exit Strategy
Post-Job Review
Material Management
Equi
pmen
t M
anag
emen
t Measurem
ent Feedback Process
Productivity
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What Processes or Systems Does Operations Have?
How do you integrate?
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The Marketplace of 2014 - 2017
Turbulent public and private market
Resources under pressure
New markets and methods of delivery
Action, Action, Action
And not enough qualified people!
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Convergence of Trends
– Command and Control – Unsophisticated – Volatility – Mobility – Ethics
– Baby Bust – Baby Boom – Immigration
– Fewer Technical/Science – Lower Skills – “Soft” Subjects
– Multiple Market Growth
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Generation Y (The Millenniums)
Born between 1981 – 1999 Ten percent of today’s work force No such thing as “before the internet”
Short attention spans High expectations of employers Multicultural Want immediate responsibility Family values similar to Greatest Generation Greater number of people but younger and inexperienced Communicate well electronically, but weak interpersonal skills
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Leading Millennials
Allow for multi-tasking
Provide creative and challenging work assignments with structure and supervision
Create stimulating learning opportunities
Provide them an ability to take part in decision-making
Putting them in roles that push their limits
Treating them as professional colleagues
Keeping them focused with speed, customization and interactivity
Provide recognition for achievements
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Generational Differences
“Young managers today want clear goals for the week on
Monday, some feedback on Wednesday and a
performance review on Friday.”
Bill Rogers, Suntrust Banks
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“ ”
Every two days now, we create as much information as we did from the dawn of civilization up until 2003. - Eric Schmidt, CEO
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− 50 document types
− 56,000 pages
− 6 @ 20” dia., 50’ tall trees of paper
1992 2012 (1) Project Management for Construction by Chris Hendrickson
Average $10 Million Project
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People Leadership and Management
Management versus Leadership Planning, Organizing and Controlling (POC) Setting Direction, Aligning People, Motivating People (SAM)
Plan for Training and Development in Leadership Perception and approach to solutions
Cynical, negative and pessimistic Supportive, creative and opportunistic
Coaching and Development
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Mentoring / Training: The “Educator”
Paint the picture with peers – graphics and charts versus spreadsheets
Training: Negotiations Customer Service Training planning Scheduling Cost/Financial Technical training on equipment Diagnosis training Time management Software
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Customer Management: The “Customer Service Manager”
Identify your customers – why?
Don’t do: Lack of Process in place to measure satisfaction
Fail to measure because of dissatisfaction No incentives in place to reward performance
Equipment Managers thinking their CEO is their only customer Stuck in the past – “same way for 30 years” Using financial reports as weapons versus tools Timeliness in construction “Bid Day Mentality”
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…what does this mean? Turning Equipment Managers into business managers means developing leadership skills and increasing business focus – giving them the skills to advance and add further value to the organization
Project-Focus Business-Focus
Managerial Needs Plan Organize Control
Leadership Needs Set Goals Align Resources Motivate Staff
Project Manager
Accountant
Operations Director
CEO President
CFO
Controller
Craft Employee
Super
Foreman
General Super
VP Operations
Estimator
Career Focus Matrix
Business Developer
Admin Staff Project
Engineer
Project Executive
Turning Equipment Managers Into Business Leaders…
Equipment Manager
Technician
Shop Foreman
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Identifying Talent
© FMI Corporation 2009
High Performance Low Potential
High Performance High Potential
Low Performance Low Potential
Low Performance High Potential
Rookies High Risk
Valued Contributors
Super Stars
ROOKIES:
Where Are Your People?
© FMI Corporation 2009
HIGH RISK:
SUPER STARS: VALUED CONTRIBUTORS:
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1. Your company does not have a vision that motivates key employees and/or a strategic plan for executing on the vision.
2. Your organizational structure and/or roles are not clear, thus impacting lines of accountability.
3. Your company does not have a structured performance management and development plan for key employees, so they do not know how to work toward the “next” level.
4. Top performers do not have a portion of their pay that is truly performance / incentive-driven.
5. Training and development investment does not exist, or is ill-defined. 6. Field and managers do not have a means of tracking their performance. 7. There is an inherent fear of sharing information across the company. 8. No one outside of ownership/senior management is involved in setting direction for your
company. 9. Your company does not have formal best practices in place. 10. Field and managers do not have any formal responsibility of providing mentorship to more
junior staff.
Top 10 Reasons Managers do Not Become Business Leaders
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Is Equipment Management a Strategic Initiative for Your Company?
Can you prove it?
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What Does Strategic Initiative Mean?
Guides direction over the long term
Creates competitive advantage
Aligns internal resources
Requires investment (i.e., time, energy, money)
Requires leadership
Requires change
Requires a plan
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“Watch your step!”
Case for change Vision Skills Incentives Resources Action
Plan Real Change
Vision Skills Incentives Resources Action Plan
Case for change Skills Incentives Resources Action
Plan
Case for change Vision Incentives Resources Action
Plan
Case for change Vision Skills Resources Action
Plan
Case for change Vision Skills Incentives Action
Plan
Case for change Vision Skills Incentives Resources
Status Quo
Confusion
Anxiety
Gradual Change
Frustration
False Starts
Source: Adapted from a Dupont presentation to CURT
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How Are You Providing Value to Your Company?
Are you a trusted advisor or are you just an obstacle to getting things done and improving the company?
How can you better organize your roles and responsibilities to help ensure a more consistent success rate?
How well do you integrate with current operations policies and processes?
What are you doing to develop future Equipment Managers (like you)?
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Procurement Operating Budget Establishment
Capital Budget Purchasing Technology
Benchmarking Financial Advisor
Vendor and parts Management Safety
Documentation Specifications and Warranty
Outsourcing Shop and Facilities
Preventive Maintenance
Project Integration Risk Management
Scheduling Lifecycle Management
Rightsizing Logistics
What Makes a Great Equipment Manager?
Business Partner
Planner Leader & Communicator
Manager
Hire, train retain HR
Development Coordinate across company
Customer Management Meeting Management
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Personal Action Plan
What actions are you going to take as a result of this program? By when?
What resources or help will you
need?
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James C. Schug FMI Corporation 308 South Boulevard Tampa, FL 33606 Tel: 813.636.1254 Fax: 813.636.9601 Email: [email protected] Website: www.fminet.com
Jim is a principal and engagement manager with FMI, management consultants and investment bankers for the engineering and construction industry. With more than a decade of experience as an Army Officer, Jim led operations in complex and challenging environments. Some of his roles included strategic planning, training across large organizations and command with honors. He refined these skills working for a national builder, repeatedly leading his teams to successfully integrate operations, sales and customer service. Today, Jim is passionate about developing customized strategy and best-in-class operations with his clients. He applies practical experience with an in depth understanding of leading lasting behavioral change in dynamic environments. Jim earned a bachelor’s degree in quantitative economics from the United States Military Academy at West Point and a master of science in engineering management from the University of Missouri. Jim has completed post-graduate work with Cornell University in Achieving Competitive Advantage and is Certified in Lean Six Sigma. He has served in leadership positions on various local and national non-profit industry associations and is frequently invited to speak at industry events.
Jim Schug Principal
Thank you
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About FMI
FMI is the largest provider of management consulting, investment banking and research to the engineering and construction industry. We work in all segments of the industry providing clients with value-added business solutions, including:
Strategy Development Market Research and Business Development Leadership and Talent Development Project and Process Improvement Mergers, Acquisitions and Financial Consulting
Founded by Dr. Emol A. Fails in 1953, FMI has professionals in offices across the U.S. FMI delivers innovative, customized solutions to contractors; construction materials producers; manufacturers and suppliers of building materials and equipment; owners and developers; engineers and architects; utilities; and construction industry trade associations. FMI is an advisor you can count on to build and maintain a successful business, from your leadership to your site managers.
Knowledge • Expertise • Relationships
Visit us at www.fminet.com
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