15 Dec What Goes Up
Owners, Developers, Contractors, and Designers are all experiencing the current economic expansion. With project volume up, most parties are enjoying a profitable 2014; however, now is often when management makes the critical mistake that has a long term effect on the company. The key pitfalls to avoid.
The economic expansion leads business owners to make decisions that have future long term effects.
Overhead Creep – When times are good, businesses take on costs. These are often small at first and take the form of new or more office space, new equipment, cars, salary increases or other incidentals. The increased profitability enables businesses to reward themselves with those luxuries that may have been postponed in the past harder times.
Staff Promotions – A key to any successful construction program is experienced staff. Good times often result in management challenging junior staff with larger responsibilities that they are not ready to handle. Existing senior staff is also stretched beyond their normal capacity. These staffing decisions often result in less oversight by management, thus allowing small project issues to expand, only to be discovered later as large project problems.
Cash Flow – Expecting that the current cash flow will continue for the foreseeable future is another pitfall. Good times, good projects, good profits, become the office expectancy. Money is always available to handle the minor “project screw up” and management neglects to put cash aside for the eventual rainy day.
Under Staffing – Construction volume across the industry is up and people are hard to find. Companies make do with what they have or hire the less experienced to fill the staffing void.
Any one of these critical decisions can bring a company to its knees when the economy turns down. Unfortunately, we have found that management will often have two or three of these lapses in judgment, setting the course for a project failure or worse – company demise.
Sir Isaac Newton’s observation of gravity created the law of physics (and business).
“What goes up will come down”
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