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Matt Verderamo is a consultant with Baltimore-based Well Built Consulting. The opinions are the author’s own.
In our work with over 100 contractors, we’ve identified three primary leadership team archetypes:
- Level 1: Stabilization
- Level 2: Optimization
- Level 3: Maximization
Each level indicates a company’s readiness for growth as measured by the ability of its leadership team to advance initiatives and work on the business.
It pays to identify where your leadership team falls on this spectrum today, because it will emphasize the next best steps on the business growth path.
stabilization
When a contractor is in stabilization, they are doing nothing but treading water.
The leadership team cannot work effectively in the business without significant support and hand holding. They typically struggle to communicate across departments without an external facilitator in the room, sometimes because there are fundamental trust issues. Other times, they simply haven’t developed the kind of executive thinking and communication needed for large-scale conversations.
The problems they solve tend to focus on immediate fires. They may have no job descriptions or little business development strategy. They need to quickly attack many small problems and be nimble in doing so.
These contractors need further development, but also represent the best opportunity for rapid improvement.
For example, three years ago, we started working with a $17 million subcontractor in the southeastern United States. Everyone in the company reported to the president; they didn’t have department heads, they didn’t have job descriptions, they had never considered building an organizational chart.
Matt Verderamo
Permission granted by Well Built Construction
Within 12 months, the business underwent a complete makeover. Leadership implemented a scalable organizational structure and found people to fill all major positions in the department. They also developed the sales skills and research selection practices they needed to refine their estimating strategy.
In just three years, the contractor grew from $17 million to $44 million while maintaining a net return of 10% plus. Meanwhile, the management team began to perform at a much higher level. All they needed was guidance on structure and a little help with what actually looks “good”.
The business quickly moved past the break-even level and was able to focus on bigger, more difficult problems.
optimization
Companies with leaders in the optimization level have learned to move forward with their own initiatives, but still struggle to “see” the future beyond what is immediately in front of them.
When I say “seeing the future,” I’m talking about the team’s ability to extend their planning horizon from one to five years and ask: What do we want the business to look like in the long term? And, perhaps more importantly: how will we get there?
Looking to the future, and working backwards to make that future a reality, are learned skills that are in high demand, but often in short supply in the construction industry.
Most leaders have never been asked to think about the future and rather have been directed to look at the problems immediately in front of them.
As a result, the problems that are good to solve are usually the three- to six-month problems that go along with making a department stronger and more effective. They may be developing key performance indicators and developing a standard quarterly review cadence; sometimes they build their leadership development programming.
While leadership teams at the optimization level need much less support to move initiatives forward, they often need significant support to build a vision. This is usually done by the owner or an outside consultant to help them think bigger. This is a learned skill.
One way to advance your long-term strategic thinking ability is to simply answer the question: What would have to be true for me to be proud of this business three years from now?
This can unlock some surprising responses from your leadership team. Suddenly, they can clearly see where they want to go. Once they do, they just need to work backwards and build a plan to make that future a reality.
Don’t be discouraged if it takes months or years to develop your team’s “long-term” vision skills, that’s normal. But it is essential if you want your business to grow and dominate in the future. You can’t afford to wait to develop this skill among the most important people in your organization.
maximization
The level of maximization is the dream: only 2% of the contractors in the country exist here.
Essentially, it means that your executive team has proven their ability to drive initiatives forward, sees the future clearly, and regularly turns it into reality. Typically, these executive teams are very effective at finding unique ways to achieve profit and revenue.
For example, a $350 million+ subcontractor client fits the maximization mold well. Instead of focusing on low-level issues like creating standard operating procedures, they’ve moved on to much more difficult problems, like how to open their third geographic location with more than $100 million in revenue. They are concerned with working capital, gross profit variation, and creating a corporate structure that can scale as they grow.
They often need high-level advisory input and knowledge of best practices, but otherwise, they make things and solve gigantic problems that help hundreds of people.
These are the companies that almost always seem to win over and over again. They have the best reputation and their clients love having them on their projects. This is a recipe for success.
There is no guaranteed level
Fascinatingly, we’ve found that leadership teams don’t live at the same level forever. They can grow from one level to another, or even fall back depending on the state of their business.
For example, a general contractor building a multi-family home during COVID-19 was at the maximization level when interest rates were low and market potential was high. The executive team hummed. But as interest rates rose and the development market slowed, they reverted to optimization and had to focus on short-term issues like where to find jobs and build their backlog. It was a matter of survival.
If you’re reading this and thinking, “Where does my gear fall?” I advise you to spend the next month assessing your leadership team’s ability to:
- Advance initiatives on your own.
- See the future clearly, one to five years at a time.
- Work on the biggest and most complex problems.
Then determine what level you are at and start building the skills to level up.
