AGC of Indiana recently hosted Gregg Schoppman, Principal at FMI in a webinar that gave AGC members advice on maintain a profitable and fulfilling businesses in a post-COVID-19 world. Schoppman identified seven habits for construction firms to embrace during the pandemic to help their businesses adapt amidst unprecedented marketplace changes. Throughout his presentation, Schoppman stressed the importance of constant and honest trend evaluations and the significance of smart spending and company culture.Framing his conversation by first reciting Mike Tyson’s “Everyone has a plan until they get punched in the mouth” quote, Schoppman wanted viewers to understand that the COVID-19 crisis demands immediate action from construction firms against a range of potential future realities. He laid out three potential scenarios for the industry stemming from the pandemic: Rebound, Revert, or Reinvent.

The “Rebound” scenario assumes the economic disruption caused by COVID-19 is deep but brief (i.e. one to two quarters of negative GDP). Construction spending put in place is moderately affected at the national level in this scenario, with more pronounced declines affecting specific markets and segments (such as New York, lodging, etc).

A “Revert” scenario assumes a deep and prolonged disruption with a minimum of six quarters of negative GDP. Construction spending put in place in this situation would be expected to fall to Great Recession levels and remain there for approximately three to five years.

Finally, a “Reinvent” scenario would entail a deep and slightly longer extended period of economic disruption than would the “Rebound” scenario and would necessitate a range of fundamental changes to the market structure. Such changes could include a long-term reduction in business travel, a major shift to remote learning and work, or an exponential increase in ecommerce. The divergence of demand across different markets and segments becomes significantly more pronounced in this scenario.

Focus on Operational Effectiveness

Schoppman said a business’s ability to respond in times of crisis depends first on its state of readiness. A clarity of vision, financial liquidity, strong relationships, operational capabilities, and adaptability all play crucial roles in crisis preparation and recovery. Firms must assess backlog and take a sober view of potential negative outcomes to identify where they could be exposed to impacted markets and segments. Creative energy within a firm should be channeled into “high-value tasks” such as building a better project, Schoppman said, not into creating an organization’s 17th version of a change order log.

Play Offense While Everyone is Defending

As new markets arise from this economic disruption, firms can take advantage of opportunities to capitalize on new offerings needed in the market. New niches will require horizontal or vertical expansion from businesses to serve existing customers better. Forced innovation can be used as a learning tool for firms to grow their technological leverage and increase their productivity. With stronger cash positions, acquisition opportunities might also arise for some businesses.

Market Exploration

A firm with scarce resources must take a hard look at how and where the future of this industry will unfold. Once market trends and potential scenarios are identified, Schoppman said firms should ask themselves, ‘Who will run this new opportunity, and will they be fully vested in that opportunity?’ Recognizing the traits needed for a person or company to succeed in a new opportunity will inevitably help a business determine ways to involve itself in those opportunities.

Smart Spending and Strong Collections

For all projects, Schoppman said it is important for companies to generate a 12-month projection illustrating cash flow and scenarios which show potential impacts due to overtime, shipping and supply chains, and extended general conditions. Other considerations which must be evaluated in the realm of finance include bonding and insurance costs, builder’s risk policies, and the state of unapproved change orders and claims.

Project Realism

Schoppman advised firms to keep a close eye on “good” projects to ensure the current margins associated with those projects remain similar to original, pre-pandemic margins. A deep examination of project trends and handicapping can demonstrate risk factors that ultimately lead to issues with projects.

Hulk Up Not Hunker Down

Schoppman said firm leaders should ask themselves how working from home and social distancing are impacting their company’s culture to ensure their company’s core values and vision are still being reinforced despite the physical distance between employees. During the Great Recession, one of the most common weaknesses of firms which did not succeed was a lack of communication. It may be difficult to calculate the Return on Investment of leaders simply being visible to their employees, but Schoppman said it is imperative for teams to see leaders, managers, etc. in offices and on jobsites.

The Significance of Culture and People Development

The growth of a firm’s people did not take time off during the pandemic. For most businesses, there is a steep curve before an individual’s talent is realized in the firm. Schoppman said companies should continue to ask themselves how they can keep their talent engaged at the tipping point of that curve. He said “best of class” firms are focusing on coaching, recruiting, screening, on-branding, long-range talent development, and their brand in the labor market.

Schoppman said winning in a post-COVID-19-reality will require leadership teams to address these challenges:

Market Insights

Staying ahead of market shifts requires the tracking of leading indicators that would dramatically impact go-to market plans, such as demand drivers, buying practices and preferences, and the overall competitive landscape.

Go-To Market

Success in a new market environment will rely on adaptive go-to market execution. Firms must translate existing capabilities into new market opportunities.

Preconstruction and Estimating

Cost and schedule will be paramount to owners post-COVID-19. Those firms with advanced preconstruction services and design-assist capabilities will be best positioned to deliver.

Operations

COVID-19 will make a significant impact on productivity: project shutdowns, social distancing, point of entry tests, resource scarcity, trade stacking, access, and site logistical challenges will all have an impact.

Organizational Design

There is no perfect structure, but the right structure aligns resources to execute strategy most efficiently. Potentially significant changes in staffing could necessitate structural realignment to maintain organization effectiveness and efficiency.

Compensation Programs

Programs that fluctuate with financial and operational performances are most effective when they align employee activities with strategic objectives and company values. The best plans achieve a high ROI through attracting, motivating, and retaining ideal talent while preserving equity returns.