TQM (Total Quality Management)

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I Salute You

A few years back, I was asked to consult with a construction company about implementing a Total Quality Management program. (TQM, as everyone knows, is a management process developed by Arthur Deming, which he taught the Japanese helping them develop a strong, global economy after WWII. It is a concept of participatory management, customer obsessed, with quality at every level being the culture of the company.) After a great deal of work, discussion, training, process review, and the enthusiastic support of the supervisory personnel, the program was ready for implementation. Including a Best Practices Field Committee.

And then I received a telephone call that the operational manager of the company had told his project managers: “Listen, don’t pay attention to this stuff. I am just going along with it because the President thinks it is a good idea.”

The company has since faced oblivion three times, countless claims and almost a culture of repetitive mistakes. At about the same time, another company wanted to develop a plan to improve its operations. Everyone got on board and in the last ten years has been one of the more successful and profitable companies in its region. Same kind of company, same region, same economy.

The principles of the latter company, though not called TQM, totally embraced the concepts of Total Quality Management. These concepts are embraced in four major groups:

  1. Foundation: Ethics, Integrity and Trust
  2. Building Blocks: Training, Teamwork, Leadership
  3. Binding Mortar: Communication
  4. Roof: Recognition

I enjoy visiting the latter company. It is fun to work there. The employees enjoy their work environment. It has become the preferential company to serve the needs of most of its customers. The company stays on top of its game, now uses BIM for example, and is a leader in design build delivery systems. It has adopted some of the practices of Lean Management. It continues to improve through process evaluation and training of its personnel…at every level. The company does not take on work just for revenue ‐ and it stays within its limits, its capability to perform. Its craftsmen are skilled and the supervisory personnel have the commitment to assure an excellent work force.

I only mention the two examples (by the way, each is a composite, so don’t try to figure out which companies I am talking about) to illustrate that the concept of continuous improvement works and further that it is vital to sustained prosperity of any company. Deming, the father of TQM, had a fourteen point program and the first was “consistency of purpose” which in my language was to develop an organization for the long haul and not just short term profit. Frankly, if a company really thinks out that first point and implements it, the other thirteen points follow. Organize for the long haul. What does this entail?

  • Customer Commitment
  • Quality at every function, everyday
  • Training of field personnel and management personnel alike
  • Improving processes and people
  • Participative Organizations
  • Removing fear as an obstacle
  • Recognition of personnel
  • Successorship development at every level (ie. aging field supervision, who will take their place?)
  • Being Problem Solvers
  • Work Place Environment where people want to work
  • Development of reputation: customers for life concept
  • Strong Values and Ethics
  • Productivity Practices that separate you from competition
  • Effective use of technology
  • Conflict prevention / conflict management
  • Effective Reporting Systems
  • Leadership

Well, you see why the one contractor’s operational manager didn’t want to fool around with a TQM type program. It is difficult to be an excellent contractor. You have to want to do it. But it is difficult to be an excellent anything…an excellent doctor, welder, spouse, parent…or president of a construction company. You have to believe that the cost / benefit ratio exists. That the commitment to develop an excellent organization which is in the loop for the long haul is a better life than one where the struggles are constant and the wolf may not be at your door, but has it on his GPS.

You also have to believe that Darwin has been, and is working; and that the future is for the best, not second best.

You should also realize that a full implementation of TQM may be costly with a low cost / benefit ratio, and that there is no “one size fits all” package. But the concept of continuous improvement through evaluation of personnel and processes figuring out how to be more competitive than your competition is an essential part of your business planning and execution. And you should also realize that without the president and management staff supporting such programs, looking ahead and preparing for emerging markets, committing to productivity gains and development of a strong work force with effective technological tools in place . . .well, guess what the results will be one day.

I. Becoming and Staying Successful in the Construction Industry

A. The Role of Small Contractors: This is largely written for small contractors, not because of some deep‐seated emotional connection with them, but just because of reality. According to a recent study by the National Research Council on Productivity in the Construction Industry:

“Of the 710,000 construction firms with payrolls in the United States in 2002, almost 80 percent had fewer than 10 employees, accounting to 24 percent of the workforce. In contrast, only 585 construction firms (less than 1 percent) had 500 or more employees (8 percent of construction workers). Looking at it another way, 98 percent of all construction firms had fewer than 100 workers (78 percent of the work force while two percent of all firms had more than 100 workers (21 percent of the work force)”

And the Federal Government tries to encourage and assist small construction contractors through its various diversity contractor programs, to the tune of billions of dollars in construction in each. So the small construction contractor, and its quality performance, is a vital component of our economy. The principles in this section will apply to larger contractors as well, for the basic game plan is the same for any contractor. I am always amazed in dealing with larger construction contractors that they often need to learn or re‐learn these principles as much or more as the smaller contractors. Indeed, many large contractors do not survive, many are fighting out claims against and by owners as this document is being written.

B. Can You Survive as a Construction Contractor? The turnover in this industry is about as high as any industry in this country. The odds are generally against you because of its very unique challenges, dramatic economic swings and the fact that this is an industry that has been more “unmanaged” than even “mismanaged” for a long time. Studies indicate that our productivity has only marginally improved over the last twenty‐five years, if it has gained at all. But the answer to this question depends upon the contractor’s answer to these questions:

  • Are you developing your organization for the long haul?”
  • “Do you KNOW what is required to develop a company for the long haul?”
  • “Are you COMMITTED to understand, develop, and implment the actions required for a construction company to become and stay successful?”
  • “Do you accept that these steps do not occur overnight and that change will be required . . .and that becoming and staying successful is a team sport, involving everyone’s enthusiastic support and commitment?”

If your honest and objective answer to these questions is “Yes”, then read no further. You have already arrived and I will come to your company and learn from you. If your answer is “NO”, or “SO‐SO”, or “MAYBE”, then perhaps the following material will assist you (not guarantee you) in creating and maintaining a successful company which will endure generations.

NOTE: I continue to emphasize, “stay successful”, not just “become successful”. I do not believe it is terribly difficult to get started and become successful for a while. The genius comes in staying successful. As someone said, many are called, few are chosen. My goal in assisting contractors is woven in the fabric of sustainability, remaining healthy in good and bad times, and having successorship into future generations. It is woven around the fabric of becoming the preferential contractor in your field and your market area. It is woven around performance and not revenue.

C. Average Isn’t Good Enough.

1. It is the end of the Dark Ages in construction. During the “low bid” cycle of design‐bid‐build, the “C” student or performer could and did get by. As long as it could pay for a bid and performance bond (where required), bid low at a meager margin, perform well enough to avoid termination or significant liquidated damages, and be reasonably successful at claims prosecution, a “C” or mediocre construction contractor could hang around at least for the intermediate term. Even in those days, the “C” player certainly had a shelf life of less than 10‐15 years and often much shorter. Owners grew weary of poor workmanship, missed schedules, cost overruns and claims (and their ire was directed to the design community as well), so new delivery systems have been developed and pre‐qualification has become the name of the game.

So at the outset, let me emphasize that to become and stay successful, contractors must realize that the good ole days are vanishing quickly, that there is a new age of enlightenment where QUALITY PERFORMANCE by excellent contractors is becoming the culture. Darwin is working on the “C” players. They are an endangered species.

2. Customer Obsession and Continuous Improvement. Today’s and tomorrow’s contractors, large and small, must embrace the absolute realism that they get in business and stay in business for one reason and one reason only: to satisfy the needs of a customer. And because of competition and technology (and the economy), the contractor must stay ahead of the pack, to be the preferential contractor because of quality performance and because of continual improvement. Tomorrow’s contractor will be better at the end of the year than at the beginning, and each project will be managed better at the end than at the front end because of commitment to and practice of continuous improvement of personnel, processes, and creativity. Still making a reasonable profit!

Professional football is a good metaphor for a construction company. There must be a home office which puts together the support for the team. (financial, logistics, tools and equipment, the overall strategy and goals, led by a general manager who is responsible for putting together the coaching staff and the team, and the development of the team that can win games each time they play). Then there is the game to be played (there is a game plan, everyone has been trained on the game plan and their individual duties in making that plan happen, there is a signal caller and sometimes plays changed at the line of scrimmage). There is a team, a bunch of well trained players who work together, in unison, to score or defend against scores. Yet, each player realizes that his one failure could cost the team the game, his failure to provide coverage in the end zone, or his toss of the ball into double coverage allowing an interception: In construction, that failure to provide notice, or to fail to check the absence of reinforcement in the CMUs. And like football ̧there must be an umbilical between the home office and the field operations. They must work together as a team. So the home office must be an “A” player, the field office must be an “A” team and the individual players must play as if they were in the playoffs and mistakes would cost them their season.

D. The Elements of Becoming Successful.

1. The Drucker Principle. Peter Drucker, an American management educator and consultant (indeed an American icon) stated that “marketing is the identification of the needs of a customer”. (Very creative people such as Steve Jobs and Bill Gates went beyond and said that “marketing is identifying needs the customer is aware that he has and creating needs that the customer didn’t even realize that he had until presented with their solutions by these two geniuses).

2. The “Enlarged Drucker” elements of business success for construction contractors are comprised of experience, case studies of companies which have done well and not so well, and the integration of lessons from Dr. W. Edwards Deming whose concepts of total quality management (TQM) enabled post WWII Japan to become a major economic powerhouse. These elements will be set forth below, but first it is important to recognize that the word planning is the most over used word in construction. It must also be recognized that the term “planning” is also the most under used activity in the construction industry . . .at least from the standpoint of being effectively used. Large or small, planning is the critical path of becoming and remaining successful in this industry. There are several layers of planning which will be further dissected but, suffice it to say that few contractors stay profitable in this business because of serendipity or luck. Contractors which have been around a long time have planned to be around a long time; contractors which perform successfully project after project have planned to do so; contractors which are selected from the multitudes by owners are those which planned to be preferential contractors. I know contractors which have planning meetings quarterly and discuss “How to Be Great”.

Strategic Planning

Productivity in the construction industry has crawled forward, if at all, over the last twenty‐five years. We are the only industry which has not had major productivity increases and most of those have come from the trend toward lower paying non‐union trends rather than real performance gains. In spite of the bad economic conditions, we have noted that a number of construction contractors have “knocked them dead”, doing very well during this downturn. They have survived and survived profitably. Inevitably, our analysis indicates, these are companies which look to the future, plan on emerging markets and how to penetrate them; commit to process improvements and best practices means and methods, effective use of software tools which help them manage their companies and projects, and develop other creative tools for getting into and performing profitably into markets, good times and bad. In all cases we have seen strategic planning as a catalyst for continually successful contractors. One of the icons of this approach was a small midwestern plumbing contractor whose owners (brothers) got together in the early ‘70s and developed a plan to penetrate the emerging water treatmentmarket that was about to unfold in America. Through effective planning, developing of a Total Management Program that really worked and hiring and training very good personnel, this company is today one of America’s premier mechanical companies, with pipe fabrication that ships pre‐fab components all over America, strong piping/mechanical/fire protection/service divisions which is now being headed by a well planned successor group of employees.

Survivability In this industry just doesn’t happen. I am equally convinced that staying successful is a product of planning, very good personnel, continuous improvement of people and processes and taking advantage of technology in both technical and management systems. Studies show that sustainability is a function. Managing growth for becoming successful is not terribly difficult, but STAYING successful is a bear!

Strategic planning is establishing the concept of your business, markets you would like to penetrate (and what markets are available and emerging and what markets are shrinking or becoming so competitive that it is difficult to get a job in them and to perform profitably), your value system and principles, your goals. Where do we want to be next year? In five years? What kind of company do we want to be? What Game Plan should we pursue to get there?

Everyone knows the story of the Trojan horse. It began with a strategy, a goal; to take the castle! So, in your company, your horse is built for the purpose of “taking the federal market” or design/build, or the health care market, or to participate in SBA programs. Your Trojan horse is the development of an organization which is better than the competition, quality and customer obsessed, profit driven , not revenue driven. That has a more skilled and effective workforce than the competition and a work place environment that attracts personnel and not repels them.

Tactical Planning

Once the overall goals are established, action plans are necessary to achieve the goals. In the case of the Trojan horse, the tactical plan was to build a horse that soldiers could be hidden in, then a plan of action for their training, arms, and what to do when they entered the fort. Your tactical plan may be to develop a best practices committee to improve field productivity or a “teaming” approach for penetration of the federal market, or a program for the continual development and training of personnel. Part of the tactical side is the development and evaluation of processes for how to run the operation; a plan for input from the employees aimed at reducing inefficiencies for example. It may and should include the development of technological issues that are occurring in the industry, including “Green”, BIM, Commissioning and the various technology changes occurring within your sector of the industry. For example, some twenty years ago building codes began requiring reinforced CMUs in various structures and many masonry contractors failed to keep up with the code changes and ran into very serious financial problems because they did not properly install reinforced block walls in schools they were building. You have to stay current in all aspects of your business! It may include action plans for assuring that the field properly uses the management tools available to it, such as earned value reporting, scheduling, the three step quality plan, field documentation.

Operational Planning

Now you are inside the fort, what do you do and how do you do it. In your construction company, it is mobilization, scheduling, built‐in‐quality. The battle has begun and every year, month, week and day of the project must be thought out and communicated to the troops. And there must be mechanism for the troops to communicate back to let the leaders know how things are going, what is going well and what is not, what can be improved and what should stay the course. In football, after a play a wide receiver returns to the huddle and tells the quarterback that those post patterns just aren’t working and better try a few short ones right over the middle where there is no coverage. Communication must always be a two way street. Operational planning consists of job selection, job set up, scheduling, planning, safety, supply chain management, contract management, human resource planning, team building, interpersonal relationships and all the other activities required to run a profitable project.

Execution‐ Closed Loop

And of course without execution and performance all that planning and a nickel get you a five cent cigar. We have coined a term “PLEX” which is a contraction of Planning and Execution. These two activities are Siamese Twins: if the heart of one dies, so does the other. Both are joined together as a continuous process. An element of execution is the evaluation of the plans and feedback for revising, improving, or in some cases abandoning. This is the Plan‐Do‐Check‐Act cycle:

  • Plan:Evaluate the issues and propose a solution
  • Do: Perform and Evaluate
  • Check: Feedback and either implement plan or develop revisions
  • Act: Execute . . .but continue evaluation and recommendations for improvement

The point is: planning and execution is a close loop process, never to be done without constant feedback. For example, an estimate is a plan . . .a plan for doing the work at given work hours. But in the execution, it may be that the estimated work hours are significantly off (either high or low). There should be a feedback system to estimating to let it update its units or perhaps for the field to figure out that the units were correct but the execution was off. In market development, the same is true and a contractor may determine that its plan to open a branch office was spurious. Current data on market conditions must be fed back to management to enable it to alter its course. Thus, all planning is subject to real world conditions and the ability of the company, based on current and valid data, to modify an approach to the market or to a job.

If there is no closed loop, no feedback, collection and evaluation of data, and revising as necessary, rest assured that rigidly and perhaps ignorantly staying the course assures that an iceberg will be hit, for the icebergs are certainly out there. All eyes must continue to scan the horizon to stay the course where the conditions are as planned and to alter where it is necessary or proper to avoid an obstacle or to improve the route and thus arrive at port perhaps sooner than planned and all in good health, the ship carrying the bounty (profit) as forecast.

D. The Yellow Brick Path to Success Consists of the Following;

1. The president is a leader as well as a manager. Leaders are creative, looking for markets to penetrate and methods to penetrate them, building organizations which are first class in every way, helping to figure out how to develop edges over the competition. Managers develop processes and assure that they are followed: leaders are futurists, challenging the present and developing with the aid of their staff new ways to perform. They make working at their companies rewarding and challenging. Leaders are essential ingredients of successful companies. Otherwise, the company becomes a “me too” company and lacks competitiveness. And the leader conducts SWOT (strengths, weaknesses, opportunities, threats) exercises at least annually to continuously evaluate where he is in the market plan and how well he is doing. (See attachment for tools involved in conducting a SWOT exercise) So the first yellow brick is the leadership qualities of the president and the staff. And I expect the president to be a good coach: he will know the players on his team, help them succeed, listen to their ideas, be loyal to them if he expects them to be loyal to him. He will be honest with them if he expects them to be honest with him. He will let them know that this company is for the benefit of all and not just his own personal ATM to be used to buy his adult toys. The best president I ever knew was Martin K. Eby Sr. of Eby Construction from Kansas. Mr. Eby had a very strong value system and did not suffer those who did not. He walked his jobs extensively, would actually pick up a vibrator on a concrete placement and work side by side with a craftsmen; he was dedicated to the development of his personnel in that even those with engineering degrees work in the field before coming into the home office. He figured that he could teach how to estimate or schedule but he couldn’t teach field experience. He walked the “trap line” as I called it, visiting and talking to his employees to find out how they were doing, getting ideas for improvements and sending out messages (The great presidents today are great listeners: they listen to inside and outside customers, analyze what they have heard and implement as necessary) to all crews about new ideas he had discovered. He considered one of his main functions to be a guru, to teach others and to coach others in his organization. He started small but he practiced the principles set forth in this section. Many of the larger companies I have dealt with started off as “mom and pop” companies and almost without except the practices which enabled them to grow into larger firms are embodied in this section. The exception is that in the “olden days” there was more of a command and control approach by the president but he still listened to his people, he realized that good people performing at a high level was his edge, his differential advantage in the market place. I wish all organizations had programs such as the “peer groups” of Mechanical Contractors Association of America, which gives a small group of MCAA contractors who do not compete against each other the opportunity to audit the operations of each other, to share ideas on management and productivity. But even if you are not a part of an organization which has such a formal arrangement, there are many opportunities for sharing, for obtaining information from others, for mentor arrangements which should be considered by small and large companies alike.

Running a construction company requires several sets of knowledge. The president must be technically strong; if this is a masonry or mechanical company, he must know that trade like the back of his hand. He must also know about three sets of management:

  • The management of a company operation which includes systems and people.
  • Field operation management which also includes contract management, schedule management, productivity and safety management, and labor relations management.
  • Financial management

So often the third, financial management, is the Achilles heel of presidents and so it becomes important to learn as much as possible about it and then to have an in‐house accountant or financial manager on whom you can really rely.

There is a concept known as the Pareto Principle which is used to justify many different situations. In this case, I will use it to get across the point that of the 100% of the things a president should know and do, he is probably pretty weak in 20% of those things. Human nature is that we shy away from our weaknesses and that is why we can get blindsided. So, a president should identify his “20%”, that is his major weaknesses and then do whatever he can to strengthen them (either by studying or employing someone to fill the gap or some combination.) And of all the things a president should do, about 20% are things that are absolutely essential to its success – the others are important but these 20% are the “do or die” of his leadership. Each company has a different “bucket” of those 20% but the really good president identifies them and takes appropriate action accordingly. (And one of the items in the bucket is the “Frisby Learning Curve: i.e., contractors have learned to repeat their mistakes, so identify the key repetitive mistakes you and your company continue to make and work on those) I can also tell you right now that true leadership is one of the shortfalls of most of the presidents I know in both large and small construction companies.

2. Commitment to building a company which has sustainability, that has edges over the competition, that continues to get better is without fail one of the most important characteristics of our “model company”. As stated before, this isn’t easy, becoming very good and staying very good. This may be the toughest business around to do that. It is a very complex, high risk industry and thus the challenge is to have a very high bar of performance at every level in the company and developing this standard throughout the company is difficult, painstaking and time consuming. But the equation of the president who is a real leader and the commitment of the leader(s) to develop an outstanding company (and those are the only ones which have real sustainability) is as close to the magic potion as will be found. There are two basic approaches of management: one is term bottom line management which is basically an approach of expediency that says whatever it takes to make the profit we will do. These are typically command and control companies and the environment is not conducive to employee participation. The other concept is top line management or principled management: the balance of the items set forth hereunder are really derivatives of the concept of principled management which is aimed at a participative, fear free environment dedicated to superior quality performance and to the long haul. However, having said these things, if the president is very competent and his staff and workforce is mediocre at best, the president may need to be more “command and control” until he develops his organization. Developing an organization may mean replacing players without potential with those who have what it takes. Professional football teams do not win games with teams comprised of 100th round draft choices. And so personal recruitment and development is a huge role for the president of any company.

3. Identification of WHO the customers are. Sounds very operation headstart, but in this economy, those contractors who identified who the customers were NOT (such as the commercial sector) very early on and found out who the customers WERE OR WOULD BE (for example the Federal Sector or health care) and made the transition have done reasonably well. Identification of WHO the customers are is a dynamic process and requires a real dedication. Obviously being a part of industry associations is a good resource, but I have found that the more successful presidents are also emerged in community affairs, sitting on Chambers of Commerce Committees, bank boards or lending committees. They know what is going on, what the trends are. They attend the trade shows and often have supplier and manufacturer representatives visit their firms to give them a heads up on trends. Manufacturers do a lot of economic studies and are ahead of the pack on both technological, economical and demographic trends. If you want to be a “me too company”, you do what other companies do, and that is just read the journals and listen to the news. If you want to march to the beat of a different drummer, if you want to have edges, you have to figure out different ways of learning market trends and how to prepare for demographic changes. Again, we go back to the leadership role of the president and his staff.

4. Identification of WHERE the customers are. This is a function of the trends in demographics. If you have infrastructure competence (say water treatment facilities) and you are in an area which has inverse growth, better figure out where your market is heading. The problem is that perhaps a bunch of other contractors are also scrambling to get work in Texas or wherever the market is developing. So, not only WHERE but HOW you participate in that market. And do you know enough about the market (labor productivity and availability, for example) to take the risk of trying to pick up work in a faraway location. Again, many are called and few are chosen. Let’s look at two case studies:

<Case Study No. 1

Some years ago, a very large addition was being made to the Bishop Hospital in Hawaii. A local (very large and very good) contractor had bid the job and was low but was still above the budget. A mainland contractor from the midwest bid it when the project was redesigned and re‐bid and was over 8% lower than the Hawaiian contractor. This was an $80 Million plus project so that was a lot of change to leave on the table, but the bid was confirmed and the project awarded . . .and completed successfully ahead of schedule and below its budget. Remarkable! How did he do it? Instead of simply stripping the job back in Minnesota, the contractor’s president visited Hawaii months before the job was bid. He talked to union representatives and had lunches with suppliers and subcontractors. He found and identified the best foremen and superintendents in the area and had meetings with them to discuss the work environment, the potential obstacles and how he could come into the island as “one of them” instead of being an outsider. It paid off. He learned the market. There is a line in the Music Man, a movie about a singing con man, that says: “You gotta know the territory”. In our market conditions, because of the different delivery systems, the need to sometimes leave the comfort of our own local market area, we had better know the territory. So, in knowing where the market is we must also know its conditions, its obstacles and challenges. In knowing who the customer is, we must know the customer needs, what it values and how to do business with it.

Case Study No. 2

Again, some years ago a huge engineering firm decided that it would become a contractor and do very large design‐building industrial projects. It had just done a cogeneration plant in Pennsylvania using union labor and subcontractors when an opportunity in the Southeast came up. This firm had not done work in this area and was pleasantly surprised when it realized that labor rates were about half those of the union personnel it had employed in the East. So the firm bid hard dollar for a cogeneration plant that was very close in design to the Pennsylvania project and besides, it controlled the design so how could this project be anything except an enormous financial success with labor rates so low. Well, the labor rates were low, but so was productivity which was well over half that of the union personnel on the other project. The firm took a huge financial bath and learned an invaluable lesson: You gotta know the territory.

The Federal area is a “white horse of a different color” as they say and here again it is vital to know how to play the game. Appendix sets forth some of the guidelines for dealing with the risk of doing business with the United States.

5. Identification of the needs of the customer (for example, the needs in many procurements today is value and quality which may take precedence over price alone. Identifying HOW you participate in such markets is vital to your success. And as noted, there is a huge Federal construction market through the SBA and so the small contractor must learn the ropes of the SBA diversity programs and the larger contractors must learn how to take advantage of them through teaming and mentoring arrangements. The rules of the game vary often dramatically from customer to customer and the contractor needs to understand those rules before he suits up and the whistle blows for the kickoff. Learn the needs very well indeed, learn how the game is played very well before you even decide to suit up.

6. ORGANIZE to solve the needs of the customer and COMMIT to the activities required at the home office and project levels to do so. Part of Organization is staying current with technology such as Green Buildings, BIM, Commissioning, Lean Management, and different electronic scheduling and cost monitoring systems. These activities involve the following categories:

a) Processes. The various processes for project success must be developed, communicated, evaluated,and performed at the highest level of quality. Remember, we want processes, procedures so that we have a well conceived game plan for how we perform the various operations. But we also need creativity and incentives for our personnel to sometimes challenge those processes and come up with better ideas. We want to be slaves to effectiveness more than to the procedure. But we don’t want to deviate from the procedure unless there is a true basis to do so. Some of the more important processes would be:

  • Built‐in‐Quality (BIQ) – not inspect and correct. This concept of BIQ is absolutely essential to Getting work and performing it profitably.
  • Scheduling
  • Planning
  • Supply Chain Management
  • Material Handling
  • Job cost reporting,including earned value
  • Safety
  • Conflict Management
  • Documentation
  • Job Start‐up
  • Closeout Management
  • Payment Procedures
  • Contract Management
  • Decision Making
  • How to Manage Others (e.g. How is a sub to manage the general and vice versa)
  • Productivity practices
  • Productivity Improvement Process (This Includes waste management, or the prevention of unnecessary steps in the process
  • Team work – how to be customer obsessed and still operate within the contract and not be irresponsible in the application of your resources

Large or small, these are the elements of high priority for every project.

b) PEOPLE. The name of the game is people. In the book Getting to Great, the author suggests that the pathway from good to great is the development of excellent people at every level in the company. The major edge that great construction companies have over their competitors is PEOPLE:

  1. Selection of people with improvement potential: this includes technical and management skills but ethics and values as well as the acceptance of accountability.
  2. Continuous training of all personnel
  • Effective communication with all personnel
  • Participation by all personnel in knowing what is going on, being given opportunities to provide input and feedback on operations processes.

  • Enablement and Empowerment. Before there is empowerment (that is giving someone the authority to perform) you must first enable that person to do what you are empowering them to do.
  • Training is a continuous process. It occurs on every project by the immediate supervisor as well as in –house programs and those conducted by trade associations. Let me emphasize that the on site supervisors have the duty to train their crews and to assure quality and safety performance and this means that those supervisors must be well trained as well. Training must consist of all the elements involved in the person’s functions, the technical skills as well as the management skills, and effective use of all electronic project tools. COACHING is one of the most effective personnel training tools and so mentoring should be a part of the culture of every company.
  • Solution Providers. Personnel must Learn to prevent problems and to be able to look ahead at potential issues and prevent or mitigate ill consequences. The Contractor is responsible for means and methods and must be able to figure out the best and most effective way to get things done.
  • Successorship Development. You cannot have sustainability without developing people who can move up in the organization and continue operations as well or better than the personnel they are succeeding. This again is a planning exercise. You may have a very good operations manager but to take over from the president without having the opportunity to learn corporate financial matters, for example, is to ham‐string his ability to quickly take over that position so the steps to move up the ladder from the top down should be thought out and developed.

c) Risk Management. Insurance companies set aside reserves for rainy days or tsunamis. Life insurance companies have reserves for mortality incidents. In the construction industry the risks are significant both internally and externally and so it is necessary to figure out how to manage those risks. First, cash management is the life blood of a company: getting jobs you have the ability to perform for a reasonable profit, avoiding high risk jobs and unreasonable risk shifting clauses in contracts, and assuring that they have capable people to run the jobs they get. In addition, they are cash managers, making sure they avoid the need for rework, backcharges, schedule overruns. They push their jobs so they get those billings up and paid on a timely basis, negotiate the change orders quickly and bill them promptly. And then they run a tight ship, avoiding needless expenditures in the field or the home office and keep liquid reserves in the event of a down turn in the economy or that bad job.

The concept of developing a highly successful business is to know the right things to do, Assure that everyone in your organization knows the right thing to do, then doing the right things, and documenting that you did, and then continuously getting better. What you probably did not appreciate as you read through this is that all of the elements of TQM are basically embodied in it.

The Profitability Quads

And so to recap, the principles that have been set forth basically are the same ones that Deming taught the Japanese and are the same principles which are obvious when one visits a highly successful company and these are:

  • Strong values and principles. Accountability
  • Development of excellent core strengths through:
    • People development and continuous training
    • Participative, fear free organizations
    • Processes which are aimed at high quality performance
    • Measurement
    • Feedback systems to enable all personnel to comment on improvement recommendations
    • Team work (in the home office, in the field, and between the office and the field)
    • Strong skilled workforce with recognition for efforts
  • Customer commitment. Development of customer for life attitude. Mind sharing with customer to receive its feedback on your performance and opportunities
  • Continuous improvement and being better at the end of the year than at the beginning company wise, and on each project being better at the end than at the beginning.
  • Supply chain management
  • Leadership, creativity. Commitment to quality and to the long haul.

The foregoing points are very consistent with the key elements of ISO 9001 2008 which establishes universal standards around the following:

  • Continual Improvement Customer Focus
  • System approach to management
  • Process approach
  • Factual approach to decision making
  • Supplier Relationships
  • Involvement of people
  • Leadership

Appendix ( )
PLEASE SEE DOWNLOADABLE DOCUMENT FOR APPENDIX Total Quality Management in the Construction Industry (1373 downloads)

Tom Frisby

Tom Frisby is: a management consultant with a legal, construction and financial background; is a negotiator, expert witness, mediator, author, educator who has managed a successful construction consulting firm for over forty years.

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