Aggressive Strategies in Hard Times
In the worst of times, the best construction companies are aggressively planning for the next month, next year and next decade.
Mike Rabren, co-owner of Rabren General Contractors of Auburn, says his strategic plan is to stay focused on what has worked in the past. This is one of the firm's job sites in the Auburn area.
Photo by Vasha Hunt
Few business sectors have been hit as hard as the construction industry by the economic downturn that began in 2008. The Associated General Contractors of America recently reported that Alabama has lost more than 35,000 construction jobs over the past four years, a reduction of nearly a third of the state’s overall construction workforce.
“I’ve been in this business 35 years, and I’ve never seen it this bad,” says Rod Cooke, of Rod Cooke Construction in Mobile. “We have cut back on overall production. We’re strictly a public sector contract company, and it’s hard to bid the market. You have to adjust your bidding. You have to bid twice as much work with half the profit.”
But while it is tempting in such an environment for construction executives to hunker down and simply concentrate on making it through the next month, it’s also important to keep one eye on long-range plans. After all, history indicates that every time the economy drops, it eventually comes back up, even if the rebound is achingly slow. And success in the future often depends upon plans that are put in place two, five and even 10 years in advance.
“Regardless of what the economy is doing, every company needs to have a long-term strategic plan,” says Jack Darnall, with Birmingham-based Brasfield & Gorrie. “It may not be as easy or convenient to implement everything you’re looking at, but it’s still important that you focus on the future.
“The worst thing a company can do during a tight time is to abandon the whole concept of strategic planning. Maybe you take up only two initiatives instead of four. But any company that abandons its strategic mission because of tight economic times is really being shortsighted.”
To that end, Darnall says Brasfield & Gorrie has actually been hiring some recent college graduates the past few years. Darnall pointed out that newcomers to the industry must go through a lengthy training process before they can begin working in the field. Rather than waiting for the economy to improve before making those hires, and then having to wait again for the new employees to be trained, Darnall says the company has decided to be proactive with its hiring.
“It’s a little bit of a gamble,” Darnall says. “But if we can recruit the best and the brightest to our company now, when the economy does turn around we’ll be in position to take advantage of it. We think that strategy already is starting to pay some dividends for us.”
Tom Bolton, of Cooper Brothers Construction in Selma, says his company also is attempting to be proactive with its long-range plans instead of merely waiting for the economy to improve. He says as the client base has dried up in certain fields, Cooper Brothers has taken the initiative to go out and find new work.
“We’re looking at alternative methods of construction delivery and new markets,” Bolton says. “We have a new manual of project development and innovative ways to leverage our assets and knowledge with other firms of similar ilk. We’re generating our own business. We can’t wait for the private sector. With so much competition and with public sector jobs nonexistent, you have to look for new markets.”
Bolton says that Cooper Brothers currently is working on a plan that will focus on community development in inner cities in an effort to improve decaying buildings and urban blight. He says this initiative will enable the company to eventually hire more than a dozen new employees.
“Although it will be national in scope, it will be based and headquartered in Alabama,” Bolton says. “It’s an ambitious undertaking. I think it’s going to do very well. We have attracted national and international talent.
“We’re going to go into small neighborhood communities that have become war zones and try to turn them around and give them a new beginning. The communities are all for it, but they don’t have the expertise or funds to do it. You have had a lot of ideas with all kinds of grants and studies.
“What we’re trying to do is put the whole operation together. We have a number of equity partners. We’re striving to make it minority owned.”
For some companies, such as Rabren General Contractors in Auburn, long-range planning basically means continuing to do what has worked well in the past.
“When you’re good at something, you have to stay at it,” says company co-owner Mike Rabren. “We’re trying to bid a lot of work. We’re getting our share, staying busy. We’re doing like everybody else, trimming the fat and trying to stay profitable. We would like to grow quite a bit, but it depends on the economy. We’re staying steady.”
One of the keys to long-term growth, according to Chet Marshall, with Marshall Design-Build in Montgomery, is to analyze potential growth sectors and then pursue business in those areas, while they are still in the formative stage.
“We have identified several and have focused our marketing and sales efforts in those areas,” Marshall says. “This strategy has proven to be successful in the past, and we hope to build our business the same way in the future. If a few projects we are targeting come to fruition, we will be looking to add employees in a few areas of our company.”
An example of this type of long-range planning is the green-design movement that has become popular in recent years. Companies that had the foresight to train employees in green design during the early stages of the movement are currently reaping the benefits.
“We have recently completed a LEED-certified project, and we see that as the direction a sector of our industry is heading,” Marshall says.
Cooke says his company also is pursuing green-design projects.
“We’ve had people go to seminars to get certified,” Cooke says. “We’re doing a LEED-goal job in Pensacola and LEED job in Hancock, Miss.”
Overall, however, Cooke admits that long-range planning and expansion have proven to be difficult for his company in the current economic environment.
“We have no (expansion) plans on the table, but within the next 10 years we hope to expand with more volume and more revenue,” Cooke says. “But not right now. We’d have to get more work first.”
There is no doubt that times have been tough lately for the construction industry, especially in Alabama. Statistics from the Associated General Contractors of America show that Alabama had the fifth-highest percentage drop in construction jobs in the United States last year.
But the only way for companies to move forward is to continue looking to the future. That means making plans for next month, next year and the next decade.
“Companies can’t afford to stand still in the construction business,” says Darnall, of Brasfield & Gorrie. “They have to continue to reinvest and look at what they’re doing and try to head in a positive direction.”
Cary Estes is a freelance contributor to Business Alabama. He lives in Birmingham.