From the Ask Tom mailbag:

Question:
We used to be the big dog in the construction business. We had the technical specialties that others couldn’t deliver, but now our market is almost stopped. There is still work, but the projects are further apart and the bidding competition has sliced margins razor thin. We have had to let some people go, but we went from cutting fat, to cutting muscle and now we are in the bone.

How do we put structure around multiple disciplines when we have to choose which discipline to keep? We can’t ask a VP of Risk Management to manage a project. And to terminate the position only adds to the chaos. You cannot cut your way to prosperity. How do we stop the chaos and improve efficiency when we are still contracting.

Response:
You are not cutting your way to prosperity. You are cutting your way to survival. Residential construction may have found a bottom, though September new home sales dropped 3.6 percent. Commercial construction is still behind the curve with significant downside ahead. If you think your market is shrinking, buckle up.

Last year, I took my clients into a meeting and asked them to project 2009 revenues. This was after the brew-ha-ha with the first stimulus, so some reality had set in. Across the board, all revenue projections were downgraded. I had the numbers inscribed on a 3×5 card and set in front of each participant. Then, I asked them to take another 20 percent off and explain how they intended to adjust their overhead to stay in the black. There was pushback, never happen, they said.

As I visit my clients today, those cards are still posted around. We talk about that exercise.

Here is the process of survival.

• Eliminate (everything that is not necessary)
• Simplify (everything that is too complicated)
• Combine (things that go together so we can consolidate responsibilities)
• Outsource (whatever you can to reduce your fixed overhead related to a function, especially part time functions)
• Automate (the things that are left. Don’t automate things that should have been eliminated in the first step)

Credit to Timothy Ferris Four Hour Work Week