Storytelling Matters

As a CEO, your responsibility is to create an environment where your company and its team members can succeed. The responsibility does not allow for days or hours off while on the job. The responsibility also requires that you understand each team member’s role and hold them accountable to execute their role. The role of a board of directors is to hold the CEO accountable. The role and its accountability is missing when the CEO is the majority shareholder. A strong peer group can provide a level of accountability for a CEO. A Peer group can be found via many management consultants, serving on trade association boards, or by finding like minded trade contractors on X. Full Value Sub is working to grow a trade contractor group on X. Our handle is @FullValueSub.

Team members succeed when they are giving the tools, training, and clear understanding of how to execute their trade, or position.

A business succeeds when its stakeholders understands the company can execute its scope of work within plans, specs, and written SOPs to meet the client’s expectations.

The CEO with the support of the CFO is responsible for telling the business’ story to various stakeholders. The storytelling is nuanced to different stakeholders.

Construction Work in Progress (“WIP”) Reports tells the story of discipline and execution of a contractor at any stage of a construction project.

WIP reports document if a project is overbilled, underbilled, or within budget. WIP reports are usually the responsibility of the CFO, full time or fractional. Business stories are stronger when the story can be documented via clear consistent financial reports.

Bonding Companies, Banks, CEO, CFO, COO, and Project Managers are the stakeholders primarily interested in WIP reports.

• Overbilling creates positive cash flow for the business but it also creates a liability for the business. Overbilling is money received by the company, but not earned. Overbilling is a liability. Bonding companies and banks understand that overbilling increases the risk of not having enough money to finish the job. If a company has too much overbilling, they may not receive full lines of credit or bonding capacity, and may pay a higher interest rate or bond rate for the increased risk to the bonding company or bank. Overbilling is most likely critical necessity to the survival of a start up trade contractor, and is likely the number one reason start up trade contractors fail. The CEO and CFO should reduce a trade company’s dependency on overbilling as soon as possible. Overbilling like other debt threatens the survival of a trade business in a market downtown. Overbilling to match the amount of retainage held is an acceptable practice if needed and when possible.

• The COO and CFO will be watching to make sure underbilling is minimized. Underbilling means the company did not bill and will not receive payment for work that has been finished. Underbilling reduces working capital. Paid when paid practiced by GCs and retainage continually stress working capital of trade contractors. Trade Contractors should make sure they are fully billed or a little overbilled at all times. Trade contractors must avoid underbilling.

• COO and Project Managers will be watching the overbilling by any subcontractors, and the job costs as a percentage of budget versus work completed. The COO will be watching these numbers to determine the effectiveness the Project Managers to manage their project on time and within budget. The Project Managers will be providing feedback to the project’s team members. The PM should be looking to address budget concerns while there is still time to make corrections.

It is critical that the CEO makes data quality control as much of a priority as quality control within the execution of the business’s trade. The two biggest challenges within modern trade contractors is lack of or poor implementation of a managerial account system, and late entry of a budget for an awarded project. In the early days of a start up trade business the CEO is usually the reason they budget are late. As a CEO, this should be unacceptable. Creating execution for you not executing your job is bad story telling and the building stones of a culture without accountability. If a business cannot consistently produce clean accurate WIP reports along with other financial reports, the business lacks or has poorly implemented managerial accounting systems. WIP and job cost reports are managerial accounting reports. For construction, managerial accounting is the practice of using accounting information to track the effectiveness of the goal of consistent execution of a trade business’ contracts within defined plans, specs, and written SOPs.

Telling the story of a trade business’ story via managerial accounting information is the easy part of a trade contractor’s CEO’s job. Easy in the sense that all that is required is to get the data the business generates into a predefined set of buckets or accounts.

The most difficult part of a the job of a trade contractor CEO is verbally presenting a consistent concise story nuanced to the various stakeholders audiences. A consistent concise message to the trade business’ bonding company is different than a consistent concise message to a trade business’ prospective new team member or client.

For example, a bonding company and bank want to see consistent project execution and financial discipline. Bonding companies and banks are looking for knowledge and character. Bonding companies and banks want to know a first time CEO is not going to buy a bass boat, luxury car, or drastically increase your lifestyle by moving into a more expensive house the first time there is extra cash in the company’s checking accounts, or the first time the business shows a significant profit on a financial statement or tax return. A CEO needs to understand these concerns, and provide assurances with conviction that they will not occur under the CEO’s watch.

Team members want to know the CEO is focused on putting them in a place to succeed, and grow professionally, if desired. Understand that growing professionally to a trade personal may mean acquiring additional skills, or a greater mastery of their existing skills in lieu of moving up a corporate ladder. This is acceptable and needed to consistently scale a trade contractor.

Trade contractors clients want to know their project can be built on time and within contract scope and price.

Many companies develop Mission or Vision Statements to communicate with stakeholders like team members and clients. Mission or Vision Statements are not comfortably embraced by trade contractor’s team members, and are rarely provide an authentic message to clients.

Trade contractors are hired to execute their trade. The following sentence is a definition of execution for a trade contractor, and can be called a Prime Directive. A Prime Directive can be used in lieu of a Mission or Vision Statement. A Trade Contractor’s Prime Directive is to plan to have the correct people, material, and tools in the correct place at the correct time working within plans, specs, and SOPs to meet client expectation. The Prime Directive clearly communicates the Trade Contractor’s focus on execution to both current and prospective team members and clients.