Many contractors start out building jobs on their own, but it doesn’t take long before you need help with production.
How should production be organized?
There are three basic ways (with many variations) to organize the production side of a construction company.
1. A job superintendent (sometimes called the production manager) who manages multiple jobs and hires subcontractors to do the work. The job superintendent is either an employee or an owner of the company.
This is how most of the smaller, three-person companies operate. The three people are the job superintendent, a salesperson, and an office manager. Often the owner serves as both job superintendent and salesperson. As the company grows, they hire an employee to take over sales or production. With more growth, they’ll bring on more job superintendents and/or salespeople.
A job superintendent can normally handle 7-10 jobs (under $25k each) at a time, depending on the size and complexity of each job. I worked for a remodeling company once that expected their production managers to run at least 10 to 12 jobs at one time, and they did. And that was before mobile phones made it easier.
2. Lead carpenters (sometimes called job managers). These are employees of the company who are wholly responsible for one job at a time. They report to the owner and are hands-on with the project, often with either other employees, subcontractors, or both working under them.
3. Job superintendents with lead carpenters. The lead carpenter (also called a job manager, lead, or foreperson) reports to the job superintendent. In a large company, you might have several job superintendents with 5-10 lead carpenters reporting to each one.
How do you get the work done on time and on budget?
I worked with a contractor who had two crews in the field. He was paying both of his lead men (job superintendents) a salary well above average for the area but the work wasn’t getting done.
In my opinion, job superintendents should have their pay tied directly to production. That means before a contract is signed, the job superintendent or lead carpenter reviews and approves the job estimate and the time frame for the project. That will improve the quality of your estimate, and helps you set realistic time schedules BEFORE the contract for the job is signed.
Every time a check comes in from that job, they get their percentage. That keeps the jobs on schedule, because progress payments on a job are normally tied to benchmarks in the project and if they haven’t reached a benchmark requiring a progress payment, they won’t get paid either. The percentage range is usually 6-8%, but I’ve seen as low as 3-4% (which is probably too low) and as high as 10%, depending on your business and how much they’re being asked to do.
If progress payments are being made on a weekly or biweekly schedule, match their pay to the production percentage. That way if the job isn’t on schedule, they don’t get paid until the job catches up. If they’re any good at their work, that will only happen once.
Encourage independence
Another problem I often hear is having employees (or superintendents or lead person) constantly ask questions about the job. Now, if you’ve held an in-depth pre-job conference, and at the end you have asked if they have any questions and they said no, they have the job. They should be good to go.
If they come back later continually asking questions, it might be time for a talk. “I’m paying you to think and solve problems. Do it. If I must do your thinking for you, then I’m going to charge you for my time.”
Does that sound harsh? Yes, it does. But it’ll stop the questions and, more importantly, it will free up your time. Henry Ford said, “Thinking is the hardest work there is, which is probably the reason why so few engage in it.” Every time they ask a question that they could have figured out on their own, they’ve wasted your time.
Now, when they solve the problem on their own, they might not solve it the way you would have. You have to be flexible and let them do things their way. As long as the job is done satisfactorily and the owner is happy, it doesn’t have to be your way. That’s part of letting go and letting them do their job.
In our next newsletter we’ll talk about finding employees.
The knowledge and experience Michael Stone gained in his 60+ years in construction has helped thousands of contractors improve their businesses and their lives. He is the author of the books Markup & Profit Revisited, Profitable Sales, and Estimating Construction Profitably, and is available for one-on-one consultations as needed.
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