Matt Verderamo is a consultant at Baltimore-based Well Built Consulting. Opinions are the author’s own.
In our work with 100-plus contractors, we’ve identified three primary leadership team archetypes:
- Tier 1: Stabilization
- Tier 2: Optimization
- Tier 3: Maximization
Each tier indicates a company’s readiness for growth measured by their leadership team’s ability to advance initiatives and work on the business.
It’s worth identifying where your leadership team lands on this spectrum today because it will emphasize the next best steps on the business’s growth journey.
Stabilization
When a contractor is in stabilization, they’re doing little more than treading water.
The leadership team cannot effectively work on the business without significant support and handholding. Typically, they struggle to communicate across departments without an outside facilitator in the room — sometimes because there are foundational trust issues. Other times, they simply have not developed the type of executive thinking and communication needed for big-picture conversations.
The problems they do solve are usually focused on immediate, burning fires. They may have no job descriptions or little business development strategy. They need to attack lots of small problems quickly and remain nimble in doing so.
These contractors need the most development, but they also represent the best opportunity for quick improvement.
For example, three years ago, we began working with a $17 million subcontractor in the Southeastern U.S. Everyone in the company reported to the president; they had no department heads, they had no job descriptions, they had never considered building an org chart.
In 12 months, the business pulled off a complete makeover. Leadership implemented a scalable org structure and found people to fill every major department lead position. They also developed the sales skills and pursuit selection practices they needed to refine their estimating strategy.
In just three years, the contractor grew from $17 million to $44 million, all while maintaining 10%+ net profitability. Meanwhile, the leadership team began functioning at a much higher level. All they needed was guidance on the structure, and a bit of help with what “good” actually looks like.
The business quickly outgrew the stabilization tier and was able to focus on bigger and harder problems.
Optimization
Companies with leaders on the optimization tier have learned to advance their own initiatives, but still struggle to “see” the future beyond what’s immediately in front of them.
When I say “see the future,” I am talking about the team’s ability to extend their planning horizon as far as one to five years out and ask themselves: What do we want the business to look like in the long-term? And, perhaps more importantly: How will we get there?
Looking into the future — and working backwards to make that future a reality — are learned skills that are in high demand but often in short supply in the construction industry.
Most leaders have never been asked to think into the future and rather have been directed to look at the problems immediately in front of them.
As a result, the problems they are good at solving are usually the three-to-six-month problems that go along with making a department stronger and more effective. They may be building out key performance indicators and developing a standard quarterly review cadence; sometimes they build out their leadership development programming.
While leadership teams at the optimization level need a lot less handholding to advance initiatives, they often need significant support in building out a vision. Usually, this is done by the owner or an outside consultant to help them think bigger. This is a learned skill.
One way to advance your long-term strategic thinking ability is to simply answer the question: What would need to be true for me to be proud of this business three years from now?
This can unlock some amazing answers from your leadership team. Suddenly, they can clearly see where they want to go. Once they do, they just need to work backwards and build a plan to make that future a reality.
Don’t be discouraged if developing your team’s “long-term” visioning abilities takes months or years — this is normal. But it is essential if you want your business to grow and dominate long into the future. You cannot afford to wait in developing this skill in the top people in your organization.
Maximization
The maximization tier is the dream — only 2% of the contractors in the country exist here.
Essentially, it means your executive team has proven its ability to advance initiatives, clearly sees into the future and regularly turns that future into reality. Usually, these executive teams are highly effective at finding unique ways to capture profit and revenue.
For example, one $350 million-plus subcontractor client fits the maximization mold well. Rather than focusing on low-level issues like building standard operating procedures, they have moved on to much harder problems, like how to open their third geographic location doing more than $100 million in revenue. They are worried about working capital, gross profit variance and creating a corporate structure that can scale as they grow.
They often need high-level advisory input and a knowledge of best practices, but otherwise, they get stuff done and solve gigantic problems that help hundreds of people.
These are the companies that almost always seem to be winning over and over again. They have the best reputations and their clients love to have them on their projects. That is a recipe for success.
No tier is guaranteed
Fascinatingly, we have found that leadership teams don’t live in the same tier forever. They can grow from one tier to the next, or even regress depending on the state of their business.
For example, a general contractor building multifamily during COVID-19 was on the maximization tier when interest rates were low and market potential was high. The executive team was humming. But as interest rates increased and the development market slowed, they slipped back into optimization and had to focus on shorter-term problems — like where to get work and build their backlog. It was a matter of survival.
If you’re reading this and thinking: “Where does my team fall?” I’d advise you to spend the next month evaluating your leadership team’s ability to:
- Advance initiatives on their own.
- See into the future clearly, one to five years at a time.
- Work on the biggest, most complex problems.
Then, determine what tier you fall into and start developing the skills to level up.
