How to Use a “Partnering” Approach to Reduce Conflict and Increase Profit
This article is taken from the text of a recent interview I did with Mike Ghilotti.
A New Approach to Partnering
Ghilotti Brothers, led by Mike Ghillotti, is a general engineering firm, responsible for most features of horizontal construction: paving, grading, underground, and concrete.
“We’re a nonconventional construction company,” Mike says. “So many companies like to come out, build the project, and move on. I was on the Caltrans partnering steering committee in 2016, when they had a big bond measure and wanted to get back into partnering, I realized that our best value is to work with developers, work with clients, mitigate risk, and align expectations. That’s really where we shine.”
The structure of partnering has changed over time. Contracting once was done out in the field, with people that were empowered to make a bargain. Now those meetings often take place in a more formal setting. When entering a new partnership, Ghilotti Brothers they employ a tool they call the “risk opportunity register.”
“We do that with every job,” Mike says. “Every entity, every client, every agency has risk. Every contractor has risk.” To develop a great partnership, Mike asks every client, “How do I help you mitigate your risk, and how do you help me mitigate mine?”
“We ask, ‘What are we going to do on this project? We’re going to finish early. We’re going to be under budget. We’re going to do value engineering. What will our safety program look like?’ Those questions set the tone for the job’s performance.”
Elevate the Conflict
Even in the healthiest partnerships, though, conflict can arise. If it lingers too long out in the field, it can disrupt the team’s cohesiveness that the resident engineer, foreman, or supervisor established, which can poison the job and send everybody retreating into their corners.
The best solution, Mike says, is to notice conflict and elevate it quickly. “We set up an escalation ladder for issues,” he says. “It’s not a reflection of the team or implying that the team can’t solve the problem. It just diverts the challenge so that the builders can keep building. We move the challenge up to the next level so that we can solve it and move the job along.”
The problem is removed from the people that live and breathe it, and it can be viewed from a different perspective. A new solution can address the conflict, and reduce the chances of it turning personal instead of professional.
Dragging Feet in Public
Public agencies can be another challenge. Private entities are motivated to move a project along and meet goals. “The biggest challenge on the agency side is that they’re not empowered to make decisions,” Mike says. “They’re not able to finalize tasks, or make agreements, and they don’t have the resources to perform at our level. It can be tough to keep a project moving forward when the agencies don’t have that capacity.”
A power structure alignment could make an enormous difference, to empower people at the agency level to make those crucial decisions. “As an organization,” Mike says, “we have confidence in our project managers. We empower them to do a good job. They may need to check in, but they’re keeping us informed. We have to make decisions every single day. We’re geared up for that.
“The agency is not. They’re more bureaucratic, top heavy, with lengthy turnaround times, all of which reduce the momentum you need to build a project successfully.”
The limits are inherent to the system. Mike points out that often, agencies aren’t rewarded for making quick decisions. In fact, many agencies and cultures penalize people for making decisions, even if it was ultimately a good decision that might have saved time and money.
“…Nobody wants to put their neck out anymore and take the risk,” he says. “It’s easy to be a 20/20-hindsight person, but construction companies burn daylight every day. We’ve got to build.”
Private owners or developers have more in common with the construction companies. They have more to risk. “The agency doesn’t understand and acknowledge the risks they have,” Mike says. “They’re more insulated. However, private owners and developers and clients appreciate when you come to them with goals for the project. Like, ‘I want to get out early. I want to do it under budget. I want to mitigate your risk. Let’s sit down and figure this out.’ And your private clients enjoy the heck out of that.”
Three Tips for Successful Partnering
In conclusion and to summarize, Mike offers the following advice based on a lifetime of experience and learning on the job:
- Set expectations. “Learn the client’s expectations and goals for the contract,” Mike says. “What would their idea of success look like?” That extends to working with subcontractors as well, which can be especially challenging on the big, heavy highway contracts Ghilotti Brothers does for Caltrans. “We have subcontractors that have 5 or 10 percent stake. They may be in earlier, or they may be in late, but you want to include them.”Communicate early, and often, and ask for their input at the very beginning, and then try to get them up to speed as they’re ready to come in. Your subs are keys. Align expectations. Tell them, ‘This is what we need out here, and this is what we’re up against.’ When you bring them in, the more successful your project’s going to be.”
- Mitigate the risks. When entering a new partnership, Mike says, evaluate the other team. “What are they up against? Is it money? Is it time? Are there third-party stakeholders that they’ve got to worry about? Align with those concerns and demonstrate that you can mitigate the risks.”
- Be a trusted business advisor. “A lot of contractors excel at the ‘gotcha’ moment,” Mike says. “That’s when you ask for a change order because you have them backed into a corner. If you’re a good contractor, get out in front, make sure that you know the road that you’re headed down, and identify problems when you have enough time and resources to address them.” Mike has learned through experience that as GC when they can get in early and help pre-construction, the best value happens with private companies.”Then you’re helping them as a trusted business advisor,” he says. “You can tell them, ‘Hey, this is a great concept or a great design. Did you think about this? I can save money if you reformulate the engineering criteria here or the design spec.’ Then you’re mitigating it before the job even starts.”
Change is going to happen
If the owner trusts you, Mike says, they can ask you, “How do I solve this?” And you’re going to come to a fair settlement. “But if he doesn’t, then it’s going to be the change order game. ‘I’m going to start really high. You’re going to start really low and we’re going to waste a bunch of time trying to figure out how to come to the resolution.'”
“I’ve had private project meetings where senior agency reps will be unable to determine if our employees are with the agency or with the contractor interest, because our approach is project-first. It’s not a contractor-first approach. Our industry has a me-me-me problem, as in, ‘How do I take care of my problems, and what’s best for me?’ And that doesn’t solve the equation. Rather, it’s how do we make the project a success? And then everything else follows.
With these tips in mind, you can set your company apart from other companies you are competing with.
Another practical (but often hidden) way to distinguish yourself from other construction companies is by creating and executing a sound strategic plan.
To help you clarify the soundness of your current strategy, you may find this short assessment useful: https://www.ericanderton.com/the-construction-strategy-blueprint/