Large or Small Contractors

smb-quality-managementI have had the good fortune to work for many varied construction companies. Ranging from very large international conglomerates to small “mum and dad” businesses. Both types have advantages and disadvantages but which offers the best environment for employees. I started considering this after spending two days interviewing for staff. Not senior people but a mixture of junior quantity surveyors, graduates and others embarking on their careers in our industry. They all had a similar goal to be project managers on large projects within a large construction organisation. They all believed best practice, the most experienced staff and the best career could be achieved within those types of company. The idea of working for a small or medium sized business wan an anathema to them.

When I interview potential staff I look for potential, energy and commitment. I may not necessarily like the candidate, in fact I prefer the candidates who I do not take an instant like to rather the opposite. I look for people who can, in time, do my job better than I can do it. I also have issues with strict selection criteria and believe in sometimes adjusting the role to suit the person.

So, which is better, a small/medium business or the big corporate behemoth. The main attraction to the small/ medium company is employees know what is going on within the business whereas in the large company with it multitudinous layers of management, employees get isolated on projects or restricted within the silos of estimating, finance, HR, IT, or other head office cells. In a smaller company, there are no hiding places and talent and commitment is more easily recognised.

Having worked in both camps it is interesting to look at gross profit, overheads and EBIT. The big end of town with their $100 million plus projects tend to be union dominated, with a small pool of approved” subcontractors which means tendering is extremely tight, with the same major contractor trying to cut their own throats to win jobs with a two to three percent margin. These projects are usually design and construct which means they need to understand that process and have the people on board to manage it. They often do not understand the process and do not have enough experienced people to manage value engineering, control novated consultants, and manage the projects commercially. Added to this is the millstone of head office overheads which the projects must support, including hanging on to staff between projects completing and commencing.  This is compounded by the simple fact large contractors pay their staff too much. At the end of the financial year many large contractors are struggling to make a positive EBIT.

The smaller contractor is not weighed down with union pressure, high salaries and overheads are kept to an absolute minimum. Which means their tender margins are higher and their net profit (we don’t here the acronym EBIT in this environment) is higher. Because their projects are of a lesser value, they turn them around quicker so one bad job is not the end of the world.

My personal preference is the small/medium size business which has several income streams: new construction; small developments, refurbishments and fit outs. These businesses can change direction quickly and the owners are usually heavily involved not just in the business management, but they know their employees, subcontractors and clients inside out.

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