I Know S*%t Flows Downhill but Why am I living in the Valley?
How did you start your business? Was it a case of the site/contracts manager encouraging you to work for them with the words “come and work for me, I’ll look after you?”
Many construction businesses started life in this way or similar. A tradesperson working for another company, that wasn't doing a particularly good job, but the site manager recognised that you were good at what you did and encouraged you to do your own thing with the proviso that "they would look after you." And they did.
But time went on, and the next thing that happened was the site manager asked if you knew other tradespeople who could come and work? You said yes and the site manager said that he would just pay you and you could take a little bit off them and that way it made the invoicing easier, as it was all in one place. You agreed again, as you wanted the work and it did seem an easier way to do it.
Thing is, before you knew it, you had people working for you either on the books or sub-contracting, you've got a fleet of vans, contracts all over the place and you're running around like a headless chicken! You've got loads of work, but you're not sure if you're making any money or not and no way of knowing for certain.
You're pricing jobs, chasing invoices, sorting out men and sites, organising materials and wondering where the time is going as you don't have any! You've tried to put some processes in place to organise and some of them have worked, some haven't and the main reason is you're too busy doing all the stuff above to make sure they are embedded properly in your business.
Guess what, you’re now living in the Valley! But things are getting more difficult…
However, now the relationship has changed. The QS/Contracts or Site Manager are beginning to question the quality of what you do. They're withholding payments on a whim or forcing you to accept reduced terms, but you're still having to pay your tradespeople and sub-contractors full rate. In some cases, they're making you pay a CITB Levy subsidy (which is illegal by the way) further reducing your profit margin and making an additional charge (akin to protection money) which means you'll get the work.
You're in between the devil and the deep blue sea. You don't want the work but need the work. It's too much hassle to try and find different work and in reality you're really not too sure how to go about it.
You're suffering from a type of workplace bullying which is affecting your business, profits and lifestyle. The sides if the valley are getting steeper and you can't climb up it, as you’re being sucked back down. What’s worse is that it’s just not one Valley! It’s 3, 5, 10 or more based on the number of contracts you have, where the same things are happening. Moreover, you’re being approached by more contractors on recommendation from the one’s you already work for. Now, this sounds great, and maybe it is, but are they recommending you because you’re good, or they can make even more money on you because they’ve been told that “you are good, but not organised if you know what I mean. I can almost hear the wink from here.
It's almost a form of addiction but there's no buzz to make it feel better.
So what can you do to change it? That's if you want to of course. It’s surprising the number of companies who are happy to live with this state of affairs. Maybe it is an addiction and it’s better that, than the cold turkey to change it?
What I tell many of my clients is this. What value do you bring to that contractor? What do you do for them that they would have to do for themselves? How hard, in reality, is it for them to find another sub-contractor that would do what you do?
Now, I'm sure that many of you feel that they could replace you in a heartbeat, but, and this is my contention it's not. What makes me say that, I hear you ask? It's simple really.
Main contractors have "abdicated" much of the onsite responsibilities to sub-contractors, apart from site management that they want to control. This means that whatever the project is, it can't be built without you. They need site operatives to do what they've contracted to do. The chances are they're doing exactly the same to other sub-contractors that they're doing to you!
The other main reason I say that is, that how difficult are you finding to get tradespeople? Easy? Hard? Impossible? In my experience, and from talking to my clients they’re in the impossible group. Too much work and not enough people to go around. Not even enough people, enough good people that they would trust to do a good job. “Lots of poor tradespeople out there Grant, not what we need.”
So, who has the power? The main contractors or the sub-contractors?
What would happen if you all banded together and said, "no, we're not having that, we just won't work for you!" What would they do? What could they do? My view is, not a lot and I'll tell you why.
I was at a networking meeting some months ago in Leeds, where as normal the main contractors were waxing lyrical about their supply chain, and how they wanted to work together with them. The usual stuff you hear at these events, while in reality the roles mentioned above are treating sub-contractors like slave labour and carrying out the activities also mentioned above to help them (the main contractor) make their margin while denying sub-contractors theirs for the flimsiest of reasons.
Anyway, at the table I was sat at, the discussion was around treatment of sub-contractors and much of this came out. I said to the two main contractors representatives (QS' if my memory serves me correctly), what would you do if the sub-contractors decided not to work for you. Surprisingly, they had no answer. The look of abject terror on their faces said enough really, that I had the courage to voice the thought.
So, who has the power in the relationship? Who brings value to it and what is that value? If you believe in what you do, provide a quality service and finish, then I would say it isn't the main contractor.
However, you need to believe. You need to believe in:
1. Your business and the reputation it has
2. Your people and the quality job they do
3. The need for the main contractor to get the job done
4. The lack of resource available to make 3 happen
Now, main contractors will not play fair and you need to expect that. They will quote contracts or purchase orders (if they have issued them or if they’re “in the post”) and you need to have read them fully, so you are aware of what you can and can’t do. They will threaten you with withdrawing work, or offering work to other sub-contractors and cross charge you for this. If you’ve read the contracts then you’ll understand what you can do.
The fact of the matter is, if you’ve got good processes in place to manage and control your contracts then that is a great basis to work from. If not, then the Valley (if you’re not already in it) is calling you…