Hungry Gustav - Life Nonpareil

A grim 2010 for construction?

It is tremendously difficult to provide any meaningful predictions accurately but instead of saying what might happen it is far better to look back and establish what was going on and why, and only then the pattern for the future might, just might become a bit clearer.

First of all, why have we witnessed a golden era of construction activity of the past decade or so? Tremendous amounts of available capital have enabled the kind of economic growth the world has never seen before. Whilst we still had some hard currency which the post WWII growth has been marked against, there was no such hard currency in the past decade or so. The growth was completely and fully fiat-currency-based (belief-based). With other words, the created value was thin air that worked as long as the growth propelled further growth. The trouble with this kind of a fragile close-to-chaos system is that once the chain is broken the whole system falls apart (the good old weakest link principle).

This always happens and has always happened but this time the self-propelled belief system went so far that it surpassed the real economy several times (or even several dozen times). Yes, this has created explosive growth in countries like China and India and spurred economic frenzy in whole regions including the Middle East but it has also led to tremendous excesses in our capacity to produce just about anything. These excesses are now actually beneficial because they act as preventative buffers to inflation that would normally result from printing money (err quantitative easing, sorry) but they are devastating for construction. Why? Well, you see, when Toyota deals with excessive capacity its managers simply reduce production, shut a few factories, lay off a few thousand people and weather the storm with further improvements to their already fantastic system. It’s a continuous and steady production flow they are dealing with. 

A typical construction company’s excessive capacity cannot be dealt with by shutting a few factories because there are no clearly defined entities of that sort. On the other hand laying off people doesn’t help either because most do not employ their own workforce anyway. Construction companies are project-based and they rely on a continuous flow of projects to maintain their cash flow and once this is broken, the system very quickly falls apart. There is very little buffer to play with (if any at all nowadays). Excessive capacity in construction is represented by a number of projects companies are involved in. The result of excessive capacity in an economic storm of current proportions for construction will be sudden and quite surprising complete collapses of very large companies. This has happened before, as we all very well know, but we have never had such an excessive capacity before.

Why is it all still working? Well, massive government stimuli and inertia is the answer. They now fuel the second mini wave of artificial growth that keeps the order books full despite the recession. However, governments haven’t addressed the basic problem of the fiat economy so nobody in the world can say for certain how much money the banks actually need to cover all the losses making quantitative easing more like shooting in the dark, and once this stops we will enter into the second phase of recession. Governments around the world will have to stop printing money one day and public spending will have to be severely cut but no political party is willing to admit just how harsh these cuts will actually be. The point is that once this happens the order books will suddenly dry out and that will then lead to the kind of collapses I was talking about earlier.

The solution? Hardly any available, to be honest, but my informed guess would be to go for little pockets of activity in countries that still rely on the real economy and build a total-package solutions. The clock is ticking and in construction it takes time before a contractor can grasp the market to a self-sustained level so moving ASAP where nobody else dared to go might be the major success factor. So what about the predictions? Well, it will certainly be much worse before it gets any better and this may take a few more painful years.

High Productivity Curse in Construction Management

Productivity in management? Well, yes, that's what executives want anyway. They are pushing their middle managers to be ever busier loading them with procedural nightmares and thinking their project, operations, construction and whatever else managers are productive if they live at least 12-hour work days running around like headless chicken. The consequences are hardly believable and although terribly obvious nobody dares to challenge the 'work hard' madness.

What's wrong with an 8-hour work day? You think it is not possible to live an 8-hour day because you wouldn't be able to complete everything? Well, guess what, you are overworked and potentially inefficient. Yes, there are people around us that can complete everything necessary in 8 hours while others would need at least 50% more time to achieve the same. But much more dangerously, being overworked dramatically reduces your efficiency and even though you might be a mean efficient machine in your normal life work overload will turn you into an inefficient headless chicken, let alone the suffering your family will be exposed on a daily basis. You will be running around firefighting, infinitely and tirelessly trying to tie up lose ends thinking how damn good you are, perhaps even feeling sorry for yourself. Sounds familiar? I bet it does because this is what construction professionals call 'normality'.

The problem is that 'construction normality' is utterly abnormal leading to a vicious circle of ever more firefighting reducing you to a monster chicken just like those Jamie Oliver was showing in his shows. So, all in all, life is good no matter the suffering because hard work is what we should do, right? Well, no! Nothing wrong with hard work, don't take me wrong but it is wrong that construction professionals are overworked. They should be ruthless efficient machines within an 8-hour work day but it is unreasonable to expect the same ruthlessness within a 12, 14 or even 16-hour day. Sorry, that's inefficient, period.

Imagine being a project manager and having a whole month or even more to evaluate your past project before being assigned to a new job, imagine being responsible for just one project at a time and imagine having an 8-hour day with no exception. Utopia? No, that is real and smart efficiency but it is far more difficult to overthrow the status quo we're trapped in now.

Radical new approach to project programming? Oh my...

I am reading the latest issue of Construction Manager and have spotted an article that reveals the radical new approach to project programming (Title: Calling time on delays to complex projects). Perhaps I am missing something but I don't think that effective time management strategy at the design stage is anything new, nor is the idea that contractor's planner should do work alone. There is nothing new in all this! I have been shouting for the past 10 years or so that construction planning is not merely forecasting but deliberate process of continuously improving already pre-planned activities involving ALL who participate in the execution of these activities.

They then go on and talk about different 'densities' in a time model that will depend on how close one is to the work to be carried out. Again, part of my contribution from PhD research is a proof using Chaos theory revealing that detailed planning beyond two working weeks is not feasible and as such planning requires different 'densities' where immediate work to be carried out has to be planned in a far greater detail against work that is further down the line.

Admittedly the article is somehow hurting my ego but then again I feel happy because they are finally realizing how important different 'densities' in planning are, and not just for large complex projects as they suggest. On the other note the article also proves how much the sector is losing out because practitioners are not reading academic papers.

Green shoots all over the place...or are they?

It's hilarious when you read that Bovis Homes report 71% rise in trading yet in the same breath talk about "sales reservations". A quick look at their own website reveals what "sales reservation" really is:

This is where you indicate you are interested in purchasing a property and confirm your intent with the payment of a reservation fee, typically £500. This forms part of the purchase price as long as the sale proceeds.

This is where you see how indubitably desperate homebuilders are! What on earth is going on here? I sincerely hope they don't believe this... Oh wait, it's about psychology stupid! We should all believe we're doing just fine and all these problems will just go away. It's all in your head Gustav, it's all in your head!

Key jobs in construction?

People keep asking me about the "killer jobs" in these difficult times. Yes, it's quite straightforward if you think. Adjudicators will thrive and so will excellent project managers, construction IT professionals and so on. But I have a problem with this view. It's not the killer jobs one should focus on really. The fact is that during difficult times there will be even more applications for every open position so even if we're talking about the best job one might not get it unless equipped with an arsenal of key skills, the right attitude and personality. First of all, companies will be seeking to reduce costs so you are far more likely to strike the accord if you can prove multiskilling abilities and attitude. Secondly, not matter what position one looks at, it definitely requires project management skills. While best courses on the subject on top of some experience form a good start there is one option that has so far been almost entirely neglected by the industry in general.

Conducting PhD research is at least to me by far the best project management "training" you can possibly get. You've got limited resources, limited time, you need to satisfy rigorous quality standards and research by itself resembles sailing through dense fog in treacherous waters. Yep, it is difficult but hugely rewarding and once you complete your PhD there is almost no limit - you can literally take almost any challenge. Even if you eventually have to hide your title to get a job in the industry it's the project management skills that you gain that matter more than anything else let alone lifetime friendships that you make along the way.