Background.



Charlie ran engineering and constructions company that specialized inroad and tunnel work. They worked over a broad geographic area withmost of their contracts coming from state and county governments.Because road building requires good weather, most of their work wasdesigned and bid during the winter, with actual construction takingplace in late spring, summer and early fall.

The Problem.

One year his firm won a state contract to improve, widen and repave 25miles of state highway over two years - two building seasons. Charlieand his staff thought they had bid it carefully. But soon after workcommenced Charlie discovered they had significantly underestimated thecosts of working in certain terrains. The contract was heading for aloss of several hundred thousand dollars and would severely impactprofits in not one, but two years. And it looked like a long two years..

The Solution.

Charlie and I carefully reviewed the contract and the subcontracts. Wecontacted all the subcontractors and asked their help to speed up thework and get the job finished in one season rather than two. Charlieexplained the financial bind and asked their forbearance in holdingcosts to the original bid even though it would be more costly to do thework faster. Most agreed and the rest were compensated for additionalcosts. The state agreed to the speed-up and the job was pushed intohigh gear. .

The Result.

The work was completed in one building season. There was still a loss,but it was less than anticipated because the sense of urgency to finishin one season resulted in many innovations, efficiencies and costsavings. The subcontractors all made money by speeding-up theirprojects. They also earned the gratitude of Charlie and his team. .

What was equally significant is that the team faced the problem and putit behind them rather than spending two years in frustration. They hadto explain only one year of bad results to the bank rather than two.What's more, the team freed up the second year for more profitablework. At the end of the job, Charlie hosted a dinner party at a localrestaurant to thank the team and subcontractors for their extraordinaryeffort. .

Commentary.

"Throughput" is measured by the time it takes from "order" to "money inthe bank." Shortening throughput is a measure of efficiency and wastereduction in a good business plan. Charlie and his team used this crisis to energize a major improvement in throughput and Working Capital Generation Improvement.However you don't need a crisis to implement a program of "constant andnever ending improvement," with a constant reduction in throughput. Buta crisis can be the catalyst for such an initiative. As Charlie and histeam found, when a major problem is confronted and made an object ofattention, interesting things happen. People perform extraordinaryfeats under pressure. A sense of urgency causes everyone to worksmarter as well as harder. Waste is eliminated. And the immediatefuture is cleared to pursue new challenges rather than spent cleaningup the mistakes of the past. When there's a crisis, and bad medicine totake, gulp it down quickly. It can be the impetus for major long-termimprovement.