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REVIEW SUMMARY
Company. Compass Construction
Industry. Construction
Key. Taking care of longtime employees and customers pays off in down years.
The way the economic recession has hit the building industry, it's hard to imagine any commercial builder calling Cape Coral home.
The Lee County city has become the poster child for foreclosures and government mismanagement, leading to a standstill in new building investment.
But one builder, Compass Construction, has survived the downturn that's wiped out so many of its rivals. How its managers have guided the company through the downturn holds lessons for others in tough straits.
One of the keys to survival was not in how the firm's executives managed the downturn but how they ran Compass during the boom times. “More isn't always better,” says Dan Luft, executive vice president of the Cape Coral company formed 26 years ago.
Too much work may seem like a good problem to have today, but during the construction boom Compass never took on more jobs than it could handle. “We stayed loyal to our current clients,” Luft says.
That paid off during the bust because the few customers who need construction services today have been more likely to give Compass a shot at bidding a job because of a job well done in the past.
Boom to bust
Turning down work during the boom wasn't easy, but
this discipline was partly imposed on Compass executives by the constrained labor market. The company couldn't find qualified employees when unemployment was at record lows.
While rivals hired anyone “vertical and breathing,” Luft says he promoted people from within the organization. It sounds so simple now, but many firms strayed from this truth in business during the boom: “You're only as good as the people around you,” Luft says.
Control was a big issue. “In this business, if you don't keep your thumb on it, you're going to lose money,” Luft says. Why? “Because you can't trust people.”
Which leads to another reason for Compass' survival: longevity of employees. For example, Teri Burleigh, the firm's vice president, started as a receptionist at Compass 21 years ago. “Teri runs things around here now,” Luft says.
Of course, Compass hasn't been immune from having to trim its own workforce. The firm had 47 employees at the height of the boom and now employs 17 people. Those who are left know that no job is beneath them. “If the phone needs picking up, pick it up,” Burleigh says. “This company has always operated that way.”
But the construction bust has brought more focus to cooperation among employees and with subcontractors to bid for new business and cut expenses. “We're all doing a little bit of everything,” Burleigh says.
Employees are more careful than ever with expenses like taking customers to lunch, requesting new phones and computers. Before driving to a job site, employees check with others to see if other errands need to be done along the way. “Instead of buying a case of pencils, it's buying a box of pencils,” Luft says.
Keeping morale up is important and money's not the only motivator. “There's nothing better than telling people they're doing a good job,” Luft says.
While the spirit of cooperation is important, delegating is equally prized at Compass. It starts at the top: owners Larry Oliver and Peter Olsen leave the day-to-day management of the company to Luft and Burleigh, only getting involved in major decisions. By turn, Luft and Burleigh say they have become good delegators themselves.
Small jobs better than none
During the boom, Compass Construction used to average jobs valued at $25 million to $30 million. Today, it will take on renovations that cost as little as $25,000.
Fortunately, Compass has a long track record of performing municipal work, even during the boom times when corporate work might have been more lucrative. That's paying off today because government projects are the main source of large jobs today.
For example, Compass is renovating the toll plazas on the Cape Coral and Midpoint bridges in Lee County, a $10 million project. That's no easy job as thousands of vehicles zip through the toll lanes each day between Cape Coral and Fort Myers. The firm even hired a public relations firm to communicate with drivers as lanes change.
Compass also has had to stretch its geographic footprint. It does business up and down Interstate 75 as far north as Hernando County, temporarily moving a superintendent to that area if necessary. It recently completed work at Eagle Point Park, Pasco County's newest park.
While the bulk of work today consists of government jobs, there are pockets of opportunity such as senior housing and education. It recently built a hospice facility in Pasco, a senior-housing complex in Brandon and is on the list of contractors for work at Edison State College in Fort Myers.
Good guys left
With fewer projects, competition remains intense. On open bids, it's not uncommon for 30 to 40 contractors to compete for the work, Luft says.
Still, there are fewer inefficient competitors left. “It's like a cleansing,” Burleigh says. “The good guys are still here.”
Luft estimates that 20% of the subcontractors that used to be in business a few years ago have folded. “A lot of people packed up and left,” he says.
Because commercial construction usually follows residential, Luft and Burleigh aren't ready to call a meaningful recovery anytime soon. “It's so gradual it's not noticeable,” Luft says. “I don't foresee any change through 2011.”
Bonding insurance helps Compass land government jobs, but Luft says banks have to start lending to businesses so they can expand. A sense of confidence must return before entrepreneurs risk their capital and that perhaps may begin with the November elections.
“We've never been through a cycle like this,” says Luft, a 26-year veteran of construction in Florida.
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