Example: a job at seven per cent margin, written into a decision card

Decision card, an example

Signal

Last autumn a client the company has worked with for ten years offered a job for a year and a half. The estimate left seven per cent, eight with luck; normally the owner takes nothing under twelve. The price was final and the answer was due that week. On the two running sites the clients were behind on progress payments, the subcontractors were due to be paid on the 28th, and the advance on the new job would have closed the gap.

Decision

Take it, but write down what the decision rests on: materials rise no more than 3%, the crew holds the schedule, the client pays the stages on time. The owner owns it, with reviews in months two, four and six.

Action

In month two the brief asked: “Materials within 3%?” The answer was no: the two main items had gone up by six per cent. The owner went to the client with the figures while most of the work was still ahead.

Outcome

For the remaining stages they agreed to reprice the two main items at actual cost. The margin on the job is about five per cent on paper: not twelve and not seven, but above zero.

Learning

The card is worth writing before answering the client. Then it is clear what has to stay true, and the review asks its question while there is still something to renegotiate.

The company is the same in all three examples: a general contractor, fourteen years in business, three sites, about twelve people in the office and about a hundred people from subcontractors’ crews on site, a few million euros a year.

This company’s owner once took a job like this on a Friday evening, tired. Nobody wrote the decision down; half a year later the margin on paper was close to zero, and he still does not know whether the decision was a good one. Here the same decision is shown the second way: written down and checked.

The fork

Last autumn a client the company has worked with for ten years offered a job for a year and a half. A good job, but the estimate left seven per cent, eight with luck. Normally the owner takes nothing under twelve. The price was final and the answer was due that week.

And the money was needed at once. On the two running sites the clients were behind on progress payments, the subcontractors were due to be paid on the 28th, and the advance on the new job would have closed the gap in one go.

The decision in a card

The owner says yes. But before answering the client he writes a card: what he chose, why, and what it rests on. He takes the job because the advance is needed and the client is a long-standing one. The decision rests on three assumptions: materials rise no more than 3%, the crew holds the schedule, the client pays the stages on time. He owns it himself, with reviews in months two, four and six.

The figures for the card were already in the company: in the bank, in the estimates, in the progress certificates.

Month two

On the day of the first review the morning brief asked: “Materials within 3%?” The answer was no. The two main items had gone up by six per cent. The crew and the client were holding for now.

Without the card this would have come up at handover. With it the owner saw it in month two of eighteen, with most of the work still ahead, and went to the client with the figures: here is the estimate, here are today’s prices, here is what happens to the job if nothing changes.

What came of it

For the remaining stages they agreed to reprice the two main items at actual cost. The margin on the job is about five per cent on paper. Not twelve and not seven, but above zero. And the owner knows why it came out that way: it is written down.

What I would do in your place

Before answering the client, write one line: what result you expect and what has to be true for it. It takes less time than the phone call.

Look at the margin this client’s past jobs actually made, not the one in the estimates.

And write down in advance on what condition you would say no. On a Friday evening that line is the hardest one to draw.