Large Corporations Cannot Do Construction- Especially Outsourcing

I have an MBA in finance from The University of St. Thomas in Houston, TX. I lead with this bit of information only to share with you that I am educated enough to tell you that our education system is perpetuating a broken system. That system is so broken that no major company, no large group of managers, could ever create a successful outsourcing company in construction.

Construction is a unique industry. It requires the most personal responsibility of any major industry. The vast majority of other industries do not do unique work every day. An organization makes a process. Managers develop the process through six sigma or other efficiency models. Smart people sit around talking about lien this or ROI that. Many abbreviations and jargon come into play. It all works in those industries because the work is streamlined. Mistakes are typically marginal. Critical processes can be easily tracked and quality controls can be established.

Construction is unique every day. It is rare for companies to continually build the same project over and over. This really only happens with commercial franchises and even then the buildings are different shapes, on different lots, and in cities with different building codes. The most expensive line item of every job is management. It is the management cost from the general contractor, the permitting and inspection costs from the municipality, and the supervision costs of the subcontractors. Everyone has to be watched and managed. The truth is that each individual worker has a personal responsibility to do quality work every day. They must do so when they are sick, tired, or frustrated. Individual workers have a tremendous opportunity to hide their shoddy work along the way. If you are curious as to what that looks like, google "million dollar home inspections videos". You'll see hundreds of expensive homes with quality problems that stem from a single worker simply not caring about that part of his job.

How does anyone motivate the individual worker? How do successful companies continue to produce good quality work within the same labor force as everyone else while mostly being price competitive?

Walk into a business 101 class as a freshman and they will ask you a question. It seems straightforward.

Question: What is the purpose of a corporation?

Answer: To increase shareholder wealth.

Remove the jargon to hear the message. What is a "shareholder"? Corporations sell stocks (shares) so that many people can be owners. Therefore, a shareholder is simply an owner. "Increase wealth"? Say that phrase the way a construction worker would.

Answer: To make the boss more money.

When you realize that this mentality is taught to the masses as a sort of statement of fact, you can't help but be disgusted. I learned this truth at a Catholic university. This is a place that prides itself on developing the morals of every student. I have a minor in theology because I took only one extra class than what was required. We all took a half dozen theology or philosophy classes in order to graduate. Very early in my studies I was told that the purpose of a corporation is to make the boss more money.

A corporation will never motivate individual workers at scale because everyone working in these jobs understands that business mantra. They call their jobs "soul crushing" for a reason. We were made for more than simply making someone else as much money as they can. Today, over half of all Americans work for a company with at least 500 employees... We are crushing alot of souls.

I've seen this phenomenon within my own industry amongst my "competitors". I had a chat with a high level manager at a corporation that also outsources to The Philippines. It was a unique experience because there are very few of us in the industry. His questions for me? "What is the market rate for labor that you are seeing".

"Market rate" is a business term used to soften the obvious. What is the average wage over there? We don't want to be overpaying. If it was less, we would go as low as possible. We simply do whatever is average because we have to hire people. Deep down, we just wish we could pay less. That's the question being asked. That is the question being asked by people with advanced business degrees running all of the major companies in the world. "How little can I pay my staff without them quitting on me?"

Almost a dozen of his overseas staff have joined my company. Instead of treating my staff as if they are expendable cogs in a wheel, I simply pay them what they deserve as if they were a partner in my company. As I grow, so does my staff's salaries. I pay my staff roughly double what he pays his, mine are able to be fully remote, our quality is higher, and our price is less. Other major corporations that have tried outsourcing in this space have simply failed at their pursuits. Multiple Fortune 500 companies have tried and failed.

Most major companies in the construction space are franchise models. Management has strong financial ties to the success of the project. Without it, the entire project collapses. Even subcontractors and project managers typically have massive incentive pay. Do this job well and you make a ton of money. Do it poorly and you are barely scraping by.

I focus on this type of incentive structure because I have never seen an outsourced company do this with foreign workers. The majority of people outsource because it is "cheap". They save on labor. When big businesses see people only as a cost of labor, you begin to understand why the industry simply doesn't pay their staff well. It might be better pay for a 3rd world worker. What else can they get? But is it a fair or just wage? Everyone knows the answer to that question.

I broke the mold. I treat my people as people. I care about their families and want them to have successful lives. I give them massive incentives to continue to grow with me. The results? We grew 25% this year alone. Most of my staff received a similar pay raise.

I don't run my company to make myself more money. I run my company for the betterment of everyone that I serve, both my clients and my employees. My friendly advice to anyone looking to start their career? Never work for a major corporation that doesn't care about you. Find a smaller business where the owner actually cares. Your life will be measurably better.