On this episode, Josh talks with Jason Schroeder from Elevate Construction. They discuss the process management system Elevate has used as well as other process management systems to consider.
Jason Schroeder has 11 children and lives in Phoenix. He is an Owner at Elevate Construction IST in addition to working as a Field Operations Director for Okland Construction. Jason teaches builders in construction to manage operationally excellent construction projects for both field and office. He is a coach, consultant, trainer, and director.
Jason has worked in construction for 22 years with notable companies, including Hensel Phelps, DPR Construction, and others. Jason’s purpose in business is to respect workers, train leaders, and preserve families. The masterminds, boot camps, and consulting align well with where we want to steer AMCHAZ in the future with coaching foster children in remarkable events.
In today’s episode you will learn about:
- Process management
- Lean in construction
- How to create organizational health
- How to build a culture of continuous improvement
Narrator: Welcome to Cracking the Cash Flow Code where you’ll learn what it takes to create enough cash to fill the four buckets of profit. You’ll learn what it takes to have enough cash for a great lifestyle, have enough cash for when emergency strikes, fully fund the growth program, and fund your retirement program. When you do this, you will have a sale‑ready company that will allow you to keep or sell your business. This allows you to do what you want with your business, when you want, in the way you want.
In Cracking the Cash Flow Code, we focus on the four areas of business that let you take your successful business and make it economically and personally sustainable. Your host, Josh Patrick, is going to help us through finding great thought leaders as well as providing insights he’s learned through his 40 years of owning, running, planning, and thinking about what it takes to make a successful business sustainable and allow you to be free of cash flow worries.
Josh: Hey, how are you today? This is Josh Patrick. You’re at Cracking the Cash Flow Code. Today, I’m really excited to have our guest Jason Schroeder. Jason just started a company called http://www.elevate.construction.com/ which is where you can find him at elevate.construction.com for some reason I left the dot out there. He is an expert on using Lean principles in construction companies. I have to tell you, I am fascinated by this because I’ve been saying for years that the secret unfair advantage that a construction company can have is to put a process improvement system in place. Because none and I mean, none of your competitors are doing this.
Before I bring Jason on, I have to ask you to do something though because I keep forgetting about this. It’s really, really important. Please, please, please go to wherever you listen to this podcast and give us an honest rating and review. It’s really, really important. Let’s bring Jason on and start the conversation. Hey, Jason, how are you today?
Jason: I’m doing good. Thank you for having me on. This is a pleasure. I appreciate it.
Josh: Yeah, I’ve been looking forward to this a ton. Am I correct in saying that using something like lean in your construction company would give you an unfair advantage?
Jason: I believe so. So we all know that construction is continues to either stay stagnant or it declines in our efficiency. Manufacturing is going up. Construction typically stays the same. I think the biggest problem is we have untrained leaders and an untrained workforce. Most of that workforce is nomadic. With lean systems, we can really build cultures on site. I think that’s our next step to improve the efficiency of construction so absolutely 100%. I do agree with you there are some companies out there that are doing great things, but it would give an unfair advantage. Well, I don’t know if it’s unfair, but it would give a really big advantage for whoever does it, yes.
Josh: The [inaudible 00:03:13] worship at why worship at two [inaudible 00:03:14] and the two are agile which is Scrum and a theory constraints. They use them for different reasons in different companies that we work with. You’re an expert on lean. I want to kind of get into what you mean by lean because I think there are about 9000 definitions.
The typical definition or the traditional definition is the Toyota Production System because that’s what became known as lean. It is so complicated. Unless you’re doing like making 50,000 Benz’s or Highlanders, you really need to modify it. How have you modified– first of all, how do you use lean in the construction company?
Jason: I’m glad that you asked me that question. I defined lean, I have my own definition for it which starts to respect for people, stable environments, and continuous improvement. Some of that’s from the Toyota way and the 14 principles of the Toyota way. The first one is respect for people. In my mind, respect for people, the individual, the environment, the workers, the customer, our neighbors, everybody.
Respect for human beings and for their families really motivates us to then create stability on the project. To your question, to your point, construction has a lot of variation. There, I would say probably millions of moving parts. There are 1000s of people that lead into it to prepare these projects. If we can create stability for the managers for our trade partners, for our supply chain, everyone then we have standards that we can use to improve and so that leads us to the continuous improvement. If you work it backwards, we can’t improve because we don’t have stability.
We don’t have stability because we don’t have respect for people as a basis for what we do. That might seem a little bit simple, but in construction we’re a little bit different. There has been a historical tendency to disrespect workers and to think of them like they’re on a different class system like they’re at a lower level. That’s just absolutely not the case. These are skilled craftsmen and women that are professionals that deserve our respect and that do amazing things. So if we can get respect back in construction, we can get stability and continuous improvement. Did that answer your question?
Josh: Yeah, actually, I’m going to go back to 1983. It’s probably before you ever were doing anything like this. 1983 on the food service company and as far as I know, we were the first and only food service company [inaudible 00:05:47] program which stands for total quality management which was designed by W. Edwards Deming, which is the precursor to the Toyota way, the 14 point actually are Deming’s 14 points you see in Toyota’s Lean Process.
We did that 1983. We had some amazing, amazing results. It was more of a fail fast, fail cheap where we did small experiments along the way. They really process improvement as much. Although we did some process charts, VIP charts and [inaudible 00:06:18] charts which are statistical charts of what happens to normalize operations. We worked on improving them, but it’s a different sort of way. I agree 100% that your employees are your most important part of your company.
A lot of companies say that, but they don’t mean it and they don’t do it. One of my core values is rights and respect which basically means I respect you as a person and I expect you to respect me as a person. We’re going to treat both each other as adults. It’s really important that we do that. I think that you’re right.
Construction companies because the people on construction companies generally are craftsmen themselves. They came up through the ranks. They never had any real management training. They just do what they’ve been doing when they were worker bees and how they were managed. You’re bringing a brand new sort of thing. When you introduce this to the owner of a construction company, what’s the normal response you get?
Jason: Well, I appreciate that if I could take– do you mind if I take a step back and and cover one more aspect of the definition of Lean? Can I start there first?
Josh: Yeah, absolutely.
Jason: So if we have respect, stability, and continuous improvement, most of what creates stability is flow. We’ve all heard of one piece flow. We know that that’s the basis for a lot of what Ford and Toyota is trying to do. In construction, we have something called the critical path method. We use programs that do that for us. Basically, we have the overall duration of a project. We enter a number of activities in a work breakdown structure.
We logic tie that into a precedence diagram. That runs a forward and a backward pass and tells us what is the critical path of this project. That hasn’t served us very well alone. I’m not saying it doesn’t serve us well as a part of an entire system, but by itself, what it does is it brings everything on the construction project left. It brings it to its earliest possible start date. It most of the time ignores the concept of flow, meaning CPM, what is our critical path? When should we start activities, mainly says, how soon can you start something?
Not, when should you start something according to a customer need, according to a one piece flow? Going back to that definition of lean in construction, it is those three things that I talked about, but mainly it’s creating flow, creating stability. To answer your other question, how do customers respond? Or how do we sell it? Most of the time, we can prove that we can add value on a construction project specifically for the owner and for the designers, if we can maintain that flow. It does a couple of things for us.
It creates stability. It creates predictability. It allows the owner to know from a financial cost management standpoint, when are we encouraging certain costs on the project site? It also allows us to properly maintain our supply chain or manage our supply chain. Here’s another one is for designers.
They’re not like us in construction. They don’t want things done on schedule as their top priority. They want things designed in an iterative cycle that gives them the most amount of creative time to design something. Construction companies historically are always saying, “No, no push everything as close to the start date as you can.”
That doesn’t give the designers the supply chain, our vendors, the coordination, the owner and everybody to adapt and take care of and support the construction process. So if we keep things on a nice flow that gives the designers plenty of time. It gives predictability for the workers. It gives the owners predictability. That’s what I was talking to you about before we started recording.
Takt planning Takt is a German word for rhythm, or baton. What it means is that we keep a rhythm and a flow and construction which flow is king. Let me just say one more thing before we go to the next question is if we can keep flow, and we can keep predictable schedules and standard schedules that aren’t moving all over the place then we can reduce inventory, we can reduce manpower levels, we can reduce costs and increase our overall effectiveness, efficiency and throughput on a project. That’s why it’s so remarkable. So when we sell this to owners, most of the things that they appreciate is the flow, the predictability, the consistency and how we get there as a project team.
Josh: That’s great stuff. I’m willing to push back a little bit because if I’m a construction guy and I’ve actually spent 40 years now playing, I’m processing proven stuff. I’ve gotten a little bit some areas really knowledgeable and some areas I’m just a little bit knowledgeable. Six Sigma I don’t know a whole lot about except that 300 likes it is highly mathematically based, really hard to do. I don’t even think about that for a small company. In your particular case, the problem I have with what we call the waterfall method which is your critical path that you’re doing is that when one thing goes out, you have to sort of replaying the whole thing because now you’re out of sight.
One of the reasons I like Scrum is Scrum is done in Sprint’s two or three weeks sprints. Sometimes a one week sprint and you got all the stuff you need to do for your projects and backlog. By putting in there and doing a retrospective after every sprint, you’ll go back and say what worked, what didn’t work, what can we improve? Now a lot of that stuff is also done in lean.
There’s a ton of overlap between these different strategies. The reason I like agile versus lean in a construction situation is that we don’t really have long processes we’re doing unless you’re building a skyscraper in New York City. If you’re building a $5 million manufacturing plant or even a $25 million manufacturing plant to relatively small project in each of the pieces are going to go relatively quickly. Using agile or an agile sort of planning methodology, along with all this other stuff you’re talking about would probably move you faster, would be my guess.
Jason: When you talk about Agile and Scrum, do me a favour because some folks have a little bit different interpretations. Can you give me one or two sentences of an overall summary? I can give your response there. I appreciate you push it back, by the way.
Josh: Scrum essentially is [inaudible 00:12:46] by Jeff Sutherland basically exists in three areas you have what’s in the backlog, what’s you’re working on, and what’s been done. We have a certain amount of points that we assign to every activity based on how difficult it is. In that point assignment is really kind of a trial and error thing when you first start. The point of Scrum is to be able to get more points done in every sprint than you did before.
Essentially, what you’re trying to do is to increase the velocity of how you’re getting things done when you bring it into it construction sort of thing because it’s only a two or three week sprint. If things get out of whack, it’s easy to fix it. The other thing was Scrum which also is is often a part of lean is what’s called the daily huddle, where you have a 15 minute meeting every morning to make sure you’re on track in the fixed things, you get off track fast, they stay on track and those sorts of thing.
Then the other key piece is a retrospective is looking back at what happened over the last sprint, what went well, what didn’t go well. Those are simple to do which is why I like it. In my experience with construction companies is if I can’t make it simple, it’s not going to be done.
Jason: Well, let me respond to you. We’re on the same page. I’ve used Scrum on my projects. I haven’t used the point system so I don’t insult the process by saying I’ve actually used it the way you’re branding it, but work to do in progress and complete onboard three categories huddling up together for specific tasks, absolutely. I love that system. To your point, I don’t want to say smaller, but for some of them, I would say more complex, maybe more focused areas, I find it effective. I have two parts to my response here real quick. I appreciate you pushing back on that. Number one is what I find– I’m not saying you are doing this, but most professionals in the industry want to take one solution and apply it to everything in construction. I’ve just never found that to be possible. That’s just not the case. Let’s take and you’re familiar with the last planar system, correct?
Josh: Actually, I’m not but if you could do a short explanation of what it is that’d be great.
Jason: Perfect. I’ll use this as an example and I just want to be clear, I love the last planner system. This system by basically says that the last planners in the planning cycle which are the foreman on your project site need to really come together and make commitments together, real commitments and not have a schedule just pushed and dictated to them by the general contractor, if that’s the scenario, we’re looking at.
When they make commitments together and create a weekly work plan which has a higher level of accuracy, a higher level of certainty to actually be carried out because people committed on it then we execute on a daily basis in our huddle systems. We also use pull planning, but that’s a different story. Then we track what we did and we did not complete as compared to what our original plan was. We come up with a percent plan complete or percent promises complete. Historically, what last planner says is that if we’re over 80%, you’re likely historically, statistically going to be on budget ahead of schedule with good quality, but if you’re under 80%, you’re not. I love this system.
Josh: I love that. It’s very simple. You explain it and I can figure it out without having to think really hard.
Jason: Yeah and I agree. There’s a really good book that I’d like to promote here. It’s not my book, but it’s called the Lean Builder. I know the folks that wrote it, they’re fantastic people. It’s a fantastic book. It’s recently won some awards for the last [inaudible 00:16:24] system. I love that system. When you get into a complex building and this is outside of your points so this like 100, 150 million project when you start to manage that much interior space, the last planner system starts to break down because the project team begins managing so many tasks that it becomes unmanageable.
For instance, the research laboratory, the last project that I ran as the senior superintendent when we had equipment in these modalities or the electrical upgrades that we were doing in the existing basement, or these complex areas, I would always have what I called a Scrum board there with my three categories that we would huddle on it daily because it was more nimble.
I think to your terminology, it was more agile. We were able to do those things. I would use the last planner system for the exterior because there was a certain amount of natural variation that we had to deal with because of deliveries coming in and out and the site work. For the interiors, I would use Takt planning because it kept thing on a consistent flow. We had repetitive areas. It reduced the amount of load on the project team because it was predictable. It was in a flow.
My perspective is, and lean practitioners throughout the industry constantly get annoyed at me, I feel this tool has a proper application per project size, per circumstance. I agree with your point, actually, the trick for us is to find out what is applicable and useful to the person and back to your point about making it simple. The person receiving it or implementing or the superintendent is managing the process has to have the aptitude, the capacity to do it. We need to tailor those tools to those persons.
That’s why I do like Scrum for that. I’m 100% agreeing with your point. The only thing that I would add at the end to push back a little bit is for at least for the larger projects, sometimes last planar in Scrum and the point system asks, and this is my opinion or maybe it doesn’t ask but the way people use it sometimes those systems ask, what do we want to do in addition to what we need to do?
What can we commit to which encourages, even if it’s a little bit maybe this is normal variation on a project. Sometimes Scrum and last planner encouraged even if it’s a little bit, encourage some forms of variation. If we focus on flow for the larger projects for the areas of the project that are more typical then we’re able to plan manpower and information materials, tools, and everything that we have to the point that those inventory levels can reduce. When that’s not predictable, inventory levels increase because foreman and trade partners and suppliers are like, “I don’t know when this general contractor is going to change the plan. I’m going to bring out everything into my little shopping area, my little shopping mall, a market over here. I’m going to bring all of the duct. I’m going to bring all of the fire sprinkler pipe. I’m going to bring all of my electrical rough and all of my condo all my greenies.”
When inventory increases, the movement, the waste, the defects and everything else all of the waste and construction start to increase which increases manpower which increases costs. I would maybe push back and say, “I do love Scrum. I do love the last planner system. I love it when they’re appropriately applied and that wherever we can we create flow instability and hold those scheduled dates in advance so that we can reduce inventory which over overproduction and inventory are the mother of all ways for us.” There you go. I hope that was helpful.
Josh: Well, Jason, here’s the thing which I just want to our listeners to get their arms around. Here’s what I want you to do. We’ve been talking through process control jargon, the last 20 minutes. We haven’t really stopped to explain what cheek piece made. If we did we’ve already spent an hour and a half. The good news about jargon is it’s shorthand for how to communicate effectively.
The bad thing about jargon is is shorthand how to communicate effectively, meaning that if you’re not part of the tribe, you don’t get it. I’m going to really encourage you. Jason mentioned a book about construction lean. I’m going to recommend that you read Scrum which is by Jeff Sutherland. I’m also going to suggest that you read The Goal by Eliyahu Goldratt which is about the theory constraints.
What you’re going to find that all three of these areas, I also read the Toyota way which is the original book on lean. I would really encourage folks to say, “What piece can I use in my company to be effective and even better.” I’m going to give Jason a plug because I’ve been looking for somebody like him for several years now, who actually understands how to do process improvement within the construction world.
It basically doesn’t exist. I have talked to people. I’ve talked to several construction consultants and say, “Are you using Agile with your clients? Are you using Theory of Constraints with your clients?” They say, “What’s that?” You need to learn about this stuff. It’s really, really important. If you don’t learn about it, seven or eight years from now, you’re not going to be able to compete because there’s going to be enough people doing it. It’s going to hit critical mass. It’s not there yet. You want to be at the front end. You’re always ahead of the pack, but it’s really important.
Jason, I’m sorry we’re on a soliloquy. I’m also sorry, but we’re out of time. I’m hoping that people want to find you because I think what you’re doing is really interesting so how do they do that?
Jason: I have a couple of ways to do that. The Elevate Construction Podcast. We’re at Episode 95. There’s some great content in there especially for people in construction, leadership, team building, war stories, lean. Also at our website https://www.elevateconstructionist.com/, that’s all one word and then.com. https://www.elevateconstructionist.com/ IST stands for Insights, Solutions, and Training. We also do boot camps for training field personnel and construction. We have a book coming out soon. Please check us out. We’d love to have you check out our podcasts. I do want to say we’re out of time, but I have plus one on the goal. I absolutely love that book. If you’re not starting this now, you will be behind the curve in 7 to 8 years, absolutely.
Josh: One of the things I kind of obsess about is I call the sale ready company. Whenever I say sale ready company that people are talking with always get it backwards. I’m not recommending you sell your company. I’m recommending you have your company ready for sale is a big difference. Having your company ready for sale just means that other people outside your company want to own it.
The reason they want to own it because you have developed a great company. There are eight things you need to do to create a sell ready company. I’ve written an eBook about it. I actually have my second parables coming out which talks about doing a sale ready company with an internal family sale. We’ll talk about that later, but for the time being, just go to https://sustainablebusiness.co/saleready. You get the eBook free. I think you’ll like it. What I’d like you to do is read it let me know what you think.
Hey, this is Josh Patrick. We’re with Jason Schroeder. You’re at Cracking the Cash Flow Code. Thanks a lot for stopping by. I hope to see you back here really soon.
Narrator: You’ve been listening to Cracking the Cash Flow Code where we ask the question, “What would it take for your business to still be around 100 years from now?”
If you’ve liked what you’ve heard and want more information, please contact Josh Patrick at 802-846-1264 extension 102, or visit us on our website at www.sustainablebusiness.co, or you can send Josh an email at email@example.com.
Thanks for listening and we hope to see you at Cracking the Cash Flow Code in the near future.