There’s often a HUGE disconnect between construction operations and finance teams — and when it comes to construction risk management, that divide can cost projects big.
Who should really be responsible for reducing risk on construction projects? Is it construction accounting and finance, or does project management and field operations need to step up?
In this episode, Adam, Greg, and Jeff break down how construction business leaders can bridge the gap between construction finance and operations to improve risk mitigation. From contract terms to budgeting, scheduling, and field execution, both teams play a role — but too often, they’re working against each other instead of together.
If you want to reduce risk on construction projects, avoid costly mistakes, and create a more aligned team, this is the episode for you. Watch now to learn how to manage construction risk before it’s too late!
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Full Episode Transcript:
Jeff Robertson:
You can’t possibly know whether my schedule’s, I’m on schedule, or the project’s not going to make money by looking at a spreadsheet, you can’t know that. That’s the, that’s the mindset. You can’t possibly know that. And therefore, shut down.
Adam Cooper:
We’ve helped hundreds of clients build better construction companies.
Greg Gorman:
We love this business. We love the people. And we’ve seen what running a successful, profitable business takes.
Adam:
And we’re sharing it all with you here, on Construction Hot Takes.
Jeff:
All right, so the question is who is actually managing risk? Operations says it’s finance, and finance says it’s operations.
Adam:
I want to ask a clarifying question, since Greg likes to do that too. I want to clarify ‘managing’, because we would say who owns the risk, a lot of the time? But who’s managing it? Because everybody could own it, and nobody’s managing it. So, maybe we could talk about the different types of risk that you would traditionally be responsible for managing that risk. Maybe that’s a good place to start
Jeff:
So, I’ve got a little bit of insight on where this comes from. The basic premise is that we’ve talked about this a couple different times, that operations and finance, or operations and accounting, have a healthy tension. Sometimes unhealthy, but healthy tension is probably a good thing.
Greg:
An adversarial relationship.
Jeff:
Yeah, it is, there’s, there’s, we’ve agreed that there’s industry, there’s an industry standard of kind of a little bit of clash there. And my, my theory on that is it’s based in lack of understanding and education about what the other does and how they actually are very simpatico, but they don’t understand that. That is where I come from. I spent a lot of years arguing with finance managers and CFOs about this on the Ops side.
Greg:
Can I add one thing to that? And it goes to the risk, it also comes from the fact that, I may understand what the Ops does, and the Ops side might understand what I do, but they might not necessarily respect that.
Jeff:
Bingo.
Greg:
It’s the respect question that I’m as important as you, or you’re as important as me in the success of this company. And I think that’s the kind of underpinning of that. It’s like, well, you know, ‘you wouldn’t be here without me’. Well, ‘you wouldn’t be here without me’, right. That’s it.
Jeff:
So, it’s the, it’s the, ‘I’m out in the field with mud on my boots.
Greg:
And it’s hot.
Jeff:
And it’s hot or it’s wet, it’s raining, it’s cold. Whatever. And then a guy in loafers shows up and says, ‘your job is failing. It’s not going to make any money.’ And I’m going to ask, ‘well, how do you know that, tie guy, wearing a bow tie, or a necktie?
Greg:
He’s got it written on his shirt.
Jeff: And you’re going to say, well, and you’re going to start explaining a bunch of spreadsheet stuff that, that person in the field, be it the superintendent of or project manager, is immediately going to go, ‘I don’t have an MBA, I can’t understand any of that, and you’re talking down to me. And, you can’t possibly know whether my project’s on schedule, or the project’s not going to make money by looking at a spreadsheet. You can’t know that. That’s the, that’s the mindset. You can’t possibly know that. And therefore, shut down. That’s what happens.
Greg:
So, so the answer to this question, the first answer anyway, who’s actually managing risk, and we can talk about, and we can talk about where you identify the risk. What is a risk. How to manage a risk. The answer to the first part of the question is everyone.
Jeff:
And I agree with you. I couldn’t agree more.
Greg:
Because what you just described is risk, that’s all around risk. I don’t understand on the finance side that you don’t know how to track your job costs in the field, and you don’t understand that I, I’m not going to show up with a spreadsheet and help you understand it because that’s not how you learn, right? Both of those things are huge risks to a project.
Jeff:
Yeah, the way I approach this is that, you know, there’s obviously project risk and company risk. And it all flows up to the company overall, whether you have 2 projects or 20. I guess I have this maybe it’s a little bit of a pie in the sky, I have this vision, you know, it’s a, it’s a personal crusade of mine, that you can train accounting and finance a little bit about the stresses and the sacrifices that are made in the field. And you could also train the field staff, operations, to understand a little bit of, ‘Oh, data actually can help you make decisions.’
Greg:
I’ve got an analogy, and I know you guys love my analogies. This one, I didn’t make up, but I’ve worked on it over the years. The great analogy for this is, a point guard and a forward on a basketball team. I’ve always used that to explain why both roles are important. Because if you know anything about basketball, we all love sports here, you have to have both of those roles. One person scores and one person kind of manages what’s happening on the court, and they’re both important. It’s the same thing in construction. And I think if you think about it that way, it takes away the ability of you not to understand me, and me not understanding you. I don’t do what you do, but I understand it. You don’t do what I do, but I understand it, or I want to.
Jeff:
That’s the goal.
Greg:
That’s the goal of a good project. And so, back to the question, who’s managing risk? All of us are. Everyone in the field and everyone in the office needs to be managing risk, if it’s project risk. If it’s company risk, it’s probably a little bit different because the field –
Jeff:
It’s over your pay grade, if you’re in the field.
Greg:
Yes. It’s not, it’s not what you’re paid to do.
Jeff:
They’re not thinking about that for sure. Except when you come out there and tell them, ‘well, okay, so we’re running a CCEP on this job and you just you just became an insurance expert, but you didn’t know it.
Greg:
Right, and you forgot to tell me, or I forgot to tell you. You know, there’s also, I think there’s also institutional. No, not institutional, there’s reputational risk, and that is field and office. We can, we can fall down in a job, you know, in the office, and we might not know we’re going to lose money. You’ve, if you fall down in the field, that client might never hire us again and we lose our strategy to go work for a certain type of clients. So, that’s another type of thing that everybody manages.
Jeff:
Yeah. Yeah, I think for me it shows up a lot in AP and AR, because you know, we see a lot of clients where there’s a good flow of information between the office in the field, right. An invoice has to be approved or at least checked off in some way or another by the PM or the superintendent or both. And we have clients where that doesn’t happen at all. We hear AP say, I have no idea whether that lumber was delivered or if it was all with the delivery. I don’t have a clue. I just know an invoice showed up, and I want to pay it.’ And then we find out, ‘well, you have a cash flow problem.’
Greg:
Or you double paid that invoice, and nobody told me it arrived, and we re-ordered it.
Jeff:
And all of a sudden, you know, you have financial troubles because you don’t have a good process where those two systems work together. But you’ve got guys in the field, like, ‘I don’t know anything about paying bills. Why would I know anything about that? I’m just supposed to make sure it gets stood up and built.’
Greg:
‘I’m paid to build.’ And in the office, I’d say, ‘I’m paid to track what you’re building.’
Jeff:
But so many problems come when you don’t incorporate those together. So, I see that with almost every client we talk to, in some way or another.
Greg:
Yeah, we do this with all of our clients here. I think one of my passions in construction is to let both sides know how important I think they are. And I tell every client that I have, look, if you’re asking my opinion, both sides are important. I can’t do my part without you. You can’t do your part without me. And let’s shake hands and be friends. That doesn’t always happen.
Jeff:
I’m working with a client right now where there is, there is sincere clashing going on between operations and accounting. And both gentlemen are well-educated, proud, they both know what they’re doing. And, in this case, it’s almost like, it’s not a personality conflict because they like each other. But they, and they have some respect for each other. But they both think each other’s full of shit, too, at the same time. It’s very interesting. So, it’s like, you could just see them shut down when it’s like, well, ‘he does this and he should do that’. And, ‘he does the other thing, and he should be doing it a different way.’ And they just cannot. So, we’re working on that. I’m going to put them in one of those, have you seen those shirts? When like, siblings are fighting, and you make them put on the same shirt and walk around the house in it? I’m thinking about that.
Greg:
I thought you were going to say, like, when you’re a kid, you put them and make them wrestle it out on the floor in front of you.
Jeff:
Yeah, actually, one of the guys actually, he’s a little bit more, he’s a little bit more aggressive, you know, and being okay with confrontation. The other one doesn’t, he’s not ‘anti’, he just, he doesn’t lean into it as much. So one of them, he’s constantly talking about getting the boxing gloves out. He’s like, ‘lets just get the gloves out, let’s get the gloves out.’
Adam:
You should get them the big Hulk gloves.
Jeff:
Oh, yeah. Hulk smash!
Adam:
Give them each a pair of –
Greg:
Or the sumo wrestler suits where they just bump into each other and figure it out. But you know, it’s an interesting question. Who actually manage risk? I think, I think there is multiple answers here, but I think the biggest answer is what we said. It’s really everyone.
Adam:
Everybody should be.
Greg:
Right, that’s what I was about to say. Everyone should be, but are they?
Jeff:
Everyone should be, but also, everyone should know, you know, it’s a big machine with lots of cogs in it. So you should understand which cog you are. Like, you know, in this particular process, I happen to be a little cog, but it’s important I’m there, or else these two things don’t talk to each other. In this other process, I happen to be the bigger cog, and I need you to be the smaller cog. But it’s important you’re there. Or the, or the mechanics don’t work.
Greg:
Well, that’s a good point, because the other thing about risk is not only should you be doing it, and do you know what part of the risks you have, but are you doing your part to manage the risk that belongs to you? Right? Like, I could be, I’d be remiss in my job if I knew we were upside down on a job, and I just didn’t tell anyone because I just don’t think they want to hear it. Right? That me controlling or managing my part of the risk. What happens to it in the rest of the machine, outside of my part, is kind of not up to me. That’s, that’s why everyone should be doing their part.
Jeff:
Alright well, I mean, well, you know as well as I do. You had this role. You’re, you’re looking at the finances of the project and or the company, and you’re sweating it. You’re looking at your WIP and you’re like, ‘oh my God’ –
Greg:
I’m sweating right now just talking about it.
Jeff:
We’re costed excess and we’re never going to catch up. I can tell. I can just look at this and know. And then you call your project manager, your superintendent, you check in. You’re like ‘Hey, how’s it going out there?’ And they’re like, ‘peachy keen. It’s awesome. I mean, we’re we’re killing it out here, and the owner loves us.’ And you’re like, ‘Fuck. Fuck, fuck, fuck.
Greg:
Which probably means you gave away a bunch of free work. You’re not getting your change orders signed, right? And someone’s not turning in their timesheets because, you know, do don’t even notice?
Jeff:
I’ve often wondered, is it a matter of, so, I understand basic stresses of that. But like, is the thought process, lack of control? Like, I can see it happening on paper. I can see the numbers. They don’t lie. I can run these six ways through Sunday, it’s going to come out the same. And like you almost maybe even know, like maybe I even have some ideas on how we could bring this back into the into the, into the landing zone here. But you don’t, you don’t have the authority, the influence. Or maybe you don’t know. Maybe you’re like, I don’t how to pour concrete. I can’t pour concrete faster. You know, is that is that where that comes from, that stress?
Greg:
I think it depends on – it’s funny you say that, because I was thinking this the other day. We talk about this in kind of global terms, but it really is, as one of our colleagues loves to say here, it depends. Because if you’re a small subcontractor and you live and die by every project, the stress of that is, is, ‘we might run out of money.’ If we have to, if we have to mobilize three more times, or we have to be out there six more weeks, we don’t have payroll to cover six more weeks because we’re not going to get paid. If you’re a medium to maybe large sized company, you could weather a bad job. But then the risk is, like I said, you know, it’s reputational risk. It’s, I might lose my job because I didn’t know what I was doing. So, the stress matters. It’s relative to what, you know, what kind of company you’re in. But overall, nobody wants to be part of a bad job. I don’t think, and I think on your side too, right?
Jeff:
Absolutely not.
Greg:
Field guys, and you know, I’m sure a good PM does not want to put on his resume that he was the PM on a failing job. Just like a CFO or a comptroller does not want to look at red bleeding all over the page all day, every day. Because it just means, it’s not good, is what it is. So yeah, I think it matters, it’s just, it’s relative.
Jeff:
I just always wondered that because, you’re sitting in the office, and you don’t get out to the field, maybe ever. And so, there’s just like, there’s this distance and unable to, you know, lack of control. Like, I see it going down the toilet and I cannot, I can’t fix it. You know, I don’t know how. Like, can I put on a hard hat, boots and go out there and manage this?
Greg:
There’s nothing I can do about this.
Jeff:
That’s not. That’s, I’ve often wondered if that was a big piece of that.
Greg:
I think that’s a good point. And I think the field is the opposite, though. The field is, if I come out to the field and tell the super, or the PM who I see down, you know, like down the hallway, one day. They can do something about it, I think. ‘Oh well, they’ll just work faster. Well, they’ll just get rid of half of the crew. Just work through the rain and the’ – but you’re going to be like, ‘I can’t go any faster on this. I’m tied by the contract and I can’t do it. And we’re behind two other people. So yeah, I think both sides have a little, education on that.
Jeff:
Yeah, well I can say for sure that I, you know, I’ve talked to superintendents about this over the years. As a project manager, I lived in a little bit of both worlds, but I can tell you for sure that guys that are out in the field as a superintendent or a foreman or whatever, they’re 100%, it’s, I hate to say it’s a class thing, but it is almost a class thing. It’s, ‘I wear boots, and you wear loafers, and you have no idea what it’s like to bust my ass out here for 8 to 10 to 12 hours a day.’
Greg:
I think it’s back to the idea of what’s a successful project? This is kind of where risk crosses over.
Jeff:
Yeah, how do you define success?
Greg:
If a superintendent finishes the job and gets to demobilization, and the building is standing, and he or she gets to walk away, go home and a job’s done. That might be a successful job to that superintendent, but the office might think that job was catastrophic. That we lost money, we lost a reputation. We like. you know, it’s, it’s two different parts of the same machine.
Jeff:
There’s a large part of it. I mean, I thought this way for a long time, we don’t we don’t teach project managers or superintendent to be businesspeople. That’s not what they’re – when they’re in the, when you’re a carpenter, say for example, and you’re coming up through the trades, they’re not teaching you things about business. They might be talking to you about production to a certain degree, and maybe you work for a larger company, and you get labor reports, and your foreman tells you, ‘Here’s where we are on labor, guys. We need to do better.’ That’s, that’s possible. But it’s not much more than that.
Greg:
Right. It’s not budget management.
Jeff:
No, and even project managers, they’re brought up to, you know, you learn how to write a contract. You going to scope things. You’re dealing with money and budgets, but it’s not taught in a business analytics way. It’s not taught in a, how does this feed the larger beast, and how to do – I mean, maybe today, I mean, I’m kind of an old guy now. But maybe today, that’s taught about, you know, doing a little bit more analytics on that. You know, the most analytics we did was on the schedule.
Greg:
Do you know what we used to do every time, every start of a project at my old company? We used to take the field crew to the first week of every job. Oh, sorry. The office crew to the field and let them see the job. Put on a hard hat. The women would put on hard hats, and they would walk around in there, you know, and get it, to kind of understand what they’re doing.
Jeff:
We did that for topping outs.
Greg:
Yeah, yeah. You can do it for topping out as well. But like, understand what you’re talking about, right? And what’s what.
Jeff:
So, Greg and I, we like to spar about this a little bit because we come at it from the two sides of the equation.
Greg:
Both sides mentioned there in the question, so we have a little background.
Jeff:
However, and I’ve experienced a lot of emotion on this side of the equation, the operations thinks it’s your job. But the truth of the matter is it is both. You’re right. It depends on what process you’re talking about, and maybe what, you know, level of the cake you happen to be talking about at the time. But truth is, everybody is. It just kind of depends on what it is you’re talking about at the moment.
Greg:
Yeah. If we’re breaking risk down into the two biggest pieces here, let’s just say financial risk to the project and operational risk to the project. And it’s obviously, it’s obviously everybody.
Jeff:
Sure. Agreed.
Outro:
And that’s all we have for this episode of Construction Hot Takes. Thanks for listening. And if you enjoyed the episode, don’t forget that you can follow us on Spotify or Apple Podcasts at Construction Hot Takes. And while you’re at it, please subscribe to our YouTube channel too, at Ascent Consulting. If you want to drop a thumbs up or a comment on your favorite video, that’ll go a long way in helping our channel. And lastly, if you want to schedule a call directly with Adam, Greg, or Jeff to talk about problems or challenges facing your own construction companies, you can schedule free consultation calls directly with them on our website, www.ascentconsults.com. Again, thanks for listening and we’ll catch you next time.
