The Great Recession has dealt a serious blow to the construction industry. The federal stimulus package has provided a boost to government projects, but tight financial markets have largely stifled private building projects.
The construction slowdown has hurt contractors, architects and engineering firms, such as Milwaukee-based engineering firm Graef-USA Inc., which serves the public and private sector.
“It’s been challenging,” said chief operating officer John Kissinger, who was recently tabbed to be Graef’s next chief executive officer. “Last year was a tough year. The start to this year has been tough.”
The company has had to lay off some employees and improve efficiencies to reduce its prices.
“We have had to adapt to the market realities,” Kissinger said. “Price has been a bigger issue than it has in the past.”
However, the company is only willing to cut back so far and refuses to harm what has made it so successful since its founding in 1961, Kissinger said.
“We have not changed the way we do business,” he said. “For us, our main advantage is gaining a deep understanding of what our clients need and solving complex problems for them.”
During economic downturns, some firms scramble for business by lowering the quality of service in order to offer the lowest price. However, that strategy is a mistake if the company’s business model is not already geared toward being the low-cost option for that industry, Kissinger said. For example, a mid-priced restaurant that suddenly tries to slash prices to compete with McDonald’s will fail because McDonald’s has already perfected the low-cost model, he said.
“You have to understand what your core business is and try to work within that model,” Kissinger said.
There are some engineering firms whose business models are to be the lowest-price option, he said.
“If we all of a sudden panic when times are tough and say we have to compete with these guys, it’s going to be a losing proposition, because that’s not what we do,” Kissinger said.
Still, a company like Graef cannot rely on its strong reputation alone to attract business. It needs to be price competitive, and oftentimes is the lowest bidder for a job, Kissinger said.
But the company will not cut its services and reduce prices to the point that it harms the quality of its work, he said.
“That’s a big concern for us,” Kissinger said. “As we try to cut costs, we need to maintain our brand. If we lose that, our customers would view us as a commodity.”