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Columns

All in Agreement
The Apprentice Reality

By Pete Battisti
June 1, 2005
Have you ever been persuaded to believe something that is not true? You have the ability to investigate but you don't take the time. Factmonster.com provides information on many business leaders. Here's the site's blurb on "The Donald."

A self-promoting and flamboyant dealmaker, he was able to secure loans with minimal collateral in the free-wheeling '80s and created an empire in real estate, casinos, sports, and transportation. By 1990, however, the effects of recession had left him unable to meet loan payments. Although he shored up his businesses with additional loans and postponed interest payments, mounting debt brought Trump to business bankruptcy and the brink of personal bankruptcy. Banks and bondholders lost hundreds of millions of dollars but opted to restructure his debt to avoid risking losing even more in a court fight. By 1994, Trump had eliminated a huge portion of his $900 million personal debt and reduced substantially his nearly $3.5 billion in business debt. Forced to relinquish the Trump Shuttle (bought in 1989), he retained Trump Tower in New York City and control of his three casinos in Atlantic City.

Here is a recent story on Trump, from the Press of Atlantic City:

Donald Trump had been facing the prospect of a courtroom showdown pitting his casinos against disgruntled shareholders and other opponents.

But in a dramatic turn of events, the casino mogul and self-proclaimed master of "the art of the deal" has reached agreements with former enemies to all but guarantee a quick ending to a $1.8 billion bankruptcy case, officials say.

Barring last-minute surprises, Trump Hotels & Casino Resorts Inc. is expected to win final court approval ... for its plan to emerge from Chapter 11 bankruptcy protection.

"I think it's going to be very straightforward and efficient," predicted Scott C. Butera, president of Trump Hotels. "I think most of our situations have been resolved or settled and we're hoping for a quick process."

Settlements last week with shareholders and a former would-be business partner removed the most serious impediments for the Trump bankruptcy plan. Instead of spending days in a grinding trial-like confirmation hearing to win bankruptcy approval, Trump likely will have a cakewalk.

By Staff Writer Donald Wittkowski

The reality

We know Trump has a nice jet, helicopter, home and hairdo. We also know that he's had some serious financial problems and is currently trying to save his casino business for a second time. We don't know how much he's worth or what he really owns. It all feels like a lot of hype to me. Maybe Trump's stock and bondholders could share how they feel about Trump's business practices.

Young people preparing to enter the business world are watching Trump and from my perspective, these youngsters like what they see. In this financial giant, they see wealth, power and attitude. In George Ross and Carolyn Kepcher (Trump's bookends), they see two successful people who are Trump's most trusted advisers. Young people listen to Trump, Ross and Kepcher's well-planned questions designed to cause battles between the contestants. Yes, I know it's television and is watched for entertainment purposes only. Are people-especially the young-watching for entertainment or are they learning how to behave in business?

How do we learn to run our small businesses? How do we learn these things and from whom do we learn? A powerful book I read is "Good To Great," by Jim Collins. According to the author, "[Good to Great] required five years of effort with 21 research associates at my management laboratory in Boulder, Colo." The research performed by Collins and his 21-member team provides us with actual "evidence" of what it takes to create a successful business. In other words, he has taken the best of the best businesses; dissected those (including their leadership) and offers us the best of the best information.

It's easier to watch a television show and be entertained by actors. It's work to read a book like "Good to Great" and even more work to implement the best of the best information into a business plan.

Construction is reality

Reality shows are not reality. The producers manipulate the actors and the program as much as they want to get the desired result. The only goal the producer, of say "The Apprentice," has is to sell advertising space. That means he has to do any and everything to get you and me to watch the show. If no one watches the show, the advertisers will not buy commercial space and the show is cancelled.

Construction is a real business and we don't have the option of re-takes. We bid jobs, sign contracts and do work. That's what we do every day of the week. We don't get second chances to re-bid a job we were low on, nor do we get second chances to change a contract after we sign it. None of us will ever be able to do the same exact job twice. We get one chance only and if we fail in the bid process, contract process or quality and production process, we lose.

An absolute truth is something that is absolutely and always true. The following are a few of what I believe to be absolute truths in construction.

• Construction has more risk than most other businesses.

• Estimating is an art.

• Contracts are not fair.

• Productivity is essential.

• Payment is out of our control.

Estimating: Even if we have a systematic approach to estimating, there is a good chance that an estimator can make a big mistake by over or under estimating a job.

Contracts: Contracts are designed to transfer risk to the subcontractor. Subcontractors absorb most of the risk.

Productivity: We depend on people meeting or exceeding our productivity estimates.

Payment: Subcontractors are not in control of the money. Payment passes from the owner to the GC to the subcontractor. Subcontractors can be used to finance projects. There are many reasons why a subcontractor may or may not be paid.

We agree that estimating, contracts, productivity and payment are absolute risk truths in construction. Since we agree these are absolute truths, how do we reduce the risk in order to make our small business less risky and possibly more profitable?

First, read Collins's book, then read it again and take notes on ideas you want to incorporate into your business. One of the things I learned from his book is that no matter which or how many systems we use to reduce risk, they are only management tools. Collins's book goes beyond management tools and gets to the heart, bowels and core of why a business is consistently successful. I'm excited for everyone who reads the book because I believe it will help one's business.

Here are a few more absolute truths that should help you reduce risk in these four categories.

• Estimating risk can be minimized by the quality of estimator or the review process.

• Subcontractors can modify their subcontracts to fairly allocate risk.

• People can be motivated to achieve production goals.

• Payment contract language can be modified and liens can be placed in the event of nonpayment.

The fifth risk is something I learned in reading the book. The biggest risk is to believe a lie. Here are a few absolute lies:

• Success is only achieved by the owner.

• The owner's way is the only way.

• The business is more important than the people.

• Business is not personal.

There are many more absolute lies that we come to believe without realizing what we believe. We just proceed in standard operating mode until something happens that shakes us into reality. It's been my goal to help readers think a little out of the box; at least to think enough to develop confidence in knowing that it's OK to look at things differently.

Trump card

It's obvious to me that Donald hasn't learned anything since his last financial mess. Most likely, he came to realize that a flamboyant, aggressive, independent and temperamental maverick approach to business creates more risk than it would for someone contrary.

My hope is that none of us would believe a lie. However, I can assure you that many people do and are deceived. As you read "Good To Great," learn the truth about people and business by examining five years of in-depth research.

Remember: Teamwork begins with a fair contract!

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Pete Battisti has been in the commercial drywall business for 20 years.

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