Chris Boyd: How Incentives Can Help Address Construction Industry Labor Shortages
Tom talks with Chris Boyd, former VP of Product at Nashville unicorn Built Technologies and now head of product for Trunk Tools, a construction fintech startup. At Built and now at Trunk Tools, Chris is focused on solving the skilled labor shortage by enabling project leaders to increase workforce productivity, safety, and profitability by aligning incentives from top to bottom.
Chris joined Tom recently from Stanford University, where he was attending a venture capital workshop for promising early stage businesses, to touch on a variety of issues like:
What’s the best way to incentivize workers?
How do you bring technology to construction and improve outcomes for everybody?
What is it like to build a technology company from scratch?
Transcript
[00:00:00]
Chris it's so good to see you.
[00:01:13] Chris: you too, Tom. Thanks so much for having me.
[00:01:15] Tom: You know, you are our first return guest I don't know if you are aware of that.
[00:01:29] Chris: Awesome. Thanks again for having me.
[00:01:31] Tom: Yeah. You're in Palo Alto right now?
[00:01:31] Chris: I am. Yeah. I've been out here at Stanford University actually for the last couple of weeks. It's been a lot of fun.
[00:01:37] Tom: My impression of Stanford is that everybody there is a jerk. Is that an accurate impression?
[00:01:45] Chris: So I feel a little bit biased. I've only been interacting with the folks in the Graduate School of Business so far, but it's been great.
And it's the summer, so it's a much smaller group of people that probably have a lighter load.
[00:01:55] Tom: Yeah, there you go. I know you started a new venture. I want to talk about that in a few minutes. Actually, why don't we just talk about that now? And then we can work our way into how you ended up there in Stanford on somebody else's dime.
[00:02:12] Chris: Sure. So I've started as head of product at a company called Trunk Tools. As I was working at Built, obviously became really, really passionate about the construction industry and all of the shortcomings there. It's just wild to me that we still have an industry that, basically over the last 70 to a hundred years, hasn't really made any productivity improvements according to all of the data, which is just absolutely flooring.
With Trunk Tools, what we're really trying to do is solve for the productivity issues that everyone on the blue collar side faces on these construction projects. That ties back to labor shortages and a slew of other things. We've created an incentive product that allows these general contractors and other stakeholders to align the incentives of the blue collar hourly workers with their incentives so they can collaborate more effectively, they can get work done more efficiently, they can do things with quality and safety at the forefront, and actually get more cash in their pocket in the process.
So it's been a lot of fun, a lot of problems to solve, but that's where I started here just recently.
[00:03:11] Tom: So this is collaboration in construction.
[00:03:15] Chris: Yeah, what a novel idea.
[00:03:18] Tom: Well, I typically think about construction as being a set of handoffs. And that every contractor is responsible for their work.
And the general contractor is responsible for the overall product, delivery on the product. It's kind of an every man for himself industry. Is that a reasonable assessment?
[00:03:45] Chris: Yeah, I think it is. There's a lot of perverse incentives in construction today.
If you you do your job, what you knew that you were supposed to do, and then you leave, and then you get called back later because another trade came in and they're frustrated with how you did something or your plumbing or pipes are in the way, and now they've got to redo it at the end of the day.
You're not really upset about it, you're making more money because you're getting paid hourly. And so that's where some of those perverse incentives come in. How do we incentivize these folks to actually collaborate effectively to get things done in a timely fashion? To do things really, really well to reduce rework.
That’s what we're trying to solve.
[00:04:18] Tom: Which market are you starting with?
[00:04:22] Chris: We’re early stage business - pre series A. Right now we're doing a lot of exploration. We've got very small companies with five workers. We've got a top 100 general contractor that's using it as well.
We're seeing value. We actually had an example the other day where that really small business doubled their productivity simply by utilizing incentives on one of their projects. As of right now, we see application across the board, but you don't have enterprise sales. We're trying to start small on the work, but work our way up.
[00:04:49] Tom: When you talk about how they saw a double in their productivity, is that measured in terms of they cut the time required to complete a job in half?
[00:05:01] Chris: They specifically, in this measurement, took the amount of work they were expecting to complete over a designated period of time and did twice as much work in that time period.
It wasn't because they worked longer hours. That's the first question we get is like, are you just cracking a whip and now they got to work late? The reality is it just changes the dynamic of the conversations in many cases that happen on the job site where every lunch break, smoke break, coffee break, whatever - they're now talking about how do we get this stuff done more effectively?
[00:05:27] Tom: Wow. So I'm a skeptic and not of you. I'm a skeptic of life, so this is not anything personal about you. I'm kind of struggling with is you're, you're asking people to change their behavior, that they've got one way of doing something and you're saying this technology abled thing is a better way.
That's a tough nut to crack. What incentives do you have or what support do you have to get people to have adoption?
[00:06:02] Chris: A couple of things that are fascinating at the macro level, which is that in all the research that has been done by numerous universities and other locations on how to incentivize hourly labor, they keep coming back to financial incentives as being the most effective.
That’s what we're doubling down on. The idea is not, ‘hey, work harder because we said so’. It's work harder because you're going to make more money. If you put more money in the pockets of these blue collar workers, that aligns the incentives. In many cases, we have been able to give these workers an extra 50 or 60 in some cases for a single day of work that they wouldn't have had otherwise, which that's a meal for their families.
That's something they would not have been able to bring home otherwise.
[00:06:40] Tom: It's meaningful. Let me dig into this. That is a meaningful amount of work to get somebody who makes 15 an hour to change their behavior. Three hours of pay. But I'm wondering that, so do you set a goal where it says, okay, the budget, this is a 10 hour job.
If you get it done in five hours, we'll give you 50 bucks.
[00:07:06] Chris: Well, it's the reality of psychology and all of this, which is really what we're talking about here is how do you break things down in such a way that people feel like they can actually have a meaningful impact on the goal. It's got to be pretty granular.
Goals that are a month long, for instance, are not very effective. And another example is it's better to pay somebody 5, 10 times than to pay them 50 one time. You know, there's more motivation and incentive there. So we try and help these general contractors and other companies break the work down where the goals are actually daily targets for teams or individuals.
So every single day they feel like they can positively influence that outcome. And part of the problem in construction historically is that you get paid for the work that you did. A week, two weeks, sometimes even months later. And in this case, the moment you complete the goal and the supervisor signs off, you get the money instantly.
So it's cash in your pocket every day.
[00:07:55] Tom: I could see how that will change behavior. The barrier to me is being able to break the work down into daily chunks and then assigning, a value to the bonus, because it sounds like this is essentially like a cash bonus structure for going above and beyond.
But as you say, it's also changing a way of working and that you're trying to encourage collaboration, whereas in the past, it's like, well, if I have to put the toilet in twice, you just pay me twice,
[00:08:30] Chris: Exactly. On the individual side of things, breaking the work down, it's happening in a lot of cases, especially on large commercial projects by its superintendents, on the job site every single day, but it's not tied to a goal.
It's just ‘Hey, go work in this area, try and get these things done.’ Now we're trying to make it concrete. That's been one of the interesting things we've learned in the process is sometimes the value of incentives is just making it clear what you want them to do. Sometimes that's not clear in many cases.
So that's one side, but on the collaboration side, we started with goals that were very, ‘Hey, in your discipline or trade. Get this thing done, whether it's a little bit faster or with making sure you're wearing your safety gear the entire day, et cetera. And we've started branching into, you know, work collaboratively between the plumber and the electrician to make sure that you don't have conflicts as you're doing all the rough-ins on the second floor.
Right. Now they can talk to one another and feel like they're both going to financially benefit as a result of that collaboration, which has never been the case before.
[00:09:28] Tom: Talk to me about how the application helps the contractor organize the work that feels like it's essential for an effective rollout is you may need to, so you have like daily work lists.
So I expect you to hang the door today and, you know, as you said, like we'll take second floor, expect you to hang all the doors. Then it's up to the individual worker about how they're going to go up there and get that done. Yep. How does your software become involved in that process?
[00:10:03] Chris: We try and train our customers to think about the conclusion of every week as an opportunity to prepare for the next week.
In many cases, they're maintaining these lookaheads that are at least one to four weeks out of what they expect the work to be and who's going to be doing that work. And so we obtain all of those documents and you know, I know it's a buzzword right now, but this is where we're using AI and large language models to pull a lot of information out to ultimately present recommended goals to them of what the team should be working on in order to help accelerate some of those things.
In the interim, we're also doing a lot in the middle because we have several folks who are actual construction professionals, which is kind of a professional service on top of the software itself. It helps these guys learn how to think differently about prioritizing the work and then looking at ways to accelerate.
[00:10:49] Tom: At this stage in your evolution, those guys are critical. Now, don't tell them this, but your AIs could eventually put them out of a job. But at this stage, they'll own a piece of the business by then. So it won't matter. But at this stage, they're super important for, your first successful customers. They're the translator between the application and then the actual work getting done.
So when you were in a, in a former job, we talked years ago about how you guys managed your roadmap, you said something to me at the time that really caught my interest. Which is that you were sitting very close to customers and asking them, what do you need us to build to close this deal?
There are pros and cons of that approach. The pro is that it helps you guys grow that business quickly. The con is that even though you were a SaaS platform, you were actually custom software for a hundred different customers. That's an outsider's observation. I don't want you have to say whether I'm right or wrong. We can just leave it there. So would you do that again in this situation? I'm sure there are, it's every business in the, in the world seems to be concentrated. I'm sure there's a handful of very large contractors.
Is that a strategy you would repeat?
[00:12:13] Chris: Short answer is yes, but with qualifiers, the reason why we were doing it in the first place was that a, it was not all the time. It was only in specific scenarios. Typically, you know, on the journey of product/market fit, you're trying to identify if you've already hit product/market fit in one segment.
How do you get product/market fit in another segment? Part of that process when done well is identifying who are the representative customers or prospects in that market, where you can say, if I've landed this group and they're using it and they're deriving a ton of value, now I have a case study of a reference customer that will resonate with similar customers in that market I'm trying to go after.
Those are the scenarios when I'm more apt to say, Hey, what do we need to build to get this done? What are the specific pain points that if we don't solve those pain points, you can't recognize the value that you need to see. That's when I use that strategy. It's not, it's not a go-to every time.
[00:13:03] Tom: It's not close every deal. You're a representative customer in a new market. Exactly. Now, how do you manage it, like, because you will get to a point to where your second or a third major prospect is going to ask you for tweaks, likely. How do you handle it in that case?
You've already established a value proposition in this market. The next guy comes along and says, well, we're different.
[00:13:29] Chris: I mean, it's going to be case by case based off the scenarios. What are they asking for? Is it market pervasive? That's usually the first question I want to ask is, do I see that adding value elsewhere?
If it's truly nuanced to what they need, then in most cases, the answer is going to be no, but you know, the way you say no, it's, it's kind of an art in and of itself. You know, part of that is. Letting them in behind the kimono at times as to the other things you're working on. You think will benefit them.
And in many cases they end up reprioritizing based off new information. That's usually the way I like to handle that and navigate it. You have to say no more often than you say yes. That's just part of the job.
[00:14:03] Tom: Well, I think establishing a customer advisory board. Did you guys have one in your, previous place of employment?
[00:14:12] Chris: We did. When I was at Built, we definitely created one. I would say it was a little bit late in the game and it was primarily focused on the really large enterprises and trying to understand at the executive level what they needed and how certain features or products resonated or didn't resonate with them.
We had one before that. It was a little bit more informal in that we had a lot of customers who were just really great and willing to give feedback and they were our first ones we would go to.
[00:14:37] Tom: Are you going to establish that in your new gig?
[00:14:42] Chris: We've already done it actually, to a certain extent.
I would say it's a hybrid model in the sense that some of them are customers. Some of them are just advisors who are in the construction industry working for really large general contractors who would love to see their company adopt it, but know it's going to be a one to two year process, just by the nature of the size of their companies.
So that's the way that we're approaching it. It gives us a foot in without actually having a signed contract in some of those accounts
[00:15:08] Tom: So is that part of your go-to-market? The establishment of contacts with people who are well known consultants in construction? Are you going to them first?
[00:15:18] Chris: Less so consultants, more so actual boots on the ground, superintendents and project managers and things like that, that are willing to give us some of their time. And we've actually been able to go onsite, you know, wear all of the gear, shadow them for a day, see the challenges they're facing, ask questions like, how would you create a goal for this?
Or how would you incentivize the specific outcome you're trying to create here? It's just given us really, really great hands-on experience really quickly. That is cool.
[00:15:44] Tom: How big is your TAM?
[00:15:46] Chris: Yeah, we're just under 20 now. And so we, we crossed the 15 mark just a few weeks ago,
[00:15:50] Tom: Congratulations.
How big is your total addressable market? I'm glad you didn't answer because nobody knows what a TAM is. Except kids like us.
[00:15:58] Chris: We look at the total addressable market as all of construction. You know, there's about $1. 6 trillion that's being spent on construction as a whole. The biggest challenge everybody's talking about is labor, whether it's labor shortages or labor inefficiency or the fact that, you know, the vast majority of construction workers, their average age is 53 years old.
They're expecting, in the next five years, over 60 percent of them to retire. So there's a huge, huge opportunity in construction. We view our TAM as the entire construction market here in the U.S. Then obviously we see where we're starting in the product as being much smaller than that, as we get a better understanding of what it means to have product/market fit.
[00:16:43] Tom: I don't see what you guys can do about that retirement problem. I'm probably missing something - tell me the story about how that works.
[00:16:52] Chris: Ultimately it's just going to exacerbate the labor shortage. This is all about how do you keep people, so retention play, as well as attract people to your company, since everybody's fighting over that labor.
Incentives are a key component of that. We're not going to snap our fingers and suddenly be able to train a million new construction workers. But we can make the construction industry more compelling than it is today, because you can make more money. Because you can work with, you know, more collaboratively with other people, which are all, as you said earlier, not things that people think about when they think about construction.
No, it's like we need, we need micro talking more about the dirty jobs and the positives that can come up.
[00:17:29] Tom: Construction is a little bit like healthcare in the sense that it's a cost plus business. Who has the risk? So in a cost plus business, there's not a huge incentive for efficiency.
Uh, so I don't, so I need to kind of the total economics, um, feel like it's, well, when I have this in place, I will be able to be the lowest bidder because, uh, and I'll have a better, I'll be able to reduce the risk of the job because now I'm actually being able to measure behavior where the only way I can, I can measure behavior is if I'm on site looking at everybody.
And if I trust all my supers and my subs. But I don't actually have any real metrics about behavior. Now I'm starting to get those. Is that, is that kind of the play? That because in the end, it's like, I'm cost plus, why do I care about cost?
[00:18:28] Chris: Well, I think that a lot of people who are more mature in the construction world from a business perspective have recognized that if I can get a worker onto a job site to get the job done and off, I can get them onto another job site where I can be making more money.
And so it's similar to the way that banks think about dollars, right? How do I lend that money over and over again so I can keep making money off of money? It's the same thing for these construction workers. And so even if it is a cost plus job, if the business is evaluating their profitability overall, every single time, the more jobs they get, the more money they make.
And so that means you've got to have your labor work as efficiently as possible. So there are numerous contract structures out there. Obviously cost plus is utilized a lot, especially right now. Walter saw this volatility, but they can still see a tremendous profitability by incentivizing efficiency.
[00:19:16] Tom: So it's the, um, the limitation is how, how many jobs can I do?
And, uh, this lets me do more jobs because I'm not wasting time.
[00:19:26] Chris: Yep, exactly. And my people are happier because they're being paid more. Right. It's just, it's been good for everyone. That's
[00:19:31] Tom: cool. Alright, well let's, let's talk about your time there in Palo Alto at Stanford. Um, first of all, congratulations on making it.
I think that's um, being funded by a VC and having them pay for you to be educated at Stanford. I'd say that, that sounds like a, I've made it kind of. Thank you. It's good to be here. Yeah. So, um, secondly, uh, what is the most interesting thing you've learned from those guys?
[00:19:56] Chris: Yeah. Well, first of all, it's just been an incredible opportunity because this is not just going to Stanford and being a part of their traditional process.
This program is called DYDX. It's specifically targeted towards technology executives and startups. We've had a chance to hear from folks like Eric Schmidt and Roelof Botha of Sequoia Capital. Diane Green was there yesterday of VMware and Google Cloud. We just had some amazing folks that we've gotten a chance to interact with.
So for key takeaways, a lot of it is stuff that you have heard before, but it gets hammered in again. The importance of strategy and things like that. One of the things I've really appreciated is academia has gotten this, personification around not really caring about the culture of companies and just really focusing on how do we educate these folks to run businesses and make money and think about the revenue and build models.
The tremendous amount of focus on building a healthy culture and what that means and being vulnerable as a leader. Practical things that you can do to help shape that, articulating it clearly, iterating on it over time, looking at case studies of companies that have done that well, and those that have not done it very well.
All of that's just been extremely fascinating and powerful.
[00:21:06] Tom: That's super cool. Particularly since it aligns with what I do. Makes me feel like I'm smart. I give a presentation about a principle-based business. Did anything come up there where they talk about policies and procedures are the wrong way to do it.
The right way to do it is you have a set of high level principles that are like all people are created equal. You trust your team to implement within the framework of those principles. Does that come up at all?
[00:21:42] Chris: Yeah, absolutely. Even at Built, we did this, we called them guiding principles.
Amazon does this with their leadership principles. I talked a lot about Airbnb, which is one of the unique ones in the sense they've had the same six underlying principles since before they were funded, which is really fascinating. It's absolutely a theme. On top of that, it's the foundation upon which not only do you establish and refine, iterate on your culture, but you intentionally do things like hiring to make sure that you're referencing back to those things in the interview process. It's definitely a theme.
[00:22:14] Tom: So what are the principles of your business now?
[00:22:17] Chris: Benefits of being early stages, we've got to shape them.
We've written them down and have been actually refining them as a part of this time out here. The goal is...Can you let us hear what you've written down? Early stage, like early. Iterate on it. Okay. But...
[00:22:34] Tom: Right, because I want to be able to iterate with you. That's why I'm asking.
[00:22:36] Chris: One of the key things for us is...it's very low ego, like you've got to have little to no egos associated with what you're doing, making sure that we're obsessing over our customers and putting them first and the things that we're focused on. Ensuring that as a team, we're seeking to pull in the same direction.
That doesn't necessarily mean consensus, but it can be disagree and commit. So these are some of the things that we're really putting on paper and. Part of it is also an extraction exercise, because culture is influenced from the top in a big way. Our CEO, Sarah Buckner, and trying to understand the things that are really important to her and what she's looking for is also a part of that process.
It's been a lot of fun. This is my fourth or fifth time going through this exercise with the company.
[00:23:16] Tom: Well, that's fantastic. A lot of people, if they go through it, it can be a very frustrating process because they feel like we're just the bullshit committee. Then, you know, it's going to go on the wall and then the next thing someone's going to say is, well, how many sales calls did you make today?
What did you close today? But to make that a living thing, it's like this is the Constitution, this is the Declaration of Independence. This is a founding document upon which the whole trajectory of the organization is based. You can go back and rewrite those things, but typically it's not because lots of good things have happened.
Right. In Animal Farm, the last thing they come to is all animals are created equal, but some animals are more equal than others when it's all animals are equal. That process also of trying to understand the vision of your CEO. So you say there's no ego involved. A CEO of a company, a venture backed company and not have ego. So how is the process working?
[00:24:20] Chris: I think that ego gets misconstrued in some cases. It's like when I think of somebody with high ego, they're just impossible to work with because they're always right. They're the most important person in the room. Nobody else's input and opinion matters.
Being confident in the fact that you have brought a product to market and that you're solving a real problem and that you're not going to give up and you're going to be tenacious about this. You can hear no a hundred times. That's not going to stop you. That to me is just the necessity of being a leader in a tech startup. Otherwise it's just not going to work.
It's been great to go through this process and you have to ask hard questions: Are you willing, if we write this down to fire somebody, if they're a repeat offender on this thing that we're calling a principle for the business, that just changes it from this kind of fluffy, like butterflies, rainbows, unicorns into like, this is somebody's life that I could change as a result of them failing to adhere to this principle.
[00:25:16] Tom: My perspective on being fired and firing is changing a lot. It's interesting that you, that you're trying to make that more grounded. What comes to mind is it's not ego, it's courage or fortitude. What you want is, openness and fortitude. You want people who are, you have to say, I don't know, but I'm going to find out.
What I believe in the courage that I have is my process for finding out. That's based on a set of principles that we're not going to stray from like the customer obsession one to me. You have to know what they want. But a lot of times they don't know what they want.
I might think about the idea that customers are children in the very best sense. You have a responsibility for them and they're not going to adjust for you. You have to adjust for them. If you want a healthy relationship with them, but with guidance, they could become these wonderful things.
But even though it's like we're customer centric, that doesn't mean you do everything they say. It's not every night is ice cream night, right? Have you been through a process like that? When you were with Built, did you feel there was an education process with your customers?
[00:26:47] Chris: Absolutely. Customer obsession is at times protecting the customer from themselves. It's not malicious on either side. It's done based on the information they have. This is what I think I need, and I need you to build it for me. What is the core problem that we need to solve here?
What if we solved it this way, et cetera, which can be an enlightening process for everybody involved. A part of customer obsession is developing that empathy. We're not talking about robots on the other side of this. These are people and we have an opportunity to positively impact them.
We need them to be champions of the things that we're doing. It's amazing how people will be your champion, even if you tell them no a lot. A part of it is building that relationship and that rapport. For me, customer obsession is, are we making business decisions based off our understanding of what our customers actually need?
Have we done a good job of discerning that by spending a lot of time with them? The contrast to the example you were giving are parallel with children is that in many cases with children, you know what they need or what will make them better at something, but in the case of our customers…
Many times we're technology professionals, we're not professionals in whatever industry they're in. How do we build that understanding of that empathy? I think is really, really clear.
[00:28:04] Tom: What processes are you creating to be able to do that, to take the information you get from your customers and turn it into features?
[00:28:11] Chris: Staying as close to them as possible is extremely important. The greater that distance, the longer the cycles are for learning. We are sitting with them, watching them operate. We're putting ourselves in their position. We're even doing it in Trunk Tools.
I call it kind of a fractional embedded approach where a PM actually is spending some time every week, thinking about what goals will make the most sense for them based on the stage of the project and the challenges they're facing, new information that we're getting, and then we've even offered at times to go in and use the software on their behalf so they can do it with us. Both as a training exercise and because we have to eat our own dog food. So the more we can do that, the better. We're actually exploring ways we can use incentives within our own company so everyone's using the software on a regular basis.
[00:28:59] Tom: That’s a great principle -when you're about to release a new feature, a new product is to ask yourself, would I use this? A lot of times the answer is no. Are you kidding me? This? I would never use this. I expect my customers to use it, but I would never use it.
[00:29:17] Chris: Which is why it's been interesting in some recent releases where we actually had that kind of fractional embedded PM that I was talking about, where it was like, man, that feature we shipped this morning, I've already used it multiple times today to try and help this customer. I totally agree with that question and it's great to see the validation.
[00:29:35] Tom: That rapid confirmation is another place where courage is so important. You're never going to have good data. There's no such thing as good data, you know? What you'll have is the best data you can have to make the best decision. Having the courage to commit to decisions with incomplete data, I think, is very important, and then also to be able to recognize when your data is garbage.
One of the things you do in early stage is establish what those core metrics are, and then you bake them into the architecture. How are you going to be collecting and measuring those? What have you guys decided are your core metrics right now?
[00:30:18] Chris: One of the most important ones for us is looking at the relationship between worker and goal volume.
If there are workers in the system, for example, but they haven't worked against any goals in the last two weeks, that's not ideal. We want to see consistently that every worker that is active is working toward three to five goals a week. That's a really healthy place to be. Obviously we want that going up and to the right as we add more customers, more projects, et cetera.
So that's a really key metric for us. The other one is that we are issuing this money out when the incentives are satisfied directly to the workers on debit cards. We want to see how is that money being utilized? Are they going to ATMs immediately and pulling it? Are they going and spending that money in different places, et cetera, because there's huge opportunity there for us as well.
Again, we want them to get that money as quickly as possible so they can use it in a way that benefits them the most.
[00:31:12] Tom: So do you see how they spend the money?
[00:31:14] Chris: No, it's more about understanding if they're pulling the money out immediately versus if they're keeping balances on the card and things like that.
As of right now, those are the key metrics that we're keeping an eye on. Volume of dollars going to them and if balances are being held or if they're being spent immediately.
[00:31:32] Tom: I'll put you on the spot. Do you eventually plan to like sell information that says these are the guys who buy cigarettes right after they leave the job?
[00:31:40] Chris: No, honestly, we see a huge opportunity in this market, given that a lot of these folks that are blue collar workers may not have bank accounts, they may not have checking accounts, etc. So how can we help them in a lot of ways? A tenet, if you will, at Trunk Tools, is we're not going to build anything that is to the detriment of the blue collar worker.
Everything we do has got to be beneficial for them. They have to be raving fans. They have to see this as an asset to their work and not an obstacle. A hundred percent, we are not going to be selling their information or providing that to other parties.
[00:32:15] Tom: Well, that's really interesting. Cause to your unbanked, and also small entrepreneurs. So I mow lawns. I've got five guys who work for me who mow lawns. None of them have a bank account right now. I'm paying them in cash. My customers don't always pay me in cash. This system is a potentially a payment system based upon their, oh, wow. That's fascinating. So your team is actually bigger.
[00:32:43] Chris: It is. We've actually been exploring manufacturing and some of these other areas that have similar challenges. Again, we're trying to focus so that we don't dilute that. We're definitely seeing kill two birds, one stone opportunities as we build out a lot of this functionality, given the reusability across verticals.
[00:33:01] Tom: Let's talk about focus when you get back from Palo Alto after being blessed by all the IT saints out there. I know I'm not going to stop - it's pure jealousy, Chris. That's all you have to think about. That's what you can tell us. Talk to this schmuck who's totally jealous. What is going to be on your 30 day to do list? What are the things that you have to tick off next?
[00:33:24] Chris: The real key for us is rapid experimentation. We have several accounts that have agreed to be early adopters. We have several customers that are live right now, but I wouldn't consider each of them early adopters. They're doing it, expecting it to improve their business right now, which is great.
But we're going to run multiple experiments with our core product, as well as some other products that we're working on, most of which are in the AI space in order to see what efficiency we can provide and how we can quantify that in a way that's meaningful for a lot of these businesses. So when I say rapid experimentation, I mean, what are the experiments we're running?
Monday through Friday so that we can see the results Friday and determine what we do next. So that's going to be a huge focus for the next 30 days
[00:34:05] Tom: How many, organizations are in your universe right now? How many actual workers who could, or potentials to get a job and then work towards an incentive?
[00:34:20] Chris: Right now - it's always interesting in construction - the way they typically adopt software is they bring on the next project they're starting instead of the totality of all the projects they're working on. So that changes the game a little bit. For instance, we have one general contractor who if they bring on all of their workers, there's 5,000 workers they keep employed consistently.
Then we have another one that has five workers in total. In their case, obviously they're fully onboarded. We're ramping up some of those larger ones as we speak. The key there is just demonstrating that ROI project by project. It's not all these are created equal. We've got solar projects, which are pretty repeatable, large commercial solar fields.
We've got, 10 story commercial, industrial buildings, things like that. It all boils down to the same underlying concept and value prop, but it manifests differently. Both of how the goals are managed, the teams are managed, et cetera. We're working toward ramping all of those up while adding more customers.
[00:35:15] Tom: And then, you're bringing on their work plans, I'm assuming. So like, Let's take the solar farm example. I'm assuming there's a project plan to install a solar farm and it doesn't change a lot except for how big is the piece of land we're putting the panels on.
Once you get that formula or they give you their work plan, tell me what happens at that point. If somebody says, all right, this is our project plan and it's in a Word document. What do you do at that point?
[00:35:48] Chris: Almost everything is a spreadsheet and that's usually the artifact that we get. We're working with them to have conversations. First of all about the amount of labor that's involved and how long are they going to be there, etc. And then what is the pace at which they're running?
Are these already sandbagged and padded really heavily, etc.? So first we want to seek to understand From there, it's all about our proposing specific areas where there can be acceleration. For instance, if I pick on the solar example, yes, a lot of these solar fields are very, very similar, but we've encountered issues like, -oh, wow: if they damage any of the curbs that they have to drive over onto the solar field, they have to replace all of those. How do we incentivize them so that they don't damage the curbs, right? There are little things like that, that we can do along the way, but sometimes you're preventing something as opposed to just accelerating something.
That's just a reality of it. Ultimately it manifests. Week over week recommendations they are then adopting into the system are being sent out via text message to all of these workers so they know exactly what they're working toward and they're getting paid on a regular cadence.
That's just the process every single week to make sure they're working on the right stuff.
[00:36:58] Tom: So you don't have to have the whole project in your software. You just identify specific, I'm going to say inflection points, but that's the wrong word. Where they get the text that says, okay, first thing you're going to do is pour sand on the curb and make a little hump.
That way you'll drive up over the sand and get under the field and not just smash the curb. So they get those and when they do that, they get the money. So it's maybe some small percentage of the total tasks necessary are going through the system, but those tasks have an outsized impact on the total cost of the job.
[00:37:38] Chris: Exactly. In some cases, it's piecework. We had one example of a welder who on average was welding 20 brackets a day. We set a target of, okay, if you do 25 brackets a day, here's a 25 bonus that you get at the end of the day. It was kind of a funny situation in that it was a single day goal.
It was kind of like, let's see if it works and see what happens. It was clearly a mistake on our part because he misread it. So we delivered the information incorrectly. He misread it as...this applies every day. For three weeks, he made 25 of these things every single day, which was amazing.
At a point we had to, we had to make it right with him, but it's amazing that it was effective.
[00:38:23] Tom: I love that. That's extremely effective. I always think about where's the content angle. There is a content angle in this app. It's best practice. So you could buy a best practice library for the kind of job that you're doing.
We know from other people who've done these jobs, when they follow our best practice, they save money. So, speaking of money, how are you guys getting paid? Is this a per user model or what's the idea?
[00:38:50] Chris: You know, early stage, obviously all this stuff is subject to change, but the approach that we're taking is that there's a platform fee associated with utilizing it and we are trying to look at both your worker volume and project volume to understand what that is going to look like. There are costs to us we have to be sensitive to.
Ultimately, the last thing we want is for them to hesitate to bring on another project or worker because it costs them more. We're structuring our pricing model as best we can so that's not the case. Most of these folks in the construction space think about software costs on a per project basis.
So when they accept a new project, their pricing is including the cost of using Procore or here's the cost of using Fieldwire or some of these other solutions. We want to be a part of that conversation. The way we described, we want to be a top three software solution for you and your stack.
We want you to feel like you got to sue us if we try and take it away from you because it's the only way that you can be as productive as you have been.
[00:39:48] Tom: That's the virtuous monopoly. Pricing is fun to talk about - for me anyway. I totally agree that per user pricing stinks.
It's the wrong set of incentives. You can do kind of a proxy for that around, a percentage of revenue. But what's interesting for your business is this per project concept, and it allows them to make a decision at the project by project basis about whether we want to use it or not.
Can we absorb the cost of this in this project? It becomes, you're close to their economics. It's an easier thing for them to just sort of line item in. There's also a gain share opportunity. This starts to get murky, obviously, because everyone does. Every game sure does.
For people who have done a repeat job, like the solar farm thing, you have to put a thousand of these solar farms in whatever, in a year. If we're going to save the planet, we got to put a thousand solar farms in a year. You already know what your cost is. I don't know if it's on a per acre or per panel, but something.
We are going to take 20 percent of the delta between those current costs and whatever you establish as your new costs. Has that come up? Like, or any of the (folks), like Eric Schmidt, was he pitching you guys on risk models or anything?
[00:41:25] Chris: We've certainly thought about it. The way we're thinking about it now is we have a responsibility to ourselves and to our customers to actually calculate ROI for them, regardless of whether or not we share in that value.
Part of that is also understanding - without getting into the weeds - implications on geographic areas, taxes, overtime, regular rate of pay - all that stuff. That ROI calculator is key because part of what we do when we're making goal recommendations is we're also showing them the ROI we expect them to get as a result of implementing those goals. It gives us a projected versus actual component.
So we're certainly keeping an eye on it. If we're doing what we did last week and doubling the productivity of some of these groups, then we've certainly justified taking a larger piece. But we don't want to do this, like, you know, what I was describing earlier with the per user pricing. If somebody decides not to use us on a project because the costs are too high, then we're doing something wrong.
[00:42:22] Tom: I love your, “we're not going to do anything that hurts the blue collar worker.” That’s a really interesting place to start from. Construction I'm sure is like a classic management and labor conflict. You've chosen the side, you're selling the management, but you've chosen the side of labor in that conflict.
So your pricing. How does the pricing reflect that alignment? Is there, some, we get a percentage of the bonuses that we give out. You define the bonus, you get to say, I'll give you a bonus for this. We get a percentage of those bonuses, which means you're, getting something you wanted, partaking in that.
[00:43:14] Chris: I don't know if that's the way to do it. It is part of our model, and this is where we get into fintech territory, but because we're moving all of this money, you know, a percentage of that is going to us. As that transaction volume increases, obviously that's good for us. We're almost looking at that though, as gravy, as opposed to the underlying business model..
This is the enterprise platform fee, et cetera, tied to the project volume that the GCs and others are paying for. At this point are not taking anything away from the subcontractors. What's really fascinating about this and has been really neat to see is that in some cases we're replacing, frankly, an illegal process, which is a 20 bill under the table.
If you get this thing done, but the advantage for them in that scenario is they handle their own taxes, but again, not legal. What we're doing in our case is that every customer, literally every customer we have so far is grossing up on these bonuses. So they're covering the cost of the taxes.
It's all completely legal. The workers are getting exactly the amount of money in their pocket that they get to keep. They're not getting screwed at the end of the year by some big IRS bill they weren't expecting. It's all above board. It's been cool to see that the GCs are willing to do that to retain labor and get this work done more effectively.
[00:44:28] Tom: So let me see if I understand that completely. Does that mean it's like, I got a 50 bonus and rather than 50 cash going into my account, there's withholding for taxes, Medicare, Social Security, insurance, blah. It's basically treated just like regular income and there's all the withholding that goes with it.
[00:44:45] Chris: Actually, it's better than that. You are working toward a goal for 50, you complete the goal, you get the 50, you can go spend it. All of the tax implications, withholdings, etc. are grossed up on top of that and covered by the general contractor. So, you keep 50. We're, you know, we're not going to tell you that you get X and they actually get Y.
[00:45:05] Tom: Right. And so the other 12, the contractor's paying for.
[00:45:08] Chris: Correct. In some cases it's a lot higher than that. When we're talking about overtime.
[00:45:13] Tom: It's really interesting. You bring up the illegal part. That is an economy, the underground cash economy you are competing against.
In that economy, a 50 bonus costs me 50. In yours, it costs me 65. Right. You're very, very early. That'll be an interesting conversation as you go through this to see how people do that. Maybe at some point, I'm just spitballing, is there some cash equivalent that doesn't have the same problem with taxes and withholding, et cetera, where it's less expensive for the vendor, but it's still totally legal?
[00:45:55] Chris: There's some interesting things. Primarily in the type of goals that you're setting, there's discretionary versus non discretionary and discretionary is handled differently from a tax perspective. So there's lots of things that we're already doing to help with that. But what's interesting is that when you stack it all up, it's actually a really good stress test of the value that we're providing.
It's like worst case scenario. I'm giving you a non discretionary bonus. I'm grossing up for everything. It's overtime. So it's increasing regular rate of pay. And if we're still providing really positive ROI, it becomes really hard to argue with the value that it's providing.
[00:46:29] Tom: No, that's a great point. I'll spend 62 to save a hundred every day of the week. This is not your first rodeo. You've been doing this for like 10 years or so. When you look back on when you started your product management career. What do you think about like, man, I'm so glad I did that. And then a flip side of that question too is like, boy, I hope I never do that again.
[00:46:57] Chris: One of the things that stands out for me was joining startups. I'm really, really glad I did that because a lot of what you have to do in product management is taking the initiative to go and figure out how do you solve for these customer problems in a way that's really beneficial for the business.
You have a ton of autonomy and empowerment to go and do that. If you're in a large company, a lot of bureaucracy, et cetera, it's kind of a stay in your lane. And so I've learned more doing the work and being in that, like, I don't really know how to solve for this, but I got to figure it out just about anything else.
So I wouldn't change that for anything. As for an, I would never go back and do that again. I would double click on the times in business growth where you feel like you have to justify your existence, and you're in the role to a dozen people as it's scaling because people don't know what you're doing necessarily - the org is evolving so quickly.
You're not really sure how to report back to everyone on the right metrics that we're tracking. It's all this stuff that gets glamorized about high growth. That's really challenging. It can be emotionally taxing in the process.
[00:48:04] Tom: One of the things that always astounds me is it's like a board meeting ends and everybody in the senior team who was there in the board goes like, Oh, thank God that's over.
The next damn day, they're going, we got to get ready for the board meeting. 24 hours later, we're going to, we got to update our slides. That that process to me is just insane and broken. So one of the things you said they told you out there is the importance of culture and the importance of being able to tell the truth and being able to have clear communication.
There's such a temptation in small businesses that are rapidly growing or trying to rapidly grow to fudge the numbers to sort of like, how do we put the best face on this reality, because we don't want mom and dad to paddle us. So I hope you've never been through a paddling.
If you have a bad month or a bad quarter where you are, how are you going to handle that?
[00:49:15] Chris: A few philosophies, that undergird my approach and a lot of that. First of all, every time that you are padding the numbers or sugarcoating things, you got to pay the piper in the future and it's only going to be worse.
There's very, very few Cinderella stories that start with, we lied 12 times, but we got it right the 13th time and made up for all the other stuff, right? I don't like that approach. We were actually even out here just looking at the HealthSouth case study on how they were just fudging the numbers for billions of dollars over the years.
So just got to pay the piper. So I think that's key. The other thing is, people misunderstand the role of boards and the value they provide. Again, I have a couple of underlying philosophies. One is don't create anything for your board that you don't need as a leader to operate and run your business.
If you're not looking at these metrics and testing them and checking in on them already, then you don't need to just go and get them ready for mom and dad. That's a problem. The second thing is your board is highly motivated to help you and honestly in those conversations of where you're struggling, I think, is the key to extracting the value they can provide. board meeting where the board members say nothing is the most ridiculous waste of time.
If they are challenging you and pushing you and questioning you and responding to you when you're asking questions to say how they can help. Now you're actually deriving value. Right now, I think we put too much weight, especially in this kind of economy, on the capital that we get from them. That's just a fraction of the value they can provide.
[00:50:45] Tom: It goes back to the principle concept of they'll never understand your business at a level of detail where they can actually help you on day to day tactical operational decisions.
[00:50:57] Chris: And that's a good thing.
[00:50:58] Tom: I totally agree. That's what it's supposed to be. But if it's just like, so I used to work for a company that managed nonprofit hospitals and members of these hospital boards were just interested members of the community. Our guys were like professional board meeting attenders. They were consultants and they would say, we would bring up like we're thinking of making a 2 million investment in a piece of imaging equipment that generates revenue for the facility. Everybody would look at each other and be like, okay, sure. But if they wanted to talk about, we got to buy a lawnmower, it's a two and a half hour conversation about what lawnmower we're going to buy.
There are a lot of board meetings that ended up into like the two and a half hours about what the lawnmower is, which is totally wrong. It's like in a case of a hospital, you should be talking about, does our community need this imaging? What does it do? You know, how does this match with our mission?
Because they can make, they can have those kinds of conversations. So your business, is this list that you're writing about what you believe in. That's the stuff where they can hold you accountable and say, well, one of your principles is you're never going to screw the blue collar worker. And this sounds, you want to sell this information to cigarette companies.
That sounds to me like you're going to screw the blue collar worker.
[00:52:11] Chris: Right. And then having them ask questions that when you're stuck in the day to day, you just don't think to ask. I think it's extremely helpful. Does this warrant a change in your strategy? It seems like this is going a different direction.
Is this signal or is this noise and those types of questions? It's uncomfortable because you almost feel like an idiot that you didn't ask yourself the question, but it can be so helpful.
[00:52:37] Tom: I worked with a CEO where every meeting I had with him, he would ask me something. I'm like, why didn't I think of that? But it was super, super helpful. Humiliating as hell, but it was super helpful.
[00:52:47] Chris: You gotta be grateful for that and find board members who are going to do that. For many of them, the ones who are really good at it, the ones who've operated before, it's just like breathing for them. It's the first thing they do.
[00:53:02] Tom: Do you see yourself becoming an investor at some point? A lot of people who have multiple successes eventually become investors.
[00:53:09] Chris: I would love to, I have a tremendous amount of joy in helping a lot of founders and, and startups think through these things and try and avoid skinning their knee.
So I'm sure that that is something that will draw me in, in the future, but for now it's, we just got to execute and this team is really exciting. It's a lot of fun to be a part of. It's a big problem to solve. It's going to take a little while, I think, to really make an important dent here. So I'm going to stay focused on that and we'll treat the investing as a retirement plan.
[00:53:39] Tom: All right, Chris, it was great to see you again. Safe travels back to Nashville.
[00:53:43] Chris: Thanks. It's good to see you.