August 8, 2025 • 50 mins
In this episode, Keaton Turner explores environmental fees and their hidden costs from a customer perspective, continuing the equipment cost series. He recaps previous episodes and highlights the importance of team dynamics in equipment management. Keaton discusses strategies and methodologies, including internal equipment invoicing and its effects. He emphasizes integrating equipment and operations teams, the project manager's role in fostering internal customer service, and avoiding silos for unity. The episode concludes with a call for listener feedback on team strategies.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Good morning, Keaton.
It's Willie Sheriff, Iron Horse Truck Services.
So the environmental fee that you're talkingabout is we have to pay it's a dollar 25 a
gallon to get rid of our wastewater to wash thefloors.
It's a dollar 25 to get rid of coolant, andit's almost $2 to get rid of oil.
(00:26):
They do not pay us to get rid of any of thatstuff.
They charge us.
In the beautiful state of Washington, we getcharged, they call them environmental fees from
the state that they just arbitrarily mail us inthe mail.
And we get to pay.
We don't get to say anything about it otherthan pay us now.
(00:46):
So we get to write a check for all that stuff.
We have groundwater taxes, tax taxes.
So, yeah, hope that helps you understand theenvironmental thing.
It's just passing state costs onto theconsumer.
Just like the grocery stores here charge us 8¢to beg groceries.
(01:08):
So, hope you have a great one.
Love your podcast.
Peace out.
How you finish like nine to five.
We stand on business.
(01:29):
Stay on business.
Here's the ketchup.
You gonna need a village.
Yeah.
Okay.
Okay.
We got no limits.
Got no limits.
Willie Sheriff.
Man, what a name, first of all.
Willie Sheriff.
If if I had a name if I had a last nameSheriff, I would literally walk around telling
(01:57):
people every single day, there's a new sheriffin town.
I love it.
Thank you, Willie.
Thanks for listening to the podcast, brother.
And thank you for being the first guy toactually take a few minutes out of your day to
help me understand environmental fees.
(02:18):
Now now, Willie, I hope you know that when yousend a video like this in, you are opening
yourself up to criticism.
You're opening yourself up to, feedback,constructive feedback, but sometimes negative
feedback.
And Willie, by the way, I love you.
(02:41):
I don't know you, but but anybody that listensto the podcast and takes time out of their day
to send in a video, I love you.
But I am in one of those moods where I'm gonnachallenge you a little bit here, Willie, and I
don't I hope you don't take any of thispersonal.
You know, I've never received an invoice fromyou, so I'm not I'm not arguing your
environmental fees.
I'm not arguing your your business costs, but Iam taking a shot at all the people that have
(03:06):
sent me environmental fees on an invoice overthe years.
And Willie, in in, you know, all's fair, inlove and war and, and the for the sport of the
game, I'm gonna challenge your explanation alittle bit.
Here's why.
(03:26):
Do you think I care that you get charged adollar to get rid of antifreeze or coolant, or
you get charged a dollar by the state forwastewater, or you get charged taxes for
(03:46):
certain things.
Like like, at the end of the day, the customeragain, I'm not Willie's customer.
I'm picking on Willie.
Willie looks like a great dude.
But at the end of the day, the customer doesn'tcare about all the costs that go into the
trinkets that it requires you to run yourbusiness.
(04:08):
The customer doesn't care.
When I when I pay someone to mow my yard, do Icare how much coolant they use or don't use or
oil they use or don't use or shop rags orgrease tubes or like, do I care they gotta go
power wash their equipment on the weekend?
I don't care about any of that.
(04:28):
I want one fee.
Charge me to mow the yard.
Like, when I buy ice cream at Dairy Queen, do Icare how much the cup caught, like, the actual
paper cup cost?
32¢ for a paper cup.
And, oh, by the way, the ice cream's an extra$3, but but the cup's 32¢.
I don't care.
(04:50):
Don't show me how much the cup costs.
Because if you show me how much the cup costs,I'm just gonna argue over whether the cup
should cost that much or not.
It just gives me something as the consumer, asthe customer, to pick apart.
At the end of the day, the customer doesn'twant another line item on an invoice to pick
(05:12):
apart.
They don't want it.
If you charge me $3 extra for the bacon on thecheeseburger or you just made the bacon
cheeseburger $3 more in price, guess what?
I'm still buying the bacon cheeseburger, butwhen you charge me $3 for bacon, I feel like
(05:34):
I'm getting scammed.
I'm like, why why is bacon $3?
I mean, I can understand a bacon cheeseburgercosting $15, but why are you charging me extra
for bacon?
Just just tell me the price of a baconcheeseburger.
Willie, every business has these random littlethings we have to pay.
(05:56):
You know, in my business, we have wastewater inour building.
Every time someone takes a crap in the toiletand flushes it, there's wastewater.
I'm sure somewhere in a stack of invoiceslaying in our office, there is a bill for how
much wastewater we used last month.
I don't charge my customers for the wastewater,the crap water we flush out of the like, don't
(06:19):
charge my customers for porta potty water orporta potty service.
It's the cost of doing business.
This is what I've always said to every by theway, Willie, I'm gonna send you a mug for
exposing yourself to my rant.
I'm gonna send you a mug.
(06:39):
Send me your address.
You gotta send me your address.
Text it to me.
I think he sent that via I think he sent thatvideo via Instagram.
So, Willie, get me your address somehow so Ican get you a mug.
I wanna do that.
Thank you for the audio.
Thank you for the video.
But this is the same explanation I've gottenfrom dealers in the past.
Like, well, yeah, but, you know, we we gottapay to get rid of our oil.
(07:03):
We got shop I had one guy tell me, well, knowhow much shop rags cost?
I literally had this conversation.
I was like, why are you adding a $150environmental fees to every invoice?
Every single invoice.
It could be a $10,000 invoice.
It could be a thousand dollar invoice, a $200invoice.
You're adding $150 environmental fee to everyinvoice.
(07:26):
Why?
Explain it to me.
What am I paying for?
The response I got was, do know how expensiveshop rags are?
Do you know what me as the customer respondedwith?
I don't know how expensive shop rags are.
I don't wanna know how expensive shop rags are,and I don't want to see a bill on an invoice, a
(07:51):
charge, for your shop rags.
It is the cost of doing business.
It's the cost of doing business.
Do know how much toothpaste is that I have tobuy to brush my teeth so that I walk in the
office in the morning, I don't have bad breath?
I don't have green fuzz all over my teeth?
You know how much that costs?
I don't charge my customer for it.
(08:11):
Like shop rags, I'm sorry.
If you're spending on every invoice again, Iknow I'm ranting.
I'm off on a rant.
By the way, welcome back to the Purdue andPodcast.
I'm Keaton Turner.
I don't wanna see a charge for your shop ragsso that your diesel mechanic can wipe his hands
(08:35):
after he replaces the hose on the machine thatI'm renting from you that I shouldn't be paying
for anyway.
I didn't break the hose.
The hose failed on its own.
It's a you problem.
Don't charge me for it and then and then chargeme for the rags.
Blows my mind.
Blows my mind.
(08:55):
Environmental fees.
Do you know what would happen again, we send,you know, in some cases, million dollar
invoices to our customers.
Do you know what would happen if I sent amillion dollar invoice for two weeks worth of
tonnages moved in a gold mine?
And at the very bottom of the invoice, like,right next to the subtotal, I stuck a little
(09:18):
line item that said environmental fees, and Itried to sneak in a $150 or $200 or $300.
Do you know what would happen?
My customer would pick up the phone and call meevery name in the book.
(09:40):
They would say, wait a second.
Let me get this straight.
You're sending me a million dollar invoice formining services, and you want me to pay a $150
charge for environmental fees?
What what are those environmental fees?
You know what I would say?
Oh, those are for shop rags.
Oh, it's for wastewater.
(10:00):
That's we gotta clean our porta potties.
Oh, that 150 oh, that you caught that, That$150 fee?
Yeah.
Turns out our employees in the office crappingthe toilets, and and every time we flush the
toilet, it actually costs us a few bucks.
We get charged by the city for our wastewater.
I gotta pass that on to you.
(10:21):
That's just a just a cost just a cost ofbusiness.
I'm just passing it on to the customer.
Do you think the customer cares?
Do I mean, again, I don't understand.
Just include the $150 worth of your businesscosts in the cost of your service.
(10:43):
Hide it somewhere in your markup.
Hide it in the cost of parts.
There's a novel thought.
Hide it in your labor rate.
There's a novel thought.
Like, hide it somewhere, but don't give me avague fee called environmental fees that I then
have no explanation around.
(11:05):
And then every time I call and ask what is inthe fee, I never get the same answer.
No two people have ever told me the sameanswer.
One guy says it's shop rags.
One guy, Willie, says it's for wastewater orfor coolant disposal.
One guy says, well, actually, now that youmention it, I don't know what that fee's for.
(11:29):
No one's ever asked.
They just pay the invoices.
I literally had a Caterpillar dealer.
I'm not gonna say names.
They were on the East Coast.
Not Carter Cat, by the way.
Love Carter Cat.
I wouldn't call those guys out on a podcast.
It wasn't Carter Cat, but it was an East Coastcaterpillar dealer told me they've never had
(11:52):
anyone question the environmental fees.
They normally just pay them.
I was like, Wild.
Interesting.
Anyway, didn't mean to go in that hard onenvironmental fees, but my goodness.
Just charge me for your service.
Don't pepper me to death with fees.
(12:13):
I don't wanna see the fee anyway.
I don't wanna ask about the fee.
Moving on.
Part three.
Part three.
You're tuning in to the Purdium Podcast.
Well, I don't I don't exactly know why you'retuning in, but I'm guessing it's to hear the
third part of the three part series here thatis mastering equipment costs.
(12:37):
Part one, we talked about equipment ownershipcosts, which is basically a fancy way of saying
your actual depreciation of your machine whenthe key is turned on.
We talked a little bit about idle time and howyou're a Delbert if you're letting your machine
idle for more than thirty minutes.
(12:58):
Now if you're getting paid for it on T and M,good for you.
There's some margin there.
But for the rest of us, if you're letting yourmachine idle for more than thirty minutes, I
would say more than ten minutes, maybe that's abit aggressive, but we talked about idle time.
Part two, we talked about equipment operatingexpense.
In one of those two episodes, I gave a freeshout out to Mike Borster.
(13:22):
Go read his book.
Go buy his course.
Go learn from the legend.
But this was part three.
Buying equipment's hard because you gotta go,you know, figure out how to finance or pay cash
for a big expensive piece of yellow iron.
So buying equipment's hard.
(13:42):
Selling equipment at optimal value can bedifficult.
Right?
You gotta find the right buyer.
You gotta advertise the machine.
Don't get ripped off and sell it to somelowball broker that's gonna get you pennies on
the dollar to go do your homework.
Selling equipment's not easy.
Maintaining equipment is extremely difficult.
We talked about EOE and how hard it is toactually maintain equipment and then capture
(14:07):
all of your maintenance costs over the life ofthe machine to get you some historical data
that you can use to then reference upcomingwork, new estimates, new projects, so that you
know exactly what your equipment operatingexpense rate is per asset, per asset class.
(14:29):
We've got an ERP in place.
It helps with that.
We're we're far, far, far from perfect, but, wewe have a lot of data that when you compile it
all and you do the math, we can look at our EOEexpenses by asset.
Part three, today's episode, is about the team.
(14:57):
This one is hard.
This one's hard because this is the peoplecomponent of the equipment business.
The people component.
You guys have heard me talk all the time.
All my problems are people problems.
The machines don't break themselves.
Normally, sometimes they do.
The machines usually don't break themselves.
(15:19):
If you maintain them properly, they should workproperly.
Every once in a while, you'll have some sort ofunexplainable catastrophic failure.
I get it.
But those problems are easy problems to dealwith compared to the people problems that arise
when you're trying to build a function that isequipment as a business.
(15:44):
And what do I mean by that?
Well, as a business, for those of you guys thatare in construction, that are in mining, that
are in the industries that utilize yellow iron.
It can be any color, but you get the point,yellow iron.
Equipment as a business is when you'reutilizing an asset to produce revenue.
(16:06):
We utilize dozers, haul trucks, excavators,loaders, you name it, and we produce a revenue
with those assets.
That's equipment as a business.
Now we've got the people component where youneed to operate equipment.
We've got the management component where we'remanaging a scope of work at risk.
That's our risk to manage a scope of work.
(16:28):
But in a lot of cases, you can think aboutrunning equipment as a key function of your
business and managing those assets as a keyfunction of your business.
Those are the I mean, again, if you're inconstruction Now, you're in a construction
company that has high material costs, meaningyou're buying steel, you're buying lumber, so
(16:49):
on and so forth, these figures I'm about totell you will be skewed a little bit.
But in our business, construction orconstruction.
Equipment costs make up, generally speaking, 40to 50% of our cost of revenue.
40 to 50%.
So you take your equipment, you add your EOEcosts, all your maintenance, all your repairs,
(17:13):
you take all of your equipment expenses for theyear, they add up to somewhere between 40 to
50% of your company's revenue.
Again, if you're one of these constructioncompanies that has to buy materials and
assemble things, maybe that number's down inthe twenties or thirties.
But if you're running equipment as part of yourbusiness, it is a huge, huge piece of your cost
(17:40):
to do business, cost of goods sold.
The team is critical.
I've screwed this up seven ways to Sunday.
I think that's a saying.
I've screwed this up more times than I cancount.
Building the team to run and maintain andoptimize your fleet, your equipment as part of
(18:07):
your business is extremely challenging.
It's extremely challenging.
I wanna talk about two different methodologieswhen it comes to assembling an equipment team
and how that team works within the broaderorganization to buy equipment, sell equipment,
maintain equipment, you know, monitor theequipment health from afar using telematics and
(18:31):
and different softwares.
There are two kind of fundamental approaches tobuilding a team.
In the early days, we used one approach.
I'll talk about it.
We then, as chapters change and new managementregimes came into our organization, we changed
the approach a 180 degrees and did a differentapproach with how we built the equipment team.
(18:59):
And then after we've lived through all thoseball kickings, we switched it again.
In the early days, when we were very small,less than $20,000,000 company or the, you know,
the first year we were $20,000,000 company.
So in the early days, like year one and two, wemade it the project manager's responsibility to
(19:26):
oversee the equipment that was under hiscontrol on his project.
So you got one manager of the project, onetotal project owner.
Some companies call these project executives.
You've got one guy with P and L responsibilityof the project.
That guy was responsible for maintaining andtaking care of the equipment on his project.
(19:51):
If the equipment got damaged, it was hisproblem.
If the equipment didn't get the preventativemaintenance services at the right intervals, it
was his problem.
He was supposed to schedule that with thedealer, the servicing dealer.
If the equipment was down for longer than itneeded to be, it was his problem.
We made it all we we put all thatresponsibility on the project manager.
(20:14):
Now we did have a few people that could help.
Right?
I obviously I was very involved in operationsback then.
So I knew every day which machines were down,what were they down for, how long were they
down, was the dealer helping, were theyhurting, you know, so on and so forth.
I was involved in, excuse me, I was involved inthe small day to day details.
(20:34):
But for the most part, the project managerowned the responsibility of maintaining and
utilizing the fleet for his project.
As we grew, different theories emerged and Istarted to watch how other companies ran
equipment as part of their business.
I watched Kiwit.
(20:55):
I studied Ames.
I got into some of the details of Leadcore,some of our core competitors.
How are these guys doing equipment?
Because a lot of these companies don't doequipment super well, but some companies are
like world class.
Some companies manage equipment extremely well.
KeyWit's one of the best in the world.
So I started to watch how other people do this,And I'm not at a place to say at this stage of
(21:22):
my career, which one of these two methodologiesworks better than the other.
I'm merely telling you I've identified twomethodologies when it comes to building
equipment teams and how those teams interactwith a broader organization.
I don't know.
I mean, to be honest with you, where I sit,jury's still out on which one's better.
(21:45):
I have an opinion on which one I think isbetter for our company, but at scale,
contractors take one of these two routes,typically.
So as we study different companies and how theydo it, what I start to identify is that some of
(22:06):
these companies have built equipment teams as,like, core pillars of their business.
Like, as if it was a business unit, just theequipment department as a business unit.
(22:27):
And what I mean by that is, there is a leaderin the organization that has full
responsibility of the equipment, how they buyit, how they sell it, how they maintain it,
full responsibility.
And so I watched this.
(22:48):
I then proceed, you know, over the years as weas we changed approaches and and entered into
new chapters.
I then proceed to bring in some people to ourorganization that came from some of these big
companies.
People that were used to running operations oneway, and they were used to having to deal with
a team of equipment professionals that satacross the aisle.
(23:14):
These were two different teams of people.
There was an equipment team, and there was anoperations team.
That was normal to some of these guys.
Some of these big contractors running billionsof dollars of work every year, that was normal.
There's a lot of companies that still do this.
I mean, you can you can go do some of thishomework for yourself.
(23:35):
There's a lot of companies that have a seniorvice president of equipment or a senior vice
president of fleet.
So what did I do?
I hired one of those guys.
I hired a senior vice president of equipment.
Let's try it.
And it was really cool.
I mean, what happened next was really cool.
(23:57):
We we spent a couple years, I don't know, twoor three years building out an equipment
function that was different than the earlyyears.
We had a we had a leader of the team.
We started to create this this was kind ofwild.
I actually loved this at the time.
We created invoices.
(24:19):
So Turner Mining Group owns equipment kind ofall over the country.
The equipment team would start to buildinvoices for all the machines that are on every
project.
They would basically act as equipment dealer,an internal equipment dealer, and we would send
(24:41):
invoices intra company from the equipment teamto the ops team.
So you had an ops project manager on the site,You had an equipment function.
The ops manager who had P and L responsibilityof the project operation would get an invoice
from the equipment team that month.
(25:03):
Every single month, they got an invoice.
Here's how many hours the equipment ran.
Here's the rate we're charging you.
And you owe this money back to the company forrunning this equipment.
It was really interesting.
And so what began to happen is there wasultimate accountability placed on the equipment
(25:28):
department to produce a return on the investedcapital for the equipment.
We as the owners, I you know, I was sittingthere.
I was like, hey.
Look.
If I'm if we're gonna have millions of dollarsinvested into this equipment, we should be
making a return on our investment.
Senior vice president of equipment hears that.
(25:48):
He's like, cool.
Perfect.
I've got all my overhead I gotta cover for myteam, and I wanna make some margin because the
equipment team had their own p and l's.
Right?
They get charred the owner of the companycharges the equipment team for the asset
because the owner needs to make a return.
So the equipment team therein has a p and l.
(26:09):
Their revenue is what they charge the projects,and their cost on their P and L is what the
owner charges them for the fleet that they'remanaging.
And so we gave ultimate equipment P and L toultimate equipment P and L responsibility to
the senior vice president of equipment, and itworked really cool.
(26:31):
I mean, it was I I loved watching it becauseevery month, someone in equipment as the team,
as a department, would send an invoice over theover the aisle, across the aisle to the ops
team, and then they would squabble.
The ops guy would be like, woah.
Wait a second.
Why am I getting charged $3,000 a month for apickup truck?
(26:53):
Equipment guys were like, well, because youhave a pickup truck.
That's what the that's what the rate is.
Then they would squabble over, woah.
Wait a second.
Why are you charging me $24,000 for this dozerthis month?
It didn't run all months.
And so we would get like, there was really coolaccountability pushed back and forth.
(27:14):
Right?
The ops guys didn't wanna pay for things thatweren't working or weren't needed.
The equipment guys wanted to charge the opsfolks because they had their own P and L
responsibility.
They couldn't show a loss every month.
And so we saw this really cool push pull.
This is super, super common with bigcontractors.
(27:34):
They have an equipment department.
The equipment department has a P and L.
The P and L should make money just like the opsteam should make money.
And so what the owner of the company is doingis he's sitting there watching the equipment
department make a profit, and he's watching theoperations department make a profit.
(27:58):
Here's the unintended consequences of that.
While it does place a lot of accountability andonus on the equipment team to go manage assets
well and provide a return on an investedcapital for those assets, And while it does
provide a lot of accountability onto the opsteam to utilize the assets they say they want
and need to utilize for their project, becauseone of the biggest challenges with operations
(28:24):
and managing operations is you have way toomany toys to play with, way too many machines
on-site, you don't utilize all of themproperly.
How do you pay for it?
How do we hold the ops guys accountable togetting high utilization out of the toys you
need and not low utilization out of way moretoys than you actually need?
(28:45):
This is a problem.
Every project manager has done this.
Right?
Well, if I need if I need two man lifts, Imight as well order three just so that way when
one goes down, I've got I've got the sparethere.
Every every one of our project managers back inthe day, they'd always ask for extra trucks.
They've got production targets they wanna hit.
Don't give me five trucks.
(29:06):
I need to run five trucks.
Don't give me five trucks.
Give me seven.
You know?
I was kind of, for better or for worse, raisedto think for every four articulated trucks you
need to run, you need one spare.
So we would price in all of our projects.
Like, we're gonna run four trucks, we're gonnaprice in a fifth.
(29:29):
Better have that fifth truck.
If we're gonna run eight trucks, you betterhave 10.
For every four trucks, we needed a sparebecause they're just they go down.
And so, you know, with this approach of havingan equipment team and an ops team, there was
really cool push pull accountability from bothsides.
(29:49):
A lot of good friction.
There were arguments every month.
Let's get rid of machines we don't need.
Like, it it was awesome to watch.
Until one day it wasn't.
And what happens next is the unintendedconsequences of building two different teams
(30:14):
when you're actually all one team.
What started to happen for us internally wasthat the ops guys on the ops team would become
very cynical of the equipment guys, and theequipment guys would become very cynical of the
ops guys.
(30:35):
The equipment guys would say, well, all theywanna do all the ops team wants to do is just
break the equipment and then not have to payfor it.
They you know, it's their fault.
The machine's down.
It's not my fault.
And the ops guys would be like, well, dude,you're sending me junk equipment.
How am I supposed to run my project?
I can't deal with this.
This is junk equipment.
It's down.
I'm not paying for it.
And ultimately, month over month after we dothis for a while, what ends up happening is you
(31:00):
have two different teams spending more timefighting against each other than fighting
together.
Some of you guys that listen to this, if youwork for one of these big contractors that has
this kind of organizational setup, you knowexactly what I'm talking about.
You resent the equipment team.
The equipment team resents you.
(31:21):
I heard this nonstop from some guys that Ihired way back in the day.
They always said, man, ops never makes anymoney.
The equipment team's where all the money ismade.
That's where the owners of the company maketheir money is on the equipment team.
And the equipment team would say the opposite.
They'd be like, dude, we got the hard job.
We gotta manage all these assets.
(31:41):
We got repairs.
We got for like, the ops guys are the ones thathave it easy.
They get let off the hook for everything.
And so what you what you end up having is thisnever ending game of finger pointing.
And the fingers, ironically, are pointed ateach other, and you're on the same team.
(32:01):
You're supposed to be anyway.
You're wearing the same logo on your shirt.
Your paycheck at the end of the week says thesame name on it.
You're supposed to be fighting together tobring value to the company, not fighting with
each other, against each other.
(32:22):
It's a huge unintended consequences of buildingtwo different teams to accomplish what I
believe is one mission.
It's extremely difficult.
But when it works, it works really well.
But when the infighting sets in, when you get ajob that goes sideways, when you get you know,
(32:44):
when you get an aging fleet, again, I I mean,all this is fine and dandy when the fleet is
new.
What happens when the fleet gets old and theowner's not ready to refleet or retool or buy
new gear because he's still got he's still gotsome value to squeeze out of the old stuff, but
the old stuff's down.
The equipment team's mad at the ops guys.
The ops guys are mad at the equipment guys.
(33:05):
It's it is a it is a cycle that can spiralquickly.
The drama triangle exists every day when thereare two different teams fighting against each
other.
And so after a lot of thinking, strategizing,evaluating, I have since turned a one eighty on
(33:32):
my theory.
And, I'm not not saying I am I've gotten twocalls in the last five minutes on the per diem
hotline.
One of them is from Manitoba, Canada.
I don't know who that is.
I have since done a one eighty with my strategyof how to build equipment teams.
And I and I wouldn't say we're we're completelythere yet.
(33:55):
And and and maybe there's a day, someday way inthe future where I totally change my mind,
believe it or not.
That's that's a that's a beige flag of mine isI change my mind a lot.
Patton would actually probably call that a redflag, but that's okay.
Current state, I believe the operations teamand the equipment team are on the same team.
(34:22):
We're operating a project.
We're using equipment to do it.
That's one resource.
And we're using people to do it.
That's another resource.
We don't have an HR department that farms outpeople and sends an invoice to ops.
We don't do that.
The people are a resource that we use.
(34:45):
They're part of the team.
In the same way, equipment is a resource forthe project, for the operation, part of the
team.
And so instead, what we have shifted back to isultimate responsibility at the project level.
It's your equipment, mister project manager.
(35:06):
You have maintenance folks on your team.
You have coordinators.
You have schedulers.
You have shifters, whatever words you guys usein your organization.
You have people that help you maintain thegear.
You have people that help schedule themaintenance of the gear, but it's your gear.
And we can't think of it as two differentteams.
We're all on the same team.
(35:28):
And and I think ultimately, a project manager'sgoal is to a, produce margin for the company,
gross margin for the company, at the same timesatisfying his customers' needs.
And a project manager, by the way, has multiplecustomers, not just the guy that pays the
(35:52):
bills, not just mister customer who we all workfor.
Project manager also has customers internally.
He's got employees.
He's got foreman.
He has superintendents.
How are we keeping the customers happy andproducing margin from the activities on the
project level?
(36:13):
Maintaining equipment, not damaging equipment,properly utilizing equipment, scheduling
services, ultimately, that should fall underthe direction, the supervision, the
responsibility of the guy you've tasked to runthe project, ultimately.
(36:38):
I'd love to hear I know there's gonna be peoplethat disagree with this.
Maybe they live and I and I've got somebuddies, a couple guys that I know really well
that run some very large fleets for some very Imean, you know the name of the companies.
One dude I respect a ton.
He's about my age.
He's working for he's working for a companythat's got four or 5,000 employees, but he's
(36:59):
managing the whole fleet.
He runs an equipment team.
He runs an equipment division.
It is a business unit that has a profit andloss.
It's a revenue center for the company.
So I know he's gonna think what we're doing isopposite of how we should do it.
(37:24):
But I I I ultimately believe our goal is to beone organization, one team.
It's not it's not safety team and then ops.
It's not equipment team and then ops.
It's not HR team and then ops.
It's not like accounting team and then ops.
It's we're we're all in operations together.
(37:46):
We're all one team trying to make this thing gothe direction it's supposed to together.
We are all here to support the projects.
I I I just fully believe if we wanted to run anequipment business as a business, then that's
fine.
We should go rent equipment to other people.
(38:08):
But to rent equipment to ourselves and treatour ops team as if they were just some other
customer, that's that's I think we're totallymissing the mark.
I think we totally missed the mark with thatapproach.
It it it was really cool to watch it play out.
It taught me a huge lesson in leadership andhow to manage egos, how to manage people that,
(38:31):
you know, had difference of opinions.
I I don't know if I would go back and undo itall or change it all because there were some
really cool things that came out of it.
But, man, it's at the end of the day, theinfighting and the divisiveness that comes from
treating your organization like you havemultiple different teams at scale is only going
(38:53):
to implode your organization.
Like, if you have if you have a small companynow and you're treating different teams
differently or or or you have small teams wherethere's infighting all the time and and don't
get me wrong.
We still have some of this.
Right?
We we do say the words like estimating team orwe do say the words like safety team, but
(39:17):
they're not different business units.
They're they they all are in support of theproject.
They're all there.
Every every job that exists exists to make lifebetter for the people on the project, make us
more efficient, make us safer, make us moreprofitable.
(39:38):
Everyone else exists to serve the project.
And when you treat parts of your project asdifferent teams, especially when you're small,
what happens when you scale is there are littlefiefdoms built.
(39:58):
There are little, like, regimes built withinthese departments, and people forget why their
job exists.
I've I've literally had this happen where I'vewalked into the office, and I have had to look
around.
And I'm like, wait a second.
(40:18):
That team, that person, that little fiefdomthat I allowed to be built doesn't actually
understand their whole reason they have a jobis because the people at the project level are
doing work that makes margin to provide themoney to pay them for their job.
(40:39):
They don't actually understand that now.
I've watched people like think they're just inthe organization producing all this revenue and
all this money, and they're actually costingthe company money.
The people that produce the revenue, thatproduce the margin, that produce the profit
(41:02):
that we get to then distribute to the otherservicing members on staff, the people that
produce the money are the ones in the fielddoing the work.
And when you allow, especially at a smallscale, when you allow people to treat their
teams as anything but a service to the peoplein the field, you allow this little fiefdom to
(41:26):
grow.
People start to think they're more importantthan they are.
People forget where the money is made.
People forget why their job exists, and theyget this ego.
They get this pride.
They get they're like, yeah, I'm I'm I'm seniorvice president.
I'm chief operating officer.
I'm chief this.
I'm chief that.
(41:46):
Like, you actually you're chief of servicingthe people in the field so that they can make
money to pay for you.
So it's what we all are at the end of the day.
And and and having these two different teams orthree different teams or five different teams
allowing these departments to grow and operatein silos causes so much long term damage.
(42:14):
So much.
I think those small companies that operatereally well and produce a ton of margin and are
are just lean and fast, they act as one team.
I think the big companies that kill it, thatproduce a ton of margin act as one team.
(42:34):
You've seen this.
You've seen big companies where the right handand the left hand have no freaking clue what
the other one's doing, and they're wearing thesame logo on their shirt.
You'll hear the guy say, well, I don't know.
Talk to Becky.
She's over there in that department.
I I have no idea.
That's that's we don't do that.
That's that's some other team.
That's some other office.
That's some other location.
(42:57):
Like, we're all we're all one team with onemission, fighting one battle together.
And I think when you unite differentdepartments and you remind people, we're all
here to serve the folks in the field.
We're all here to make their jobs easier sothey can be more efficient, to produce more
money.
(43:17):
When you remind people of that, your incentivesare aligned.
Everyone wants to help.
The equipment and maintenance folks wanna helpthe operations folks, the guys operating the
equipment.
The senior vice president of this wants to helpthe senior vice president of that Instead of
just arguing and bickering over whose P and Lit hits and why it should hit, instead of that
(43:40):
wasted conversation, they instead start gettingcreative on how to solve problems so that the
project is more profitable.
This is where I'm at.
This is where I'm at with the equipmentorganization and how it layers in to the
operations organization and how it all rolls upto the greater organization.
(44:03):
I don't think there are two teams.
I had this conversation here recently with oneof our guy a couple of our guys in the office,
and I'm like, know, we can't go backwards.
I I don't think we can go backwards and andbuild these two different things out in silos.
We're one team.
(44:23):
We're here to serve the project.
The project manager has p and l responsibilityof the operation that he controls.
He gets the assets.
Now we gotta give him the tools.
Right?
I've already talked about the reports.
We need to do a really good job of reporting tomake sure he's using all the assets that he
says he needs.
(44:43):
We need to we need to have proper utilizationso we're not having, you know, equipment
sitting around that that's that's never gettingutilized.
I you know, Gant has always said in the past,he's like, look.
You know what a machine parked out?
I love this illustration is why I'm saying it.
You know what a machine parked out in the yardat the lay down yard looks like to me?
(45:06):
Gant's not an equipment guy.
He's he he told this to Jay Hubbell one time.
He's like, why would any company ever park adozer out the lay down yard, like, and just
wait for the next job?
Jake's like, well, you know, yeah.
I mean, they you know, you own the machine, soyou don't wanna get rid of it because you might
need it for another job and blah blah blah.
And Jake's kinda, they're kinda sitting theresquabbling.
(45:28):
Gant and Jake love to squabble.
And Gant's like, well, you know what a dozersitting out in the yard looks like to me?
It looks like a pallet of cash sitting theregetting rained on.
It's doing nothing.
Providing no return.
It's creating no revenue.
It's doing nothing.
It's actually losing value every day it sitsthere, hypothetically.
(45:54):
Right?
If the key's not on, it's not losing value.
We already talked about that.
But that's I mean, to me, we've gotta make surethe project uses the tools they ask for.
They use them efficiently.
They maintain them properly.
They don't damage them.
But if they do, the equipment team and the opsteam are one team figuring out those problems
(46:18):
together, not separately, not in silos.
And this is hard.
This is I mean, I if I'm sure I've got my ownsets of infighting going on right now.
There's probably someone listening to this onone of our operations somewhere rolling their
eyes like, yeah, dude.
The freaking equipment guy on this job's ajoke.
He doesn't wanna help us.
(46:39):
I I there there is a chance we we have some ofthat somewhere or have had I know we've had
some of this somewhere.
Maybe we don't have it today.
But this is the challenge within the industry.
A lot of these big companies, if you're gonnahire a mechanic or you're gonna hire an ops
guy, you're gonna hire a maintenance guy fromone of these big companies, they might have
been ingrained with this mentality that it isan ops versus equipment team battle.
(47:06):
They might have been ingrained this way.
They might have been trained this way.
Some of the most successful contractors havethis mentality.
You really have to screen for this.
Some people can adjust.
Some people can be trained that way and thenjump into a new organization.
Like, oh, yeah.
Actually, wait a second.
This makes more sense.
We are all one team.
We all should be pulling together.
(47:26):
We all should be trying to get creativetogether to solve the problem for the project.
But man, it's a it's it's rampant.
It is this is this is the two different schoolsof thought when building an equipment
organization, how the org chart looks, how youknow, who reports to who.
(47:46):
I can tell you kind of very simply, if you askan equipment maintenance person, whether it's
an equipment manager, a maintenance manager, amaintenance planner, if you ask them to draw
you what the org chart looks like formaintenance professionals, maintenance you
(48:12):
know, equipment equipment team members, if theyreport all the way up through the layers to a
senior vice president of equipment or chiefequipment officer or chief fleet officer, my
guess is there is massive divisivenesshappening in the company.
(48:36):
If the maintenance professionals do not reportup into someone that is running the project
with their full responsibility and that persondoesn't report up into someone who has full p
and l responsibility of the operations.
Like, if if that's not the case, the teams willbe divided.
(48:59):
If there is an equipment p and l and there isan ops p and l, the teams are probably spending
more time fighting against each other thanfighting with each other to solve problems.
So that's that's my take.
I'd love to hear from you.
I'd love to hear your opinion on this one ifyou hate it, if you agree with it.
(49:22):
Love to hear from you, especially those of youthat that have lived through this or that are
living through this.
Give me your perspective.
Give me your perspective on if your currentorganization's doing it right in your mind or
if they're doing it wrong.
Maybe maybe some of you guys think we're doingit wrong.
I'd love to hear from you.
I love to argue this stuff.
(49:42):
I love this is the beauty of building abusiness from scratch here in America the way
we want to.
We get the choice to build it however we want.
And I might change my mind in a year or two orfive, but that's the beauty of building
something from scratch is we get to try thesethings.
So so that's what I got.
Again, huge, huge thanks for the video frommister Willie Sheriff.
(50:09):
Send me your address, but I can send you acoffee mug.
For the rest of you guys, pray you're killingit.
Pray you're getting your per diem.
Pray tune back in one more day.
Good morning, Keaton.
It's Willie Sheriff, Iron Horse Truck Services.
So the environmental fee that you're talkingabout is we have to pay it's a dollar 25 a
gallon to get rid of our wastewater to wash thefloors.
It's a dollar 25 to get rid of coolant, andit's almost $2 to get rid of oil.
(00:26):
They do not pay us to get rid of any of thatstuff.
They charge us.
In the beautiful state of Washington, we getcharged, they call them environmental fees from
the state that they just arbitrarily mail us inthe mail.
And we get to pay.
We don't get to say anything about it otherthan pay us now.
(00:46):
So we get to write a check for all that stuff.
We have groundwater taxes, tax taxes.
So, yeah, hope that helps you understand theenvironmental thing.
It's just passing state costs onto theconsumer.
Just like the grocery stores here charge us 8¢to beg groceries.
(01:08):
So, hope you have a great one.
Love your podcast.
Peace out.
How you finish like nine to five.
We stand on business.
(01:29):
Stay on business.
Here's the ketchup.
You gonna need a village.
Yeah.
Okay.
Okay.
We got no limits.
Got no limits.
Willie Sheriff.
Man, what a name, first of all.
Willie Sheriff.
If if I had a name if I had a last nameSheriff, I would literally walk around telling
(01:57):
people every single day, there's a new sheriffin town.
I love it.
Thank you, Willie.
Thanks for listening to the podcast, brother.
And thank you for being the first guy toactually take a few minutes out of your day to
help me understand environmental fees.
(02:18):
Now now, Willie, I hope you know that when yousend a video like this in, you are opening
yourself up to criticism.
You're opening yourself up to, feedback,constructive feedback, but sometimes negative
feedback.
And Willie, by the way, I love you.
(02:41):
I don't know you, but but anybody that listensto the podcast and takes time out of their day
to send in a video, I love you.
But I am in one of those moods where I'm gonnachallenge you a little bit here, Willie, and I
don't I hope you don't take any of thispersonal.
You know, I've never received an invoice fromyou, so I'm not I'm not arguing your
environmental fees.
I'm not arguing your your business costs, but Iam taking a shot at all the people that have
(03:06):
sent me environmental fees on an invoice overthe years.
And Willie, in in, you know, all's fair, inlove and war and, and the for the sport of the
game, I'm gonna challenge your explanation alittle bit.
Here's why.
(03:26):
Do you think I care that you get charged adollar to get rid of antifreeze or coolant, or
you get charged a dollar by the state forwastewater, or you get charged taxes for
(03:46):
certain things.
Like like, at the end of the day, the customeragain, I'm not Willie's customer.
I'm picking on Willie.
Willie looks like a great dude.
But at the end of the day, the customer doesn'tcare about all the costs that go into the
trinkets that it requires you to run yourbusiness.
(04:08):
The customer doesn't care.
When I when I pay someone to mow my yard, do Icare how much coolant they use or don't use or
oil they use or don't use or shop rags orgrease tubes or like, do I care they gotta go
power wash their equipment on the weekend?
I don't care about any of that.
(04:28):
I want one fee.
Charge me to mow the yard.
Like, when I buy ice cream at Dairy Queen, do Icare how much the cup caught, like, the actual
paper cup cost?
32¢ for a paper cup.
And, oh, by the way, the ice cream's an extra$3, but but the cup's 32¢.
I don't care.
(04:50):
Don't show me how much the cup costs.
Because if you show me how much the cup costs,I'm just gonna argue over whether the cup
should cost that much or not.
It just gives me something as the consumer, asthe customer, to pick apart.
At the end of the day, the customer doesn'twant another line item on an invoice to pick
(05:12):
apart.
They don't want it.
If you charge me $3 extra for the bacon on thecheeseburger or you just made the bacon
cheeseburger $3 more in price, guess what?
I'm still buying the bacon cheeseburger, butwhen you charge me $3 for bacon, I feel like
(05:34):
I'm getting scammed.
I'm like, why why is bacon $3?
I mean, I can understand a bacon cheeseburgercosting $15, but why are you charging me extra
for bacon?
Just just tell me the price of a baconcheeseburger.
Willie, every business has these random littlethings we have to pay.
(05:56):
You know, in my business, we have wastewater inour building.
Every time someone takes a crap in the toiletand flushes it, there's wastewater.
I'm sure somewhere in a stack of invoiceslaying in our office, there is a bill for how
much wastewater we used last month.
I don't charge my customers for the wastewater,the crap water we flush out of the like, don't
(06:19):
charge my customers for porta potty water orporta potty service.
It's the cost of doing business.
This is what I've always said to every by theway, Willie, I'm gonna send you a mug for
exposing yourself to my rant.
I'm gonna send you a mug.
(06:39):
Send me your address.
You gotta send me your address.
Text it to me.
I think he sent that via I think he sent thatvideo via Instagram.
So, Willie, get me your address somehow so Ican get you a mug.
I wanna do that.
Thank you for the audio.
Thank you for the video.
But this is the same explanation I've gottenfrom dealers in the past.
Like, well, yeah, but, you know, we we gottapay to get rid of our oil.
(07:03):
We got shop I had one guy tell me, well, knowhow much shop rags cost?
I literally had this conversation.
I was like, why are you adding a $150environmental fees to every invoice?
Every single invoice.
It could be a $10,000 invoice.
It could be a thousand dollar invoice, a $200invoice.
You're adding $150 environmental fee to everyinvoice.
(07:26):
Why?
Explain it to me.
What am I paying for?
The response I got was, do know how expensiveshop rags are?
Do you know what me as the customer respondedwith?
I don't know how expensive shop rags are.
I don't wanna know how expensive shop rags are,and I don't want to see a bill on an invoice, a
(07:51):
charge, for your shop rags.
It is the cost of doing business.
It's the cost of doing business.
Do know how much toothpaste is that I have tobuy to brush my teeth so that I walk in the
office in the morning, I don't have bad breath?
I don't have green fuzz all over my teeth?
You know how much that costs?
I don't charge my customer for it.
(08:11):
Like shop rags, I'm sorry.
If you're spending on every invoice again, Iknow I'm ranting.
I'm off on a rant.
By the way, welcome back to the Purdue andPodcast.
I'm Keaton Turner.
I don't wanna see a charge for your shop ragsso that your diesel mechanic can wipe his hands
(08:35):
after he replaces the hose on the machine thatI'm renting from you that I shouldn't be paying
for anyway.
I didn't break the hose.
The hose failed on its own.
It's a you problem.
Don't charge me for it and then and then chargeme for the rags.
Blows my mind.
Blows my mind.
(08:55):
Environmental fees.
Do you know what would happen again, we send,you know, in some cases, million dollar
invoices to our customers.
Do you know what would happen if I sent amillion dollar invoice for two weeks worth of
tonnages moved in a gold mine?
And at the very bottom of the invoice, like,right next to the subtotal, I stuck a little
(09:18):
line item that said environmental fees, and Itried to sneak in a $150 or $200 or $300.
Do you know what would happen?
My customer would pick up the phone and call meevery name in the book.
(09:40):
They would say, wait a second.
Let me get this straight.
You're sending me a million dollar invoice formining services, and you want me to pay a $150
charge for environmental fees?
What what are those environmental fees?
You know what I would say?
Oh, those are for shop rags.
Oh, it's for wastewater.
(10:00):
That's we gotta clean our porta potties.
Oh, that 150 oh, that you caught that, That$150 fee?
Yeah.
Turns out our employees in the office crappingthe toilets, and and every time we flush the
toilet, it actually costs us a few bucks.
We get charged by the city for our wastewater.
I gotta pass that on to you.
(10:21):
That's just a just a cost just a cost ofbusiness.
I'm just passing it on to the customer.
Do you think the customer cares?
Do I mean, again, I don't understand.
Just include the $150 worth of your businesscosts in the cost of your service.
(10:43):
Hide it somewhere in your markup.
Hide it in the cost of parts.
There's a novel thought.
Hide it in your labor rate.
There's a novel thought.
Like, hide it somewhere, but don't give me avague fee called environmental fees that I then
have no explanation around.
(11:05):
And then every time I call and ask what is inthe fee, I never get the same answer.
No two people have ever told me the sameanswer.
One guy says it's shop rags.
One guy, Willie, says it's for wastewater orfor coolant disposal.
One guy says, well, actually, now that youmention it, I don't know what that fee's for.
(11:29):
No one's ever asked.
They just pay the invoices.
I literally had a Caterpillar dealer.
I'm not gonna say names.
They were on the East Coast.
Not Carter Cat, by the way.
Love Carter Cat.
I wouldn't call those guys out on a podcast.
It wasn't Carter Cat, but it was an East Coastcaterpillar dealer told me they've never had
(11:52):
anyone question the environmental fees.
They normally just pay them.
I was like, Wild.
Interesting.
Anyway, didn't mean to go in that hard onenvironmental fees, but my goodness.
Just charge me for your service.
Don't pepper me to death with fees.
(12:13):
I don't wanna see the fee anyway.
I don't wanna ask about the fee.
Moving on.
Part three.
Part three.
You're tuning in to the Purdium Podcast.
Well, I don't I don't exactly know why you'retuning in, but I'm guessing it's to hear the
third part of the three part series here thatis mastering equipment costs.
(12:37):
Part one, we talked about equipment ownershipcosts, which is basically a fancy way of saying
your actual depreciation of your machine whenthe key is turned on.
We talked a little bit about idle time and howyou're a Delbert if you're letting your machine
idle for more than thirty minutes.
(12:58):
Now if you're getting paid for it on T and M,good for you.
There's some margin there.
But for the rest of us, if you're letting yourmachine idle for more than thirty minutes, I
would say more than ten minutes, maybe that's abit aggressive, but we talked about idle time.
Part two, we talked about equipment operatingexpense.
In one of those two episodes, I gave a freeshout out to Mike Borster.
(13:22):
Go read his book.
Go buy his course.
Go learn from the legend.
But this was part three.
Buying equipment's hard because you gotta go,you know, figure out how to finance or pay cash
for a big expensive piece of yellow iron.
So buying equipment's hard.
(13:42):
Selling equipment at optimal value can bedifficult.
Right?
You gotta find the right buyer.
You gotta advertise the machine.
Don't get ripped off and sell it to somelowball broker that's gonna get you pennies on
the dollar to go do your homework.
Selling equipment's not easy.
Maintaining equipment is extremely difficult.
We talked about EOE and how hard it is toactually maintain equipment and then capture
(14:07):
all of your maintenance costs over the life ofthe machine to get you some historical data
that you can use to then reference upcomingwork, new estimates, new projects, so that you
know exactly what your equipment operatingexpense rate is per asset, per asset class.
(14:29):
We've got an ERP in place.
It helps with that.
We're we're far, far, far from perfect, but, wewe have a lot of data that when you compile it
all and you do the math, we can look at our EOEexpenses by asset.
Part three, today's episode, is about the team.
(14:57):
This one is hard.
This one's hard because this is the peoplecomponent of the equipment business.
The people component.
You guys have heard me talk all the time.
All my problems are people problems.
The machines don't break themselves.
Normally, sometimes they do.
The machines usually don't break themselves.
(15:19):
If you maintain them properly, they should workproperly.
Every once in a while, you'll have some sort ofunexplainable catastrophic failure.
I get it.
But those problems are easy problems to dealwith compared to the people problems that arise
when you're trying to build a function that isequipment as a business.
(15:44):
And what do I mean by that?
Well, as a business, for those of you guys thatare in construction, that are in mining, that
are in the industries that utilize yellow iron.
It can be any color, but you get the point,yellow iron.
Equipment as a business is when you'reutilizing an asset to produce revenue.
(16:06):
We utilize dozers, haul trucks, excavators,loaders, you name it, and we produce a revenue
with those assets.
That's equipment as a business.
Now we've got the people component where youneed to operate equipment.
We've got the management component where we'remanaging a scope of work at risk.
That's our risk to manage a scope of work.
(16:28):
But in a lot of cases, you can think aboutrunning equipment as a key function of your
business and managing those assets as a keyfunction of your business.
Those are the I mean, again, if you're inconstruction Now, you're in a construction
company that has high material costs, meaningyou're buying steel, you're buying lumber, so
(16:49):
on and so forth, these figures I'm about totell you will be skewed a little bit.
But in our business, construction orconstruction.
Equipment costs make up, generally speaking, 40to 50% of our cost of revenue.
40 to 50%.
So you take your equipment, you add your EOEcosts, all your maintenance, all your repairs,
(17:13):
you take all of your equipment expenses for theyear, they add up to somewhere between 40 to
50% of your company's revenue.
Again, if you're one of these constructioncompanies that has to buy materials and
assemble things, maybe that number's down inthe twenties or thirties.
But if you're running equipment as part of yourbusiness, it is a huge, huge piece of your cost
(17:40):
to do business, cost of goods sold.
The team is critical.
I've screwed this up seven ways to Sunday.
I think that's a saying.
I've screwed this up more times than I cancount.
Building the team to run and maintain andoptimize your fleet, your equipment as part of
(18:07):
your business is extremely challenging.
It's extremely challenging.
I wanna talk about two different methodologieswhen it comes to assembling an equipment team
and how that team works within the broaderorganization to buy equipment, sell equipment,
maintain equipment, you know, monitor theequipment health from afar using telematics and
(18:31):
and different softwares.
There are two kind of fundamental approaches tobuilding a team.
In the early days, we used one approach.
I'll talk about it.
We then, as chapters change and new managementregimes came into our organization, we changed
the approach a 180 degrees and did a differentapproach with how we built the equipment team.
(18:59):
And then after we've lived through all thoseball kickings, we switched it again.
In the early days, when we were very small,less than $20,000,000 company or the, you know,
the first year we were $20,000,000 company.
So in the early days, like year one and two, wemade it the project manager's responsibility to
(19:26):
oversee the equipment that was under hiscontrol on his project.
So you got one manager of the project, onetotal project owner.
Some companies call these project executives.
You've got one guy with P and L responsibilityof the project.
That guy was responsible for maintaining andtaking care of the equipment on his project.
(19:51):
If the equipment got damaged, it was hisproblem.
If the equipment didn't get the preventativemaintenance services at the right intervals, it
was his problem.
He was supposed to schedule that with thedealer, the servicing dealer.
If the equipment was down for longer than itneeded to be, it was his problem.
We made it all we we put all thatresponsibility on the project manager.
(20:14):
Now we did have a few people that could help.
Right?
I obviously I was very involved in operationsback then.
So I knew every day which machines were down,what were they down for, how long were they
down, was the dealer helping, were theyhurting, you know, so on and so forth.
I was involved in, excuse me, I was involved inthe small day to day details.
(20:34):
But for the most part, the project managerowned the responsibility of maintaining and
utilizing the fleet for his project.
As we grew, different theories emerged and Istarted to watch how other companies ran
equipment as part of their business.
I watched Kiwit.
(20:55):
I studied Ames.
I got into some of the details of Leadcore,some of our core competitors.
How are these guys doing equipment?
Because a lot of these companies don't doequipment super well, but some companies are
like world class.
Some companies manage equipment extremely well.
KeyWit's one of the best in the world.
So I started to watch how other people do this,And I'm not at a place to say at this stage of
(21:22):
my career, which one of these two methodologiesworks better than the other.
I'm merely telling you I've identified twomethodologies when it comes to building
equipment teams and how those teams interactwith a broader organization.
I don't know.
I mean, to be honest with you, where I sit,jury's still out on which one's better.
(21:45):
I have an opinion on which one I think isbetter for our company, but at scale,
contractors take one of these two routes,typically.
So as we study different companies and how theydo it, what I start to identify is that some of
(22:06):
these companies have built equipment teams as,like, core pillars of their business.
Like, as if it was a business unit, just theequipment department as a business unit.
(22:27):
And what I mean by that is, there is a leaderin the organization that has full
responsibility of the equipment, how they buyit, how they sell it, how they maintain it,
full responsibility.
And so I watched this.
(22:48):
I then proceed, you know, over the years as weas we changed approaches and and entered into
new chapters.
I then proceed to bring in some people to ourorganization that came from some of these big
companies.
People that were used to running operations oneway, and they were used to having to deal with
a team of equipment professionals that satacross the aisle.
(23:14):
These were two different teams of people.
There was an equipment team, and there was anoperations team.
That was normal to some of these guys.
Some of these big contractors running billionsof dollars of work every year, that was normal.
There's a lot of companies that still do this.
I mean, you can you can go do some of thishomework for yourself.
(23:35):
There's a lot of companies that have a seniorvice president of equipment or a senior vice
president of fleet.
So what did I do?
I hired one of those guys.
I hired a senior vice president of equipment.
Let's try it.
And it was really cool.
I mean, what happened next was really cool.
(23:57):
We we spent a couple years, I don't know, twoor three years building out an equipment
function that was different than the earlyyears.
We had a we had a leader of the team.
We started to create this this was kind ofwild.
I actually loved this at the time.
We created invoices.
(24:19):
So Turner Mining Group owns equipment kind ofall over the country.
The equipment team would start to buildinvoices for all the machines that are on every
project.
They would basically act as equipment dealer,an internal equipment dealer, and we would send
(24:41):
invoices intra company from the equipment teamto the ops team.
So you had an ops project manager on the site,You had an equipment function.
The ops manager who had P and L responsibilityof the project operation would get an invoice
from the equipment team that month.
(25:03):
Every single month, they got an invoice.
Here's how many hours the equipment ran.
Here's the rate we're charging you.
And you owe this money back to the company forrunning this equipment.
It was really interesting.
And so what began to happen is there wasultimate accountability placed on the equipment
(25:28):
department to produce a return on the investedcapital for the equipment.
We as the owners, I you know, I was sittingthere.
I was like, hey.
Look.
If I'm if we're gonna have millions of dollarsinvested into this equipment, we should be
making a return on our investment.
Senior vice president of equipment hears that.
(25:48):
He's like, cool.
Perfect.
I've got all my overhead I gotta cover for myteam, and I wanna make some margin because the
equipment team had their own p and l's.
Right?
They get charred the owner of the companycharges the equipment team for the asset
because the owner needs to make a return.
So the equipment team therein has a p and l.
(26:09):
Their revenue is what they charge the projects,and their cost on their P and L is what the
owner charges them for the fleet that they'remanaging.
And so we gave ultimate equipment P and L toultimate equipment P and L responsibility to
the senior vice president of equipment, and itworked really cool.
(26:31):
I mean, it was I I loved watching it becauseevery month, someone in equipment as the team,
as a department, would send an invoice over theover the aisle, across the aisle to the ops
team, and then they would squabble.
The ops guy would be like, woah.
Wait a second.
Why am I getting charged $3,000 a month for apickup truck?
(26:53):
Equipment guys were like, well, because youhave a pickup truck.
That's what the that's what the rate is.
Then they would squabble over, woah.
Wait a second.
Why are you charging me $24,000 for this dozerthis month?
It didn't run all months.
And so we would get like, there was really coolaccountability pushed back and forth.
(27:14):
Right?
The ops guys didn't wanna pay for things thatweren't working or weren't needed.
The equipment guys wanted to charge the opsfolks because they had their own P and L
responsibility.
They couldn't show a loss every month.
And so we saw this really cool push pull.
This is super, super common with bigcontractors.
(27:34):
They have an equipment department.
The equipment department has a P and L.
The P and L should make money just like the opsteam should make money.
And so what the owner of the company is doingis he's sitting there watching the equipment
department make a profit, and he's watching theoperations department make a profit.
(27:58):
Here's the unintended consequences of that.
While it does place a lot of accountability andonus on the equipment team to go manage assets
well and provide a return on an investedcapital for those assets, And while it does
provide a lot of accountability onto the opsteam to utilize the assets they say they want
and need to utilize for their project, becauseone of the biggest challenges with operations
(28:24):
and managing operations is you have way toomany toys to play with, way too many machines
on-site, you don't utilize all of themproperly.
How do you pay for it?
How do we hold the ops guys accountable togetting high utilization out of the toys you
need and not low utilization out of way moretoys than you actually need?
(28:45):
This is a problem.
Every project manager has done this.
Right?
Well, if I need if I need two man lifts, Imight as well order three just so that way when
one goes down, I've got I've got the sparethere.
Every every one of our project managers back inthe day, they'd always ask for extra trucks.
They've got production targets they wanna hit.
Don't give me five trucks.
(29:06):
I need to run five trucks.
Don't give me five trucks.
Give me seven.
You know?
I was kind of, for better or for worse, raisedto think for every four articulated trucks you
need to run, you need one spare.
So we would price in all of our projects.
Like, we're gonna run four trucks, we're gonnaprice in a fifth.
(29:29):
Better have that fifth truck.
If we're gonna run eight trucks, you betterhave 10.
For every four trucks, we needed a sparebecause they're just they go down.
And so, you know, with this approach of havingan equipment team and an ops team, there was
really cool push pull accountability from bothsides.
(29:49):
A lot of good friction.
There were arguments every month.
Let's get rid of machines we don't need.
Like, it it was awesome to watch.
Until one day it wasn't.
And what happens next is the unintendedconsequences of building two different teams
(30:14):
when you're actually all one team.
What started to happen for us internally wasthat the ops guys on the ops team would become
very cynical of the equipment guys, and theequipment guys would become very cynical of the
ops guys.
(30:35):
The equipment guys would say, well, all theywanna do all the ops team wants to do is just
break the equipment and then not have to payfor it.
They you know, it's their fault.
The machine's down.
It's not my fault.
And the ops guys would be like, well, dude,you're sending me junk equipment.
How am I supposed to run my project?
I can't deal with this.
This is junk equipment.
It's down.
I'm not paying for it.
And ultimately, month over month after we dothis for a while, what ends up happening is you
(31:00):
have two different teams spending more timefighting against each other than fighting
together.
Some of you guys that listen to this, if youwork for one of these big contractors that has
this kind of organizational setup, you knowexactly what I'm talking about.
You resent the equipment team.
The equipment team resents you.
(31:21):
I heard this nonstop from some guys that Ihired way back in the day.
They always said, man, ops never makes anymoney.
The equipment team's where all the money ismade.
That's where the owners of the company maketheir money is on the equipment team.
And the equipment team would say the opposite.
They'd be like, dude, we got the hard job.
We gotta manage all these assets.
(31:41):
We got repairs.
We got for like, the ops guys are the ones thathave it easy.
They get let off the hook for everything.
And so what you what you end up having is thisnever ending game of finger pointing.
And the fingers, ironically, are pointed ateach other, and you're on the same team.
(32:01):
You're supposed to be anyway.
You're wearing the same logo on your shirt.
Your paycheck at the end of the week says thesame name on it.
You're supposed to be fighting together tobring value to the company, not fighting with
each other, against each other.
(32:22):
It's a huge unintended consequences of buildingtwo different teams to accomplish what I
believe is one mission.
It's extremely difficult.
But when it works, it works really well.
But when the infighting sets in, when you get ajob that goes sideways, when you get you know,
(32:44):
when you get an aging fleet, again, I I mean,all this is fine and dandy when the fleet is
new.
What happens when the fleet gets old and theowner's not ready to refleet or retool or buy
new gear because he's still got he's still gotsome value to squeeze out of the old stuff, but
the old stuff's down.
The equipment team's mad at the ops guys.
The ops guys are mad at the equipment guys.
(33:05):
It's it is a it is a cycle that can spiralquickly.
The drama triangle exists every day when thereare two different teams fighting against each
other.
And so after a lot of thinking, strategizing,evaluating, I have since turned a one eighty on
(33:32):
my theory.
And, I'm not not saying I am I've gotten twocalls in the last five minutes on the per diem
hotline.
One of them is from Manitoba, Canada.
I don't know who that is.
I have since done a one eighty with my strategyof how to build equipment teams.
And I and I wouldn't say we're we're completelythere yet.
(33:55):
And and and maybe there's a day, someday way inthe future where I totally change my mind,
believe it or not.
That's that's a that's a beige flag of mine isI change my mind a lot.
Patton would actually probably call that a redflag, but that's okay.
Current state, I believe the operations teamand the equipment team are on the same team.
(34:22):
We're operating a project.
We're using equipment to do it.
That's one resource.
And we're using people to do it.
That's another resource.
We don't have an HR department that farms outpeople and sends an invoice to ops.
We don't do that.
The people are a resource that we use.
(34:45):
They're part of the team.
In the same way, equipment is a resource forthe project, for the operation, part of the
team.
And so instead, what we have shifted back to isultimate responsibility at the project level.
It's your equipment, mister project manager.
(35:06):
You have maintenance folks on your team.
You have coordinators.
You have schedulers.
You have shifters, whatever words you guys usein your organization.
You have people that help you maintain thegear.
You have people that help schedule themaintenance of the gear, but it's your gear.
And we can't think of it as two differentteams.
We're all on the same team.
(35:28):
And and I think ultimately, a project manager'sgoal is to a, produce margin for the company,
gross margin for the company, at the same timesatisfying his customers' needs.
And a project manager, by the way, has multiplecustomers, not just the guy that pays the
(35:52):
bills, not just mister customer who we all workfor.
Project manager also has customers internally.
He's got employees.
He's got foreman.
He has superintendents.
How are we keeping the customers happy andproducing margin from the activities on the
project level?
(36:13):
Maintaining equipment, not damaging equipment,properly utilizing equipment, scheduling
services, ultimately, that should fall underthe direction, the supervision, the
responsibility of the guy you've tasked to runthe project, ultimately.
(36:38):
I'd love to hear I know there's gonna be peoplethat disagree with this.
Maybe they live and I and I've got somebuddies, a couple guys that I know really well
that run some very large fleets for some very Imean, you know the name of the companies.
One dude I respect a ton.
He's about my age.
He's working for he's working for a companythat's got four or 5,000 employees, but he's
(36:59):
managing the whole fleet.
He runs an equipment team.
He runs an equipment division.
It is a business unit that has a profit andloss.
It's a revenue center for the company.
So I know he's gonna think what we're doing isopposite of how we should do it.
(37:24):
But I I I ultimately believe our goal is to beone organization, one team.
It's not it's not safety team and then ops.
It's not equipment team and then ops.
It's not HR team and then ops.
It's not like accounting team and then ops.
It's we're we're all in operations together.
(37:46):
We're all one team trying to make this thing gothe direction it's supposed to together.
We are all here to support the projects.
I I I just fully believe if we wanted to run anequipment business as a business, then that's
fine.
We should go rent equipment to other people.
(38:08):
But to rent equipment to ourselves and treatour ops team as if they were just some other
customer, that's that's I think we're totallymissing the mark.
I think we totally missed the mark with thatapproach.
It it it was really cool to watch it play out.
It taught me a huge lesson in leadership andhow to manage egos, how to manage people that,
(38:31):
you know, had difference of opinions.
I I don't know if I would go back and undo itall or change it all because there were some
really cool things that came out of it.
But, man, it's at the end of the day, theinfighting and the divisiveness that comes from
treating your organization like you havemultiple different teams at scale is only going
(38:53):
to implode your organization.
Like, if you have if you have a small companynow and you're treating different teams
differently or or or you have small teams wherethere's infighting all the time and and don't
get me wrong.
We still have some of this.
Right?
We we do say the words like estimating team orwe do say the words like safety team, but
(39:17):
they're not different business units.
They're they they all are in support of theproject.
They're all there.
Every every job that exists exists to make lifebetter for the people on the project, make us
more efficient, make us safer, make us moreprofitable.
(39:38):
Everyone else exists to serve the project.
And when you treat parts of your project asdifferent teams, especially when you're small,
what happens when you scale is there are littlefiefdoms built.
(39:58):
There are little, like, regimes built withinthese departments, and people forget why their
job exists.
I've I've literally had this happen where I'vewalked into the office, and I have had to look
around.
And I'm like, wait a second.
(40:18):
That team, that person, that little fiefdomthat I allowed to be built doesn't actually
understand their whole reason they have a jobis because the people at the project level are
doing work that makes margin to provide themoney to pay them for their job.
(40:39):
They don't actually understand that now.
I've watched people like think they're just inthe organization producing all this revenue and
all this money, and they're actually costingthe company money.
The people that produce the revenue, thatproduce the margin, that produce the profit
(41:02):
that we get to then distribute to the otherservicing members on staff, the people that
produce the money are the ones in the fielddoing the work.
And when you allow, especially at a smallscale, when you allow people to treat their
teams as anything but a service to the peoplein the field, you allow this little fiefdom to
(41:26):
grow.
People start to think they're more importantthan they are.
People forget where the money is made.
People forget why their job exists, and theyget this ego.
They get this pride.
They get they're like, yeah, I'm I'm I'm seniorvice president.
I'm chief operating officer.
I'm chief this.
I'm chief that.
(41:46):
Like, you actually you're chief of servicingthe people in the field so that they can make
money to pay for you.
So it's what we all are at the end of the day.
And and and having these two different teams orthree different teams or five different teams
allowing these departments to grow and operatein silos causes so much long term damage.
(42:14):
So much.
I think those small companies that operatereally well and produce a ton of margin and are
are just lean and fast, they act as one team.
I think the big companies that kill it, thatproduce a ton of margin act as one team.
(42:34):
You've seen this.
You've seen big companies where the right handand the left hand have no freaking clue what
the other one's doing, and they're wearing thesame logo on their shirt.
You'll hear the guy say, well, I don't know.
Talk to Becky.
She's over there in that department.
I I have no idea.
That's that's we don't do that.
That's that's some other team.
That's some other office.
That's some other location.
(42:57):
Like, we're all we're all one team with onemission, fighting one battle together.
And I think when you unite differentdepartments and you remind people, we're all
here to serve the folks in the field.
We're all here to make their jobs easier sothey can be more efficient, to produce more
money.
(43:17):
When you remind people of that, your incentivesare aligned.
Everyone wants to help.
The equipment and maintenance folks wanna helpthe operations folks, the guys operating the
equipment.
The senior vice president of this wants to helpthe senior vice president of that Instead of
just arguing and bickering over whose P and Lit hits and why it should hit, instead of that
(43:40):
wasted conversation, they instead start gettingcreative on how to solve problems so that the
project is more profitable.
This is where I'm at.
This is where I'm at with the equipmentorganization and how it layers in to the
operations organization and how it all rolls upto the greater organization.
(44:03):
I don't think there are two teams.
I had this conversation here recently with oneof our guy a couple of our guys in the office,
and I'm like, know, we can't go backwards.
I I don't think we can go backwards and andbuild these two different things out in silos.
We're one team.
(44:23):
We're here to serve the project.
The project manager has p and l responsibilityof the operation that he controls.
He gets the assets.
Now we gotta give him the tools.
Right?
I've already talked about the reports.
We need to do a really good job of reporting tomake sure he's using all the assets that he
says he needs.
(44:43):
We need to we need to have proper utilizationso we're not having, you know, equipment
sitting around that that's that's never gettingutilized.
I you know, Gant has always said in the past,he's like, look.
You know what a machine parked out?
I love this illustration is why I'm saying it.
You know what a machine parked out in the yardat the lay down yard looks like to me?
(45:06):
Gant's not an equipment guy.
He's he he told this to Jay Hubbell one time.
He's like, why would any company ever park adozer out the lay down yard, like, and just
wait for the next job?
Jake's like, well, you know, yeah.
I mean, they you know, you own the machine, soyou don't wanna get rid of it because you might
need it for another job and blah blah blah.
And Jake's kinda, they're kinda sitting theresquabbling.
(45:28):
Gant and Jake love to squabble.
And Gant's like, well, you know what a dozersitting out in the yard looks like to me?
It looks like a pallet of cash sitting theregetting rained on.
It's doing nothing.
Providing no return.
It's creating no revenue.
It's doing nothing.
It's actually losing value every day it sitsthere, hypothetically.
(45:54):
Right?
If the key's not on, it's not losing value.
We already talked about that.
But that's I mean, to me, we've gotta make surethe project uses the tools they ask for.
They use them efficiently.
They maintain them properly.
They don't damage them.
But if they do, the equipment team and the opsteam are one team figuring out those problems
(46:18):
together, not separately, not in silos.
And this is hard.
This is I mean, I if I'm sure I've got my ownsets of infighting going on right now.
There's probably someone listening to this onone of our operations somewhere rolling their
eyes like, yeah, dude.
The freaking equipment guy on this job's ajoke.
He doesn't wanna help us.
(46:39):
I I there there is a chance we we have some ofthat somewhere or have had I know we've had
some of this somewhere.
Maybe we don't have it today.
But this is the challenge within the industry.
A lot of these big companies, if you're gonnahire a mechanic or you're gonna hire an ops
guy, you're gonna hire a maintenance guy fromone of these big companies, they might have
been ingrained with this mentality that it isan ops versus equipment team battle.
(47:06):
They might have been ingrained this way.
They might have been trained this way.
Some of the most successful contractors havethis mentality.
You really have to screen for this.
Some people can adjust.
Some people can be trained that way and thenjump into a new organization.
Like, oh, yeah.
Actually, wait a second.
This makes more sense.
We are all one team.
We all should be pulling together.
(47:26):
We all should be trying to get creativetogether to solve the problem for the project.
But man, it's a it's it's rampant.
It is this is this is the two different schoolsof thought when building an equipment
organization, how the org chart looks, how youknow, who reports to who.
(47:46):
I can tell you kind of very simply, if you askan equipment maintenance person, whether it's
an equipment manager, a maintenance manager, amaintenance planner, if you ask them to draw
you what the org chart looks like formaintenance professionals, maintenance you
(48:12):
know, equipment equipment team members, if theyreport all the way up through the layers to a
senior vice president of equipment or chiefequipment officer or chief fleet officer, my
guess is there is massive divisivenesshappening in the company.
(48:36):
If the maintenance professionals do not reportup into someone that is running the project
with their full responsibility and that persondoesn't report up into someone who has full p
and l responsibility of the operations.
Like, if if that's not the case, the teams willbe divided.
(48:59):
If there is an equipment p and l and there isan ops p and l, the teams are probably spending
more time fighting against each other thanfighting with each other to solve problems.
So that's that's my take.
I'd love to hear from you.
I'd love to hear your opinion on this one ifyou hate it, if you agree with it.
(49:22):
Love to hear from you, especially those of youthat that have lived through this or that are
living through this.
Give me your perspective.
Give me your perspective on if your currentorganization's doing it right in your mind or
if they're doing it wrong.
Maybe maybe some of you guys think we're doingit wrong.
I'd love to hear from you.
I love to argue this stuff.
(49:42):
I love this is the beauty of building abusiness from scratch here in America the way
we want to.
We get the choice to build it however we want.
And I might change my mind in a year or two orfive, but that's the beauty of building
something from scratch is we get to try thesethings.
So so that's what I got.
Again, huge, huge thanks for the video frommister Willie Sheriff.
(50:09):
Send me your address, but I can send you acoffee mug.
For the rest of you guys, pray you're killingit.
Pray you're getting your per diem.
Pray tune back in one more day.
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