Rishi Srivastava (00:41)
Today, our guest is Michael McKeon Michael, welcome.

Michael McKeon (00:46)
Hi Rishi, thanks for having me.

Rishi Srivastava (00:48)
First section is here on your background and perspective. Michael is a project manager at Nordby Construction. You started your career in public accounting and moved into construction operations. What surprised you most when you crossed from spreadsheets into the field?

Michael McKeon (01:07)
I was really surprised at how much my education in accounting was relevant to construction operations. I figured making that transition was going to be a long, arduous process. certainly, I paid my dues, but it was a lot smoother than anticipated. I didn't fully appreciate that effectively half of construction operations is accounting.

And what differentiating me from other operations managers was my grasp of finances and accounting practices.

Rishi Srivastava (01:28)
Mmm.

know, money is the loop that moves the entire business world and construction world.

Michael McKeon (01:41)
tends to be important.

Rishi Srivastava (01:42)
Yeah. How does having an accounting mindset change the way you run projects day to day compared to a quote unquote pure operations PM?

Michael McKeon (01:54)
Well, hard to say, right? I just have my lived experience, but I can say my mind tends to process in dollars and cents. And at the end of the day, like you said, that is the lube that makes everything work and move. And while developers care about the end product and the experience that they get along the way, they care more about finances than construction details by and large. So

You know, it's obviously my job to make sure that it's built with high integrity for longevity. Finishes are done cleanly, precisely. Structural integrity is there. But ultimately, cost is the main driver as to the size, location, complexity of each project. And that's what, like I said, developers tend to focus on.

Rishi Srivastava (02:42)
Yeah, when you're bidding on these projects, the owner is most of the time looking for the lowest bid.

Michael McKeon (02:49)
Yes, and it's tough to come in. We're a bit more of a smaller firm with a more white glove approach. you know, it's not always easy to make that sell that, hey, you know, we're very client forward and there are other things that you get with us that are not just saving that extra 3%, what have you. But we do our best.

Rishi Srivastava (03:12)
You've worked on everything from large residential developments to high-end hospitality projects. What stays consistent financially across very different types of jobs?

Michael McKeon (03:26)
I mean a handful of things I find that you know if you

take for granted that you need to have the proper basics and fundamentals of good takeoffs, good estimates, budgets, contracts, et cetera. I find what helps me and what I see at the end of a job being a great indicator of a project success is knowing and understanding the client, what they value, and how to communicate with them. Because this changes on every job. Even with the same clients, it will change job to job.

across phases as they, you know, cling on to things that they find value in and want to make sure go smoothly. if I can communicate and understand my client, I find that I have a much higher chance of making that project a success in absolute terms and in relative terms as far as the client feeling taken care of and at ease with my team and our performance. And it kind of ties

back to the previous question and just my background in accounting that I do think in dollars and cents. I like making cost analysis on spreadsheets so that I can see how things play out and then I share those with the client right to say hey we're not just telling you everything's

looks good on this change order. We did a takeoff, we broke it apart and I vetted it against local materials pricing and they really enjoy that. So I sometimes get into trouble providing too much service. They then expect it every time. But like I said, we try to be white glove and go above and beyond to make sure our clients are at ease along the construction process.

Rishi Srivastava (05:01)
Mm-hmm.

Taking care of clients is, I believe, one big way to get new projects. Sometimes people think there's so much about sales. To get that repeat business, you need to have this client service sort of sentiment all the time.

Michael McKeon (05:21)
Definitely. And I think, you know, we were a family run company. We're about to hit 50 years here in Sonoma and Napa County.

Most, if not most, at least a large chunk of our business is repeat clientele or word of mouth recommendations. So we really do see the long-term effects of making sure that we are client first and valuing those relationships. And we mean it, right? We're not trying to cheapen it and just work with people just for money. Obviously, we need to make a living, but we do enjoy the experience and like working with people.

I think that goes a long way.

Rishi Srivastava (05:55)
Now what part of the US are you in?

Michael McKeon (05:58)
We're on the West Coast. We're here in Northern California. We're in Sonoma County, which is the lesser known of the two wine counties in California. Our north of San Francisco, right next to Napa County where Napa being a hospitality and wine cave, wine tasting room, wine everything GC, we tend to have a lot of our work in Napa County.

Rishi Srivastava (06:23)
Thank you. The next section is on people, communication, and leadership. You mentioned that what excites you most about construction is the human and psychological side of the work. Why do you think those factors are still undervalued in project outcomes?

Michael McKeon (06:42)
I think I think it's hard to place concrete value on anything that is not quantified when it's something as subjective as, you know, psychological or empathetic connection. Yeah, it's always going to be subjective. But I think that if you do have a good human connection with your team, with your client.

It is apparent in, you know, before the project is done, about halfway into the project, you really see that communication is easy. There's less difficulty communicating and everything just works a little better. At least that's my perspective.

Rishi Srivastava (07:22)
Yeah, people like to do business with people they like.

Michael McKeon (07:27)
Yeah, absolutely. And we try to make ourselves as easy to work with as possible,

Rishi Srivastava (07:32)
From your experience, where do communication breakdowns most often happen between owners, designers, subs, and accounting?

Michael McKeon (07:42)
I don't want this to come across poorly. There's a kind of a trope between design team and general contractors. But in my experience, it does start at the very beginning in the design phase where typically this is not just a business decision. It's a personal decision for the developer. So they get excited and they want it to look exactly how they've always dreamed or, you know.

hope it can be and so it tends to balloon the budget more than they want to come to terms with and our job being putting the pen and paper together is putting numbers to that design and so if we're not included early on we find sometimes it can get a little out of control

that costs money. People don't always see the value in that. And not to say we don't see great design teams, really, really knowledgeable, discerning architects that understand the local market, how to make a detail work and look good and be a high value detail. We love working with those architects, but unfortunately not every single one is that good.

But yeah, think if we get brought in early and we can at least provide some feedback on the design, it'll help guide the developer and their design team toward a good ratio of quality design and cost.

Rishi Srivastava (09:05)
So, your company, what kind of construction business you are in?

Michael McKeon (09:09)
So we are, I work for Nordby Construction. Like I said, this is in specifically Santa Rosa, California. We specialize in hospitality and wineries. We do restaurants, hotels, anything hospitality. We also do warehouses and other commercial buildings, but we tend to work in the hospitality and wine.

Rishi Srivastava (09:33)
Hmm. And your company is a general contracting business or is it something else?

Michael McKeon (09:34)
industries mostly.

Correct. We are general contractor and we do not typically self-perform. We find over the years it is in our best interest to subcontract everything and manage being that we are a smaller company, know, small to mid-size doing 10 to 30 million in revenue annually typically. That's kind of our sweet spot for managing subcontractors and letting them do the work.

Rishi Srivastava (10:08)
how do you build confidence with owners and subs when things aren't going perfectly on a project?

Michael McKeon (10:14)
Generally with difficulty, but my preference is to be honest and as early as I can. I think everything comes out eventually. If a project is over budget, behind schedule, it can't be ignored. It will eventually rise to the surface and if I can get ahead of it as soon as possible and provide

some reasonable context as to why that's the case, as well as my solution for how we are going to overcome this issue. I find that works most of the time and is how I prefer to work if I can now.

Sometimes it's just a bad fit. You know, some people just don't get along and that's okay. It is work at the end of the day and we will still work with everyone and do our job. Yeah, but we're all people and generally speaking, if I'm authentic and have a decent reason for being in a situation, people tend to understand. But I will say there are some clients that this approach just doesn't work for. And that goes back to knowing your client.

And if a client doesn't care about how earnest you are, they want results. Sometimes I find it best to just be concise and measured with my words and say, yes, there's a problem, but I have a solution. I'd be happy to explain it to you and it will be taken care of and leave it at that.

Rishi Srivastava (11:36)
Yeah, especially when things are not going well, those communications can be very tricky.

Michael McKeon (11:41)
Certainly that's when they are most difficult, but it also gives you an opportunity to, with every difficulty comes an opportunity to provide a solution, be a leader, and bring confidence from your team and clients. So I try to keep the difficult situations in a positive light as much as possible.

Rishi Srivastava (12:03)
make sense. The next section here is field to accounting connection. You are responsible for the financial health of your projects and meet monthly with accounting. What makes those reviews effective and what would make them even better?

Michael McKeon (12:20)
Well, think it's quite simple. I need to make sure that my payment applications are all correct every month. Garbage in, garbage out, right? If my pay apps are not reflecting the status of the jobs, current

as built status if it doesn't reflect the percentage of completion for my overall project schedule this is where we get behind. I tonight keeping detailed track of all the proposed change orders, executed change orders, making sure that everything is captured and we're either billing for contingency, billing to an owner change order or making sure that our budget can absorb those extra costs.

and that we're aware of all the costs and keeping track with correct cost codes. Yeah, that will keep the project from getting off the rails when you aren't paying attention, similar to checking your credit card statements every month, right? Making sure that there are no surprise expenditures. Just paying attention and being detail oriented.

Rishi Srivastava (13:18)
From a team's perspective, what do accountants often misunderstand about what's happening in the field?

Michael McKeon (13:24)
Is that relating to accountants in an operations role or are you referring to the accounting department itself?

Rishi Srivastava (13:31)
It's the accounting department itself who are sitting in the office most of the time.

Michael McKeon (13:37)
I mean, I think by and large, like myself before I started working in operations, accountants tend not to know exactly the construction process. They may have, you know, you may pick up things working in the industry over time, but generally speaking, that's not your area of education and expertise. So.

I find they misunderstand a good amount but as long as you've got an open line of communication as atypical situations arise you can explain why things need to be a certain way. On the flip side

There doesn't need to be a great understanding. If the PM is doing his job, I'm doing my job. Costs are being coded correctly. Budget is considered. Contract changes, payments are all processed correctly in the required time frames. I find if I'm doing my job in those regards, the accounting department can do their job and we will operate smoothly.

That's my preference. But there's certainly times where we need to move money around, pay someone in advance, et cetera. Those are somewhat atypical that arise from unique issues. So yeah, just if need be, pick up the phone, write a quick email, and make sure it's communicated correctly.

Rishi Srivastava (14:52)
Yeah, one question I was thinking, how do you measure percent complete? Do you have like some sort of cameras or AI measuring that?

Michael McKeon (15:02)
No, so I mean, you've got a question below that made me think of this, but I think it really boils down to our schedule of values and just having a good understanding of the job. It can oftentimes be a bit of a feel thing, understanding that, you know, we are without doing a complete takeoff, you know, being aware of the day to day construction and.

aware of how that fits into the project as a whole and just kind of keeping tabs as you go. Definitely an inexact science.

Rishi Srivastava (15:35)
Conversely, what do PMs sometimes underestimate about the accounting team's constraints and responsibilities?

Michael McKeon (15:42)
I'd say that's a tie between some software limitations and their timelines. They operate on a different schedule than we operate in operations and

They have to have bills issued, checks cut, tax information provided by a particular date or as a ripple effect can negatively impact the rest of the company's operations. So sometimes when they ask for seemingly redundant or unnecessary information or make odd requests.

that's usually has a good reason behind it and it is in my best interest just to give them whatever they need as quickly as possible. I think to answer your questions, what do they underestimate? I think that their job's important too. PMs tend to have an ego and…

You need to keep your team informed and respected and working smoothly so that the rest of the business can follow suit.

Rishi Srivastava (16:36)
Most of the time, accountants and PMs, both sides have best interest of the other side, even though it's not obvious in the conversations.

Michael McKeon (16:44)
Certainly, I mean, it all boils down to money and keeping track of that is the lifeblood of any company, right? So, it's not just for my own past, but accounts are important.

Rishi Srivastava (16:58)
Right,

right. The next section is tools, systems, and workflow reality. You use Autodesk, Construction Cloud, Sage300, Bluebeam, and HH2 together. Where does technology genuinely save time, and where does it still create friction?

Michael McKeon (17:18)
Well, all of their strengths and weaknesses. Would you like me to reference each of those softwares or kind of respond encapsulating them as a whole?

Rishi Srivastava (17:31)
I think you can go over each of them and also give us something overall.

Michael McKeon (17:37)
Sure. So let's see. Starting with Autodesk Construction Cloud, that's our operation software for anyone that may not be aware. It is a competitor to Procore, which is the bigger name brand operation software. Very similar. It's.

Phenomenal software it keeps all of our information in one place right any team member any subcontractor

can access any of the information at our fingertips at will. So that is new drawings, photos the same day, any punch list items, RFI submittals, you name it. We keep all of our project operations information all in the cloud and accessible. So that alone has been a total game changer for construction as a whole.

It can also create a little confusion if maybe someone's used to Procore and they're not used to Autodesk or vice versa. Or if they're not generally good with computers and you make one wrong click and you're kind of lost in the system.

You tend to find that more with people that started in this industry when it was all paper and pencil. But I also have to give credit where credit's due. I've had a lot of the older generations surprise me with how technologically savvy they can be when it's important and helpful to their job. I've learned a lot from people decades older than myself technologically, which is always great to see.

So that's Autodesk. Sage 300 is great. I don't work in it a ton, being that I'm not in accounting anymore. It is a little bulky and cumbersome. It is powerful and that comes with some cumbersome time intensive workflows.

It's great software. Again, it gives me all the reports I need. I know where I live, which is the project management reports section. I get in, I get what I need, and I get out. So I'm sure my accountant would have a lot more to say on that topic. Bluebeam is, in my opinion, my personal single favorite piece of software.

from measuring plans, doing markups, pictures worth a thousand words. And if I can detail something in real time in a meeting and share on my screen what I'm visualizing, if I can show a subcontractor exactly how we want something built and create, you know, take a detail from an architect and either pull that apart or turn it and show a different perspective on that detail, that really helps my communication and making sure that there are no

gaps in understanding during the construction process. perfect, perfect software. I've got no complaints. I love working in it.

HH2 is an integration provider. again, for anyone that doesn't know, they integrate different softwares. And we use it to integrate our operation software, Autodesk Construction Cloud, with Sage 300, our accounting software. It has incredible potential.

Due to its nature as a third party integrating two other major softwares, it has a lot of friction. It's not incredibly smooth just yet. And this could be user error as we were still setting everything up. But we keep working on this to hopefully be able to place all of our accounting inputs in Autodesk. So that means pay applications, both subcontractor pay apps in and our owner pay app out.

Change orders, both sub and owner and internal. There's an integrated docu sign. So basically, all the paperwork, all the back and forth handling and changing the contracted amounts of money for each member of our team could all be handled in Autodesk. So that's the dream. We are still setting that up.

The is absolutely huge, but we need to get our architecture tight before we can really see the potential in real time.

Rishi Srivastava (21:33)
So the integration that HH2 does is not perfect. There's still some issues.

Michael McKeon (21:42)
I would say it's not perfect and I don't want to talk poorly of HH2 because they could be doing a great job and it could be user error to an extent but I will say that being semi-technologically savvy it has some sticking points and I'm hoping that we can overcome that by and large with

just another few steps of setup so that we can smooth out all the bumps and make sure that everything's communicating clearly. in a perfect world, Autodesk could come out with their own integrating platform and work out deals with these accounting softwares to make it a much smoother operation. Having a third party come in and

kind of connect to two different softwares in my mind just makes for a lot of potential error.

Rishi Srivastava (22:36)
Yeah.

You described the quote unquote ghost in the machine problem where automation works four times and fails once. How do you decide when automation is worth the frustration?

Michael McKeon (22:48)
I don't have a particularly concrete answer on this. I think of it in terms of quantified frustration. If something saves me time on the whole, but it is a hassle to use, and the one in four times leaves me so frustrated, it impacts the rest of my day.

I tend to not use the automated version. I will use the slower process and avoid the potential derail. you know, maybe that's something I need to work on and maybe I need to fix the problem and enjoy the gains of that automated process. But I do enjoy consistency and.

Maintain better attitude and better efficiency when things go according to plan so Yeah, the ghost of the machine can be a Non-issue or it can be pretty pretty frustrating

Rishi Srivastava (23:38)
Yeah, you have any recent examples of ghost in the machine?

Michael McKeon (23:42)
Kind of with this integration we were just referencing, I go in and I input the information and then it doesn't give me the intended result. So then I reach out to tech support and say, hey, this is my understanding of how to achieve this result. This is what I did to get there. And they say, well, you know.

Did you try this? Yes, I tried that. OK, well then, you know, really, it should work. But it doesn't. And so I guess not having a reliable answer, like I said, on the consistency side and still doing things right and getting an unintended negative consequence. That's what gets me.

Rishi Srivastava (24:24)
Yeah, yeah, makes sense. Subcontractor pay apps are still largely PDF and spreadsheet driven today. What would an ideal low friction pay app process look like from your seat?

Michael McKeon (24:38)
Well, it would look like the HH2 integration again. You know it's possible.

In a perfect world, it would be an Excel spreadsheet or PDF of a spreadsheet, specifically a schedule of values that has fillable fields in the current month column. So all you have to worry about, assuming that all the past months you have filled out correctly, is this month you fill in either a percentage of completion or a value.

and it will calculate through the rest of the fields or cells.

change orders would populate in the pay application due to the fact that it's fully integrated. the system sees that you have submitted a change order and that everyone has signed it and then it hits their contract and everything happens in real time. There's no taking information from one source and updating information on another source. And then the

really big upside on this is that it would serve our subcontractors. They wouldn't have to

go through the trouble of double checking which change orders have been executed and what their last month's pay up said. They could just go up. It's all stored in the cloud, all readily available for them to review and fill in one to three fields per month. I think that would be a huge time saver industry-wide if anyone could really crack the code on that.

Rishi Srivastava (26:02)
So this is the owner change order that not flowing well to subcontractor pay apps. Is that what you're talking about?

Michael McKeon (26:10)
Yeah, I'd say specifically, you know, my I'd be remiss to not bring it up to speak on behalf of my project administrator.

who spends hours every month going back and forth with subcontractors saying, hey, you billed for this change order. It hasn't been executed yet. We can't bill against that. It's not an hour contract. Therefore, it can't be in yours. So it creates a lot of busy work, just this lack of clarity or.

assumptions being made, right? If there are no assumptions, if everything is clear that, oh, this was signed so I can bill against it and really narrow down what the inputs available are, that makes it so much smoother. It takes the need for communicating off the table by and large, which would be great. We could take on more work with less people, right? Which is the goal.

Rishi Srivastava (27:04)
The subcontractor may have actually executed some work on that pending change order from the customer of yours. And that's why they may be billing you.

Michael McKeon (27:14)
Certainly and sometimes it is you know kind of going back to the accounting side of things. It's It can be somewhat unreasonable right we have a subcontractor that has been directed by us and Ultimately by the owner to do work. They do the work. They should be able to bill against it, but

per our contract, per our AIA requirements. If it's not on our contract with the owner and it's an owner change order, we do our best to not bill for it to make sure that our books are clean and that we are.

maintaining contractual integrity, really. Sometimes we have to go out of order. The owner's unwilling to sign, and you make a great point, right? It's not always so black and white. So we're not unreasonable, but we try to keep those standard operating procedures in place whenever possible.

Rishi Srivastava (28:04)
The next section is Accounts Payable and Financial Controls. Today, you approve pay apps through review, conversations with the superintendent, and trust in your accounting team. What signals tell you a pay app is right or wrong?

Michael McKeon (28:20)
I mean, like you said, we could go take a look at what's built out there. But ideally, it's just a detailed schedule of values. Or if it's wrong, a lack of detail in their schedule of values, right? It's a one line, we are 50 % through with the project schedule of values. Well.

That's a lot harder to verify than breaking it out by building, by level, by unit, by scope. The more specific, the better in schedule values as far as.

I'm concerned. If we can easily look at the pay app, understand what they are billing for, what we are paying for, it's a lot easier for us to agree to it, a lot easier for ownership to sign off on it if they review the backup, and for everyone to understand exactly what the current status of the project is as it relates to billing.

If there's going to be a unique situation, say, materials deposit for a piece of equipment or a large chunk of time getting billed because they finished a certain scope and they were under billed on that and it seems to to raise a flag is too much of a percentage in one line item at one time given the amount of time. That also really helps the the devil's in the details. And the more we know, the easier it is to get everyone to buy off on it.

Rishi Srivastava (29:38)
Yeah. So, accounting can also help you validate a pay app? What and how they could?

Michael McKeon (29:45)
Accounting I mean I would say yes so far as

not the percentage completion perhaps but I mean as far as checking details I mean to make sure you know sometimes it's taken for granted that

the values in in a pay application reflect what was the end values in the month before. So oftentimes accounting will say, hey, look, they said that we have paid them X number of dollars. Now they're billing for this much more. And that'll bring that to 50 percent complete. But last month they built to 55 percent complete. Now they're saying that they have in total build us less and other billing. Their billing is off and

be it intentional or unintentional, this is incorrect when you go fix that. those types of catches, right, of just do the figures, does the data reflect what has happened before and where the steps we've taken to get there. That was actually my first job in construction was checking the applications month to month. It's riveting.

Rishi Srivastava (30:54)
How important is context? Photos, RFIs, change origins, in approving costs, and what breaks when that context is missing?

Michael McKeon (31:04)
I mean, context is incredibly important. It is vital to certainly change orders approved. But you said photos – RFIs mean, I think nuance and context and details are what separates, you know, competent to great.

PMs, superintendents, what have you. For photos, you know, you could take a photo of an area. But if you were to make a description saying this is the southeast corner of building A and this is specifically what I am looking at in this photo, well, when you go back to review it or when other parties say the owner.

a lawyer, a client goes to look at it, they can quickly understand what is being communicated there. So extrapolate that to RFIs and like I said, certainly change orders. mean, if we get a dollar amount change order and it says for repairs to pipes, I'm going have a really hard time signing it and getting it signed by ownership.

Yeah, context is everything. The more context provided, the easier it's going to be. And I really appreciate my subcontractors that do a good time maybe overlaying a big set of documents compared to a new set of documents that comes out. Or the price of copper went up 10x, and that's not their fault. And the more specific information received, the better.

That is not to say the more information the better, but the more concise pertinent information. I don't want any of my contractors listening to this to send me an essay next month.

Rishi Srivastava (32:38)
Yeah, you only have so much time to read and analyze. The last section and the last question is, as AI and automation continue to enter construction finance, what excites you and what makes you cautious from a project manager's perspective?

Michael McKeon (32:55)
would say there's the project manager perspective and then there's the personal perspective, me as Michael and it's hard to extricate those two. In general, find that initially I was very excited. As time goes on, I have become more conservative and cautious with the introduction of AI. I think there are…

you know, incredible upsides using AI in our projects. But I do think most of that being reliable is in the mid to distant future. We're not quite there to where we can depend on the output of AI. You know, I think we'll be living through the process of.

these AI companies crowdsourcing their fine tuning of their platforms. Right. So we are the guinea pigs. We are going to be suffering the one out of four incorrect answers as it gets better. But I do think it will get there. And I do think it will be a huge gain. It already is. But for instance, I have already had multiple conversations with design team members that responded using AI to an email I had.

And, you know, my personal feelings set aside of not being responded to by a person. That's OK. I don't love it, but, you know, that's business. But I found that I had.

two separate interactions of several emails a piece. And what I was trying to explain was not getting understood. And that was very concerning to me. And I eventually on one of them just dropped it and said, OK, I've made my case. You're obviously not hearing me. It felt like communicating to a brick wall. So I hope this doesn't go awry. And if it does, then I did my best. So I think that's where I kind of go to in practice what I see is

It's great for some things. I use, you know, Otter AI for my meeting minutes. It gives me a summary with a to-do checklist after every single meeting and that is incredibly valuable, particularly for the dollar spent annually on it. mean, phenomenal value proposition, but…

By and large, I think there are concerns. And I've also seen some people that may not have a great grasp of the specifics of the industry, right? They may be fresh out of college or starting a new area of responsibility or technical specificity. And they try to compensate with AI. I find if they don't have a good technical foundation to…

vet the responses they're getting, they will pass along that bad information. And that can be more damaging than just not knowing to begin with and saying, putting up your hand and asking the question from someone who may have the answer. So long story short, I mean, I think.

I mean, don't get me wrong, I use AI daily. It helps me in a variety of ways. Huge time saver in a lot of ways, but I try to limit myself to areas that, like I said, I can vet the outcome and make sure that it's giving me the information needed. I think the negative potential is also concerning, but I would love to be wrong.

Rishi Srivastava (35:58)
Yeah,

I mean, if you don't know how to evaluate AI's output on a certain subject, you probably should be asking that question to the AI.

Michael McKeon (36:08)
Certainly, Yeah, you know, I've asked illegal questions, but I'm not going to go to court with those responses. Similarly, if you don't know how to vet the answer to, know, what size beam should I put there? I wouldn't use that information in real world practice.

Rishi Srivastava (36:28)
Very well said, Michael. Thank you so much for your time.

Michael McKeon (36:31)
Likewise, Rishi. Thanks for having me.