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Matt Stevens, PhD, on risk-reward management, best practice compliance, and what upper quartile firms do differently

The performance gap between top and bottom quartile contractors is not 10%, 20%, or even 50%. According to Matt Stevens, PhD, a researcher at Western Sydney University and author of The Construction MBA, it is between 300% and 1,100%. Stevens traces this figure to banking data that has been tracked since 1914. It raises an uncomfortable question for every construction executive: which side of the divide are you on, and do you know why? 

Stevens has spent decades studying what separates contractors who thrive from those who quietly disappear. His argument is straightforward. The difference is not size, luck, or access to technology. It is disciplined adherence to a defined set of best practices, measured through a framework most firms have never encountered: risk-reward management. 

The best contractors aren’t slightly better… they’re 3x to 11x more profitable. Why? Not tech. Not size. Not luck. Relentless execution of the right practices.

Here’s what separates them:

Bottom line: Construction doesn’t have an innovation problem. It has a discipline problem. And the firms that fix it are printing outsized returns.

Stevens draws a sharp distinction between risk management and risk-reward management. The former is standard practice. The latter is what upper quartile contractors actually do. 

The concept centres on a risk-reward curve. Every contractor sits somewhere on it, and the industry average clusters around 22%. A firm building hunting cabins occupies a different position from one delivering nuclear infrastructure, but both should know where they sit and whether the returns justify the exposure. 

According to Stevens, this positioning is an art, one that requires a project ROI calculation he has presented to over 150 contractors. Six got it right. The remaining 144 did not. 

This is where contractor failure begins. The primary cause of bankruptcy in construction, as Stevens describes it, is a misalignment between the work a firm takes on and the territory it actually understands: the client types, project categories, and geographies it has mastered. A restaurant contractor does not do hospitals. A hospital contractor would never win a restaurant job. The margins are too thin to learn on the client's time. 

The second structural advantage Stevens identifies is speed, but not in the way most executives frame it. Compressing a schedule from 12 months to six creates safety risks, quality problems, and cost overruns. That kind of speed is destructive. 

The speed that matters is organisational. It shows up in how quickly a firm responds to a client enquiry, how early a team delivers against internal benchmarks, and how smoothly a project runs from day one. Stevens recounts how his own firm would return estimates within two or three days, hand over submittals early, and ask a simple question: who wants your business more than us? 

The benefits of early, well-organised delivery extend far beyond client satisfaction. A calm job site retains experienced tradespeople. Veteran craftworkers, as Stevens observes, will quietly walk off a chaotic project and onto a better-run one down the road. They have seen enough to know how a disorganised first month ends: overtime, weekend work, and blame. 

This retention problem is part of a broader workforce challenge. According to the National Center for Construction Education and Research (NCCER), approximately 41% of the current construction workforce is projected to retire by 2031. When experienced workers leave, they take decades of operational knowledge with them. The firms that can keep them on site longer hold a compounding advantage. 

Stevens connects this to a broader principle. A genuine best practice produces multiple positive ripple effects. When a project team beats its internal schedule, the job runs more smoothly, experienced workers stay, client trust deepens, and rework drops. Each of these outcomes reinforces the next. 

Stevens quantifies this relationship precisely. For every 1% increase in the on-time completion of defined best practices, a contractor gains approximately 2% in efficiency. The data behind this comes from his doctoral research, and the logic is confirmed by decades of industry observation. 

Upper quartile contractors operationalise this through simple accountability systems. Practices are documented, assigned to individuals, and monitored daily. Compliance rates in the firms Stevens has worked with reach 91%, against an industry average of around 60%. The profitability difference is substantial. 

These firms also share a common cultural trait. At least one senior executive functions as a teacher, someone who actively develops younger staff but expects results within a reasonable window. Three chances to learn. After that, a conversation follows. This teaching culture, Stevens argues, is what makes these firms genuine learning organisations: not in a vague corporate sense, but in the operational reality of how knowledge moves from one generation of builders to the next. 

That same logic informs his team's work on employee selection. Stevens and his colleagues at Western Sydney developed an eight-factor screening framework designed to identify what makes a contributory employee from the employer's perspective. The framework tests for four personality traits and four learned behaviours: 

Candidates complete a confidential assessment, and hiring managers use the results to structure targeted interviews across 64 questions. Stevens describes this as the first framework of its kind in construction, and the early results suggest a measurable improvement in workforce quality. 

Stevens positions technology as downstream of best practices, a view that challenges how many firms approach procurement. His proposed technology map begins with a full inventory of practices, not software features. If a firm has 20 estimating practices, it evaluates software by how many of those 20 it supports. One platform might cover 15. Another covers seven. The purchasing decision follows from that analysis. 

His research into software support for valued industry practices found a significant disconnect. When contractors rated ten key practices on a scale of one to five for both value and software support, the average gap was 44%. Practices rated at four for importance were supported at roughly two. The implication is clear: firms that buy technology before defining their practices risk automating processes that are incomplete or poorly understood. 

This view sits in productive tension with Deloitte's 2026 Engineering and Construction Industry Outlook, which argues that firms slow to adopt digital tools risk rising costs, shrinking margins, and strategic irrelevance. The two perspectives are not necessarily contradictory. Stevens is not anti-technology. His team at Western Sydney has used agentic AI to build a housing construction cost forecasting tool for the Australian market and a lean construction simulation game for undergraduate education. But his argument is that the sequence matters: define the practice first, then find the tool that supports it. 

Construction's self-image remains stubbornly negative. Stevens points out that the industry ranks second among goods-producing sectors in intellectual property relative to revenue, ahead of mining, oil and gas, and behind only agriculture. Bankruptcy rates, as a percentage of total firms, remain extremely low. Productivity, by Stevens' estimate, has risen around 17% in 30 years, though he acknowledges the measurement systems behind that figure are imperfect. 

The industry's challenge is not a lack of innovation. It is a lack of rigour in applying what already works. For executives reviewing their own operations, the question is not whether better practices exist, but whether anyone is measuring compliance against them. 

 
Where does your firm sit on the risk-reward curve? Stevens' framework challenges contractors to answer that honestly. If this sparked a question or a disagreement, we want to hear it. Reply to this newsletter. We read and respond to every email. 

Watch the episode with Matt Stevens here👇👇👇