Have you ever looked out your window at a construction site and wondered “what’s going on with that project, how soon will it be finished?” People like to make jokes about how many workers stand around while others are busy working away. But those people are mistaken. In reality, even the simplest of construction projects are a complex series of events that require constant monitoring for progress and involve many different trades in order to create something quite amazing.
The construction industry has enjoyed strong growth over the last few years and several reports continue to support a continued trend in building projects. But while the growth of projects continues to be strong, what isn’t is the improvement of operations by companies completing the work.
Problem Statement: Productivity in Construction
In a report completed by the McKinsey Global Institute titled “Reinventing construction through a productivity revolution”. It labels productivity growth as one of the areas where the construction industry is lagging behind other major industries. Globally, construction represents a $10 trillion investment in construction-related goods and services and according to the report, the lack of growth in productivity is leaving about $1.6 trillion on the table.
Other industries have seen 2-3 times the growth of the productivity rate versus construction. In the last 20 years, the global rate of productivity has grown 2.8%, with manufacturing seeing an astounding 3.6% increase. Sadly, the construction industry has only seen an anemic 1% growth in the same measurement.
The McKinsey report states that a revolution is needed...a PRODUCTIVITY revolution!
Now, before we go off charging the barricades and hearing the people sing the “song of angry men” for revolution, it’s best that we determine the areas where companies can have the greatest impact and have the greatest amount of control.
The Solution: Increase Productivity With Impact & Control
Out of the seven areas listed in the report: reshaping regulation; rewiring the contractual framework to reshape industry dynamics; rethinking design and engineering processes; improving procurement and supply-chain management; improving onsite execution; infusing digital technology, new materials, and advanced automation; and reskilling the workforce.
Areas where the owners have complete control and don’t have to rely on influence from outside resources are: improving onsite execution; infusing digital technology, and reskilling the workforce.
Several factors are challenging owners to get creative in their operations as they work to balance the responsibility of keeping tabs on growth and making sure jobs are running smoothly.
David Timpson, a construction industry expert and consultant with MSI, argues that “management attention is spread too thin.” Unfortunately, management is all too often led to focus on several factors which divide attention: Conflicts in priorities and initiatives; Tension with suppliers, employees and customers; Lack of cash...leading to more conflicts and limitations. As both the McKinsey report and Timpson state, focusing on productivity across an organization can bring these factors in line.
Recalling that owners have control over the areas of improving onsite execution, infusing digital technology, and reskilling the workforce, the big question for them is where do we start?
Improving Onsite Execution
How does productivity drive better execution?
Productivity is not some abstract concept. It’s a real number that can be determined based on the reporting done in the field. It’s a rate at which the labor force generates revenue. W. Edward Deming stated: “Tell me how you measure me, and I’ll tell you how I Perform.” Performance is primarily a function of measurements.
Countless spreadsheets and paper documents have gone into figuring out this rate, but as the numbers indicate, the industry isn’t acting on the data it’s collecting. Part of the problem is the industry doesn’t understand the difference between value and cost. Too much weight is given to costs. When this is done, owners have very few options to increase the bottom line; charge more for the work done, cut wages, or even worse cut the workforce altogether.
On the whole, the focus on costs is a good thing, it helps in accounting and keeping the books straight, but what value is being generated by the labor force? That is the number that has the greatest impact.
Your measurements should focus on the value that is generated based on the dollars spent on labor and not just on the cost of doing business.
Rework: The Productivity Killer
In a report on the causes and costs of construction rework, Robin McDonald, CCM, LEED G.A. explains the 5 areas of construction management that cause rework:
- Human Resource Capability (Unclear guidelines given to team-Too much overtime work-Workers with insufficient skill levels-Not enough worker supervision)
- Leadership & Communications (Poor communication-Lack of safety protocols-Ineffective management/leadership)
- Material & Equipment Supply (Problems with construction plans-Late input from a designer-Unrealistic schedule)
- Engineering & Reviews (Late design changes-Changes in project scope-Errors in design-Poor document storage and control)
- Construction Planning & Scheduling (Materials delivered late-Work not completed to specifications-Construction materials not to project requirements)
When you focus on productivity as a measurement, the challenge of improving onsite execution becomes a function of identifying areas where productivity is diminished. As you can see above, rework is a great example of a productivity killer. If you’ve already paid for labor to be done but the quality of work causes rework, no additional revenue is generated by that rework. It’s a sunk cost.
Infusing Digital Technology
Use of Data
Why are manufacturing and retail outpacing construction in growth?
Seen here, over the 20 year span, construction is showing little to no growth. One reason for their increased growth over the construction industry is the harvesting and analysis of data and the use of digital technology.
In recent years, data has been a driver of business performance and the ever-growing use of technology is behind that expansion. Data needs to be source driven and not gathered manually. It needs to move via a system in the normal flow of operations.
Adopting technology that provides this flow is critical to the success of measuring productivity. Whatever your resource, make sure it operates as a function of your operations and not an outlier to your daily process. The more you incorporate technology that enhances your operations, the faster your adoption rate will be across the workforce.
Technology is not an obstacle to performance, though employees may challenge that assumption, but the companies that enhance operations with technology end up with greater results than those that keep doing the same things. “If you keep doing what you always did, you will get what you always got.”
Mobile apps that are designed to provide productive data at your fingertips are an excellent resource for companies looking to get a leg up on the competition. And since we are talking about productivity here, find an app that shows you your company’s productivity. Measuring productivity and profitability is what it’s all about. VisionTrax certainly is one of the digital resources focused on that measurement and is worth a look to see how they can help you achieve greater results.
Reskilling the Workforce
Companies that make systems simple, but effective, find themselves growing. Companies that also find a common language end up with the highest level of growth and sustained operational effectiveness.
One example of this kind of impact took place at the BrassCraft Western plant in Lancaster, Texas in the mid-2000's. When the plant manager took over the operation, a long-term strategy was put in place to make sure the entire organization had the same “business language”. Using the “Seven Habits of Highly Effective People” by Stephen Covey as a framework, everyone was trained on the 7 habits and adopted the culture of principled actions. The difference in the plant was astounding. In the first 3 years, the efficiency in the plant went from 58% to 85% and that had a direct increase in the bottom line of $3 million profit per year. During this time, there were no additional employees added and no additional equipment was purchased.
In the case of Olson Construction, a commercial cabinet company out of Draper, Utah, when the owner began working with David Timpson and followed the principles of the Theory of Constraints as a framework for the company language, the company went from handling 5 commercial projects to 20 without increasing the headcount of their staff. Only normal attrition took place for both of these companies during this time, which meant each worker was providing greater value for the hours worked...that’s PRODUCTIVITY!
Resistance to change
One of the greatest challenges for construction organizations across all industries is resistance to change. In dealing with variable work forces ranging from migrant work forces to executive leadership change management is critical to the success of any effort to improve operations.
You’ve probably heard the old story where a husband watched his wife preparing Easter dinner and watched as his wife cut the ends off the ham prior to putting it in the oven. He asked his wife “Honey, I saw that you cut off the ends of the ham, why did you do that?” She responded that it tastes better that way. When the husband asked how, she answered that she was taught to do it this way by her mom. “I’ve always done it that way” was the response. Now, both were curious “WHY” it was done that way. So, they called “Mom” and asked her why she did it that way. She too said, “I’ve always done it that way”, citing her mother as the source of training. Still not getting an answer they called grandma and asked her “Why did you cut the ends off the ham?” Her response was so understandable, “Well, my pan was typically too small, so I always had to cut off the ends to make it fit.”
Often what used to work in the beginning doesn’t stand the test of time and systems that once worked should be examined to see if they are not working now. People naturally resist change. They get comfortable with a process and don’t like changing even when they know their jobs will be better if they do. Somehow, the change is “too hard” for them to put in the effort.
Whether you work internally to adopt change across the company, or seek out an outside source for consulting, both should follow a similar process. In his book “Leading Change” and refined in “Accelerate”, Dr. John P. Kotter outlined a process where change can be implemented and the 8 steps that can be followed to implement that change. Listed here:
- Create a sense of urgency
- Build a Guiding Coalition
- Form a Strategic Vision & Initiatives
- Enlist a Volunteer
- Enable Action by Removing Barriers
- Generate Short-Term Wins
- Sustain Acceleration
- Institute Change
Transforming a company is not a quick fix and requires long-term commitment to the change in the culture. All too often, owners want a "quick-fix" and while there may be short-term wins, it's a marathon, not a sprint. Early adopters can be a real asset to your organization and you should surround yourself with those who have a positive attitude toward that end. I heard a business leader once say, “If you are doing things the same way in the next five years, you won’t be here in five years.”
Take the time to adopt the right focus in your business. Look to make it simple and focus on singular targets that everyone can rally around. Make productivity the focal point in your business and have everyone drinking the Kool-Aid and talking the same language and you will find success in growing your bottom line. Want to know more about how VisionTrax is helping companies measure productivity in the construction industry? Give us a call today.