Five Ways to Improve Productivity at the Construction SiteBy Michael P. Rollage, CPA, CVA, ABV

In the current environment, contractors are hard pressed to find ways to gain a competitive advantage and improve slim profit margins. In any given geographic area, construction labor, material and equipment costs are essentially the same. One of the few opportunities to improve the bottom line is to increase productivity.

Increasing productivity benefits a contractor in several ways:

Projects are completed more quickly Project cost is lowered The contractor can submit more competitive bids The project can be more profitable

Studies show that workers on a construction project are unproductive for 50 percent of their time on site. Waiting eats up more than half of an employee's unproductive time and about one-third of total project time. It can wreck a schedule and reduce the contractor's profits.

Some studies indicate that a third of waiting periods result from factors under management's control. By improving management practices, a construction company can therefore reduce waiting time significantly. Let's take a look at a $1 million construction project, for which direct labor costs typically account for about $400,000. Labor that is unproductive half the time costs the construction company $200,000, with nothing to show for it. If a construction company could improve its management practices, it could see one-third of that $200,000, or $66,667, drop straight to its bottom line. Or it could lower its bids and win more projects.

Besides long periods of waiting, there are many other drains on productivity at the construction site, including:

Poorly planned materials management Cleaning up the job site Materials waste and theft Accidents Substance abuse Redoing substandard work and completing client punch lists

Improving site productivity is easy to pose as a strategic objective, but not so easy to achieve given the complexity of the construction process. There are five major ways, however, that a construction company can improve its productivity:

1. Analyze the entire construction process in detail.A construction company should analyze each phase of its process to determine what the barriers are to improving productivity. It should begin by measuring key factors and setting benchmarks and goals for improvement. For example, the company can carefully observe the percentage of productive and nonproductive time at a site. By comparing projects, the company can determine why one project was more productive than the other. For instance, perhaps productivity always slides when a certain piece of equipment is used. The company can set a goal for using the equipment more efficiently, and then provide the training the crew needs to reach the goal.

2. Do better planning.There will never be a magic solution that eliminates all work changes, but better planning will mitigate the impact of work changes and also eliminate the unnecessary waits that result from imprecise planning. For example, if you don't order material to arrive at the date it is needed, the crew will be forced to wait until the material arrives.

But just to say we need to do better planning isn't good enough. You also need to develop a measurement for determining how accurate the current planning process is, plus develop a realistic benchmark for improvement.

3. Train your supervisors and the crew.An important key to improving productivity is to train the crew � especially construction supervisors, whose knowledge and skills can make or break a project � in sound management principles and techniques. Construction companies rarely hesitate to train employees in specific skills such as how to operate a new piece of equipment. The benefit of training is measurable almost immediately: the employee is more productive as soon as he has mastered the new skill. Training in how to improve productivity is no different.

Supervisor training should be specifically related to how to improve productivity at the job site. Supervisors must be trained to look at the job not on a day-to-day basis, but as a work process with many discrete steps that must be completed over an extended, if limited, period of time.

You should also explain what productivity means to all employees and show them how increased productivity leads to fewer hassles and greater profits. Once you have identified new, more productive ways of doing something, make sure everyone involved understands the change and why it is being implemented.

Productivity training should always stress that the most productive workplaces are always the safest and produce the highest quality work, since accidents and rework are major drains on productivity.

4. Employ new technologies.

New technologies such as scheduling software and more efficient equipment can yield an immediate return on investment in increased productivity. Studies show that the construction industry spends fewer dollars for research and development than any other industries in the United States. The technological explosion that has revolutionized the U.S. has so far only affected the very largest construction companies.

In implementing new technology, construction companies should learn from the mistakes made in other industries. Too often, companies have attempted to implement new technologies and equipment literally overnight, leading to a cataclysm of change that disorients and discourages workers. We suggest that construction companies take a gradualist approach, introducing first the new software or equipment that will have the most immediate positive impact. Make sure the training that you provide in new technologies not only details how to use the technology, but also how the company and the workers will benefit from it.

5. Communicate that increasing productivity is everyone's job.No one knows how to do a job better than the person doing it. A construction company should therefore enlist all of its workers in the search for greater productivity. The company should communicate explicitly that suggestions are welcomed and should consider some type of reward system for suggestions that increase productivity. One effect of involving the workers in improving productivity is that they will come to look on the goal as making progress, not finding blame.

This brief review of how to improve productivity may make the task of improvement seem daunting to the average general contracting company. Typically construction companies enlist construction productivity consultants to help them improve. The consultant has a wealth of experience in the construction industry to draw upon in addressing the specific needs of the company, as well as a methodology for identifying and addressing the barriers to increased productivity. The consultant understands both the best industry practices and the current construction technologies that can improve productivity. Perhaps most important, the consultant can provide the supervisor and crew with the training that will yield the greatest productivity improvements.

About the Author

Michael P. Rollage is a principal in McCrory & McDowell, a Pittsburgh accounting and consulting firm, where he heads the firm's construction industry practice. He has more than 30 years of experience in the construction industry, including more than a decade as a controller and CFO for two major construction companies.