Construction in all forms employs about 7% of the world’s workers – that’s a lot of people! It’s a $10 TRILLION chunk of the global economy. But it’s also one of the least evolved industries on the planet.
While many sectors, especially manufacturing, have seen leaps and bounds in productivity improvements in the last several years, construction has stayed flat. Despite technological advances and faster communication methods (no more scrawling messages on drywall to be found…whenever), the construction industry simply hasn’t seen the same improvements in productivity. Worldwide, construction only improved productivity by 1%, compared to almost 4% in manufacturing.
Why? What causes continued productivity issues in the construction industry?
The answer is complicated by differences in regions and more. Large construction companies involved in mega-projects, civil, industrial and large-scale housing have anywhere from 20% to 40% higher productivity than small contractors and subs who do projects like single home builds or remodeling. Larger scale operations can simply run more efficiently. That said, industrywide there are some common reasons for productivity issues in construction.
What is Labor Productivity?
It’s hard to discuss any issue unless everyone is using the same definitions of the words. So, what does productivity really mean? How fast a job gets done? Wasted material? Labor costs? Overall profits? Time to completion?
The American Society of Civil Engineers defines it as a “measure of production output for a given resource input, normally expressed as output units per input unit.” That’s a dull, fancy way of saying “how much you get out of what is put in.”
If one worker hangs more drywall than another, their productivity is higher. If one earthmover digs 5 tons a day, and another digs out only 2, the first one has greater productivity than the second. The goal, of course, is to get the maximum safe productivity out of every worker and every piece of equipment on every project from start to finish.
In most cases, labor costs are the greatest wild card in productivity. But there are other factors that are hard to predict and can affect short-term productivity. Maybe the less productive drywaller had to keep relocating their power source. Maybe that second earthmover had to deal with obstructions the first one didn’t. Everyone has an off day. As long as productivity is consistent for workers and equipment over the life of the job, mission accomplished!
Common Productivity Issues in the Construction Industry
McKinsey & Company, one of the biggest consulting companies in the world, has a Productivity Sciences Center. A few years ago, they took a close look at why productivity wasn’t improving in construction as quickly as it was in other sectors like retail and manufacturing. They estimated that 98% of megaprojects suffer from cost overruns and 77% incur delays. To anyone in the industry, that’s probably not a surprise! Some of the reasons found by their teams include:
Short-term planning SNAFUs. If the needed equipment isn’t in place, if the right crew was sent to the wrong job, nothing will get done on time. Week-ahead scheduling is just as important as long–term scheduling for the month or quarter ahead.
Missed signals. When communication and reporting are uneven (or non-existent!), there’s no mutual understanding of job progress and adjustments that need to be made.
Piss-poor organization. Most companies don’t have the speed and scale to make decisions and procure materials as fast as they need to.
Horrible bosses.Lack of communication and accountability up and down the chain cause problems in any organization and project.
Scheduling slipups. When a project is planned, it has a timeline. If day-to-day deadlines are missed, and no one tells the planners and schedulers, they can’t adjust to make up for that.
Contract conundrums. Procurement needs to do a better job explaining contracts to project managers, so they know how to address issues like late deliveries or missing items.
Risky risk management. Are short-term risks considered and managed with the same care as long-term ones? Most of the time, no.
Shallow talent pool. Too many companies go back to the same subs and teams over and over rather than taking the time to find the best match for the job at hand.
McKinsey reports that these are systemic problems, entirely too common in construction worldwide.
Labor Issues in Productivity
The human element on any job is always the hardest one to predict. One good, local flu season or unexpectedly bad weather, especially big events like hurricanes or blizzards, can destroy productivity. Connected to the list above, management over—or under—assigning crews to sites, assigning crews that get in each other’s way or are out of sequence (drywall installers showing up before electrical is done) will obviously tank productivity on any site. Workers who can’t do their jobs are unproductive workers. It may even make workers unhappy to the point that they may seek work elsewhere.
Waste Not, Want Not
Waste is part of any job site. That’s a fact. But excessive waste hits productivity, too. The time spent clearing, disposing of, returning or recycling wasted material is time that could be spent on other tasks. This goes back to procurement and planning. When those teams don’t do their jobs well and are sending unnecessary items to job sites, managing them takes time and slows the job down. Workers navigating around excess materials will slow them down on other tasks as well, once again impacting your overall productivity. (Side note: that goes for timing too. Working around materials delivered far ahead of their need is a nuisance and slows work down.)
Now, on top of all these common productivity issues in the construction industry, add a global labor shortage in the wake of the COVID-19 pandemic and the so-called Great Resignation. Given that FMI is forecasting a tremendous construction boom in 2023, now is the time to begin addressing the many causes of productivity problems.
With the right tools to measure and analyze productivity and look for opportunities to improve on it, construction firms will be able to get more out of the resources they already employ and use. Admitting there’s a problem is always the first step!