Five Ways to Improve Productivity at the

Construction Site

By 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.