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Running your own company in the construction industry can certainly be lucrative and personally rewarding, especially when your project team completes a big construction project on time and within budget. But, when construction firms delay jobs due to workflow inefficiencies, rework, change orders, and other issues, the drop in productivity can translate directly to a loss in profits.
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A recent QuickBooks survey found 36% of general contractors monitor the cost of materials the most to ensure profitability, while 34% track labor costs most carefully. The survey also found labor costs to be the hardest for contractors to estimate and what they ranked as the most expensive aspect of a project.
Like others who do construction work, Silvio Dobrovat, president of Hometelligent in the San Francisco Bay Area, says labor costs are "probably the most expensive and most complex" part of running a construction company. But when you get them under control, it directly results in better labor efficiency.
"It's not only managing the relationships, but the actual productivity of it," Dobrovat says.
As a full-service general contracting firm, Hometelligent might spend six months to a year on one custom-home project, which requires careful planning for quality construction and production, a cost-effective budget, and precision scheduling of subcontractors from various trades.
"Adhering to that sequence and schedule is ultimately what drives your bottom line," Dobrovat says. "If you're not able to manage the trades correctly, and delays start adding up and accruing, the bottom line is going to suffer. It's very, very important to make decisions that move the needle in a positive direction."
1. Plan Better to Increase Productivity
Construction project management takes organizational skills, leadership, effective decision-making, and, most importantly, pre-planning. The more planning you do before getting to the job site, the fewer productivity problems you'll likely experience.
Plan for anticipated and unexpected change orders on work sites. Know who's doing what, where, and when, to avoid unnecessary scheduling delays. Establish a set budget, then work to meet it with specific milestones or benchmarks along the way.
Review historical data from previous construction projects to identify where problems, surprises, or delays might occur—then plan ahead to prevent them. Also, implement baseline quality control measures on the construction site to make sure things get done right and on time.
Meeting the client's deadlines matter, but so does doing good work, says Kim Hibbs, president of Hibbs Homes, which specializes in luxury custom homes in Missouri and Utah. She always strives to use quality estimators, project managers, and superintendents to oversee projects for better outcomes.
"You want to be lean, you want to be mean. You want to make sure you're running a project as quickly as possible, but I also want to make sure we've got quality control going on," Hibbs says. "I want to make sure we're moving quickly, but we also are taking our time to deliver a quality project."
2. Set Benchmarks; Reward Crews When They Meet Them
In the construction sector, building projects take time and require steady construction labor productivity to meet deadlines and avoid cost overruns. In most areas of construction planning, contractors also set benchmarks or milestones to check off at certain stages of the project.
Setting benchmarks not only helps your clients gain clarity on your construction process, it also outlines goals for each stakeholder and works to keep the project on track. Construction workers tend to bring a competitive spirit to the job, so challenge them to meet a goal and reward them when they do.
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3. Communicate Clearly in Real Time to Avoid Delays
In that same QuickBooks study mentioned above, 60% of general contractors say problems with coordination and communication between project team members ranks as a key contributor to the problem of low productivity on construction sites.
Dobrovat of Hometelligent says delegating a point person on every construction project, no matter the size, provides a simple fix for communication and coordination issues. And, sometimes it needs to be the general contractor who spends time on the job site each day to understand who's doing what and when they're doing it.
"Much can be lost on inefficiencies if you have a lot of employees and you don't have a point person, a project manager, or a foreman who's making sure there's a task list, and that task list gets completed on a daily basis," Dobrovat says. "And, if there's nobody in that hierarchy who is holding that foreman accountable...gosh, you could really be bleeding cash, and cash flow is everything in construction."
Adopting a uniform reporting system for the overall project also helps streamline communication with construction workers, subcontractors, and other stakeholders. Tracking site productivity with all documents and information stored in one place also makes for better decision-making in real time.
4. Use Technology for Measuring Productivity
New technology in the construction industry, such as prefabrication building, automation, building information modeling (BIM), and construction project management software, can help improve project performance, remove inefficiencies, and reduce rework resulting from bad design, errors, poor data, or miscommunication.
ServiceTitan's Construction & Service Software gives you the power to drill down on job-progress metrics, communicate with crews on project delivery, and know the exact status of all construction activities. Using your own customer data, this all-in-one software solution uses construction technology to automate job estimating, dispatch scheduling, construction reporting, and so much more. It even integrates with QuickBooks or Sage Intacct for accurate work-in-progress reporting and improved cash flow management.
5. Train and Develop More Construction Industry Leaders
The labor shortage and lack of skilled tradesmen definitely impacts construction productivity rates, with 80% of construction companies reporting they can't find the workers they need—which, obviously, results in productivity loss.
As a female general contractor, Karen Digman has owned and operated Homes by Karen, LLC, in East Central Indiana for the past 15 years. While she employs one skilled lead and a semi-skilled worker, along with 15-plus independent subcontractors, Digman says finding skilled labor ranks as her top pain point.
"That has been the biggest problem I've had for the last couple of years … the need for skilled workers who are dependable," says Digman, a home builder who averages about $900,000 in sales each year. "The need is for skilled people who are willing to work for a decent wage and show up. It's hard!"
Construction workers perform a physically demanding job year round and in all kinds of weather conditions, from sweltering hot to icy cold. But for those willing to do the work and learn a skilled trade, the construction industry offers many benefits, including job security, better wages, and higher earning potential.
To help improve construction productivity rates, combat the labor shortage, and remove the stigma associated with working in the trades, Digman thinks the answer falls on the shoulders of the construction industry to push colleges and trade schools harder to offer more training in the skilled trades.
"A lot of our skilled workers are older and they do this for a living, but our youth or all the rest fall into it by default," she says. "Nothing else worked out, they didn't go to college, they couldn't hold down a job. They'll go get a summer job—roofing, framing, or whatever—but they don't pursue it. They don't try to make it a career, because it's hard.
"It doesn't take a boatload of training. It really doesn't," Digman says. "You put them with a good lead worker, encourage them, mentor them. … If they have a knack for it and they like it, they're going to do really well at it."
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