Although the construction industry is one of the world economy’s largest sector (around $10 trillion spent on construction yearly) that employs about 7 percent of the total world’s working-age population, its productivity “increase” is -0.32 percent per year. Nowadays, efficiency in the construction industry is even lower than it was in 1993. No less than 98 percent of all megaprojects slip by over 30 percent, more than 75 percent of the big projects suffer cost overruns by even 40 percent and more. If productivity could catch up with the global labor-productivity growth (2.8 percent) nearly $1.6 trillion would be added up to the construction sector (McKinsey).
According to MGI’s digitization index, which represents the first major attempt to measure digitization growth of the US economy at a sector level, the construction sector is among the least digitized sectors in the world. The United States is only trumped by Europe, where construction is in last on the index. Whereas efficiency in manufacturing has almost doubled from 1995 to 2012 construction productivity decreased by around 5 percent.
“Generally, the negative changes over the last three decades have outpaced the positive changes. Lack of consistent engagement by construction project stakeholders to each other has made project information flow unevenly, causing chaos.” – Matt Stevens.
Value added per employee for the construction and manufacturing industries from 1998-2011 (Source: BEA Value Added and Employment Data by Industry).
This chart shows the disparity and the result of decreasing productivity in the construction sector. The reason is not only a lack of technological improvements but also based on difficult and varying environments during construction projects.
Minor improvements can result in 80% increase in construction productivity
Inefficiencies (unforeseen events included), such as project expansion and schedule slip, have the biggest impact on cost overruns. But the main factor for exploding construction costs is still a lack of productivity within the people you hired. Another major cost driver is rework time. A research by the construction industry reveals that around
5 percent of the total construction costs can be attributed to reworking time (report from 2005). As we can see now, the construction sector has a lot of catching up to do regarding the digital, automated processes which can be completed by software technology. PlanRadar for example, helps you to create an automated construction report by providing the technological infrastructure and by collecting data from every project member and working contact listed in your system. You can access PlanRadar on any mobile device and create or share your construction report and insights with your clients using only a few clicks. Your business growth already starts with minor improvements on the construction site. All that you need is to search for the best ways to enhance the employee’s productivity. This can be in a software, training program or weekly fixed meetings that shows the project update.
1. Use innovative technologies
The fastest way to increase efficiency and make a change is to implement innovative apps for your day-to-day operations. This will help for two reasons:
- Installing software in your business routines is not as difficult as e.g. adopting new machines or regulations. Especially modern, cloud-based, software is easy to use and allows you to start immediately. In addition, every employee need to fulfills the hardware conditions by just having a smartphone or tablet. To overcome the fear of implementing new software is the real challenge here and the first step to help your projects and satisfy your clients.
- Implementing productivity software will immediately boost your return on investment. For example, PlanRadar allows you to completely automatize construction documentation and defect management which brings you over a 9-times ROI. Not only by saving rework time up to 90 minutes a day, but construction professionals are also now able to dedicate themselves to construction projects in their extra time due to digital processes. If you want to know more about PlanRadar, our technology, and interface design, don’t hesitate to contact us!
2. Improve Planning
Even if you cannot eliminate unforeseen events or unreliable contractors through detailed planning, technology can help your search in improving efficiency and flexibility during the construction work. Start with analyzing every job position on site and in your company by splitting every single task into subprocesses. This will give you new insights that allow you to reveal inefficiencies during the process as well as gain more flexibility on site. Replace analog work processes with a digital construction punch list if possible which will help to boost your business efficiency and improve your projects.
One percent improvement in every process will make a change and have a massive impact on productivity (aggregation of marginal gains). Start creating metrics for every (sub)process to use them as a benchmark and have better insights into the future. This way you will never go astray and start to perform above construction industry performance (global average).
Improving data is the next crucial step. Try to combine data from as many necessary project members as possible in real time by using technology. Want to build a building with low operating costs? Try to integrate a facility manager into your planning process! Costs for planning may increase in the short term but you will profit from the extra knowledge in the long run. Software, like building information modeling software or PlanRadar, helps you to make real-time information exchange possible and gain more insights. Keep in mind that evaluating data is the next productivity boost in this process. By improving data, you are also able to reduce cost overruns (see McKinsey evaluation at the beginning).
3. Shorter contracts
Once again, we can learn something from the Asian business mentality where the continuous improvement process (CIP) also reached contracts. In the western culture, it is common to hammer out as many detailed contracts as possible to cover up all possible eventualities which overstep the mark in terms of what is really needed. This makes it difficult for team members and contractors to engage directly with each other and paralyze construction productivity. Start splitting legal agreements into smaller single contracts rather than creating lengthy contracts. Less legal mediation spares your nerves, time, money and increases efficiency during the construction phase. Learn from our global ideals in 2017 and adopt their business mentality to serve your clients’ demand!
4. Talent management
Talent management is often a sensitive issue. Companies defer to contact familiar people and teams rather than picking the best people for a certain job. Trust and long-term memberships are crucial and very important aspects of a company’s vitality. But this is only the half-truth for occupying a position. A strong skill- and mindset, as well as being innovative and open-minded, are the heartbeats of every outperforming employee, contact person or partner. Furthermore, many (global) companies fall into another trap: staff training. To expect autonomous working from employees is suitable and ensures his or her professional development. But keep in mind that there is a fine line between autonomous working and leaving people on their own. As a rule of thumb: Dedicate one week for staff training if you hire a new employee.
5. Use prefabrications
Using prefabricates can increase construction quality and help to decrease the costs of all participating contractors. “When you have a big building, there are a lot of repetitive elements that you can prefabricate in a factory, and anything that you can prefabricate, unless it has to be trucked an enormous distance, normally is very cost-effective and the quality is higher […]. If you can put the proper design content for prefabrication into the design from the beginning, you can achieve a very significant improvement.” Paul Teicholz, National Society of Professional Engineers.
There are a lot of useful apps for different purposes out there in 2019/2020. Just take the time to look for project management software, productivity software, building information modeling software and/or drones and you will be surprised by what you will find. Research time is definitely a worthwhile investment here. Help to improve the McKinsey evaluation and start to contact software developer like PlanRadar to skyrocket your productivity and the contentment of your clients. Reading this article was only your first step toward construction productivity!
