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Hard Times Yield a Silver Lining

Monday, February 13, 2012

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Forced in recent years to do more with less, construction-related companies finally have something good to show for it: better productivity.

“The early effect of the recession on the nonresidential construction sector included significant productivity improvement,” according to The 2012 U.S. Construction Industry FMI Productivity Report, a new report by FMI, the largest provider of management consulting and investment banking to the engineering and construction industry.

FMI Productivity Report

The findings are remarkable, FMI says, as “the construction industry, as a whole, has not seen significant productivity improvement during the last five decades when compared with other industries.”

The survey consisted of industry CEOs, CFOs, COOs, presidents, executive vice presidents and vice presidents of general and trades contractors.

Improvements Reported

“Downsizing has resulted in retaining the most-experienced and best-trained personnel who are the most capable of working more efficiently and harder,” the report says.

Many industry-leading firms have used the recession as an “opportunity to re-engineer their companies and make the necessary changes to allow them to be competitive and profitable, in spite of the market conditions,” FMI said.

The report notes that the industry is undergoing significant changes in procedures, roles and responsibilities, and it details challenges to productivity as well as productivity drivers.

‘Our Best People’

The report noted these comments from companies surveyed:

• “Adversity always makes you review your current procedures and make adjustments that are good for the company.”

• “The recession has made us look at and continue to look at our company and how we conduct business from several angles. It has forced us to make some cutbacks in areas and continues to force us to look at becoming lean and efficient down the road.”

• “Like everybody else, we are looking for ways to improve productivity and reduce costs. Our best people, including our field staff, are the ones working. Productivity has gone up. Safety has also improved. Waste has dropped."

Because companies measure productivity differently, FMI asked for the respondents’ professional opinion on whether and to what degree productivity in their firms had changed.

The finding: 57% of participants said productivity had improved in the past two years, while the rest said it had stayed the same or decreased.

Room for Improvement

That still leaves plenty of room for improvement, of course, which many companies seem to realize.

Some 80 percent of respondents told FMI that they could save at least five percent of their annual field labor cost through better management, and half reported cost overruns on at least 21 percent of projects.

FMI Productivity Report

FMI believes the industry could do even better.

In FMI’s experience, “well over half of all projects fail to meet or beat the labor estimate.”

Planning: ‘You May Be Shocked’
Among the areas in need of improvement, FMI said: planning. Two-thirds of respondents reported that less than half of their field managers use daily planning and goal setting, while 40 percent say that less than one-third of managers do so.

“FMI would like to challenge upper management to get out in the field, talk to people on your crews below the foreman level, and see how much (or how little) they really know about the goals and production expectations for the day,” the report said. “You may be shocked.”

Seven in 10 respondents who have seen improved productivity plan field resources at least five days in advance, FMI reported. Only 40 percent of those who said productivity has decreased plan that far ahead.

Another bright spot is the increasing use of new technologies like building information modeling, integrated project management, and lean construction practices. Forty-two percent of respondents who have used prefabrication on projects have experienced improved productivity by 10 percent or more. And although only 35 percent of respondents have employed integrated project delivery, 19 percent of them are reporting significant improvements in productivity.

Slowing Down

The initial productivity spike has begun to wear off, however. “While productivity does continue to improve, the rate of improvement is slowing,” FMI reports.

The report notes that the industry is undergoing significant changes in procedures, roles and responsibilities, and it details challenges to productivity as well as productivity drivers.

So what is the secret of great productivity? Project planning, effective project managers, clear productivity measures, and effective use of emerging technologies.

Says FMI: “Productivity is largely the result of good leadership, sound and consistent management processes and a culture that supports the field.”


Tagged categories: Construction; Labor; Personnel; Productivity

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