Are your profit margins being affected by low productivity on Construction projects?

Learn how productivity impacts construction projects

Labor costs often form a large portion of the costs on a project. It sometimes accounts for more than 50% of the costs, meaning even a 10% improvement in efficiency can result in an additional 5% profit. Of course the converse is true, and if labor is 10% less efficient than expected then the profit is reduced by 5%.

But it’s usually more than just the direct costs of the workers.

Low productivity means more workers are required, which adds additional costs for accommodation, transport, mobilization and supervision. Poor productivity also impacts the schedule which can result in the client imposing penalties for late completion (known as liquidated damages) as well as the contractor incurring additional overhead costs.

Furthermore, if machine operators aren’t fully productive it probably also means the equipment isn’t productive – which adds more costs.

Poor worker productivity is sometimes obvious when there are people standing idle on site. However, often poor productivity isn’t picked up before there are delays to the schedule, or the cost reports show labor losses. Usually by then it’s too late to rectify the problem.

Some reasons for poor productivity

Poor productivity on construction projects is a common problem and could be a result of many reasons. Some common causes include:

  • having too many people on the project
  • the work area being congested or cluttered
  • poor supervision – the team isn’t utilized efficiently and lack direction
  • waiting for access to work areas
  • waiting for equipment or materials
  • having the incorrect equipment or materials
  • equipment breakdowns
  • insufficient equipment to move and lift materials
  • materials which are difficult to handle and work with which slows progress
  • insufficient resources of one trade and too many of another resulting in one trade waiting for the other to complete their work
  • workers aren’t sufficiently skilled meaning they take longer to complete their tasks or make mistakes which have to be rectified
  • workers may be unhappy because of poor working conditions or clashes with other team members, their supervisor or management, which often results in them performing tasks slowly
  • poor discipline
  • the project isn’t planned and coordinated
  • poor safety and housekeeping resulting in:
    • lost time due to incidents
    • the project being shut down due to poor safety
    • accidents leading to poor morale
    • key people being injured and unable to work
    • tasks being done more slowly
  • fatigue (it’s important to ensure workers don’t work excessive and long shifts or work on rest days and project breaks)
  • a high turnover of personnel which is disruptive, leading to poor productivity because new personnel have to learn the project rules, systems, procedures, and tasks, and work with new team members
  • workers are frequently moved between the tasks in the course of the day, resulting in:
    • lost time when they pack up tools and move, as well as going through safety briefings and explanations of the new task
    • reduced productivity since they’re unable to gain familiarity with the task or other team members (there’s a learning curve to most tasks and as workers become used to performing a task they usually become more proficient and more productive)
  • management is indecisive and fail to make timely decisions
  • access routes and roads are poorly planned, becoming blocked or restricted
  • storage and stacking areas aren’t planned and become unsafe or inaccessible
  • long distances between work areas, the toilets, offices and stores
  • poor performance of subcontractors
  • work areas have inadequate lighting
  • personnel don’t work their full hours, they may take extended lunch and tea breaks and arrive at the work site a few minutes late and leave early (often this can amount to thirty minutes for each person, every day, so it’s important Project Managers set the right example with their own time-keeping, and enforce good time-keeping on the project from the beginning)
  • adverse weather such as rain, wind, high temperatures and low temperatures (steps can be taken to limit the disruption such as; moving workers to other areas, providing adequate protective clothing, allowing sufficient rest breaks, reducing work hours, planning projects to ensure much of the work is done before the onset of poor weather, making buildings weather-tight as soon as possible and lifting items at times of the day when it’s less windy)

But sometimes the customer is at fault!

Sometimes poor productivity is a result of the customer. The reasons must be ascertained so measures can be implemented to rectify the situation, or so that variations for the additional costs caused by the customer can be submitted. Reasons may be because of:

  • late information
  • drawing changes resulting in rework
  • lack of access or late access
  • the client’s or their subcontractors’ activities impacting the work

Conclusion

It’s imperative to analyze why there’s poor productivity. There’s some truth in the saying ‘a busy worker is a happy one’. Workers who are idle tend to chat to colleagues, even influencing and interrupting others who are working, and start to see and create problems where there weren’t problems before.

Even improving productivity slightly can have dramatic positive impacts on profits.

ABC Baltimore’s upcoming course on ‘Managing Productivity’ will give you or your team insight on how to gain better profit margins by improving productivity your jobs.  CLICK HERE to learn more.