What is in this article?:
- Electrical Contractor Productivity Examined
- Controllable Variables' Effect on Productivity
As the recession began to hit the nonresidential construction sector, productivity improved significantly, largely due to companies doing more with fewer people. Those employees not hit with downsizing were likely the most experienced and best-trained personnel as well. However, those immediate improvements, due mostly to downsizing and working harder, begin to wear off in time. While productivity continues to improve even though business is struggling, the rate of improvement is slowing. Continued improvement will come from strong leadership and management, better and more consistent management processes, new delivery methods like integrated project delivery (IPD), tools and technologies like building information modeling (BIM), and formal training/development programs for project managers (PMs) and field managers. These improvements will require significant investments at a time when margins and profitability are strained.
Perceptions of Productivity
The following summary of FMI’s “2012 U.S. Construction Industry Productivity Report” includes additional comparisons broken out for electrical contractors participating in the survey. However, it’s important to note that the percentage of respondents identifying themselves as “electrical contractors” represented only 12% of all responses. A few of those were also mechanical contractors and performed other subcontracting work. Although we cannot claim that this small sample represents the practices of a larger number of electrical contractors, from our firm’s field experience, we note this sample is not atypical of larger electrical contractors in the business. Generally, electrical contractors face the same productivity challenges as the other trades do — the differences in certain areas are just a matter of degree.
Companies across the industry measure productivity in different ways. To compare trends across different metrics, the survey did not ask questions tailored to specific metrics. Instead, it asked for the respondent’s professional opinion as to what degree productivity in his or her firm has improved, decreased, or stayed the same.
More than half (57%) of the participants responded that productivity had improved either slightly or substantially in the past two years, while the remaining 43% reported it had stayed the same, decreased slightly, or decreased substantially. Nineteen percent of electrical contractors said productivity had improved significantly, while 61.9% said productivity improved slightly (Fig. 1). Some of this improvement is simply the result of downsizing, where the marginal performers were the first to be laid off. Because of washing out the lower-level performers in the field and project management, the average performance level naturally increased. However, while productivity improved for more than half of respondents, it did so only slightly for the majority, leaving ample room for improvement across the industry. Furthermore, 90% of electrical contractors believed they could save at least 5% of their annual field labor cost through better management (Fig. 2). For a contractor with $20 million in annual field labor cost, this represents a $1 million profit opportunity!
Seventy percent of participating companies (67% of electrical contractors) reported experiencing cost overruns on at least 11% of projects (Fig. 3). FMI believes that this self-reported data is extremely optimistic. From our consulting experience, the actual data from analyzing thousands of completed projects suggests that well over half of all projects fail to meet or beat the labor estimate. Clearly, there is an opportunity for companies to make improvements in productivity that will improve their ability to achieve labor budgets, which, in turn, will improve the bottom line.
Project Planning Processes
Through FMI’s productivity consulting practice, we consistently see significant opportunities to improve short-interval planning skills of field managers. The same holds true for participating companies, with less than half reporting that field managers plan and communicate resource needs more than five days in advance (Fig. 4). However, based on the number of last-minute calls to the shop or daily trips to the supply house that we see in most of our clients’ operations, we feel comfortable saying that the number of field managers planning and communicating resource needs more than two or three days in advance is a very small minority.
The lack of planning skills at the field management level is a significant industry problem. If your field managers have to call your shop or make trips to the supply house on a daily basis, it is safe to assume that your crews are often waiting or delayed. In addition to the labor cost impact, buying materials and supplies at the last minute ensures you are paying a premium. Furthermore, we have learned that if field managers get the correct labor, tools, equipment, materials, and information in the crews’ hands at the right time, the result is decent productivity. Use of a practical and formal short-interval planning process is one key to achieving this goal. Knowing and communicating resource needs a week in advance greatly increases the likelihood that all resources are available when needed, which, in turn, decreases nonproductive time.
Survey results regarding daily planning and goal setting also revealed opportunities for improvement. According to our survey, an overwhelming 66% of respondents reported that less than half of their field managers use daily planning and goal setting, while 40% believe that less than one-third of field managers follow that practice.
Project Manager Impact
Project planning processes, however, are not enough on their own. An organization with well-defined processes cannot expect to deliver projects in the most productive manner without effective project managers. The best tradesmen and field managers in the industry can only do so much without proper support from project managers to provide the right materials, tools, information, equipment, and feedback at the right time.
On a scale from one to 10, 71% of PMs fell in the good, but not great, range of six to eight, which indicates there is room for improvement in the industry (Fig. 5). The real question you should ask is, “How would our field managers rate the quality of support they receive from our project managers?” Their responses may not be as flattering as those of the executives answering our survey. In high-performing companies, project managers truly understand that their primary role is to support the field.
Measurement and Feedback for ProductivityImprovement
To manage practices that lead to improved productivity, first one must measure what he or she intends to manage. When asked whether job cost reporting processes track units per labor hour, 43% of electrical contractors responded in the affirmative. While the majority of electrical respondents do track units in addition to time, that leaves nearly 60% who only report time to a cost code, leaving little of the necessary data to effectively manage the process of increasing productivity through this metric. Because productivity is defined as units per man-hour or man-hours per unit, trying to track, measure, and manage productivity without these two key pieces of data is unrealistic. To create a consistent culture around productivity, contractors need to be able to communicate clear expectations and track actual unit performance for this key metric.