Electrical contractors turn to information technology to control their single biggest expense variable
When systemic problems plague a business, relief is immediate once they're revealed and corrected. At the same time, there's a natural tendency to resist dwelling too much on how long they've festered and how much they've drained your bank account. With the advent of more capable and affordable information technology (IT) that employs software to slice and dice the cost of labor — often a source of chronic problems for electrical contractors — owners who have given automation a try often wince at what's revealed, scratch their heads, and wonder, “If I'd only known.”
That's probably how Steve Bender, president of Bana Electric Corp., Farmingdale, N.Y., felt after the new labor tracking software he purchased flagged an inordinate amount of time being spent on conduit installation at a particular jobsite. Designed to collect and allocate labor costs to different job functions, mJobTime, marketed by mJobTime Corp., Beaumont, Texas, helped Bender isolate labor costs, revealing that task was over budget in just the first week.
“The job time figures came in the course of a review with the superintendent, and we wondered how come we're blowing our budget on this,” he says. “We found out that we were installing rigid pipe instead of PVC, which requires a lot more labor. We ended up discovering that it was an erroneous assumption on the job foreman's part about what type of material to use. Rigid was specified just for the fire alarm system, but we discovered it was in the process of being used for everything on the job.”
While the error probably would have been caught eventually, Bender likely would have found little comfort in conceding that he could have lost even more money — had he not caught the problem when he did.
“For a long time, we didn't have a good, solid account of what our people were doing on a job,” he says. “We had names of people and the hours they put in. That was fine for looking at whether I made my labor hours for a job, but the old way was lousy at two things: catching problems on the job early and determining if we were spending too much time in certain areas on a project. We wouldn't catch things until we were well into a job. We were always looking in the rear-view mirror.”
For other contractors, labor issues often precede a decision to seek assistance from technology. That's what led Terry Dickerson, president of Bessemer, Ala.-based Future Electric and Construction, Inc., to a software-based solution — JobClock, a product of Exaktime, Inc., Woodland Hills, Calif. — for tracking employee hours.
“One day, shortly after we handed out checks, we had a job close to the office that I decided to swing by,” he says. “When I got there at 11:30, everyone was gone. About a quarter 'til they showed up. They had all gone to the bank to cash their checks, and taken an extra 15 minutes on their half-hour lunch break. For the four-man crew, that would have amounted to an extra hour of pay. That was the last straw for me.”
The incident merely confirmed Dickerson's lingering suspicions that some of his workers weren't always putting in the same amount of time they were claiming. Fifteen minutes here, 15 minutes there, Dickerson says, and pretty soon paying for services not actually rendered amounts to real money.
“I figured it up. If the technology we purchased saved us 15 minutes per day/per man at the price we were paying for help, it'd save us $65,000 annually with an investment of a little over $5,000,” he says.
A better fix
With labor costs starting to tick up and a growing realization that controlling and understanding them provides a competitive edge, more contractors like Dickerson and Bender are turning to software for help. Powerful labor management software programs that link to accounting, project management, and estimating software are growing in popularity because contractors understand labor is the core source of their value and pervasive in its impact.
“Most of the risks in the jobs we tackle are tied to labor; by comparison, the materials part of the equation is easy,” says Phil Rose, president of Roman Electric, Inc., a Milwaukee-based electrical contractor that began using the labor management module in PENTA, a software product marketed by Penta Technologies, Inc., Brookfield, Wis., about a year ago to track project labor hours against both estimated hours and units installed to get a real-time snapshot of progress. “One of the big issues we face in our business is managing manpower levels for our various jobs. One of the key things we need to know is whether we're behind or ahead of schedule so we can avoid manpower spiking. No one wins when that happens.”
Bender agrees, classifying labor as Bana Electric's single biggest concern. If properly managed, it's an asset, but if mismanaged it can drive a company to ruin, he says.
“It's most of my cost,” he notes. “As a union shop, my costs are incredibly high. Even with material costs going up, it's still my most unreliable and yet controllable job costs. When I bid a job, I can say within about 2% what my material costs will be, but labor is very unpredictable. So if you're not managing it properly, you're going out of business.”
Determined that his 50-year-old company wasn't going to end up as a statistic, Bender admits he was flying blind on too many jobs and not clearly understanding his labor costs before moving to a software-based labor management system. The product he chose has automated the process of collecting more accurate employee time records from the field. More importantly, it's given Bana the ability to massage that raw labor data to produce critical insights into the company's performance.
The tracking process starts with a job foreman. Using a handheld device, like a Palm Pilot or a Dell Axiom, a foreman pulls up each workers' name at the end of the day and allocates the time worked to the applicable pre-defined tasks. The data is uploaded to an office server via a cell phone wireless Internet connection, where it's linked to an accounting system that prepares and produces weekly paychecks. However, its real value comes in taking the labor data and matching it against dozens of cost codes Bana has devised to identify precisely how labor is being deployed on the project.
“I get a report showing the total hours worked and that's compared to the project budget,” Bender says. “During my weekly meetings with the job superintendent, I'll go over the budget and see where any significant changes have taken place.”
While the system is set up to capture upwards of 100 cost codes, job foremen are not expected to allocate hours anywhere near that precisely. Using the software product effectively still demands an ability to analyze data knowing what the general goal is in terms of how much time should be spent on each major part of a job, Bender says. “Men in the field don't always cost code their activities in the same way that I estimate them for a job, so the technology requires an intelligent head-end that's able to adjust for those kinds of discrepancies,” he says.
Indeed, a perfectly detailed record of how much time was spent on what task is usually unattainable. Instead, what Bender says he's looking for is simply a fairly good record of what his men are doing in a given week. With that knowledge, he can figure out if a job is on track to come in on budget.
“Often, what I get from the field is half-hour chunks,” he says. “It's not perfect, but it's perfect for what I need. I'm not counting how many nails are in a bucket. I just need to be able to compare it to the budget, which is simply a bucket of hours.”
Bana's move to this software-based system two years ago was a major leap. It replaced a crude system of foremen manually entering workers' hours and tedious data entry in the office. Now, significantly more information is gathered and transmitted. While the system probably requires more work by project foremen to transmit data regularly and reliably, it has yielded critical information that's making the firm more competitive.
“We're capturing a lot of historical data that's helping us estimate jobs better, as well,” Bender says. “When a project is done, I not only know a lot more than just whether I made my total hours; I also know where it was allocated. That means we can zero in on our estimating better rather than just ballparking it.”
Reducing phantom time
While Bender's primary interest is using IT to massage data, other contractors are more focused on streamlining the process of time collection and ensuring that it's highly accurate.
Worried it was getting too difficult to accurately track the activities of its four-dozen electricians on far-flung jobs, Cities Electric, Inc., a Farmington, Minn.-based contractor, turned to a contractor-friendly version of a time clock system.
With Exaktime's JobClock product, Cities issues all of its workers key-like devices that work with reader devices installed at each job. Workers use a green key when they start work, a yellow key when they start travel time between jobs, and a red key when their workday ends. The onsite device logs and stores each employee's hours, rendering an accurate record of time spent on various jobs.
Prior to the end of each pay period, data from devices at each job site is downloaded into a handheld device. Back at the main office, the data is fed into the company's accounting system and used to generate a variety of customizable reports that provide job- and employee-specific data.
“When we started using the system three years ago, we presented it to our employees as a way to help us better track hours, who was there, and how many hours,” says Jody Kuoppala, builder assistant for the company. “The employee's priority is to get the job done, and if employees get very busy it can be hard for them to keep track of their own time. Our job supervisors who used to have that responsibility can't keep track of everyone.”
For many of the same reasons, Future Electric's Dickerson turned to JobClock.
“We can look at how labor costs are trending on a job as we're working on it and also keep good track of hours,” Dickerson says. “Plus, it gives a good record of the manpower used at each job and a reliable way of settling disputes on time issues with employees. We realized it was difficult for electricians to always be aware of when to turn their time in and what they did the day before.”
With employees constantly shuttling between jobs within a 60-mile radius of the company's home base, the system also gives Dickerson a clear picture of how crews structure their days and greater insight into how to efficiently allocate labor. “It's the next best thing to our electricians having a GPS system in their back pockets,” he says.
Indeed, even as new-generation software gives contractors more power to analyze labor costs, it requires a deft hand to not use it in a way that smacks of “Big Brother.” Users say it's important to share the labor tracking's net benefits to the overall business with employees who may feel like they're under the microscope. For any business so reliant on labor, making the case shouldn't be difficult, says Bender.
“We lived for a long time without these capabilities, and we relied on people and human fallibility too much,” he says. “Now we're catching mistakes earlier and capturing the kind of data we need to help us run the business better.”
Zind is a freelance writer based in Lee's Summit, Mo.