According to the consulting firm Mckinsey, no industry has witnessed a steeper decline in its hourly value addition than the construction sector, since 1995. It has seen its employment go down, talent lost, and global value decline. Since the housing market crash, no industry has done worse than construction. So why is productivity in the Construction industry declining?
You may be tempted to dump all that on the housing bubble collapse, but the data says otherwise. The worst of it has been seen in rich countries like France and Italy. Productivity per hour has fallen by about one-sixth. That may not seem like much, but it has made the world $1.6 trillion poorer over the last two decades.
Measuring productivity isn’t always easy, but it’s a good measure of economic growth. It’s incumbent on governments to maximize productivity within their workforce. Low productivity in any industry, especially construction, shows disinterest, waste, loss of resources, etc. The same is true for individual companies.
One way to measure productivity is to divide the units of output by the units of input. The former could be the products or services and the latter could be the labor, capital, or materials. However, this doesn’t work uniformly since not everyone on Earth has the same job.
Other puzzles have come to light like stagnancy in the UK construction industry, while the economy has grown. According to the Office for National Statistics, there is a productivity gap of 15.4% in the UK.
Reasons for Declining Productivity in Construction
Construction productivity has remained flat or declined in most economies in the last 25 years, while manufacturing has doubled. This is in spite of the fact that the global construction sector employs around 75 of the world’s working population. There are many reasons why construction industry productivity is declining, and they’re not all clear cut. One source may be the fragmented structure of the industry.
In the US, nearly 5% of builders work for companies that employ over 10,000 workers. In manufacturing, that number is 23% and in business services, it’s 25%.
Further problems have arisen over the last two decades that have discouraged progress. Here are just a few.
The Cost of New Companies
A new construction company is difficult to finance than others. Manufacturing, software, and other fields require much less investment. For construction, you have to think of material, labor, and infrastructure costs immediately. Paying workers is expensive since construction is a much more dangerous job than manufacturing. There are significant chances of injuries and death in this sector.
Since the construction sector involves more manual labor than other industries, a significant investment goes into setting up a construction company.
Lack of Investment in Technology
Smaller companies and large exist on low margins, which is why they can’t afford to invest in advanced technology. Even expensive software packages are a huge burden for them.
Neglecting Big Data
Speaking of technology, big data is not being utilized at all in construction. There are huge amounts of waste in construction due to that fact. The level of organization in construction projects is lacking due to advanced software and planning not being utilized. Big data analysis can identify a lot of inefficiencies that plague construction companies.
Solutions to Low Productivity
So why is productivity in the Construction industry declining? There is an entire host of solutions to low productivity in construction. Here are just a few.
A will to invest and implement technological solutions is absent in the construction industry. Due to the neglect of technology and more advanced solutions, the construction industry is lagging behind. According to Marketwatch, construction is the second least digitized industry in America, next only to agriculture. This is despite there being an entire suite of applications from different software developers to design buildings.
These include 5-D modeling apps and communications software for better data sharing between departments. Augmented and virtual reality has even hopped on board to overcome the epidemic of low productivity. Hence, it’s important that these high tech solutions be made available to more firms in the near future.
Virtual assistants can also help improve productivity by taking care of mundane tasks. This will improve the overall workflow problems that plague the construction industry. Construction industry productivity is not a problem that can be solved overnight. However, with the right investments in technology and planning, crucial improvements can be made.
Imbuing the Workforce with Better Skills
The skills gap is one of the biggest issues that is affecting construction industry productivity. Skilled workers are becoming harder to find. Surveys have shown that though construction industries are willing to hire more workers, they’re finding a huge lack of talent. This is delaying the onset of more construction projects and migrant workers are being used to fill the gap.
An industry wide initiative is needed to help workers gain the skills and job training needed. There needs to be a partnership with the government and public schools to train future generations for this.
Increasing Use of Prefabrication
Modular and pre-fabricated construction will allow for a much greater boost in productivity. This involves the bulk of construction being done off site and thus being cheaper. It’s more efficient due to the standardization of parts and dimensions.
Delays on site can cost a lot of money and can be incredibly wasteful. Work can pile up overtime due to deliveries being late or workers getting hurt. With modular construction, there’s a lot less of that happening.
It’s also a more sensible approach to construction that allows for a more equitable distribution of resources. Hence, it avoids waste, saves on labor costs, and improves output. Again, technology like 3D printers, modeling software, and other advanced technology will help implement this faster.
Digitizing Contractor Management
Managing large numbers of workers is complicated as it is. However, with the digitization of contractor management, costs can be reduced incredibly. This will also help increase productivity.
If your business is having trouble increasing and managing productivity, consider working with an Online Business Manager for your construction business. We will help you streamline your business and manage your day-to-day business functions so you can focus ON your business and not stress IN your business. Contact us today for a Client Discovery call.