With general contractors and subcontractors pricing construction projects at very low prices, you have no option but to look for ways to reduce costs to compete. Finding ways to lower field costs will allow you to be more competitive and make a profit. Material costs are relatively the same for all contractors and can’t be reduced much. Therefore, labor, as the largest part of most contractor’s total job cost, must be addressed as the logical choice to reduce field costs with careful planning to implement an effective production cost reduction campaign.
Construction field production labor usually runs about one-third to half of the total job cost for most construction trades. The easiest method to lower job costs is to start a productivity improvement program by taking small simple steps one-by-one. Each step will reduce your costs by small percentage points, which will add up to large overall improvements that make a real difference.
10% Improvement = 3.3% Savings
Imagine you made a goal to improve annual field labor costs by 10 percent, which only equals to six minutes per hour. Could you make a commitment to achieve a six-minute improvement goal per hour? And would it really help your bottom line enough to make it worthwhile? Let’s look at the numbers:
Total annual sales =$3,000,000
Total annual labor @ 33% of total sales =$1,000,000
Improve labor productivity @ 10% savings = $333,000
Annual net profit margin increase = 3.33%
For a small labor productivity improvement of only 10 percent, your company is now 3.3 percent more competitive. By reducing overall costs by 10 percent, you might be able to increase your total volume, which will add even more to your net profit. Now what simple standards can you implement to improve your field labor costs?
Start by Finding Things to Fix
Improving field labor costs starts with identifying areas to fix, which are bogging down, slowing down or holding the crew back from operating at their maximum capacity. These productivity pressure points are caused by many field project factors including poor planning, lack of supervision, untrained crews, lack of materials, the wrong equipment, waiting for decisions, bad attitude, mistakes, out-of-sequence workflow, missing materials, broken or lack of proper tools, or no standard field systems.
The average construction field crew wastes around two to four hours per day waiting, talking, walking, smoking, taking long breaks, starting late, finishing early, looking for materials, waiting for their boss to tell them what to do, or trying to look busy. To get started making your production fix-it list, go watch your crews for a full day. Get to the job site before they arrive and be the last to leave.
Take a look at their start times, end times, break times, lunch start and stop, if and when the crew meets with their foreman, how they roll out the tools and cords, if they keep the site clean, how they care for the tools, if their storage area is organized, how often and how far they have to walk to the toilet, cellphone use, smoking while working, location of power poles and access gates, site layout and logistics, location of trash bins, job-site congestion, crew production activities versus waiting for their boss to show them what to do, or any other activity that’s distractive or disruptive to their proper productive flow of work.
Looking for simple ways to fix these problems is not hard to find if you get your field crew together and ask for their ideas and input on how to improve productivity. Start with establishing standardized company-wide employee job rules. Get everyone to agree on the following and create company simple standards:
Employee job-site rules:
- What does start and finish time mean?
- What does roll-out and roll-up time mean?
- What does a 15-minute break mean?
- What does a 30-minute lunch mean?
- No smoking during working hours
- No personal cellphone use during working hours
- Drug and alcohol use
- Everyone must wear safety attire, gear and hardhats
- Dogs and radios not allowed
Job-site responsibility and logistic rules:
- Daily crew meetings
- Daily job cleanup
- Weekly punchlist walk-through and completion
- Job-site daily safety inspection
- Who can go to the hardware store?
- How many times someone can go to the hardware store?
- Who’s in charge when the foreman leaves the job site?
- Who can operate equipment supervised or not?
- Job-site logistics and layout to reduce walking
- Power pole and toilet locations
- Material storage location to reduce transportation
- Trash bin requirements and locations
- Tool and equipment maintenance standards
- Organized storage and tool bins
Follow the McDonalds Rule
As a construction business coach, I often facilitate field foreman and superintendent meetings to help companies decide how they want to do business and create field standards to increase overall field productivity. When we start, many foremen don’t want to deal with a set of standard rules or have to manage their crews on these difficult-to-enforce items. But in reality, these factors and pressure points can add up to lots of wasted dollars. When employees know what the rules are, they follow them.
I always bring up what I call “The McDonalds Rule.” If employees at McDonalds can’t do it, we can’t either. For example, at McDonalds, if an employee is late, he doesn’t keep his job long. Employees also can’t smoke or use the cellphone while working. Or if they take too long a break or lunch, they get a warning and their pay gets docked. No excuses or exceptions. It shouldn’t be any different at a construction company.
By implementing these simple field standards, your productivity will improve by at least 10 percent or more. Get your team involved and start a competition to find ways to save money by being more organized, plan better, and setting simple and clear standards for everyone to follow.
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George Hedley is a professional construction BIZCOACH and popular industry speaker who helps contractors increase profits, grow and get their companies to work. To get your copy of “Field Tracking Systems For Contractors,” email
gh@hardhatpresentations.com. To learn more, visit www.hardhatpresentations.com.
