There are a lot of moving parts in a construction project. From selling services to performing those services and receiving final payout, contractors have to be on top of their game if they want to be competitive in today’s market. And at the end of most projects, the owner will look at the bottom line to see how well the company did financially and evaluate each area to see where improvements can be made.
There are many factors that may contribute to cost inefficiencies. Project design errors, inaccurate project estimates, administration errors, scheduling, poor site management, and unproductive labor can all take their toll on a project's bottom line.
Whether you have been in business for a long time or just a few years, here are five tips to help improve your company's productivity.
Be selective when choosing projects
Know your niche and where you can make money. If you decide to step out and do something new to expand your business, you'll need to figure out how to make money with that new venture. It's important to create detailed and accurate estimates, which requires knowing your overhead and evaluating the risks and costs associated with each project. It's also important to be aware of your actual costs throughout the project, so you can make adjustments as needed.
Hire and recruit good employees
Hiring and recruiting employees for a construction company is often an ongoing process. Well-seasoned tradesmen tend to move to companies that can attract and retain talented people or go into business for themselves. Recruiting new employees must be seen as a critical long-term investment. Offering incentives may help draw skilled workers to your company. Have experienced employees conduct on-the-job training to help improve the productivity of less experienced workers. In my experience, companies that value their employees, reward them for good work, and provide friendly, safe, and healthy work environments are more successful in hiring and recruiting.
Know when to self-perform vs. sub out
Being able to self-perform much of the work on a project has its advantages. It can give you more control over the project and scheduling, as well as increase your overall profit. Sometimes you are better off subbing out portions of the work to increase productivity. Each contractor and project are different, and knowing what to self-perform and what not to will increase productivity.
When my company was building a chain of grocery stores, we would self-perform around 30 percent of the work on the new stores. For example, we had our own carpenters, but we found it was better for us to sub out the labor to hang and tape drywall. When you hire a subcontractor, make sure you have a good contract in place and ensure they have the proper insurance to protect you and any other upstream party.
Technology has continued to develop in construction. Equipment, power tools, safety equipment, fasteners, and building systems have made the process of hands-on construction quicker, easier, and safer than ever before. Advancements in building information modeling (BIM) and estimating and management software have brought efficiencies to the office. Staying on top of the latest technology can help your company stay competitive.
Review your supply chain
Understanding a construction company’s supply chain is critical in improving productivity. Supply chain is a term used to collectively describe the companies that turn a series of materials, labor, and services into a final product for the client. In construction, the architect or designer, engineers, general contractor, subcontractors, and suppliers can all be part of the supply chain.
Working to build long-term relationships with the other companies in the supply chain can empower a team's end goals of reducing cost, delivering greater underlying value to their client, reducing waste, and providing more accurate long-term planning for future projects. A contractor's supply chain should be reviewed periodically and adjusted as necessary to ensure the flow of goods and services to their clients.