The Construction Industry is taking hits on all sides lately, the latest upper cut coming from the McKinsey Report on Modular construction stating, "there are strong signs of what could be a genuine broad-scale disruption in the making."
According to McKinsey, "a profound shift in the sector can have a major impact on global economic productivity" and the report cites several reasons this new wave of modular housing is set up for potential success, not only in niche areas but broadly around the world.
While scrambling to keep market share in the face of newer technologies and solutions can in many ways be cost prohibitive, the 7 actions (below) your company can take right now to improve your bottom line have the potential to be easier on the pocketbook, even if you outsource some of the work.
Regardless if you go it alone or hire outside help, implementing even just some of the improvements below can have a huge impact to your company’s productivity and profitability.
Automation
Many times automation is a leap. Processes start out being manually designed and implemented for a reason – you pretty much get everything you want the way you want it. In other cases, processes are designed around the way a system was first implemented. Either way, once it “works” it can be extremely hard to find a compelling reason to change.
What you may not realize is how much you lose on productivity if your most skilled workers are performing manual tasks and processes that in many cases were developed years ago. Seasoned workers are a great asset and actually can be your biggest champions of change – if you bring them on board very early in the process. Start the automation ball rolling by asking for ideas and then bring everyone together to discuss them in the context of what your systems and people are capable of doing.
In many cases your employees already have a list of improvements that they’ve been meaning to get to if they only had the time. Automating manual processes will either eliminate those tasks or free up your employees to finally get a chance to do them.
Better metrics
Machines can do the same task over and over the same way day in and day out without issue. However, for people this is practically impossible. Most people don’t really like having to adhere to the repetitive nature of processes and when they are required to, vary on the exact tasks and steps they take from day to day. There are a great number of reasons for this but when things go wrong it is typically because someone didn’t follow the process correctly, whatever the reason.
At the same time, a lot of reports and metrics (think dashboards if your company uses them), give management a snapshot of how things happened after getting products to market. If the data in those reports falls short of any goal, that’s the point at which change happens.
If companies could take a deeper dive into their processes to determine key indicators for when a process is going off the rails, notifications and alerts could be created to get everything back on track before an unwanted event occurs (and impacts goals). Review of data proactively will help to keep an error in one department’s process from impacted the downstream process in another department.
Most companies create massive amounts of data that can be shared amongst departments and leveraged to bring those departments out of their silos to focus together on enterprise objectives.
Communication
Even in the most progressive companies, it can be hard to see how doing a particular job contributes to the company strategy that your management envisions. It also can be hard for employees to speak up about certain issues or events when they know someone is at fault (especially if that someone is their boss or that boss is effectively blocking them from speaking up for whatever reason).
But, your employees have ideas and good or bad, you should at least listen to what they have to say. It takes a certain amount of patience on everybody’s part to create a company culture of open communication. Companies need to learn how to listen and respond to employees who feel strongly about issues that concern them and give those employees multiple avenues to be heard.
Develop guidance on effective communication techniques and implement various ways of obtaining feedback on processes, technology, and people within the organization so that your company can gain valuable insights, diffuse potential issues, and maintain a healthy environment for all workers. You want them working for your company, not just for themselves!
Leverage assembly line techniques
While employees don’t typically like performing the exact same tasks day in and day out, having them constantly “shifting gears” and being pulled from one thing to another tends to result in low productivity. Sometimes the person performing a task is doing so because they got stuck with it during a period of turnover.
Job descriptions don’t tend to be accurately documented, kept up to date, or reviewed together with all other job descriptions and processes. One of the biggest surprises when companies gather all departments together is to discover another department has the means to perform a task better than the department currently handling that task.
Giving visibility of processes across departments can provide opportunities to determine if certain tasks or processes can be better achieved by handing them or parts of them off to different workers. Other processes may benefit most by starting in one department and finishing off in another. By examining processes and resources holistically, companies can determine the allocation required for optimal performance.
Full utilization
One of the most wasteful occurances in companies is the purchase of software to perform a task or process that could have been performed in existing software. Second to that is performing that task manually instead of utilizing existing software. To make matters worse, typically in these cases extra cost and effort is expended to make the new system interface with the old.
It is often very valid for an employee to say that existing software capabilities do not meet their needs. However, management needs to require due diligence as proof. This documentation should include a response from the existing software vendor and a cost/benefit analysis with quotes from at least two different parties for augmenting the system to provide the missing capabilities.
Many times the due diligence will reveal that the system capabilities are not fully understood. In these cases companies may find that they can actually tweak several processes to begin to take full advantage of previous software purchases. In addition, findings could also determine that augmentation of the existing system is cheaper than purchasing new.
Track hidden costs
Hidden costs are not uncommon in companies; there are many, many costs that are just not tracked (and therefore hidden). Typical costs that companies can’t or don’t track include:
the cost of process rework due to error (manufacturing tends to be an exception)
the cost of doing processes manually
the cost of overhead, properly allocated to end products/services
the impact of cost of returns, warranty items, disputes, etc. on profit margins
the cost per hour for each employee, including all benefits
the cost of replacing an employee versus training
the cost of performing a task in-house versus the cost of having a third party perform the task (also in-house hours to completion should be included as an impact to cost for comparison)
Project ROI, cost of abandoned projects
Budget overruns
This list is not all inclusive – companies need to examine all processes to determine costs that they may not be including on financial reports.
Play to your strengths
In 2018, someone at Powers Construction Company in Vancouver, BC wondered why a construction company would be using a purchased trailer (AKA mobile home) as an onsite office. And voila! the “Site Shack” was constructed (in-house, of course). Their new construction office is infinitely better suited for the task and can be moved around to different job sites as necessary.
While inspiration is fickle, companies can help it along by encouraging thought exercises to examine processes for improvement opportunities. Improvements may include outsourcing tasks, jobs, and even portions of departments, such as with IT data centers.
Strategic partnerships with other companies can also help keep your company from “sprawling.” If you’ve ever watched a TV show where an outside consultant comes in to help a restaurantaur, a person or family, etc. you know the first task is to “simplify” – reduce the number of menu items, clean house, and consolidate! By focusing on what you do best, you can also improve your bottom line.
Final thoughts
The old saying is true – everything tracked does tend to improve. Companies who have not taken these 7 actions should:
Look for ways to automate manual processes
Examine processes for ways to fail and set alerts and notifications to prevent failure
Create an open communication culture – whether you use them or not, the ideas you get can actually spark other ideas
Optimize processes across departments to abolish silos and give workers insight into how they support enterprise objectives
Promote full utilization of existing systems and investigate the feasibility of changing of processes to fit the system or augmentation
Track all costs – poll employees for their take on hidden costs
Learn your strengths, (potentially) outsource the rest
Consultants can have a bird’s eye view of all departments and inform you on what other companies do – they can be an excellent resource in your overall toolkit if you can get past the “sticker shock” [as consultants, we deal with sticker shock every day; it’s simply part and parcel in our line of work. As we’ve noted, it’s because most companies don’t have a readily accessable way to determine how much it would cost for an employee to do in-house the same work we come in and do. Spoiler: most of the time we’re cheaper].