Chapter Corner

How to Immediately Improve Productivity and Profitability

Posted in: Features, July 2015

You are not going to eliminate all your inefficiencies overnight. For one thing, improving efficiency is a journey, not a destination. In other words, there is always room for improvement. For example, new technology is designed to improve efficiency, however, there are inexpensive steps virtually every contractor can take that will produce very quick results. Quick-hitting actions are an essential part of the larger, long-term effort of improving productivity. First, in order to create a sustainable improvement process, people need to experience immediate rewards for their efforts. Far too often, improvement programs are too large and grandiose and take too long to bear fruit. In this situation, those individuals involved in the effort start to become frustrated and return to their old, comfortable way of doing things. Success is critical because nothing encourages people to keep trying something new more than success. The second important issue is that the immediate cost savings can be used to fund additional investments in the ongoing improvement effort, including possible training programs or technology.

productivity.jpgThe opportunity for improvement is enormous, the Construction Industry Institute estimates that 57 percent of the activities on a project add no value and are not needed. Another 23 percent add no value but are needed. Only 20 percent of the activities on a project actually add value. Value added activities are activities that contribute directly to the construction of the project. For example, hanging light fixtures or installing a generator are value added tasks. An example of a non-value added task but needed would be delivering material to the project. Obviously, the material is needed on the site, but the activity is not directly related to constructing the project. While the material must be delivered, the delivery process needs to be as efficient as possible. When a delivery truck sits for hours waiting to be unloaded, that is not efficient. Finally, there are the non-value added activities that are not needed. A perfect example is moving material at the site. Studies indicate that the average piece of material is moved 4.5 times before it is installed. Every time you move material you are wasting time and increasing costs. From the worker’s perspective, it’s also a disaster because a worker is more likely to get hurt moving material than when installing it.

Most contractors are interested in improving their productivity but far too often they make some common mistakes that hinder that effort. One common mistake is focusing on the value added activities. There is always room for improvement, but the amount of potential improvement from the value added tasks is limited because they currently only represent 20 percent of the project’s total effort. Further, the value added tasks have been worked over many times, therefore, they are already reasonably efficient. Most of the waste in construction occurs between the tasks, not in performing the tasks. For example, Clemson professor Roger Liska’s research reveals that construction workers lose 20 percent of their efficiency waiting for materials, information, equipment, or supplies. In other words, the task cannot be performed because the worker doesn’t have what he or she needs to perform the task. Instead of focusing on the worker’s performance, what is needed is the determination of why the workers didn’t receive what was needed to perform the task. It is important to understand that far too often non-value added activity negatively impacts value added tasks.

Eliminating waste starts by examining every task that is not directly involved in building the project, such as hanging light fixtures, installing conduit, etc. The examination starts with a series of questions. Do we need to do this task to construct the building? If it’s not needed, why are we doing it and how can we eliminate it? If the task is needed, how can we reduce the time necessary to perform the task? To illustrate this point, let’s examine moving material around the site. Do we need to move material around the site in order to construct the building? Of course, the answer is no! The question that needs to be addressed is why are we moving the material? A typical response is that the material is in the way but the real question is why is the material on the project if it’s not needed at that time? Remember, if the material weren’t on the project it would not need to be moved.

The key to eliminating problems is determining the underlying cause or root cause of the problem. The Japanese have a process called the "five whys." The concept is if you ask "why" up to five times you will usually get to the root cause of the problem. For example, a case where a crew doesn't finish an assigned task within the required time. Instead of immediately blaming the crew, ask "why#1." "What was the reason you couldn't finish on time?" The crew chief's response might be "We didn't receive the material on time." The second "why" would then be "Do you know why the material was delivered late?" The crew chief may respond with, "I don't know why it was late. I spoke with our purchasing agent, and they assured me the material would be delivered when we needed it. But it didn't arrive on time." The third "why" would be directed to the purchasing agent, "Why did the vendor deliver the materials late?" The purchasing agent's response might be, "I don't know. They guaranteed it would be there, but they didn't deliver on time and hasn't provided any legitimate reason. However, this isn't the first time we've had a problem with their delivery.” That answer should certainly raise a red flag. Your fourth “why” might be “Then why did we use that vendor?” The purchasing agent responds, “Because I was told to use him by the operations vice president because they offered the lowest price.” In this example, it took four “whys” to get the root cause of the problem, namely, making a purchasing decision based solely on price. The problem is that having a crew stand around for a half-day waiting for the material probably cost more than any material savings offered by this vendor.

A crew chief might not be able to solve a problem totally by him or herself. However, by identifying a problem, they can initiate a process to determine the root cause. The important point to take away from the delivery example is by determining the root cause of a problem; it enables the problem to be permanently fixed. If the crew chief merely grumbles about the vendor’s late delivery, nothing gets resolved, and the same mistake is likely to reoccur over and over. Therefore, whenever a problem occurs, it’s essential that the root cause of the problem be determined because that’s the only way the problem and its related waste can be eliminated.

Another way of looking at this hypothetical scenario is thinking about it in terms of reliability. Studies by the Lean Construction Institute have found on average on non-Lean construction sites that over 50 percent of the tasks assigned in any given week are not finished on time. The number one reason for delayed tasks is the task could not begin on time because the prior task was not finished on time.

The lack of reliability is both costly and time-consuming and prevents effective planning. Not knowing when the prior task will be completed makes it impossible to plan when you can start your work. If the schedule keeps slipping due to your work or others it will typically result in the need for additional workers and/ or overtime in order to make up the lost time; both of which are costly. Therefore, it is essential for you to be able to plan your work accurately in order to start on time, but this requires reliability.

But what is reliability? Reliability is the measurement of someone’s ability to make and keep commitments. One obstacle to improving reliability is the failure to measure it. However, measuring it provides significant benefits. First, posting crew reliability automatically creates awareness and focuses everyone on completing their assigned tasks on time. I honestly believe most people are trying to live up to their commitments. Another reason for poor reliability is the preceding crews do not know what is exactly required for the next crew. It is important to communicate with earlier crews exactly what they need and when. This simple communication can significantly improve reliability.

shutterstock_179702804.gifThe second, and probably the most important, benefit of tracking reliability is the ability to fix the root cause of the reliability breakdown. If every breakdown in reliability is tracked, it becomes much easier to see patterns. The old 80-20 rule indicates that 80 percent of the reliability failures are caused by only 20 of the root causes. Therefore, attacking the 20 percent will help remove 80 percent of the reliability issues.

Unfortunately, when a crew misses a deadline, far too often that crew is blamed. However, attempting to determine the root cause would be more productive. In fact, studies reveal that management is more likely the cause of the delay than the workers. What makes this situation worse is that when crews understand they will be responsible for not finishing on time, they begin to build in a contingency to their commitments. They attempt to protect themselves from issues beyond their control. This approach destroys the schedule and increases everyone’s costs.

A more effective solution is to work with the crew that missed the deadline to determine the root cause of the delay. This process starts by asking them to explain in a single sentence or less why they missed the deadline. Start the “five why” process to determine the root cause. Some problems are unique and there is nothing anyone can do. For example, during the building of the Pennsylvania Convention Center a freak snow storm hit. The factory roof collapsed on our carpet sitting there ready to be shipped. Obviously, this delay wasn’t the installer’s fault. It was something we just had to work around.

However, most of the delays on projects are caused by reoccurring problems. One of the largest problems during construction of high-rise buildings is the bottleneck created by the vertical transportation. Once this problem is identified, it becomes easier to convince those in charge that a better job must be done in scheduling the vertical transportation. In other words, vertical transportation is too important to use a laissez-faire approach.

Obviously, if reliability is tracked on a project-wide basis, it would have the greatest impact on improving the project’s reliability because all problems would be identified. However, as a specialty contractor, if you track your own crews’ reliability you can begin to address at least those issues impacting your crews. And many of the problems you identify others will also experience so that you can enlist their support. Once you have identified the problems, you have the ammunition to fight for the necessary changes in the project’s procedures.

In other words, it is important for everyone to become accountable for their results. While a crew chief might not think it is his or her responsibility to make sure other trades know what he needs, that simple little exercise can improve that crew’s performance. Also, by the crew chief taking the responsibility for identifying the problems that are impacting his crew and then fighting to get those situations corrected, he is helping ensure his crew’s optimum performance.

Until you identify the problems impacting your productivity, very little sustainable progress can be made. Once you have addressed the above issues, you can begin programs on improved pre-planning, continuous improvement, and other impactful initiatives.

Ted Garrison is the principal at New Construction Strategies. As an International speaker, author, and consultant he is a catalyst for change within the construction industry. He can be reached at Ted@TedGarrison.com or followed at twitter @TedGarrison.