Construction Productivity: Why It Matters
We've talked about the productivity problem in construction for years, but what about the impact it has on the ground? Increasingly more craftspeople are leaving the industry, but where are they going and why?
How can we move the productivity needle if we don’t have any boots on the ground?
In July. the U.S. Bureau of Labor Statistics (BLS) found there were 273,000 job openings in construction nationwide, highlighting the importance of investing in people and retaining their services.
For project owners and contractors, itt’s important to dedicate time away from core duties to upskill current workers, keep them happy and recruit new people, especially in an industry with high employee turnover rates.
BLS says the annual craftsperson turnover rate in construction last year was 30% higher than in manufacturing industries and 13% higher than in the oil and gas sector.
Why is construction's turnover rate so high relative to other industries that employ craftspeople? Because competing industries like oil and gas offer skilled workers a higher wage. The average pay for construction workers in the U.S., according to BLS, is $29 per hour – a staggering $16 less than oil and gas workers who earn $45 per hour on average.
With the cost of construction materials increasing at a rate of 6.2% year-over-year, according to the Associated General Contractors of America, this pay gap won’t narrow on its own.
To make matters worse, with rising prices for crude oil, we could see far more jobs become available in the oil industry for skilled craftspeople who are being relatively underpaid in construction.
How do those other industries afford to pay their employees so much more? Because they are much more productive and therefore generate more revenue per employee.
According to 2017 government statistics, there were 12.4 million employees in manufacturing, 7 million in construction and a mere 146,000 in oil and gas extraction. Yet, the total revenue brought in by industries with a higher headcount was far lower than those who had fewer workers.
Last year, the U.S. construction sector annual gross output was $1.47 trillion. Divide this by the number of employees and you’ll see that the revenue per employee was just $211,675.
In oil and gas, however, the yearly output was $291 billion—meaning the revenue per employee was $1.99 million, which indicates much higher levels of productivity and competitiveness when attracting new employees.
But the bigger concern is productivity improvement, especially when compared to industries that compete for the same pool of workers and craftspeople.
BLS says productivity has increased year-over-year by 32% in the oil and gas industry, despite employees working 20% fewer hours than they were 10 years ago.
On the other hand, we have specialty contractors and tradespeople involved in residential construction who work 1-2% more hours year-over-year, yet with flatlining productivity.
The average craftperson is still wasting 70% of his or her day on administrative tasks, transitioning, or simply waiting on equipment, materials, and information.
To equal or surpass our competitors and see true productivity improvements, we must turn to technology for help. Construction management software is already being adopted by project teams – big and small – that want tools to foster collaboration and streamline daily workflows.
Today, field management platforms can connect just about everybody on a project team—from the owner to each subcontractor and from project managers to site foremen and forewomen on the ground—to improve job site coordination and allow real-time information sharing between field and office employees.
Why should this matter to you? Calculate your revenue per employee, and see if technology is worth the investment.
Yves Frinault is the co-founder and CEO of Fieldwire, a field management platform that it says powers more than 300,000 construction projects around the world.