Masonry Magazine February 1987 Page. 37
CONSTRUCTION INDUSTRY TRENDS
AFFECTING CONTRACTOR OPERATIONS
The following article was prepared by Fails Management Institute, the nation's largest specialized management services firm serving the construction industry. Corporate headquarters are located in Raleigh, N.C., with branch offices in Denver and Tampa. By adapting the management disciplines required for any profitable company to the construction environment, the Institute has become a resource of knowledge for the entire industry.
For the last several years, the U.S. construction industry has found itself in a unique situation. Even though there has been seen an expansion in the market, profit margins haven't reacted accordingly. Construction remains one of the least profitable industries in our economy. Some unusual situations are occurring which influence this lack of profitability.
Field Productivity Continues to Decline
Studies show today's average construction worker is only productive for two hours and 40 minutes out of each 8-hour day. From 1972 to 1979, the productivity index fell from a base of 100 to 82.9 and is still headed downward.
Construction work remains more manual than other industries. The application of advanced technology in construction has been slow to take place. Research and development in technology are typically funded by large manufacturing corporations and aimed at manufacturing applications. Construction presents special problems and, so far, the funding hasn't been made available to discover the unique solutions required.
Another reason for the decline in productivity is the rise of open shop operations. For years, unions had a stranglehold on management with work restrictions and upward pressure on wages and benefits. This pressure caused many companies to go "double-breasted." But, open shop labor wasn't as well trained as union labor. Individual companies became more responsible for the training effort a role many of them were unaccustomed to, particularly in light of the fairly transient labor force. As a result, productivity suffered. Today, the number of untrained workers in construction is increasing. Many older, experienced workers are retiring and younger people replacing them-particularly in open shops don't have the necessary training.
The shift away from union labor is pressuring unions to devote more resources to training in response to market demands. The traditional adversarial relationship between management and labor is changing. Companies must cooperate with labor to keep workers and get jobs. Unions no longer see management as the enemy. The enemy today is the open shop operation.
To keep people working, management and unions must cooperate. So, the effort to increase field productivity through education and training is crossing traditional boundaries. Unions are now interested in productivity improvement and meeting market demands. Open shop contractors are also seeing the need for better trained field people.
Another factor adversely affecting construction productivity is drug and alcohol abuse on the job. The pressures of construction create an environment where substance abuse can flourish. And, there can be no question that drug and alcohol abuse strongly decreases productivity.
Most companies can find specific areas where opportunities for productivity improvements exist. For example, immediate improvements can almost always be made in job planning and scheduling. Training field managers in supervisory skills is another opportunity for improvement. Both informal and formal corporate communications are now more important. Communication, motivation and productivity are closely related because companies are more fully accepting the responsibility to adequately train and motivate employees.
Many successful contractors now have formal productivity improvement programs in place. Companies ignoring productivity issues are losing ground.
Strategic Response to High Risk
Construction risks are increasing dramatically. Today, people will "resort to the courts" for almost any real or imagined infraction. Claims are increasing. More cases are going to arbitration or even trial. Owners want it built faster and completed sooner to get early occupancy income. Contractors can fast-track to compete in a tight market, but fast-tracking increases risk with the owner as well as other contractors on the job.
These uncertainties emphasize the need for a company to carve a niche in the market that will endure over the long term. Contractors are learning to look at internal strengths and weaknesses to develop marketing flexibility by developing primary plans and contingency plans to correspond to changes in the economy and the market. This process has long been known in other industries as strategic planning. It helps avoid costly mistakes associated with impulsive actions. Because strategic planning involves an analysis of market conditions, the contractor can take corrective measures while maintaining a proactive mindset. This kind of risk management impresses bankers and bonders who hold the key to success for many contractors.
The geographical diversification of contractors in an attempt to maintain sales volumes adds to the risk of doing business. When a contractor relocates to a new area, special management problems arise. Many contractors use a formal strategic plan to determine where to go, and how to control things when they get there.
Changing Face of Field Management
Contractors are going to have to pay more attention to education and on-the-job training for employees. Managers have to be trained in management theory and practices to meet the demands of a changing work force. Contractor/owners themselves have to change old management habits. They are going to have to delegate responsibility and authority, release the reins and implement systematic management practices. Employees want to know what is expected of them and what they can expect in return.
The current scarcity of qualified field managers impacts contractors. Many experienced field managers are retiring, and they are being replaced by younger workers with more formal education, but less field experience. These