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Why haven't construction companies demonstrated notable productivity changes in the last 30 years?

Updated: Apr 20

As featured in the March 2021 issue of NZ Manufacturer magazine our Stephanie Pretorius discusses the construction sector challenges in New Zealand.

Globally, labour-productivity growth in construction has averaged only 1 percent a year over the past two decades, compared with growth of 2.8 percent for the total world economy and 3.6 percent in the case of manufacturing. McKinsey Report – Reinventing Construction through a productivity revolution.www.mckinsey.com/business-functions/operations/our-insights/reinventing-construction-through-a-productivity-revolution


The construction industry has been quite resistent to the continuous improvement philosophy that has made large inroads in manufacturing.


The pattern that emerged from the McKinsey report of lagging construction productivity will continue until the industry takes productivity improvement seriously.


The industry cannot keep growing the way it is with more resources being tipped in to create poor or suboptimal outcomes, often for all of the parties involved.


Striving to be the best is a wide-open field in construction and is going to generate huge opportunities for those who take action in coming years.


What are the impacts if construction don’t make a significant change?


The costs of an inefficient construction sector are already becoming more burdensome, for all parties including society in general.


Poor planning processes create and enable disruption which affects large communities.


The workforce who are working in an environment that accepts poor performance and is inefficient, or doing things because they have always been done that way, creates a workforce that is not engaged and not able to perform at their best. Infrastructure is not on time to meet the needs of the population.


Value add delivery is constrained by mis-aligned processes, inadequate contracts and dysfunctional organisational relationships.


Sub-contractors struggle to survive.


The project mentality of ‘just get it done and move on to the next project’ means an ongoing cycle of reliving the same performance – different projects; the same issues.


Why is the sector so resistant to improvement?


From procurement through to planning and delivery, it seems the industry is on a treadmill and cannot take the time to step back and ask – is there a better way?


Skills shortages, changing programme dates, unclear forward work and urgency all add up to a high stress environment where few have the time or inspiration to try a new way.


Late decisions and late changes set projects up for failure from the start.


By doing their best to respond, the supply chain inadvertently create yet another cycle on the treadmill and reinforce unrealistic expectations. It seems the industry is in a rut.


What needs to change to address systemic problems?


There are several key areas that will support construction to deliver better performance and better outcomes.


Value Add must be the Priority – the industry must focus on enabling each party, from client to contractor to sub-contractor, to be able to do their best and deliver value adding work in an efficient way.


The flow on effects of poor process performance in inter-related organisations means inefficiency and waste downstream and suboptimal outcomes for all. Enabling value delivery needs to be the core goal for all parties.


Processes First – moving the focus from projects to processes is the long-term way forward. Projects are planned and done, often relying on the skill of a few key individuals on whom performance is dependent.


Processes repeat again and again, and if they are invested in, will deliver better performance consistently over time.


Processes that build in what works for each party in a shared process is infinitely better than a process that is dysfunctional or inefficient or caters to only one party’s needs.


Own Your Outcomes – clients must take a leadership role with their supplier base and actively engage with their contractors to see how they, in their client role, can support better performance over a long-term relationship.


Clients must take ownership of their own performance and the impacts it has on contractors.

Contractors must take ownership for their own performance and the impacts it has on delivery.


And both must work together to create the shared processes that will enable value delivery.


Monitor Performance – know what is being done to generate the current result by monitoring the effectiveness of processes and relationships.


Transparent process performance is what will enable all parties to respond and act to adjust when outcomes do not meet expectations.


If any issues or opportunities for improvement are identified, work together to identify where the process failed and act at the point of cause.


This is the cycle of learning and ongoing improvement which go hand in hand.

Leadership with Constancy of Purpose – remember it takes time to change.


Leaders must set the direction for continuous improvement and follow-through with the discipline and constancy of purpose required to embed changes over time.


Construction needs a new way forward – for better outcomes for clients, contractors, projects and society. Improvement will come through more effective collaboration that optimises core value delivery and enables productivity improvement.


Construction – will you pick up the challenge?

https://nzmanufacturer.co.nz/2021/03/why-havent-construction-companies-demonstrated-any-notable-improvement-over-the-last-20-30-years/

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