Are you ready to have your mind blown? The construction industry isn’t very efficient. I know! When I heard, I was just as surprised as you are…
But all kidding aside, the construction industry is arguably the most important industry in the world, and a huge percentage of Americans work in construction and construction-related fields. However, despite the industry’s importance, an increase in efficiency and productivity in construction is M.I.A.
According to McKinsley, productivity in the worldwide construction industry has only grown by 1% annually over the last 20 years. During that same time, productivity gains in manufacturing have increased almost 4x as much. Now, there are obvious differences in the industries, so it’s easy to discard this statistic as misleading.
But consider this: In the United States, the construction industry is less productive now than it was in 1968. That’s 50 years ago (!!) for those of you keeping track at home.
Did that catch your attention, because it sure caught ours! Read on for a brief overview on this fascinating topic.
The Construction Industry Is Ripe for a Productivity Boom
The construction industry is leaving a lot of money on the table. Precisely, according to McKinsley Global Institute, the global construction industry is leaving as much as $1.6 trillion on the table (and about 1/3 of that is in the U.S. alone – yep, that’d be well over $500 billion) by lagging behind other industries.
If you google “construction industry productivity,” you’ll find a lot of doom and gloom – but that’s the opportunity that’s before the industry. That’s the (hopefully) coming productivity boom that we’re talking about here. To be fair, a lot of that comes from the idea that there’s nowhere to go but up. It’s kind of like that first week you’re on a diet. However, in matters both large and small, you always have to start somewhere, and every little bit counts.
The Problems & The Fix
The McKinsley Institute recognizes some of the key issues playing into the productivity problem, and has also provided seven key goals that would turn the trend around, creating a more productive construction industry.
Key Issues Driving Construction’s Productivity Problem
– Poor Organization
– Inadequate Communication
– Flawed Performance Management
– Contractual Misunderstandings
– Missed Connections (Failure to Monitor and Update Schedules and Priorities)
– Insufficient Risk Management
– Limited Talent Management
7 Key Goals to Turn it Around
– Reshape Regulation and Raise Transparency
– Rewire the Contractual Framework
– Rethink Design and Engineering Processes
– Improve Procurement and Supply-Chain Management
– Improve On-Site Execution
– Infuse Digital Technology, New Materials, and Advanced Automation
– Re-skill the Workforce
How Does Levelset Fit Into the Productivity Discussion?
If you’ve been paying attention to our prior posts (it’s ok if you haven’t 🙂 ), you’ll notice that Levelset fits nicely into a few of these categories. Creating more transparent projects through improved communication and the use of technology is what we do here, and we’ve written plenty about rethinking construction contracts and building the construction workforce.
Many lags in productivity can be traced back to payment problems – either directly or indirectly. But when parties up and down the chain don’t have to worry about when payment is coming (or if it’s coming at all), collaboration becomes a lot easier.
The first step to doing that is improving communication and transparency on projects, and utilizing technology like ours goes a long way in that regard.
Author’s Note: This article is a summary of some of the brilliant work published on this topic by McKinsey and Company. If you’re interested in taking a deeper dive, have a look at some of McKinsey’s articles. Start here for an overview on the subject of productivity in the construction industry, then read this article and this one. If you’re interested in productivity on so-called “megaprojects,” be sure to read this article as well.
Effective collaboration on a construction project starts with having good information. After all, if you’re going to collaborate with someone, at the very least you’re going to have to know how to get in touch with them! We’ve got a great resource to help you keep all of your project information straight – our Project Information Sheet template.