5 Big Benefits of Improving Construction Productivity

Businesses think about improving productivity all the time, and that’s hardly a shocker.

After all, increased productivity results in increased output and profits.

However, taking specific actions to boost productivity usually comes second or third to managing construction operations and staying on top of more urgent demands.

So, if you’re struggling to carve out the time to think about and introduce these improvements, you’ve come to the right place.

The 5 major benefits we’re going to explore in this article will make you pivot back to pursuing better productivity.  

Increases Profit Margins

It’s simple: productivity means profitability.  

Companies that take measures to boost productivity can stay within or under budget more easily, which sets the stage for a profit margin increase.

If you’re wondering how, let’s first take a moment to examine two similar, yet distinct mindsets: one based on efficiency, the other one on productivity.

Although they’re frequently seen as synonyms, there’s an important difference between the two.

As highlighted by Michael Mankins, Head of Bain’s Organization Design, Corporate Strategy, and Transformation, efficiency means reducing the hours needed for output, while productivity increases the output itself.

Being able to achieve more while working within the same framework creates a positive effect overall, and profit is no exception.

Although productivity relates to multiple factors—including capital, energy, materials, and purchased services—labor productivity tends to receive the most attention.

This is in part due to the gradual decline of construction labor productivity over several decades, estimated at an average of 1.7% a year, according to a McKinsey report.

The same report elaborates on how exactly labor productivity creates value, and why it should stay in focus:

“An increase [in labor productivity] means that higher value can be provided to customers with the same or fewer resources. This translates into a desirable mix of higher-quality structures at lower cost for owners, higher profitability for contractors, and higher wages for workers.”

To zero in on profitability in particular, McKinsey compared the data from the 100 largest construction companies by revenue from 2005 to 2015, linking their leaps in productivity with higher profits.

Unsurprisingly, aiming for better productivity brings you closer to the end goal of every business: making a profit.

Businesses that nurture a productivity mindset not only raise their profit margins but pave the way for swifter project completion, which we’ll elaborate on in the following section.

Enables Faster Project Completion

Meeting project deadlines, and even finishing early, becomes much more likely when companies prioritize productivity.  

Time is a huge luxury in an industry characterized by tight deadlines and demanding large-scale projects, so finding ways to be productive and maximize output becomes a priority.

But what happens if the opposite is the case?  

Simply put, low productivity levels increase the chance of encountering delays.

In fact, some factors directly contribute to delays, as evidenced by a recent study of contemporary Saudi Arabia’s construction landscape.

The above-listed factors were ranked the highest by surveyed contractors and consultants working in the Saudi Arabian context, but the findings certainly have global implications.

There are plenty of reasons to try to prevent delays, but perhaps the biggest one relates to potential penalties and additional costs.

Experiencing delays raises the costs on several levels—from labor, equipment, and material, to subcontractor and jobsite overhead costs.

Even if we disregard these, the possibility of facing penalties and delay claims is sure to cause headaches, jeopardizing project completion and the company’s reputation further.  

Now imagine a different scenario.

Your precisely defined timelines and productive workforce enabled you to complete the project on time or even ahead of schedule.

The extra time opens up new opportunities, from doing some final quality checks before closing the project to pursuing entirely new ones.

Finally, avoiding nightmarish delays—and also cost overruns—is one of the best ways to affirm the professionalism and reliability of a construction business.

Such a reputational boost is a key ingredient of business growth, and gives you a competitive edge that we’ll examine in more detail in the next section!

Gives You a Competitive Edge

Being recognized as a company that gets things done while sticking to deadlines is a huge plus in any context, let alone in an industry known for its cost and time overruns.  

Word of mouth can make a world of difference when competing for attention, so you better make sure your reputation is spotless.

After all, a good reputation is often the decisive nudge for clients to choose your services, but a poor reputation is even more persuasive.  

Of course, timely delivery of projects is just one ingredient in the mix.

Building a strong reputation requires you to insist on certain standards and nurture client relationships.

One thing that makes all of these easier to achieve is to keep productivity at a satisfactory level.

On the other hand, lower productivity prevents you from setting standards and upholding them consistently, and attracting clients based on reputation will only get you so far if that reputation suffers cracks time and time again.

Making a winning bid and landing a project is never easy, but the process is certainly smoother for those eager to work on and leverage their productivity.

Although many clients still embrace low-bid procurement and choose contractors strictly based on the lowest price or more traditional criteria, the alternatives are gaining more and more traction.

The Managing Director of Supramar, Bahadir Tonguc, certainly thinks so, as he urges for a different, merit-based angle.

This view is shared by Shu Nomura, CFO at Teklus & Teklus Construction, who also advocates for more consideration of the companies’ qualifications and track record:

“In this process, the contractors are evaluated on various factors such as their technical expertise, safety records, financial stability, and project management skills. This approach aims to ensure that the best contractors are selected for a project, which leads to better-quality outcomes.”

This paradigm shift is particularly valuable to companies that continuously strive to unlock better performance and productivity, through, among other things, better resource utilization.

Allows for Better Resource Utilization

If your construction company’s productivity is high, chances are, you’re using your resources efficiently.

However, this works both ways:

By taking measures to improve productivity, you’re at the same time ensuring better resource utilization, as well as reducing idle time and maintenance costs.

As per usual, the secret recipe boils down to careful planning and scheduling.

By following the steps outlined below, companies gain greater visibility and control over the resources, all while staying flexible with their allocation.

At the same time, the adoption of construction technology helps make sure that undesirable scenarios—such as unexpected shortages freezing all activity or equipment going missing—are nearly eliminated.

The construction industry of today relies on different software solutions to increase productivity and optimize processes.

Whether it’s fleet management or asset tracking systems, technology that automates and streamlines processes is indispensable when it comes to resource utilization.

And if you’re wondering why, here are two words for you: organizational drag.

The term covers all forms of non-essential, energy-consuming activities that take away from core processes, and was introduced by two organizational experts and co-authors of a book on productivity, Michael Mankins and Eric Gartner.

Resource utilization benefits from automation precisely because many of its related processes needlessly eat up time and energy.  

Think about it: how much time do your workers spend searching for tools and equipment and checking if they’re available?

If your answer is anything other than “just a few seconds”, it might be time to consider an asset tracking and management solution like our GoCodes.

In short, GoCodes will give you a comprehensive overview of all your different resources and help you keep an eye on all assets, at all times.

From check-in and check-out logs to value and service notes, you can find all the essential data with one tap.

One of the solution’s notable features is its effortless scheduling of regular maintenance, whose benefit is reflected in curbing unexpected equipment breakdowns and reducing downtime.

Indeed, focusing on productivity means introducing better practices on many levels, and one of them is sustainability, the main theme of our final section.

Leads to More Sustainable Construction Practices

Productivity usually makes us think of projects being completed better and faster than ever before.

But there is another thing: construction projects are also becoming greener.

The recent advancements in technology are propelled by different aims, from improved productivity to reduced costs.

But sustainability, for all its importance, isn’t one of them.

Instead, sustainability is most often a byproduct of businesses wanting to secure productivity gains and cost savings.

Nevertheless, a more environmentally friendly way of doing things is proving to be very persuasive to businesses.

Take a look at the projected growth of the global green building materials market.

With the market value seen as nearly doubled in 7 years, the future looks pretty green.

However, it should be pointed out that more and more businesses incorporate practices that benefit sustainability and waste reduction, even if they don’t have a comprehensive sustainability strategy.

Namely, process optimization leads to overall decluttering and reduction of waste.

This gives productivity measures an environmental dimension at the same time.

In a nutshell, higher productivity results in minimal errors and less rework, because efficient processes ensure that all the tasks are done up to standard the first time around.

This, in turn, reduces fuel costs and carbon emissions.

And every little push towards reducing waste helps, even more so if we take into account the United Nations’ 2022 Global Status Report and its distressing figures.

These seemingly small interventions contribute to reducing the waste and carbon footprint of each project, and with more companies following suit, reducing this negative statistic is a matter of time.

Meanwhile, the best thing that businesses can do is focus on navigating their growth by relying on productivity-based and forward-thinking practices, including sustainability.

Conclusion

Highly productive construction companies get more work done, all while gaining time and money.

Why?

Because the benefits of improving productivity on the construction site build upon each other.

Better resource utilization unlocks more sustainable practices, and staying on track with projects builds a favorable reputation that helps you outpace competition.

To sum up, investing in higher productivity creates a positive cycle of benefits, increases profitability, and opens up new opportunities on multiple levels.

So, if you haven’t yet ventured down the high-productivity path, now’s the time!