Are labor costs helping or hurting your bottom line? How much time are crews wasting each day? Consider this. If you have a 20-person crew and each employee wastes just three minutes per hour, that’s eight hours of wasted time by the end of the day. That’s the equivalent of one employee’s full day’s work. Even more alarming, think of it this way. Over the course of a year, that wasted time adds up to 1,600 hours. If your employees make an average of $35/hour, that equals $56,000 per year in lost production. Consider four positive impacts of controlling daily labor costs.
- Improve profits. According to Construction Business Owner, improving your labor costs by just 5 percent can improve your net profit by four to five percent.
- Improved efficiency. When less time is wasted, jobs stay on schedule. In turn, customers are happy, and more money is saved by not having to pay overtime or penalties to the customer for a late project.
- Increased employee morale. Inefficient labor strategies often lead to frustrated, over-worked employees. Having a group of disengaged workers results in an even greater decrease in productivity. However, when crews are well-trained, feel like they have a voice and are contributing to the overall success of the company, they are engaged, more productive and less likely to leave the company.
- Enhanced skills. An effective labor strategy means leveraging the strengths of each employee. Regularly evaluate workers to find out who excels in which areas. Offer more training to help those lagging behind or to further improve the employees that are already performing at peak levels.
Strategies for Improvement
Improving labor costs and productivity goes way beyond telling employees to quit wasting time. Implement these suggestions in your management strategies.
- Create a culture where ideas are welcome. The construction industry usually works within a hierarchy system, with good reason. Managers are accountable for the safety of their workers and the project. However, this atmosphere often makes employees reluctant to share suggestions. Often, workers are the best source of ideas about how to increase site effectiveness. They are doing the work every day, and are quite literally the eyes and ears of the project. Create an atmosphere where suggestions are welcome, even considering launching an official employee suggestion program. Encourage managers to take these suggestions seriously.
- Offer opportunities for professional development. Think beyond just training employees for their particular skill. Create an onboarding process that makes employees feel part of the whole. Offer classes about topics such as time management, problem-solving or conflict resolution. Don’t view training time as time lost. View it as an investment in productivity.
- Lean on Technology. Automate the employee attendance process. Software, such as solutions offered by CFO on the go, can help your company analyze data to determine the efficiency of your workforce, and where there is a need for improvement. Mobile tech solutions also give employees the ability to clock in and out right from their cell phones and allow managers to monitor productivity in real-time from wherever they are.
- Be transparent. Don’t keep employees in the dark about decisions, especially plans to downsize. They will usually find out anyway, leading again to disengaged employees that are uncertain about their future with the company. Be transparent. Ask for feedback, and involve employees. The result will be employees that want to work hard to contribute to a company they feel part of.
When taking a hard look at labor costs, most managers start by analyzing start time, break time, lunchtimes and quitting time. However, the logistics of the schedule only scratch the surface of labor costs. Employee morale and attitude, training, the use of technology, as well as the overall culture of the company contribute to the effectiveness of your labor force. Implement a strategy that encompasses all these facets and reap bigger profits and a more effective workforce.