Pressure on Productivity

Posted on September 10, 2010


When company belts get cinched as tight as they can be without becoming a tourniquet, cost saving shoppers rely on improved productivity for relief.  Outside of major business model overhaul, producing more with the same or less resources, is one of the only advantages against inflation.  Whether a professional or assembly line operation, cutting costs to produce more for less is always a goal.

Productivity does not increase randomly.  In some cases it develops as people get better at their jobs:  they do more in less time. But for businesses that make things, like contractors who build buildings, improving a process is where productivity is gained. However, this does not magically happen. A business must invest in studying itself and industry best practices, engage in research, initiate experimentation and new ways of learning (usually trial-and-error) to find productivity improvements. It may be something as simple as training employees—but it costs money.

Industries outside construction call this research and development (R&D), and it is budgeted every year like marketing and payroll. Without it, a business is likely to stagnate and not make up gains to stay ahead of not only inflation, but other competitors.

In construction, R&D is woefully underutilized to the tune of an average 0.4% annual revenues in the 1980s according to author Barry LePatner in Broken Buildings, Busted Budgets. This is a prime reason construction costs continue to climb instead of drop like in most R&D-intensive industries like telecommunications and computers.

LePatner relates that it was predicted in 1987 by the Department of Commerce that advanced materials, microelectronics, automation, biotech, computing, membrane technologies, superconductors and lasers would be a large part of standard construction processes. Twenty years later, almost none of these are common.

Construction R&D is simply rarely done by actual construction practitioners. Builders rely on professional organizations, universities and the government to lead productvity and research discoveries. This work trickles down to product manufacturers and materials manufacturers. Then new products come out and the subs installing in the field begrudgingly adapt to new ways of doing things. This says nothing about internal processes within the business of the builders themselves, where internal six sigma and automated processes occur too infrequently.

It does not take a lot of analysis to see this process simply does not lead to marked and reliable productivity improvement. R&D needs continuous investment, in good times and in bad, to keep the pump of increased productivity primed. Otherwise, when the economy slows and firms quickly crank for increased productivity to keep them alive, they may find it simply takes too much time and energy to get the sustaining water for life.