Simply put: productivity is king. As a subcontractor you are required to perform many tasks; from generating an estimate and proposal, to safely performing work, as well as everything in between. So why do I believe that productivity is king?
- Performing work safely, in compliance with specifications, and to certain quality standards are non-negotiable items. If you cannot do these things well, then you should improve them immediately or get another line of work.
- Estimating is a difficult task. Estimating involves two key components: capturing all of the work required and being cost competitive. As you know estimates are just quantities multiplied by a certain production rate. That production rate is the field productivity you should experience and should be specific to your employees' performance on that particular project.
- When installing the work, it is a default that productivity is king (provided that you are performing the prerequisites identified in number 1 above).
- Material and subcontractor costs rarely are a source for extra profit or loss.
- Performing on schedule is directly related to productivity. Customers want specific areas of work done in a specific amount of time and that area has a certain amount of work. If you know your productivity inside and out, it will be easy to plan and execute the work with the appropriate resources.
So if it is king, is it king in your organization? Almost every organization tracks productivity, but is it at a level that will enhance your performance and provide information you can learn from? Productivity is typically tracked using some job cost reports and by some level of phase code. For example, we have 5,000 hours in the budget to hang duct work and have spent 4,000 hours to complete that work so are productivity rate 80%. I am sure you may not talk in this economist language and may say something more like, "we saved 1,000 hours in installing the duct work, good job".
However the real question is, if you track productivity at this level, did you really produce at a better rate than stated? What about spending 6,000 hours in lieu of 4,000 hours? This typically elicits a response that the estimate was wrong, but how do you know? If you make productivity king, you should be tracking units and hours and thus production rates. In the first example if there were 8,000 feet of duct to install in the budget and 8,000 feet was actually installed then it could be said that productivity in the field was much better. This could then allow the follow up questions of what did we do and can we replicate that, thus increasing profits and/or lowering prices.
Alternatively, in the second example if 9,600 feet of duct was installed it would indicate that productivity was on par, but the estimate did in fact miss 1,600 feet of duct. This could lead to follow on questions of why: did the estimator miss something, did we perform change order work we need to get paid for, did our crews have to install more due to field conditions, etc.
Any contractor that self performs work, needs to make productivity king. It will lead to better results across the organization including higher profits, more work, and less headaches.