Tag Archive for 'ADEACA'

ADEACA: Why Productivity in Construction is Flatlining

By Daniel Bévort

Let’s face facts, the construction industry does not do well when it comes to completing projects on time and within budget. Approximately 98 percent of megaprojects suffer cost overruns of more than 30 percent and 77 percent are at least 40 percent late, according to a McKinsey & Company report. 

Unfortunately, construction companies that fail to identify as a project business (a company that provides products and services for their customers through projects) can face many problems that impact business performance, productivity, and profitability.

However, if you take a step back, look at the fundamentals and recognize your business as a Project Business, you can start to see: 

  • Why your business isn’t running as well as it could
  • Where the problems are
  • What you need to do to solve them

By structuring your project business processes, you will be able to analyze what systems need to change and what solutions are possible. 

Business management

Why are Construction Companies Not Optimized for Success?

Why do construction companies suffer from low productivity? Compared to other industries where productivity has steadily increased, productivity in the construction sector has remained stagnant and even declined. 

One of the main reasons stems from poor project management and the lack of technological innovation. The inability to utilize technology to improve processes and information flow is a major reason why construction companies lag in productivity and are often faced with budget overruns and project delays. 

Poor Organization

Construction companies tend to have separate systems and databases for each stage of their projects. This disjointed structure not only causes delays, but also hinders insight. In addition, most construction businesses lack standardization and integration. Processes aren’t uniform, and they often rely on individuals who take extreme liberties with them. As a result, it’s difficult to control the business functions and create standard metrics to measure performance.

Insufficient management

Inadequate Communication

When managing projects, establishing the right communication strategies ensures that all stakeholders are on the same page. It’s important to create the right sequence of processes and proper networks across the organization so everyone who needs to be informed has access to the data at any point during a project’s life cycle. Inconsistences in reporting mean that stakeholders don’t have a common understanding of how the project is doing in real time. 

Flawed Performance Management

Oftentimes, construction companies run their business units and projects as independent entities, without consistent project management. This leads to the “silo effect.” Project Businesses that don’t standardize their operations and project reporting across the company aren’t able to manage their risks as well as they could. In addition, they cannot apply the best practices discovered from one project to the next. Let’s face it, if you can’t measure performance, you can’t improve it. The key to operational excellence is scalable and predictable business processes. 

Project business structure

Missed Connections 

There are different levels of planning, from high-end preparation to day-by-day programs. Schedulers need to know if the daily work isn’t done so they can update the priorities in real time. However, they often don’t have this information. Today’s real-time economy demands visibility into what’s going on inside your company. Failure to integrate all project functions into one system leads to organizational inefficiencies, delays, budget overruns, and poor performance. 

Poor Short-Term Planning

Project businesses are good at understanding what needs to happen in the coming two to three months, but they aren’t so good at figuring out what must happen in the next week or two. 

Insufficient Risk Management

Although project businesses pay considerable attention to long-term risks, they tend not to give the same attention to the kinds of risks that might crop up on the job. In order to manage milestones and deadlines to ensure the successful delivery of projects, it’s important to be aware early on when project plans slide. A lack of real-time insight into your operations will result in increased risk and ultimately, decreased profitability.

Insufficient project business management

The Way Forward

When you recognize that the bulk of what you do is projects and you are a project business first and foremost, you develop a new way of thinking and the ability to recognize new solutions. Project businesses need to operate with similar transparency and control as traditional industries. As projects get bigger in size and complexity, it’s critical to implement a project business structure that improves the chances of success of those projects. 

For more information: http://www.adeaca.com/ http://www.adeaca.com/

Watch case study: https://youtu.be/SVrHoqePjeI

This material appeared in the June 2020 issues of the ACP Magazines:

California Builder & Engineer, Construction, Construction Digest, Construction News, Constructioneer, Dixie Contractor, Michigan Contractor & Builder, Midwest Contractor, New England Construction, Pacific Builder & Engineer, Rocky Mountain Construction, Texas Contractor, Western Builder

Why Recognizing Your Construction Company is a Project Business is Critical for Success

By Daniel Bévort

How would you categorize your construction company? If you think about it, the construction part of it is just about the type of projects you do. Essentially, your company is a project business, a company that provides products or services for their customers through projects. 

Project business is an industry just like Retail and Manufacturing because projects are their primary business function. For example, if we think of a retail business, it’s about reselling goods to consumers. It doesn’t matter what goods you sell. Whatever it is, if you sell it to consumers, you are a retail business. The same goes for a manufacturing business. It doesn’t matter what products you make, if you manufacture it, you are a manufacturing business. 

Project business is the same. Whatever the product or service is, if you are running and delivering projects to your customers, you are a project business. The same holds true in construction – 80 percent of what you do is about managing projects.

Project Management as a Central Component of a Project Business

Oftentimes, people think managing a project and managing a project business are interchangeable. They’re not. Project management is something that a business does, regardless of the type of business it is. Project management applies knowledge, skills, tools, and techniques to complete projects and is a central component of a project business. Since projects are temporary, managing a project is also temporary. On the other hand, project business is enduring and as such, managing a project business is an enduring activity. 

Characteristics of Project Businesses

Although we can compare project business to traditional industries like retail, distribution or manufacturing, there are several major characteristics unique to project business. Unlike traditional industries:

Projects are Temporary and Unique to Each Customer

Retail, distribution, and manufacturing companies produce or sell the same goods repeatedly. This allows these companies to take advantage of standardized processes and KPIs, automation, and economies of scale more easily than project businesses. As a result, these traditional businesses are more predictable and can replicate procedures and processes easier than project businesses.

Project Business Processes Can Differ Depending on Who is Doing Them

In traditional industries, processes and data are standardized no matter who is doing the work. In a project business such as construction, it all depends on who is executing the task. With the amount of detail included in a specific project plan, processes can differ between different project managers who have different preferences. Even the data that is considered important and used to make critical business decisions can be different across the company. This makes project businesses more complex than traditional businesses. Since project business processes aren’t uniform, it’s difficult to manage the business functions and establish standard metrics to measure performance.  

With all that in mind, it’s no surprise we’ve seen productivity in traditional sectors continue to grow while it has remained stagnant in construction and other project industries. This increase in productivity has largely been attributed to technology. The construction market has been slow to embrace digital technology solutions compared to other business sectors. It’s a lot easier to apply technology to standardized processes and data in order to automate and increase production. However, it’s not so easy with project-based construction businesses that have unique products and non-standard business practices.

And while there’s been advancements in equipment and mechanical tools in construction, streamlining business processes and boosting productivity through technology has remained a fragmented prospect. 

The important thing to keep in mind is if you’re not integrated and automated on the back end with your business processes, you’re not going to improve to the degree you want no matter how effective you are in the field.  

Identifying as a Project Business is Key to Growth and Success

In order to improve productivity and optimize your business for success, it’s important to first identify as a project business. Once you do that, it’s easier to see how you can improve, structure your project business processes, and identify what systems and solutions are possible.   

Project businesses need to govern their business activities in the same way traditional industries have. More specifically, they need to be able to control their business processes to optimize business performance. To do this, first look at the core activities for a project business.

Project Businesses engage in the following activities:

  • Scheduling, resource management, change control, risk and issue management, time and expense
  • Costing and estimating, budgeting, cost control, EAC/BAC, cash flow management
  • Earned value analysis and management, forecasting, KPIs, profitability
  • Project-owner collaboration, portfolio/program management, HR management, sales, customer service, business intelligence and financials

These are the key areas you need to focus on when building a successful business foundation for your construction company. When your business depends on the successful delivery of projects to your customers, it’s critical to be on point here. Recognizing your construction company as a project business is the first step to setting the foundation for expansion, growth and profitability. Failing to identify as a project business will lead to challenges in business productivity and performance. 



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This feature appeared in the April 2020 issues of the ACP Magazines:

California Builder & Engineer, Construction, Construction Digest, Construction News, Constructioneer, Dixie Contractor, Michigan Contractor & Builder, Midwest Contractor, New England Construction, Pacific Builder & Engineer, Rocky Mountain Construction, Texas Contractor, Western Builder