Solutions PMA header 1200x784 - construction site with workers and equipment
Solutions PMA header 1200x784 - construction site with workers and equipment

How do you calculate labor productivity in construction?

Creating accurate projections of the expenses needed to complete a construction project is hugely important to running a profitable contractor firm. There are some variables that are difficult to calculate, however, which makes the entire process of tracking – and improving – productivity challenging.

One such tricky matter is labor productivity. Finding an exact figure for labor utilization is generally an imprecise science, as there are inevitable inconsistencies in the human factors of construction work. The primary way to make this process less demanding for your organization  and get labor utilization data you can use in your overall projections and calculations is to invest in new construction management software.

Today’s electronic content management platforms purpose-built for the construction industry allow you to create a single, integrated data environment in which modules including human resources, finance and more all share data. Harnessing the power of these data environments is one way to take the ambiguity out of construction productivity and become more data-driven in your operations overall.

The incentive to monitor and control labor utilization more effectively comes from talent’s massive effect on overall construction budgets. The Turner & Townsend International Construction Market Survey found that the relative cost of labor is wildly divergent in different markets around the world, with North America topping the list. In areas where it’s relatively expensive to hire skilled workers, the U.S. included, companies are focusing on both building efficiency through technology – and on monitoring productivity.

Studying the various ways in which businesses can measure the production of their workforces can help you improve construction project management, manage your own costs and enhance the quality of your jobs overall.

Labor productivity formulas for construction

While it is difficult to create a clear framework to calculate construction labor utilization rates, experts have attempted to do so over the years. Inspecting these formulas can demonstrate how imprecise calculations of construction productivity have historically been while also pointing out the elements that need to be considered in calculating labor utilization.

The tasks needed to complete a construction project’s life cycle vary widely across and even within employee specialties.

Accounting for 17 variables

As one example of labor productivity tracking, a scholarly attempt to create a productivity formula at the University of Warsaw acknowledged that there are so many variables inherent to construction work that designing one catch-all formula is highly challenging. The tasks needed to complete a construction project’s life cycle vary widely across and even within employee specialties. Not only can two workers on the same crew be given very different tasks based on their expertise, the same person can tackle divergent roles from one day to the next.

The University of Warsaw researchers also noted the impact of individual human factors on productivity: How can a mathematical model determine the relative efficiency of a construction worker when each employee is a human being with unique preferences, traits and abilities? Add in the impact of environmental and other external factors on the progress of construction work and it becomes clear there is no 100% accurate way to craft a numerical model for completing work on the job site.

In the end, the Warsaw team developed a 17-factor model of efficiency, spanning everything from the day of the week to the temperature of the job site and the level of organization present. While the calculations proved relatively useful in initial testing, the complexity of the model mostly serves to demonstrate just how many factors go into determining relative productivity on any given day.

Developing a 3-factor model

A second attempt at creating a labor utilization formula, this one presented at the Seminar on Industrial Engineering and Management, tied the ability to predict worker efficiency to the final quality of construction projects and used three variables to determine the contribution of a worker: effective working time, contributory working time and ineffective working time.

The authors of this study noted some of the same difficulties that faced the other team. Namely, they pointed out that each individual unit of construction work is different. Working on disparate parts of a building will take divergent amounts of time, so simply measuring how much of a project an employee has accomplished does not give the whole picture of that person’s contributions relative to another team member with their own task.

The researchers also noted that unlike another industry where measures of productivity are important – manufacturing – construction work can’t be broken down into standardized and repetitive tasks. Therefore, companies hoping to bring over labor utilization formulas that are useful on the factory floor won’t get satisfactory results.

The final Labor Utilization Rate formula, designed to be simple enough for use on the job site without breaks for heavy calculations, has some drawbacks. Namely, it does not allow the capture of information describing the why behind an individual’s performance. Furthermore, there is room to improve the calculation through the addition of digital real-time data, perhaps captured by the sensors that make up the internet of things.

Real-time data regarding employee attendance or absenteeism can have an immediate effect on projected inventory, job timelines, finances and more.

Useful technology deployments for intelligent team utilization

Given that scholar-created formulas for determining and improving construction productivity are provisional and complex, you need something more practical. What you need is an ECM tool integrated with other modules used across your entire organization, from building information modeling and drawing management to human resources and inventory, so that you can make more informed decisions and immediately see the complete effects of changes.

The real-time flow of information between the job site and the office is not a speculative feature. If you use the right ECM solution, namely one purpose-built for the needs of the construction space, you can enable this high level of information visibility and utilization now. Accurate and frequently updated information on labor utilization can deliver insights that are actionable in the moment to get your projects completed more efficiently.

While you may not have the ability to track dozens of metrics regarding employee performance, job site conditions and more, you do have the ability to gather highly accurate data regarding employees’ time spent working on various tasks on the job site. Modern time-tracking solutions are compatible with smart devices for use on the job site. In addition, they enable the gathering of data from RFID chips. With such a module as part of your ECM platform, you can create more accurate projections of timelines and resource utilization.

HR, equipment usage, budgeting and more are intrinsically linked. Therefore, the modules dealing with each of these variables should be integrated through a single ECM solution. Real-time data regarding employee attendance or absenteeism can have an immediate effect on projected inventory, job timelines, finances and more. Keeping centralized information on these factors and making them accessible to internal and external stakeholders helps you complete jobs effectively, with no surprises and open communication between owner and contractor.

To reach its labor oversight potential, your firm needs an ECM deployment with a modern human capital management system. Such a system creates a paper-free and highly efficient labor management environment. When you have more accurate reporting on every individual working on the job site, you can maximize the utilization of each employee’s skills and efforts, all while keeping track of the effects on the overall budget.