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Construction Industry Insights | FMI’s New Labor Productivity Study Results Revealed

Published on by Eric Goodman in Construction

Construction Industry Insights | FMI’s New Labor Productivity Study Results Revealed

Leading construction industry consulting firm FMI recently released the results of its 2023 labor productivity study – a landmark look at trends shaping the industry. In exclusive virtual events in Cincinnati and Indianapolis, FMI Senior Consultant Michael Keller hit the highlights and took a deep-dive into the details.

What the construction industry productivity study showed

During the event, Keller covered:

  • Key takeaways and current productivity trends in the study
  • Internal and external productivity impacts
  • What successful contractors are doing differently
  • Best-in-class labor and productivity KPI’s
  • What’s ahead for the construction industry

Key takeaways and current productivity trends

Based on the responses from companies who took part in the study, there were six main takeaways from the results:

  • There is an estimated $30-40 billion lost annually to poor productivity industry wide
  • 11% or more of field labor costs are wasted – per 60% of the respondents
  • Three of the top four internal factors affecting productivity are related to planning, communication, and collaboration
  • Low-quality design and construction documents are a top external factor stunting productivity – per four of five respondents
  • 79% of contractors could improve labor by 6% or more with better management
  • 50% of the average increase in profitability comes from a 6% productivity improvement

77% of respondents said productivity has remained stable or decreased over the last 18 months.  All contractor types averaged between 2.52 and 2.90 on a 5-point scale from significant decrease to significant increase, revealing that on average, all contractors saw productivity remain stable or slightly decline over the last 18 months.

Internal and external productivity challenges

Three of the top four internal factors negatively impacting field labor productivity are related to planning, communication, and collaboration – with the only other item ranking higher is the lack of qualified craft labor.  At least 61% of the respondents saw these four items as the biggest barriers to productivity.

Four out of five contractors said low-quality design and construction documents are a top external factor negatively impacting productivity. The other items with at least 60% of the response rate were schedules not being updated/realistic/coordinated, and general contractors.

What successful contractors are doing differently

Superior firms are implementing strategies to boost productivity, including pre-job planning, look-ahead planning, labor productivity tracking and feedback, and cost-to-complete forecasting.

  • Pre-job planning – collaboratively develop strategies to optimize project performance with field buy-in prior to mobilization
  • Look-ahead planning – coordinate resource needs for upcoming installations driven by field leaders
  • Labor productivity tracking and feedback – create a scoreboard for communicating labor performance, risk, and opportunity to the field
  • Cost-to-complete forecasting – conduct accurate field-driven estimates of what it will take to complete the remaining scopes of work

Best-in-class labor and productivity KPIs

Labor-intensive contractors are implementing and analyzing specific processes to help boost productivity, including direct cost variance analysis and productivity tracking and feedback.  Direct cost variances are being calculated on labor, material, subcontracts, equipment, and other elements based on estimated cost versus actual.

Looking forward

The top three most selected priorities to improve productivity over the next 12 to 18 months are improving operational planning/execution activities, leadership skills training, and talent acquisition.

Sponsors Barnes Dennig, BMO Commercial Bank, Michaelis Corporation, USI, and FMI, offer these exclusive events regularly. You can watch this year’s event on-demand and download the slides. You may also be interested in the 2024 Construction Industry Compensation and Benefits Study. And if you’re looking for smart financial strategies to move your construction business forward, contact us. As always, the Barnes Dennig team of construction industry pros is here to help.


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