Construction Operational Systems and Their Effect on Project Outcomes

Background

The question is, how does the project owner ensure that the most capable and competent organization is hired to build their project? The primary method of selecting a contractor to build the project is by competitive bidding or through negotiations. To that end, the owner must establish some criteria on which to base the selection. The primary criteria may include such things as the proposed cost and the length of time to complete the project. Some owners may have other additional criteria such as reputation, years in business, capable staff, safety record, plant, equipment, if they have been sued, etc.

The owner may also have a number of different firms compete for the project to ensure that they get the best possible combination of cost and time. The owner then selects the most responsive bid and awards the contract.

The limiting factor here is the pool of contractors the owner draws from. The bidder pool may have a geographic or regional limitation. If all the contractors in that regional pool have a B or lower rating, then the best the owner may hope to get is a B-level firm. Some organizations rate construction firms by their annual volume, the type of structures they commonly build, if their volume has gone up or down compared to the previous years, etc. This is far from evaluating the organization's capability, expertise, competence, or capacity. It is also a fact that the construction company is only as good as the staff (e.g., capability, experience, and motivation) they assign to the project.

Productivity Issues

Compared to many other industries, construction invests little in research geared toward improvement initiatives. In many cases, this was 20 times less than some and significantly below that of manufacturing. Such underinvesting reduced the potential for research-fostered innovations in potentially improved productivity, greater operational efficiency, superior systems integration, smoother flow, facilities that are more environmentally and user-friendly, and structures that are more affordable, productive, and that are easier, faster, and more life-cycle cost-effective to build, operate, and maintain, which are similarly making construction workers more productive, safer, involved, and satisfied, as well as making the construction industry more globally competitive and profitable.

A long-term study (1964–2003) of Bureau of Labor Statistics data on productivity in construction compared to other industries, excluding farming, found that it significantly fared worse than the others. The study measured constant contract dollars of new construction work per fieldwork hour. The study found construction averaged a downward trend in productivity of about –0.6 percent per year over the 40-year period. That represents an almost 25 percent decrease in productivity in that time frame. Conversely, the study found that the other industries' productivity, on average, trended upward at a positive rate of 1.8 percent per year over the 40-year period. That was equivalent to a 72 percent improvement over that period. The spread between the two equals almost 100 percent!

Another long-term productivity study spanning 1964–2013 found a year-on-year decline in construction of about –.04 percent compared to other industries that realized an improvement of 1.9 percent over a 50-year period. A later study that started in the early 1990s and continued for about 20 years found that productivity in construction was still declining to some degree, while in manufacturing, it was increasing at a greater rate. The spread between the two was about 1.7 times. This spread was less than the previous study, but it was still significant. Another study of global industries conducted a couple of years ago found that over the past decade, productivity in construction averaged year-over-year growth of 1 percent, compared to 3.6 percent in manufacturing. This indicates that the construction industry is still not reacting and responding to make significant changes to effectively improve outcomes.

A study done a while back by the National Institute of Standards and Technology found that 57 percent of the project cost resulted in no value created for the construction project owners. A study by the Construction Industry Institute (CII) found that only 43 percent of time spent on construction activities was considered productive and created value for project owners. Another CII study found that over 10 percent of the project cost was attributable to rework. A number of studies attribute much of the situation faced by the construction industry to fragmentation. This invariably results in the following.

• Fragmentation increases complexity
• Complexity increases uncertainty
• Uncertainty increases variability
• Variability increases risk

Increased risk leads to a greater likelihood of discrepancies, disruption, disputes, or damages, which lead to both short- and long-term problems for all involved!

Much of what was discussed above has caused construction projects to utilize significantly more work hours per constant dollar of contract. This will cause the project to cost more and take longer to complete. So, to reduce time, the contractor will have to either use more workers or speed up the process. This, to some extent, will increase risk, leading to possibly inferior quality or more worker accidents, which may result in owner dissatisfaction.

In one way or another, all of this affects project time and cost and is reflected in just about every important construction management metric in the area of production, productivity, quality, safety, and partner satisfaction—impacting relationships as well as the bottom line. It is important to note that any level of improvement of the operational systems will, to some extent, improve many of the other project outcomes.

All of this highlights the need for a massively significant change in project delivery as well as organizational systems (i.e., policies, processes, practices, and procedures). In other words, all means and methods. The problem is that this would be disruptive to the ongoing operation and have serious financial consequences. The best way to approach this is to find the areas that need change, evaluate the importance of improvement, devise a strategy, secure employee buy-in, deploy change initiatives, monitor improvement, and make any necessary changes.

Resistance to Change

While some may say that change is the only constant in business, change affects people differently, which often results in some form of resistance. This may occur in fairly subtle ways, including avoidance or passive-aggressive behavior, up to outright hostility and possibly even sabotage. Even if the proposed change will not largely impact many of the employees, they may perceive that it somehow will. To actively address resistance to change is to convince people of its necessity for the organization in general and, more importantly, it benefits the employees in particular. Therefore, prior to deploying the initiative, management must carefully envision the possible impact—real or perceived—the change may have on the employees by analyzing the following elements.

• Specific changes sure to cause concern. These are the ones involving restructuring or consolidation, as these may lead to reduction in employees, and are bound to create concern.
• Which employees may be impacted. This depends on the type of change and may impact a cross-functional team, a project, a specific department, or the company on the whole?
• How it will or may impact them. Obviously, the biggest impact, both financially and emotionally, involves layoffs. Any jobs that involve significant change may be a close second. Some employee jobs may be restructured due to someone being laid-off. Any of these changes may emotionally impact others who will lose coworkers, or friends, even if the change does not directly impact them.

After a careful analysis of the three elements above, one may be able to anticipate the reason for as well as the nature of the employee's reactions and the possible potential backlash. This will, in all likelihood, stem from their emotional reaction to the uncertainty associated with the change or their perception of the negative outcome and how it might potentially affect them. This exercise will provide management with information that may make it easier to create a deployment strategy directed toward dispelling many of the reasons for the employee's reaction to the upcoming change initiative.

Possible Employee Reactions

People are different; therefore, their reactions to change will vary from one another. Some people enjoy change because it provides them with learning and growth opportunities both personally and professionally. Others abhor change because they prefer a set routine. These employees usually are the ones who become suspicious of change and are more likely to resist. Management should consider what information, knowledge, and skills employees will need during and following the implementation of the change. Devise a plan to help each person gain the necessary competencies. Where possible, individually spend time with everyone and encourage them to identify their own developmental needs. Some of the issues involving aspects of change include the following.

Confusion. People fear change if they don't understand the reason for it or believe it will adversely affect them. Over time, people will develop a routine in their work and get comfortable, and that routine makes people feel secure. Therefore, any change will create uncertainty and will threaten the status quo. As a result, people have to clearly understand the necessity for the change and the potential benefits associated with it.

Fear of the unknown. Like confusion, fear will elicit resistance from employees. This reaction will mainly occur when change is implemented without warning and justification given to the affected employees. The change may increase the organization's market share, improve technology that makes it easier to perform the work, or provide the employee with learning and growth opportunities. These will increase buy-in, improve engagement, and make the change more acceptable to the employees.

Loss of job security/control. This type of resistance often occurs when companies announce they will be restructuring, downsizing, or rightsizing. This is sure to result in fear among employees that they will lose their jobs, be moved into other positions without their input, or be expected to do more work without proper consideration.

Possible lack of competence on the part of the employees. Even minor changes may affect the employee's routine or make them fearful that they may find it difficult to perform the changed work. Rather than voicing this, they will disagree with the new approach or challenge the very reason for the change. Management must put a plan in place and explain to the workforce how they will support and assist them in dealing with the challenges they may be facing during and after the implementation of the change. This will go a long way toward their acceptance and cooperation.

Poor timing. As the old saying goes, "Timing is everything." Heaping too many changes on employees over a short period of time will cause concern and resistance. Change must be implemented in a timely manner and at the "right" level with a lot of discussion and involvement of the people who will be affected to make it acceptable and understandable; otherwise, it will not work!

The role of trust/mistrust. If the individuals in a team, department, or division highly respect their manager, who has built up a trusting relationship over a period of time, then that group will be more accepting of any suggested change. If, on the other hand, the manager is new or has not earned the trust of their people, then mistrust can manifest itself as some form of resistance to the implementation of any change initiative.

The bottom line is to take the time to understand the following.

• What the specific changes include;
• Who the changes will impact;
• How it will impact them; and
• Why they might resist the changes.

Being aware of the reasons people resist change will help the implementation of change with fewer issues. Eliminate fear of the unknown by letting affected groups know there will be changes coming. Avoid mistrust and the feeling of loss of control by getting others involved in the changes before they occur and asking them to offer input and feedback. Prevent bad timing by providing a clear vision and reasons for the changes along with a timetable or schedule of what to expect and when to expect it. Implementing change is never painless, but it can be a lot less painful for everyone when it is done with empathy and compassion after thorough analysis, planning, and strategizing.

Conclusion

With change as an inevitable part of working life, managing the change process well for both the organization and one's team has become a core competency for managers. But for many employees, change means uncertainty, anxiety, or stress from the perception of the loss of control. If you can identify why specific individuals in your team may be worried, then you can be proactive in your mitigation approach.

The most effective way to combat this is through open two-way communication. Empathically listen to concerns and encourage employee involvement and participation. Provide reasons for the need for the change and its benefit to the organization and, more importantly, the benefits to the employees.

With the inevitability of change, leaders must ascertain factors of concern to employees and deal with them head-on prior to implementing change. Engage the employees in frank discussions, articulate a compelling vision, propose a winning strategy, and present a deployment plan. Ask for input with an eye on dispelling concerns, fostering involvement, and ensuring participation.