Equential featured in CFMA - Talking Heavy Newsletter
With Tight Margins, Why Are We So Inefficient?
With construction companies experiencing tight margins and low profitability, it seems almost paradoxical that the industry is also well known for waste and inefficiency. While construction is not alone as a low margin industry, think computers and grocery, the industry has nothing comparable to a sophisticated supply chain operation or self checkout lines. The good news is that construction companies are starting to tackle some of this waste and inefficiency by deploying technology in the office such as estimating software and sophisticated accounting/ERP systems that handle everything from customers and subcontractors to financials and personnel. With the office becoming more efficient, the next opportunity to tackle waste and inefficiency is clearly the jobsite.
As Old as Pencil & Paper
One of the most archaic ways business is conducted on the jobsite today is the recording of employees’ labor each day. Whether tracking labored hours related to cost codes, production quantities or daily job notes, there has to be a better way than a piece of paper, a pencil and a fax machine. Not surprisingly, companies struggle with illegible timecards and invalid cost codes. They are overwhelmed with mounds of papers and processing delays. But more importantly, companies pay legions of payroll personnel to sit and type these timecards into their sophisticated accounting/ERP system. Amazingly, even with this data entry team, companies still come under pressure to complete payroll on time and accurately. Furthermore, with stacks of timesheets to process and the time delay getting them into the office, companies also are handicapped by days and days of delay before they know the financial status of their projects. Unfortunately, when management finally updates the status, they are still several days behind.
Who’s Behind and Why?
You are not the only one! In CFMA’s 2008 Information Technology Survey, 83% of respondents stated they do not use wireless/laptops/handheld devices for payroll purposes in the field. So, there must be reasons companies remain inefficient. A few are foremen technical capability, foremen time requirements and solution cost.
I often hear that foremen do not know how to use computers. However, at the same time, construction companies are putting more laptops in the field with other applications such as email, the internet for information such as weather updates, and document sharing. Furthermore, we visited with one foreman recently who makes his own paper spreadsheets bringing data from numerous sources to calculate job cost data on his own, which is much more difficult than using a computer. Finally, the construction industry is experiencing a labor shortage with few people desiring to go into the construction field. It is fair to say that the absence of technology makes construction jobs less appealing.
Foremen time requirements are probably the most misunderstood by companies. Oftentimes, someone points out that filling out a timecard by hand is much quicker for the foremen than using a computer. But, people are forgetting to analyze the entire paper timecard process. For example, companies often have foremen photocopying timecards, filling in by hand names, employee numbers, jobs, cost codes, and equipment. Foremen must look up job numbers and cost codes or call into the office to get new information. They may fax the sheets in and find out the fax did not go through. They spend extra time double checking their math and other information because there is no validation. All this time must be calculated when determining if a remote time entry solution can save foremen time, not just who wins a race to fill out a timecard.
What’s the Cost of This?
I doubt construction managers enjoy sitting around and calculating the cost of inefficient and wasteful business processes. However, if you want to examine your remote time entry process, here are a few areas to start.
- How many people in payroll process paper timesheets for what percentage of their time?
- What is their burdened compensation rate?
- What is the cost of always being __ days behind on visibility of the job?
- What would be the savings if you clocked in and out your field employees and recorded their actual work time instead of their “estimated” work time?
- How much time do foremen spend dealing with timesheets and in discussion with the office?
There Must Be A Better Way
Amazingly, there is a better way! Begin with the notion that all your necessary information is already in your sophisticated accounting/ERP system (employees, jobs, cost codes, equipment, rates, etc). Then, imagine that information being sent out to the jobsite for your foremen to access on a laptop or mobile device. At their fingertips, foremen can look up employees, valid cost codes, equipment, past timesheets, rates, job cost information, etc. At the end of the day, the foreman records the work of his crew. He fills out the same information he would on a paper timecard, but now he does it on his laptop. Simply, this information is instantaneously sent back to the office through a wireless connection. In the office, payroll personnel and supervisors are able to access, edit and approve this information. Upon final approval, all pertinent information goes into the accounting/ERP system and updates the appropriate areas.
Numerous Benefits
All of a sudden, payroll does not take legions of people performing data entry. The foreman enters the data once, as with a paper timesheet, with no need for duplicate data entry. In addition, information makes it back to the office quicker and project managers know the financial status of a project on a daily basis. Receiving information faster enables better decision making and quicker responses. Thirdly, foremen spend less time finding the right cost code and talking with people in the office about illegible and inaccurate timesheets. Instead, they spend more time focused on their responsibilities in the field. Finally, the company wastes significantly less time and money moving paper around. With waste and inefficiency reduced, margins and profitability grow. Construction companies can choose a better way.
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