Construction Digitization: Understanding the Impact on Profitability *For Construction Pros

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For one of the global economy’s largest sectors, the construction industry has a mulish productivity problem. While labor productivity across all industries has jumped 2.8 percent over the past two decades, the construction industry has only seen a one percent productivity increase over the same time period, according to Reinventing Construction: A route to higher productivity, a McKinsey Global Institute (MGI) report.

That same report made a connection: If construction companies invest in digitization while also continuing to embrace new materials and advanced automation, they could see a 50-60 percent increase in their overall productivity. This MGI research indicates that making a digital transformation alone can result in productivity gains of about 15 percent and cost reductions in the range of 4 to 6 percent.

How Digitization Benefits Different Areas of a Construction Business

Digitization marks a shift away from traditional analog practices. It’s an integration of digital tools to streamline your existing business processes, like moving your time tracking, safety training and various paper forms online. This makes the field data collection process more efficient, improves time tracking accuracy, and centralizes the field data for global visibility. By turning away from cumbersome practices and investing in digitization, construction companies can level up their businesses, improving processes and systems to make employees more productive, reduce overall costs and, consequently, increase profitability.

But, the construction industry remains among the least digitized sectors, according to MGI’s digitization index. For an industry reliant on skilled labor—and facing an industry-wide shortage of said workers—it’s time to invest in technologies that help you get the most productive output from your workforce.  

Eliminating Time Tracking, Payroll Processing Losses

Paper time cards and spreadsheet tracking are profit killers. It’s estimated some 43 percent of hourly workers have exaggerated the time they’ve worked. From late arrivals and early departures to long lunches, these labor costs can add up quickly. The American Payroll Association estimates such “theft” of time amounts to about four hours per employee per week. Moving this process online eliminates such losses.

Take Archer Mechanical’s move to digitization for time tracking for example. For years, the Salt Lake City-based company specializing in sustainable mechanical and plumbing systems tracked their employees’ time manually. Tracking was the responsibility of project managers and superintendents who typically entered 40 hours for each employee on their crew into a spreadsheet at the end of a workweek. The spreadsheets were then emailed to the administrative office, reviewed and manually typed back into their accounting and payroll system. In total, it was a two-day process for one employee to complete every week.

The company wanted a faster, more efficient way to collect time and process payroll, so Archer Mechanical replaced its manual employee time tracking process with a mobile workforce platform solution. Each employee clocked in and out in real time with a face recognition confirmation to ensure it was the right employee clocking in and out and not the supervisor or another employee adding time to someone’s shift. By shifting the responsibility for tracking time from the field manager to the employee reduced the average total of labor hours per employee.

Utilizing a mobile workforce app to collect live field data with facial recognition to identify employees, the average labor hours were reduced to a total of 38 per week instead of the previously reported 40 hours per week through spreadsheets for a cost savings of $141,440 annually. All of the hours were accurately calculated by the mobile workforce platform in real time, which eliminated the 16 hours of manual data entry into their payroll solution. By digitizing their time tracking and payroll processing, Archer Mechanical decreased their employee time tracking processing, and reduced their payroll processing time by 75 percent. It now only takes the payroll manager four hours in total to complete what was a two-day process for an additional savings of $11,856 in payroll management labor costs in one year alone.

Regaining Productive Work Hours by Going Paperless

Have you ever stopped to consider how much time your administrative staff spends searching file cabinets and stacks of paperwork each week for a given document? Or how often they actually locate the information they’re looking for versus how frequently they come up empty handed? Research shows the majority of employees spend a quarter of their time searching for the information they need to do their jobs. When you think about their hourly wage, and how much time is wasted on a weekly, monthly and annual basis – and multiply that by several employees – the costs can be staggering.

What if you could get these hours back and cut out those costs altogether? Nayland Scaffold Limited did. The scanning of physical documents, time cards and handwritten reports left the New Zealand scaffolding contractor with months of backlog. With a cost of $15 an hour for an administrative worker to spend hours on end digitizing individual documents, the process was both expensive and inefficient. The company’s physical forms, including job tag, status change and site audit forms, were often illegible, missing critical information and riddled with errors.

Nayland Scaffold Limited decided to digitize their time tracking and paper forms with a mobile workforce platform. Now, not only could the company capture labor hours accurately and in real time, but all of their employees were more productive. Additionally, they were able to increase their overall billable hours to clients. The company’s office staff no longer had to decipher illegible time cards or forms. The office staff also no longer had to track down field employees when its now easy-to-complete digital forms and time cards were incomplete. They also eliminated the need to spend time scanning paper forms. With all of their forms digitized in one place and searchable, Nayland Scaffold Ltd. recovered those once wasted hours spent managing physical documents. By eliminating paper time cards and forms, the company’s cost savings totaled $172,476.

Integration Streamlines Operations, Cuts Costs with Live Field Data

Digitization not only helped Archer Mechanical and Nayland Scaffold Ltd. reduce their labor costs, it also resulted in the companies having access to live field data to help keep projects on target and produce more precise bids for future projects based on accurate historical costs. Real-time visibility lets team members across departments know if labor and production are going off plan almost instantly so they can mitigate issues and make informed decisions to quickly get back on track.

The digitization benefits are numerous. Not only can companies utilizing mobile workforce platforms customize their digital forms with easy to use drop down options, they can also add in photos to forms, like scope of work forms, to further document work that’s been done. Being easily accessible from any digital device, mobile workforce platforms are also helpful for preventative maintenance, confirming scope of work and providing evidence to mitigate disputes should an issue arise later. Companies can also create daily log reports that include daily progress reports and field notes that can be shared across their workforce to keep every member of the team informed of a project’s labor budget and production progress by leveraging real-time data.

Finally, from a health and safety standpoint, companies can also digitize their safety training and documentation.  Utilizing these technology tools, they can start sharing information on everything from preventing COVID-19 on the jobsite to updates on site safety procedures. This helps better ensure the safety of employees while also mitigating their risk for safety violations and fines. With Occupational Safety and Health Administration (OSHA) violations averaging $40,000, digitizing your company’s safety training and forms reduces your risk for offenses, leading to even more increased profitability overall.

When your team’s systems and processes are streamlined and more productive, you pay less for your labor and reduce your overall costs. By digitizing your administrative processes, like time tracking, form filing and even safety training, you can reduce human error and cut costs to increase productivity and profitability. Systems that work for you, rather than against you –– that’s what digitization can accomplish.