By Daniel Bévort
There’s a difference between managing projects and running a construction company—at least that’s what most people think. Many companies will conduct internal capital projects to create a new product or improve efficiencies, but it’s not their main source of income. For construction companies, delivering projects is how they directly serve their customers, and essentially, how they make money. More specifically, the projects they deliver directly affect their bottom line.
The fact of the matter is productivity in the construction industry has remained stagnant and even declined. By understanding the seven challenges of the construction industry, it will be easier to take the necessary steps to be more productive, profitable, and ultimately successful.
ACCEPTANCE OF THE STATUS QUO
Construction companies are often submitting RFPs and RFIs for ERPs and business systems with requirements that are limited around project accounting. This assumes that any kind of financial and operational project management is done in third-party applications or spreadsheets, but not in the main business application. It’s time these companies demand more from the business solutions they adopt. Sticking to the status quo due to habit means technology providers will continue to sell glorified accounting software, which means construction companies will continue to manage their business processes through spreadsheets and disparate point solutions.
FAILING TO IDENTIFY AS A PROJECT BUSINESS
It’s impossible to identify as something you don’t know exists. The term Project Business has been around for a while, but it remains relatively unknown to project-based companies (e.g., construction) that should be recognizing themselves as such. Failing to identify as a Project Business causes them to focus on the wrong aspect of their business. Oftentimes, project-based companies will focus on the 5 percent of their business that makes them unique from other companies when really their focus should be on the core part of their business projects. To see the most productivity gains, construction companies need to take care of managing projects. After all, it’s 80 to 90 percent of what they do.
OPTIMIZATION OF PROJECT MANAGEMENT SILOS HAS MAXED OUT
There’s been a lot of effort in trying to squeeze as much efficiency out of silos, or the different aspects of project management that are managed in spreadsheets and point solutions that make up the fragmented data landscape. As a result, productivity in construction continues to decline. Instead of putting time and effort optimizing these individual silos, construction companies need to focus on optimizing the net total of all the silos and think of the enterprise as a whole and implement a single, integrated solution that manages all their Project Business processes.
INADEQUATE COMMUNICATION AMONG KEY STAKEHOLDERS OR LACK OF STAKEHOLDER COLLABORATION
Oftentimes, key stakeholders have different versions of project information and operate within their own silos, making it difficult for them to collaborate and have a shared opinion of where a project is at. Why? They are operating in different tools and using different information. It’s impossible to implement a communication strategy or Project Business governance program in such a disjointed arrangement. To do a better job of communicating, everyone needs to be on the same page. Giving key stakeholders the tools and having them work from one source of truth enables better outcomes for your projects.
LACK OF GOVERNANCE, LACK OF STANDARDIZED SYSTEM OF ORGANIZING THE DATA
Construction companies operate in a very fragmented application landscape, deploying multiple tools and solutions to manage their business. This results in the lack of Project Business governance—a standardized approach to the management of processes and data in project-based companies. Not only is it difficult to control the process, it’s also difficult to trust the output. In addition, instead of having a governed set of processes, you’re relying on individuals. In the long run, it makes it difficult for construction companies to have scalable business processes.
LACK OF AUTOMATION
Construction workloads or processes are usually limited within a silo. There are workloads that happen in the planning silo, workloads in a specific spreadsheet, or workloads that happen on the procurement side. If something happens in the planning silo, that event needs to translate into a spreadsheet or communicated to the procurement department. Lack of automation means someone needs to intervene and make that transition from one silo to the next. And oftentimes, that doesn’t happen. As a result, project controls and workloads are neglected, and it prevents the flow of information across the enterprise. Construction companies operate in a very fluid, high-risk environment that demands organizational agility.
LACK OF REAL-TIME INSIGHT
The number one complaint from C-level executives is they don’t actually know what’s going on with their projects until they are done. Why? They don’t have that information available. If they want that information, they must dedicate people to finding that specific information and presenting it in the right format. This means executives end up making important business decisions based on either no data or unreliable, outdated data. In some cases, they don’t make any decisions at all. In addition, lack of real-time insight means there’s no way to have early detection of issues. If you’re able to identify a problem while it’s small and manageable, then you can mitigate and prevent it from becoming worse.
If you’ve done the same thing for decades, making a big change can be difficult. But when the bread and butter of your company depends on completing projects on time and within budget, ensuring your Project Business processes are as efficient as they can be is essential. Recognizing the seven challenges of the construction industry not only helps you identify what solutions are possible but positions the company for growth and success.
About the author:
Daniel Bévort is founder and CEO of ADEACA. For more, visit www.adeaca.com.
Modern Contractor Solutions, August 2020
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