Trust me, this article is about Productivity

Social media-fuelled debate thrives on immediacy and drama:

“I’m OUTRAGED!”

“who’s dropped the ball on that?”

“Someone (obviously not me) should fix that!”

“wHy haven’t they fixed it yet?”

Sometimes short-term, reactive behaviour is exactly what’s needed.

Pretty much every business owner I meet, can recall the frantic feeling soon after they founded their business. The rushing about (like a Labrador dog on lino if you will) chasing work – any work – to pay for the new staff just taken on or the shiny plant newly leased. That’s the anxious energy that gets us out of bed every day, ready to have another go at getting things done and driving the business forward.

with growth and success though, comes a gradual but sustained change in feeling, from frantic to confident. And with confidence comes a change in focus and thinking, from short term and reactive to more long-term and strategic.

The current debate regarding productivity improvement in the construction industry is an important one that must be had. The trouble we face is associated with the intrinsic nature of productivity.

As the Productivity Commission’s February 2023 5-Year Productivity Inquiry report tagged “Advancing Prosperity” reminds us, productivity improvement requires long-term, strategic change rather than short-term reactive activity. Specifically, actions associated with future rewards that attract little of the immediate dopamine-fuelled feedback of a social media debate.

Productivity improvements are measured and aggregated into a single number — the rise in Gross Domestic Product (GDP) per hour worked across the economy. It is an imperfect measure with enormous value if we interpret it carefully. The important message of the Commission’s report is that the average rate of productivity growth in Australia has slowed in the last 20 years, as it has in much of the developed world. This trend spells bad news for the future improvements in living standards we’ve enjoyed, particularly over the last thirty years.

There is a great deal of variation in productivity performance across the various sectors that comprise an economy. Some parts of the economy have experienced massive technological transformation and innovation, while other sectors not so much.

So where does Engineering and Construction fit in this?

Construction is considered for the purposes of GDP measurement, to be a product industry (think combining labour, raw materials, skills, and other resource inputs to produce an output such as a bridge, road or building). However, the reality of our industry as an elaborate web of product and services businesses creating complex assets, gives us a clue as to where productivity-related issues truly lie.

What is the size of the problem?

Consider the chart below, illustrating percentage annual growth in multifactor productivity for various Australian industry groupings over a thirty-year period.

Average industry productivity for Transport, Manufacturing, and other Selected Industries has improved by more than 33% since 1990. Construction however has performed abysmally, actually decreased by 1% over the same period.

Why? Consider for instance the number of hands typically involved in observing the actual digging of a hole, or alternatively the layers of bureaucracy involved in our current industry version of safety management. This is the very definition of poor productivity!

Consider too the challenges involved in harnessing data and digital technology which has enabled the transformation of other sectors of the economy. Widespread implementation of 5D “digital twin” modelling from design through to asset maintenance on major projects, remains constrained by integration issues across the plethora of systems utilised by supply chains.

In case you’re wondering, there’s no shortage of ideas regarding what can be done to improve industry productivity. That’s actually the why for the Productivity Commission: proposing solutions to Government regarding productivity-related problems. The blocker (as with many similar challenges) lies with a lack of political will, borne of widespread public resistance to Governments of all levels making tough calls now to achieve future benefits.

Regardless though, change will come. And as with all long-term change, for a long time it will feel like nothing has happened. And all of a sudden everything will feel very different.

The business challenge lies then in being adaptable, and developing a strategy that positions the organisation to take advantage of this new world.

Peter Wilkinson – Director, Sam Wilko Advisory

Author of “The Steel Ceiling: Achieving Sustainable Growth in Engineering and Construction”?Wiley, 2023