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Transforming productivity in a stagnant industry by building a culture of trust and cooperation

Now after Slush 2017, it’s easy to remember how technology development during the past 20 years or so has greatly changed the ways how people live, work and recreate. However, there’s one industry which has stagnated in its renewal: construction sector.

Since the 1970s, construction sector’s labor productivity has remained almost flat. This poses a positive opportunity for change and as stated in the article in Helsingin Sanomat: “It’s funny to imagine that the outcome is something else if things are done in the same way.” (https://www.hs.fi/talous/art-2000005350624.html)

Some companies are already capturing this opportunity. According to August analysis, mid-sized general contractors and special contractors have clearly outpaced the market growth in Finland as the incumbent TOP 5 general contractors have stayed flat. One of the success factors for mid-sized contractors´ high performance is their innovative service concepts and business models both for new build and renovation. Consequently, the mid-sized contractors now capture an equal share of the construction profit pool with the large ones – a dramatic shift in just five years.

Does the poor productivity development matter to anyone outside the construction industry? Well it does since we all are customers and end-users for built environment. Finnish consumers have experienced constantly increasing housing expenses taking a larger share of their disposable incomes, despite the negative interest rates. Government holds a huge renovation debt in the public buildings and infrastructure, needing to choose which mold-school or hospital to renovate, while new infrastructure is desperately needed in the growth centers. These issues are difficult to resolve unless construction sector can produce more valuable outputs with the same inputs.

So, what can construction companies do to achieve their productivity leaps? According to August experience, the answers include well-managed design and planning, higher level of industrialization, lean construction site operations, technology and data utilization, aligned objectives across the parties, and a culture of collaboration. One thing that’s common to the most productive construction organizations I have worked with is that they identify themselves closer to running a repetitive production business rather than practicing the craft of construction in unique projects. Should I need to prioritize only one means for productivity improvement, I would choose culture: trustworthiness and collaboration are self-evident building blocks of many high-performing teams. Sometimes these traits are difficult to see in construction, but organizations which do succeed in embedding trust and collaboration into their DNA have a healthy foundation for experimenting new things, learning and becoming slightly better every day. Just like the cool tech start-ups in Slush.

Olli Lehtonen

By: Olli Lehtonen