Will our current tough market prove to be a catalyst for improved efficiency?
It has been 12 years since Sir John Egan first championed the case for applying “Lean Thinking” in the construction sector. Since then innumerable additional reports and other work has explored, debated and developed thinking of how the goal of considerably greater efficiency can be delivered by the UK construction sector. Despite this, little has actually changed.
This was recently highlighted by Constructing Excellence, the organisation charged with driving the change agenda in construction. The report, entitled Never Waste a Good Crisis, found that whilst the industry is moving in the right direction, it has fallen well short of Egan’s targets.
Both safety and profitability have taken reasonable steps forward, but progress on all other areas has been disappointing with an annual improvement of less than 3%.
Based on the input of over 1,000 industry professionals, who completed online questionnaires, in depth interviews with senior industry figures and key performance indicators from over 500 demonstration projects, the review highlights the issues that continue to stifle progress in the sector. These ‘blockers’ are business models based on short term cycles, a fragmented industry, poor integration in the supply chain, and a lack of strategic commitment at senior management and government levels.
Chair of the Review Team Andrew Wolstenholme said: “For the last decade the construction industry has been sheltered by a strong economy. The current economic crisis is the perfect opportunity for us to restart the process and create a built environment sector this country deserves.”
Few people question the view that the industry is going to have a more challenging time over the next couple of years. Perhaps the CIRIA (Construction Industry Research and Information Association) Lean Guide for Construction, to be published later this year, will prove a further timely stimulus for the systemic change in productivity and efficiency that Sir John Egan first championed back in 1998.
Protecting margins and jobs
The report, like those before it, makes a very strong case for the widespread adoption of Lean both as a means of delivering client value whilst achieving the efficiency and cost savings that companies will need, if they are to maintain margins and protect jobs.
The trouble is that government and senior management will need to change their approach and attitudes to the way they evaluate success. Central and local government are going to have to move away from a focus on certainty of cost and rewarding construction companies on being within plus or minus 10% of the quoted cost, to one of benchmarking quality and operational efficiency.
Whilst this approach may require more work, care, consideration and negotiation at the outset, in order to ensure that targets give due consideration to the vagaries of each construction project, construction companies will have a clear and sizable financial incentive to eliminate waste and improve operational efficiency on the scale Sir John Egan envisaged back in 1998.
- Stuart Smith is managing director of Bourton Group