Why the answer to contractors’ shrinking margins is already in workers’ hands
In the UK we have created a construction industry that makes everyone poorer. Not just workers, but contractors – who take the lowest margins in Europe – and the people who eventually pay high prices for their buildings. The system isn’t working as well as it should.
If contractors aren’t profitable, then they can’t afford to innovate. We know that the cost of re-work is as much as the total profits for most tier 1 contractors. And yet we also know that engaged, motivated workers make fewer mistakes.
Improving communication and engagement should be good for everyone in the value chain. Virtually every worker today has a smartphone, yet contractors have barely scratched the surface of what that access to technology could enable.
Our team has worked both on the tools and in project management. We’ve spoken to workers, managers and leaders across multiple sites throughout the UK and they all agree that the construction industry could do better and needs to change.
Why can’t contractors improve profitability?
In London, total construction costs are the highest in Europe. Prelims (i.e., all the costs of design, planning, etc., before the building starts) are high, but not higher than Stockholm. Yet London margins are the lowest in the world.
London’s not quite as expensive as San Francisco, but Californian workers earn more than double what London workers make. Somehow, in Stockholm, where costs are a third lower and prelims higher, contractors make about double.
Fig 1: Preliminaries vs margins vs costs – International Construction Market Survey 2021, Turner & Townsend
If there’s an opportunity to be more profitable, why aren’t contractors seeking it?
Construction in this country is stuck in a “local minimum” of efficiency. A local minimum happens when a system has optimised in one direction. It means that to get to a better state (i.e., a lower minimum), it would have to get worse.
Fig 2: UK's local minimum of efficiency
UK construction has optimised around the subcontractor model to a much greater extent than other European countries, which has led to a complex mix of relationships. Moving out of this model would require getting less efficient in the hope that another model could be more efficient. And construction companies are currently not profitable enough to take that risk.
So what can be done?
Contractors don’t have the communication channels in place for workers to tell them how they could improve. Despite almost all workers having sophisticated devices in their hands, site teams still rely on gated WhatsApp groups and word-of-mouth to communicate.
Other industries, by comparison, now use apps throughout the value chain. We bank on our phones, shop, travel, get the world news and play games – even meet potential partners through them! Our phones can even provide language translation at the tap of a button, breaking down social barriers.
At Worker Feedback Club we’ve developed an app-based platform that enables effective communication on construction sites. It allows site teams and workers to communicate quickly, easily and reliably, to share important alerts and provide feedback: from hazards to general site access. And we are designing it in a way that can reduce interpersonal barriers and fuel engagement.
Some important lessons
Through our work on site we’ve learned some important lessons. We’ve been deploying our platform on sites of different sizes and picked up insights for successfully improving communication and productivity:
Tell and check | Don’t assume that because a message has been delivered, it has been understood or even heard.
Everyone hates a chain letter | WhatsApp groups are inefficient. No one wants to wade back through 50+ replies to find what they’re looking for.
Don’t just listen to the loudest | The most helpful insights can often come from people who feel least confident speaking up.
How can Worker Feedback Club help?
The answer to contractors’ shrinking margins is already in workers’ hands. Workers already own the critical piece of technology that can boost productivity on site and increase contractor margins – and allow the UK construction industry to improve.
But without harnessing the power of apps – technology that people in other sectors now take for granted – the construction sector as a whole will continue to get stuck with high costs and low profitability.
With Worker Feedback Club, every person effectively has his or her own supportive manager in their pocket, giving them the confidence and respect of being de facto employees that are listened to and communicated with transparently.
If you're a contractor, Worker Feedback Club can help you manage communication on your sites, with simple implementation, ongoing support and smart presentation of key feedback.
This can help to reduce the likelihood and costs of re-work – and improve health, safety and wellbeing, while also making your sites desirable places for people to work, which is no trivial matter amidst today’s shortage of talent.
Email us to learn more and find out how we can help you.