Understanding utilization for general contractors

Understanding utilization for general contractors

In an industry where labor costs account for a huge percentage of your actual job costs, there are few metrics more crucial to success in construction than workforce utilization. After all, time is a limiting factor for construction. No matter how efficient you are, there are only so many hours in a workday.

Many factors can impact utilization, and there are several ways to improve your construction firm’s utilization rates. Check out how we define utilization and what you can do for better and more efficient management.

What is workforce utilization?

Workforce utilization is a key metric for businesses and organizations of all sizes. It helps managers assess whether they’re making the most efficient use of their employees’ time and skills and can be a useful tool for identifying potential areas of improvement within the company. 

In other words, utilization metrics let you know how much of your workforce’s available time is spent on billable work. This, in turn, lets you budget accordingly and oversee your project’s expenses more effectively.

Utilization rates are typically expressed as a percentage, varying from company to company, depending on the industry. For example, the average direct labor utilization is around 65 to 85%. 

Taking away vacation time and public holidays, most construction employees get at least 38 to 40 working hours each week, with 23% of “waged and salaried” employees working overtime hours, which should also be accounted for.

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Understanding labor utilization rate

Since utilization measures how much available time is used in productive work, understanding it equips you with the skills to do more with less. Utilization gives great insight into your company’s profitability and construction workforce management, so improving utilization rates is extremely important.

A consistently high labor utilization rate, for example, means that your workforce is at risk of being overworked or spread too thin, which can end up detrimental to growth. Utilization above 100% can imply that too many projects have been taken on, or a need to expand your workforce. 

Meanwhile, a low utilization rate for an extended period of time means that you need to bring in more projects.

Tracking utilization

Tracking utilization helps businesses make strategic decisions about allocating their resources while also being a valuable metric to benchmark performance against competitors. Businesses can make necessary adjustments to stay ahead of the competition by examining how utilization rates compare to other companies.

Tracking utilization for each skill and employee type (such as project managers or superintendents) helps you plan when to hire. Doing so with different skill sets shows your demand for different services.

In summary, workforce utilization helps you better understand project costs, map demand for different skills and certifications, and develop your workforce.

Common challenges of workforce utilization in the construction industry

Some common challenges in the construction industry these days that affect utilization include the following:

  • New employees take longer to become acclimated and become productive
  • High turnover rates due to nonproductive and unsafe working conditions
  • Unskilled and untrained workers coming in record numbers to fill the worker shortage
  • More experienced workers are retiring or leaving the industry with no younger workers to replace them
  • Overextending existing workers due to lack of available labor

How a poorly positioned workforce happens

How does an operations team poorly position its workforce? Some common causes are:

  • Giving inexperienced workers tasks for difficult jobs
  • Creating less-than-ideal crews without consideration for individual talents, skills, and personalities
  • Putting the wrong people on projects rather than selecting those who are skilled enough and suited to address problems
  • Assigning too many workers to a crew due to a lack of accuracy in labor utilization rates
  • Placing too few people on a project or crew increases the likelihood that other workers will be standing around doing nothing

Some contractors do a great job of optimizing their workforce with knowledge and skills to strengthen performance. Still, for an industry in need of a new generation of workers, it would seem that treating your team as your most important asset might just help your struggle to fill gaps in your workforce with whoever is available.

Managing workforce utilization

Construction companies can take a few different approaches to manage their utilization.

1. Use better construction workforce management software

There’s only so much you can do with a spreadsheet before you begin to run the risk of errors and inaccurate data. Your construction workforce planning should be built on accurate data to avoid overworking or underutilizing your workforce and prevent missing opportunities to provide meaningful work.

Software solutions like Bridgit Bench were designed to clarify your workforce plan and provide accurate data on labor utilization rates to equip you with the information you need to get the most out of your project teams. 

There’s no better way to judge a project’s performance than to look at your project history. This lets you see who the key performers were and what impacted the success of those projects. Accessing your entire project history is just one of the many benefits of improving your tech stack with better construction workforce management software.

2. Fit the right people to the right projects

Putting the right people on the job isn’t easy, and sometimes it’s impossible. The construction industry needs workers, and sometimes gaps need to be filled, but you must make a strong effort to connect people to projects that will allow them to put their best foot forward. 

Part of workforce utilization is ensuring that employees are qualified and fit for the job. If your workers are good at what they do and are happy doing it, they tend to stay longer, work harder, and produce better results.

When the time does come, and you have to put someone on a project role that isn’t a good fit, be upfront and work to support them by providing resources to help them see the project through.

3. Keep track of employee skills and experience

Tracking and deciding who to put on the job is similar to coaching. A coach will keep track of players’ abilities and experiences in different game-time situations, so when a player goes down, or a specific scenario presents itself, the coach knows exactly which players can step into those roles for continued success.

4. Staff lean when possible

As most workforces are spread thin these days, there’s a tendency to throw extra people at difficult scenarios and projects to improve labor utilization rates. This can lead to idle hands walking the job site, which is more of a distraction than anything. 

Knowing which people are suitable for which work helps keep your teams lean and profitable. Removing those distractions helps keep them focused on the tasks at hand.

5. Minimize “on-the-bench” time

Bench time is simply hours worked that aren’t billable to a project. This could mean there isn’t enough work, skills and experience are lacking, the workforce hasn’t been delegated properly, or an error in the current workforce plan has led to people “falling through the cracks.” 

Thousands of dollars have been lost within weeks simply because of mislabeled job titles in a spreadsheet. Bench time is unavoidable in most cases, but you can minimize it. Better construction workforce management practices can ensure that your teams are optimized for success.

If skills and experience are lacking, use this time to train or provide the experience needed to utilize people later at even better labor utilization rates.

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Managing your workforce is crucial

Utilization management is important for your construction firm’s success, but it doesn’t have to be complicated. Enlisting the help of technological solutions can make overseeing labor much easier.

Bridgit Bench is one of the best construction workforce management software solutions. Built for construction, users can effectively track workforce experience and skills while accessing the clarity needed to find the right people for the project. Our platform provides visualizations and reporting that spreadsheets simply can’t.

Leading general contractors across North America are better utilizing their teams with Bridgit Bench. When you need to improve workforce utilization management, choose Bridgit Bench.

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Michel Richer

Michel Richer is the Manager of Content and Product Marketing at Bridgit. He started in the construction industry early on with a local restoration company. Michel is driven to propel the construction industry forward by helping to eliminate outdated, ineffective processes.

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