I’m sure at some stage we’ve all had a construction project that no matter what we did, or how hard we worked, the project was doomed to lose money. Month end cost reports just brought more bad news. Our bosses were grumpy and usually blamed us for the losses. We were told to cut costs, cut people and get the project back on track.
Most construction companies go through periods of good times, which are inevitably followed by a cycle when work is scarce, when profits turn to losses.
In an attempt to remain profitable, construction companies and projects resort to cost saving measures. Many of these cost saving measures are necessary and yield the desired results. Unfortunately, some measures are handled badly, go to extremes, or are counterproductive and eventually exacerbate the losses.
Cost saving measures that can cost money
If your construction project or company is losing money it's important to understand why, and then get to the underlying cause. Maybe you are losing money on wages and salary, but what is the real cause? It’s often not simply because there are too many people, and cutting staff may in fact exacerbate the problem. Sometimes there are even a number of reasons contributing to the problem so it’s important to uncover them all. Knowing the real reason the project or company is losing money enables you to rectify the problems.
Frequently it only takes small adjustments, or changing a few key people and the project can turn around. Unfortunately, some projects are doomed to make a loss – maybe they were priced badly, things didn’t go according to plan, or mistakes were made at the beginning. In these instances it's important to get the project finished as soon as possible while maintaining good quality and safety standards.
It’s easy to be depressed sometimes, but depression can be like a viral infection quickly spreading through the rest of the team, impacting morale and productivity. It’s important to keep the team’s morale up, to maintain good productivity. People don’t want to feel like they’re working for a losing team.
Construction companies will go through cycles of little work and scarce profits, but in these times good people, the right technology, good equipment and a good reputation are even more vital to the company’s survival.
It’s always vital to take a critical look at costs to see how we can reduce them, but we must do things for the right reason and not just for the sake of cutting costs. Don’t let your cost cutting measures cost you more than they are worth.
What cost cutting measures has your company taken that have backfired?
Have you taken a critical look at your costs recently to see how they could be reduced?
This article is adapted from information in the author’s popular books: 'Successful Construction Project Management: The Practical Guide' and 'Building a Successful Construction Company: The Practical Guide' and 'Construction Project Management: Tips and Insights'
'Construction Claims: A Short Guide for Contractors' is another of Paul's useful books.
Paul has recently published 'Construction Management: From Project Concept to completion'.
These books are available on Amazon and other online book stores.
Paul publishes articles regularly on LinkedIn and his website.
Paul writes regular articles for other websites, gives lectures, mentors, and is available for podcasts and interviews.
© 2018 This article is not to be reproduced for commercial purposes without written permission from the author.
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Copyright 2016 - The attached articles cannot be reproduced for commercial purposes without the consent of the author.
The opinions expressed in the attached articles are those of the writer. It should be noted that projects are varied and different laws and restrictions apply which depend on the location of the contractor and the project. It's important that the reader uses the supplied information taking cognisance of their particular circumstances. The writer assumes no responsibility or liability for any loss of any kind arising from the reader using the information or advice contained herein.
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