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Labour is often a major component of the costs on a project. It sometimes accounts for more than 50% of the costs, meaning even a 10% improvement in efficiency can result in an additional 5% profit. Of course the converse is true, and if labour is 10% less efficient than expected then the profit is reduced by 5%.
But it’s usually more than just the direct costs of the workers. Low productivity means more workers are required, which adds additional costs for accommodation, transport, mobilisation and supervision. Poor productivity also impacts the schedule which can result in the client imposing penalties for late completion as well as the contractor incurring additional overhead costs. A major cause of poor productivity is a demotivated workforce. See the attached interesting article: The Warning Signs of a Demotivated Workforce We will discuss other causes of poor labour productivity in future articles.
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November 2024
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