Using Phases/Cost Codes – Part 1 Standardization
January 10, 2018
3 Simple Steps to Build Employee Trust
March 14, 2018
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Using Phases/Cost Codes – Part 2 Collective Intelligence

“The goal of standardization is to create a measuring system that increases the collective intelligence of the entire construction industry including the craftsmen and apprentices.” – Lee Clark

In Part 1, the following points were proposed as a “standard” to what is a Cost Work Code?

  • Phases = areas, floors, buildings, etc. (Schedule, Sequencing)
  • Cost Work Codes = footings, CIP walls, slab on grade, etc. (Production Measuring, Skill)
  • Cost Classes = labor, material, subcontractor, etc. (Cost)

The above represents a “standardization” of terminology for the construction industry that I believe would greatly improve our industry. What we lack is a process to measure the collective intelligence of everyone in construction. When I say “everyone” I am including the new hire that just graduated from high school. In a blog by Sabine Hossenfelder she elaborates in great detail to the concept of collective intelligence.

I have been in the industry for 25 years watching management get frustrated with the field because they won’t do paperwork or understand their needs. So the great wall between the office and field has continued. I had the luxury to experience something completely different.

In 1999 we developed a process that involves “everyone”. All field employees and management had to actively participate. The idea came from the time collection process. Our goal was to answer a basic question that all the employees wanted to know, “How did I do today, Boss”? We simply added the production information to every time ticket! To do this we had to start simple. By simple I mean the number of Cost Work Codes we could accurately ask every employee to report their time to daily had to be less than our estimators were wanting. We started with paper in the early 90’s but in 1999 we developed a website that could show the data in real-time and connected to our accounting system. The employees loved it! As everyone started to understand what and how to measure production, the collective intelligence increased. With this increased intelligence we could add Cost Work Codes. The estimators were getting accurate results from the measuring system that allowed them to historically go back and review for future estimates.

 

 

 

Coding

They still wanted more detail but the collective intelligence did not match the estimator’s intelligence. Again the solution is shown in the chart above. The 10 fields were added to each Cost Work Code on the left under Production gave us the ability to filter the completed production results in the historical database. Now the estimators could narrow the data down to exactly what they needed to feel comfortable with the amount of labor required to establish each bid. With more eyes on the daily production the estimated job costs when compared to the actual costs became very accurate at determining the percent completed because the costs were following the production measuring system. Our work in progress was factual and did not require “manipulation” to establish the monthly financials.

Everyone was happy except human resources. They still had employees asking the question “How do I get a pay raise?” This is where the idea for Skill Based Pay was developed. (See previous article) In the chart above you will see 10 fields that were added on the right of the Cost Work Code that defines the skills required to accomplish the Cost Work Code. We also added a required number of hours needed before the employee could be eligible for a pay raise. Every day the employee is evaluated on the standardized skills required for the Cost Work Code based on 5 simple answers.

  1. They don’t know the skill.
  2. They somewhat know the skill.
  3. They know the skill.
  4. They know the skill and can supervise it.
  5. They know the skill, can supervise it and train it.

When the foreman/superintendent approves the employee time for the day he simply assigns one of the above answers to their time and it is approved daily. The employee now knows where they are in the skills required for pay raises and the length of time (hours) remaining that the company expects for them to have experienced the variables that may be associated with each Cost Work Code. The training expanded to every employee communicating the skills needed daily in conversation and helping each other meet the goals!

The above coding system has proven over the last 25 years that production can be measured and the process in doing it starts conversations that improve the bottom line and more importantly is fun for everyone! I have heard repeatedly that this type of system will not work for some clients. All employees want the 2 basic questions answered for them. My question is how well are you answering them? By answering them you will see the collective intelligence improve dramatically. The results will surprise you! Feel free to comment or email me with any questions you may have.

Lee Clark
Lee Clark

As the CEO and co-founder of PayCrew, Lee Clark is passionate about the people in the field, because he understands the importance of trust between a company and its people. As a construction business owner, he saw first-hand how attracting and retaining skilled people form the foundation of a company’s success.

Lee has a passion for measuring daily performance in the construction industry and is also a regular contributor at Concrete Construction.