"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, I proposed the following terms as a “standard” for defining 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)

I believe this “standardization” of terminology for the construction industry will greatly improve our understanding—our collective intelligence. What we lack is a process to measure the collective intelligence of everyone in construction—and when I say “everyone” I am including the new hire that just graduated from high school.

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. But I have had the luxury of experiencing 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, meaning that the number of Cost Work Codes we could accurately ask every employee to report their time to daily had to be less than what our estimators were wanting. We started with paper in the early 1990s but in 1999 we developed a website that could show the data in real-time and connect 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.

The estimators still wanted more detail but the collective intelligence did not match the estimator’s intelligence. The solution is shown in the chart above. The 10 fields 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. With that 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.

In the chart above you will see 10 fields that were added on the right of the Cost Work Code that defines the skills needed 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 levels of skill:

  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 skill levels to their time and it is approved daily. The employee now knows where they stand 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 two basic questions answered. My question for you is how well are you answering?

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.