November 23, 2011
Overtime and the loss of productivity
Guest Column | Jeff Skosnik
It has been reported that Canada's construction industry will need about 320,000 workers over the next nine years to meet demand for new construction and to replace retirements and mortalities.
The labour supply is likely to fall short of the need, which in turn is likely to result in more work being done at overtime rates. This problem may be exacerbated by poor project planning that compresses time frames, resulting in yet more overtime.
Research indicates that in about 73 per cent of construction delays, project owners refuse to grant time extensions.
Therefore, when estimating project costs, managers and project planners need to be aware of the full costs of overtime.
A recent study by Dr. Awad Hanna identifies and quantifies some of these hidden costs, including fatigue, low morale, higher cost per unit, higher accident rate, and pacing.
Pacing is described by the US Army as when workers tend to pace themselves for a longer work day or work week, which reduces productivity.
A few points of his research paper, Impact of Overtime on Electrical Labor Productivity: A Measured Mile Approach, is summarized here. The full paper is available from http://www.ceca.org. He used both U.S. and Canadian data.
The approach used in Hanna’s paper is the gold standard for analyzing labour productivity losses due to multiple variables, such as overtime, schedule changes, scope changes, and less than perfect labour and management situations.
The approach compares unit productivity under various circumstances.
“The theory is that the difference between a contractor’s actual inefficient productivity and an identified normal productivity is the amount of excess cost to the contractor as a direct result of labor inefficiencies and loss of productivity,” he stated.
Using this approach, Hanna found that placing an electrical crew on scheduled or unscheduled overtime reduces labor productivity and increases labor costs.
“A greater number of hours worked beyond the regular forty hours per week is related to higher productivity losses,” he wrote. “There is a direct correlation between labor inefficiency and the duration of overtime use.” Broadly speaking, I believe that Hanna’s well researched conclusions apply to the whole construction industry, not just the electrical sector.
They certainly apply to the power line construction sector, which, as the government noted in its recent review of BC Hydro, has been characterized by far too much scheduled overtime for far too long.
I am pleased that the Line Contractors Association (LCA) and BC Hydro are now working closely together to reduce the amount of scheduled overtime in the power line industry through better project planning and scheduling. This should allow work to be spread more evenly over the year and thus require less overtime because more work can be decompressed to fit into the normal 40 hour work week.
In addition to better project scheduling to break the cycle of alternating periods of feast and famine in the industry, it is important that enough workers are trained. Hanna’s methodology may be adaptable to forecasting long-term, global apprenticeship requirements in the volatile construction labour market by better defining the cross-over point where adding apprentices is more cost effective than adding overtime.
The power line industry could serve as an excellent case study directed at developing better tools for predicting apprenticeship training needs.
It helps that BC Hydro’s historical overtime records are publicly available, and its projected labour needs are be reasonably well defined.
Jeff Skosnik is the CEO of the LCA of B.C., a non-profit association of private sector power line companies. Prior to becoming CEO of the LCA, Jeff was the Dean of Electrical and Electronic Technology at the BCIT.
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