In construction, we can’t solve a global pandemic, but we can protect our contracting companies by keeping overhead flexible in case business declines. It may require going against your assumptions. To keep permanent staff levels low enough, make judicious use of overtime, put on extra shifts and hire foremen and forewomen who won’t hesitate to go back to toolwork when the amount of work available to the company falls off. Using part-time or student workers can help during peak periods of work. In busy times, even occasional outsourcing of work to a competitor is better than keeping too many people on the payroll.

Schleifer

The standard objection I hear to having craft labor work overtime is this: “I can’t make money at time and half.” But that is in error.

Numerous academic studies have verified that getting to and from the face of the work for the start of a shift, breaks and lunch cut into the total time of productive work in an eight-hour day (depending on the study or size of project). The actual amount of work time is plus-or-minus 6.6 hours, or 82.5% of the day. An hour of overtime, however, is 60 minutes of work or 100% of productive time. Two hours of overtime provides even more payback for the cost.

There is an added cost to overtime work, of course, but nowhere near the expense of putting on additional permanent overhead in the form of a bigger permanent staff.

Contractors whose opportunities and contracts expand should consider adding a second shift to a project before expanding permanent resources. Many hesitate or are unwilling to consider adding a shift to the normal workday. Working shifts is unusual, and construction generally is seen as a daytime activity. One approach to an overtime shift is to use only a small, hand-picked crew and, to the extent possible, to do primarily the most repetitious work at night. The night shift workers thus make use of the existing facilities and equipment and don’t require more to do the work.

A double shift is cost effective when used to permanently expand a project staff. There is added cost, but not nearly as much as the continuous cost and risk of more permanent overhead.

Reducing staff at a company-operated equipment or storage yard, which is common for self-performers such as general masonry or concrete contractors, is possible, too. Some large yards have staff that includes full-time supervisors, yard workers and truck drivers. It’s hard to envision how everything can be done with fewer staff. Deciding to try adding a shift is much harder than doing it.

Several years ago, a Midwest contractor told me he had to keep all of his nine-member yard staff because “these employees know where everything is, how to handle it, and where to deliver it. So we can’t just let them go when work slows.”

For this contractor, the yard staff was much busier in summer, while  work slowed to a crawl every winter when only three staff members were needed. Heeding my advice, the contractor let go six of the yard staff in the fall. Then, managers mapped all equipment locations, labeled the equipment and locations and installed GPS in the delivery trucks. The following spring, the contractor added to the yard staff. With improved efficiency, supervision, and a little overtime, seven people have handled the yard.

There are some other concerns. In a union firm, the engaging and letting go of field labor is almost routine and so the issue of staff levels self-corrects. Open-shop employees trained at the firm’s expense are harder to part with. Contractors need the highly skilled first-level managers, superintendents and project managers.

To keep labor overhead flexible in case of a falloff in business, the first-level staff managers, foremen and forewomen, most of whom have first worked in a trade, must be willing to go back to working with their tools; superintendents and even project managers with craft work experience must go back to being foremen or working with their tools, too. I am asked, “What if they refuse?” And my answer is: “They have announced their lack of loyalty, so let them go.”

When you are trying to protect your company from a severe market decline, there is little to be gained negotiating with people whose jobs you were trying to save.