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The environment in which the NZ construction sector operates increasingly demands a much higher level of integration, responsiveness and collaboration on a supply chain level

Collaboration and performance in the construction sector – By Herman Potgieter

There’s no doubting the impact of a better-performing construction sector on the New Zealand community, as well as people working within the sector. What are the current issues and how can we improve performance?

The performance of the construction sector has a ripple effect across the New Zealand community, and especially on the thousands of people working within the industry. Linked to an improvement in performance, investment in construction has a significant impact on the whole economy. However, it takes a significant amount of leadership and a genuine willingness to address some of the systemic issues on a collaborative basis to maximise the ongoing value from this investment.

A core challenge facing the construction sector is to achieve a substantial improvement in productivity, coupled with an improvement in alignment across the value chain. This has been achieved in many other economies, and as recent research and pilot operations show, there is no reason why this cannot be achieved in New Zealand. But we need to be aware of the current level of maturity of the sector, and we should be extremely practical and focus on those few issues that provide the best return now.

Performance improvement

Globally, performance improvement is maturing: from individual performances of single organisations, towards the performance of integrated supply chains, and then towards the performance of the sector on an industry-cluster basis.

An industry cluster entails an extremely high level of collaboration between construction firms, clients, central government, training institutions, investors and so on. When we talk about maturity, we are really talking about the movement of organisations along this path, which includes organisational practices, leadership, values, procurement and PPP relationships. Global players with high levels of maturity tend to far outperform local companies trying to compete on their own. The recently announced Construction Sector Accord is a positive development in this direction.

At Lumus, our focus has been to work with the industry sector to accelerate performance improvement and alignment along this path. In construction, and in line with international examples and benchmarking, there is typically a 20–25% productivity improvement that can be gained on this basis, where the impact on people’s daily lives is also significant.

Based on our experience with the UN in other economies to drive change on this basis, as well as recent operations and research in New Zealand, the following are some suggestions.

Collaborative practices

The environment in which the NZ construction sector operates increasingly demands a much higher level of integration, responsiveness and collaboration on a supply chain level. Yet the reality is that many organisations in the value chain, including clients, simply do not have the underlying daily practices, attitudes and leadership and hence the maturity to operate on this level.

For example, collaborative planning, which requires significant joint input and visibility on future work, has a major effect on cost, risk, the quality of jobs and the willingness of the local industry to invest in capacity. This is normally a first and basic area of focus in cluster initiatives, yet here in NZ we tend to struggle with this.

A typical symptom of a lack of appropriate collaborative practices is operational management being in a constant state of firefighting to fix issues. It often leads to excessive amounts of finger-pointing between organisations, leading to greater levels of misalignment that further erodes collaboration.

We therefore end up with a fragmented and inefficient system issue that feeds on itself, especially if there is a lack of understanding across the value chain to address the underlying systemic issues.

Instability and the waste of people’s time spent trying to work together effectively, often in the same organisation, affects people on a very personal level. It erodes family time, causes high levels of stress and contributes to a demotivating work environment. It affects our ability to attract and retain new blood willing to challenge the way the industry operates.

What ‘good’ looks like

A major attribute of more mature organisations is a deep value of caring for people, which is supported by business practices that embed participation, communication and personal accountability. The result is a more responsive organisation that addresses issues immediately at the right levels. This gives the management team more capacity to address the long-term issues.

A lack of exposure to other industries results in a lack of understanding of what ‘good’ looks like. The UK embarked on a similar programme and achieved a 20% output improvement in construction, largely based on the lessons learned from other industries. Many of the more mature practices and behaviours that we developed with the infrastructure sector were gained from input from organisations like Ford, petrochemical firms, global procurement organisations, and the overseas organisation responsible for performance improvement work in Fonterra.

New Zealand is a small country where collaboration should be easier and a natural strength. Yet a silo attitude often prevails, with organisations not willing to collaborate on issues that have an impact on the total value chain. A typical example is around the number of different procurement accreditation frameworks within the main contractors and clients. The result is that second and third-tier contractors are inundated with various overlapping accreditation frameworks, often for the same piece of work.

A key aspect of the New Zealand construction sector is the number of small players who are difficult to reach and to support in their development. Yet this can be done through a variety of mechanisms, providing that there is also a high level of alignment within the development community in this regard.

Key suggestions

Accord initiatives often come with a high level of unrealistic expectations and political pressure that needs to be tempered to create an environment that can effectively deliver the change. While there are several low-hanging fruit to create momentum and we can accelerate delivery, some of the systemic and maturity issues may typically take up to five years to address. Communication and engagement on this is essential.

Initially, the focus should ideally be on those issues that create more stability and the management capacity for change. This typically requires joint process review workshops between clients and the contractors to address instability and reduce frustrations. This may include addressing ongoing and unnecessary changes to delivery programmes that has a ripple effect down the value chain.

A small step which has a substantial impact across all players is the adoption of a common performance maturity framework that drives development across the industry. Based on the NZ pilots, we started with the adaption of the international Lumus construction maturity framework, which can be used by contractors at their own cost to better understand their maturity, the development gaps and the next steps to address these.

It simply means that contractors, clients, buyers, risk managers and support organisations move towards a common language which accelerates development on a sector level. A first step is to get broader input to ensure this incorporates the wellbeing and economic objectives of the sector, which we are currently busy with.

As indicated earlier, a final suggestion is that the value of caring for people could be used as a primary theme for change. It mobilises people, challenges the status quo and creates a better work environment. It also happens to be damn good business.

Herman Potgieter is a director of Lumus; he served internationally as programme manager for the UN to drive performance improvement on an industry level within the infrastructure sector; he can be contacted at pothe@lumus.net


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