Plugging holes in the profitability bucket

John Forster, Group chairman, Forster Group

Plugging holes in the profitability bucket

The Government’s new industrial strategy, launched for consultation last week, had a sharp focus on increasing the UK’s productivity. But what does that mean for the construction industry? John Forster of the Forster Group gives his view.

Productivity can mean different things to different people across the construction industry. Governments tell us our productivity should be getting better. Many larger companies are already aware of its importance and are working on ways to improve their productivity. However, there will be many others - as well as some of the thousands of small businesses in our industry - that might not have it so high up on their agendas.

Forster Group is classed as a medium sized business – there are only 360 medium sized construction businesses in Scotland, so it sometimes feels like we’re a bit of a protected species. Forster’s claim to fame is that we put roofs on one in five of Scotland’s new build homes, and also provide a fully integrated solar roof service.

So why am I qualified to talk about improving productivity within the construction industry? What can I tell you about productivity that you don’t already know?

Well, like many other construction businesses, Forster peaked in 2007, when we were told by many people that we were a very good business, and we were certainly really profitable. Then of course, the recession hit.

I like to use the analogy of a bucket to illustrate the challenge posed by this. Imagine the bucket is your business, and the contents of the bucket are the value of your business. The market and your customers are the tap that fills up the bucket, and when the industry is flourishing the tap is on full, and the contents of your bucket – like profits - will spill over the edge.

Of course in a recession the tap gets turned down, but in theory the bucket should stay full. But what we found during the recession was that the level in our bucket was falling. There must be holes in the bucket. The productivity challenge was to identify where those holes were and how we could stop the value of our business leaking from the bucket.

So we set off on a mission to improve our productivity - and as a result, our profits – by focusing on two areas; customer experience and employee experience. We had two simple objectives; to create excellence in roofing, and excellence in everything we did.

We figured that if we put together the things that were good for customers, and what would create a sense of satisfaction for our employees, we could create wholesale change and ultimately previously inaccessible levels of performance. But of course, the first stage was to find the holes.

We found that, like many construction businesses, we didn’t measure our performance properly, and were relying on third party organisations like NHBC to tell us how we were performing. So we decided that this was something that needed to change and from then on, we started to capture and analyse our data, producing some revealing results.

One of the most interesting things we found was that one of our roof tilers was achieving 2.25 times the output of the average tiler. His jobs were all top notch. He was never questioned on health and safety or quality, so he wasn’t compromising standards to achieve this increased productivity.

We needed to understand what he was doing differently and what we could learn from this – and equally we wanted to know why some tilers were achieving below the average.

So as we developed that new level of understanding on what really drove the performance of our business, we went about acting on the data. We developed the Forster Standard.

Taking industry standards like BS 5534, NHBC 7.2, all the manufacturer information we could find, and, perhaps most importantly, every bit of data we could lay our hands on from our aftercare service when things had gone wrong.

We drew on all of this experience to create our own standard. We introduced a new skills academy, which has been a fascinating experience, and we worked on better understanding the role of the supervisor and our managers. We take the whole team offsite every year and give them the opportunity to interact with the directors, and let them tell us how we can do things better.

We’ve introduced a very different bonus structure and a whole new set of employee motivations that encourage a different set of behaviours. We looked at process, supply chains and products, halving the amount of site stock, and analysing supplier performance like never before.

Much of our innovation was remarkably simple. So now every plot we do, right across the country, gets a little bag, which contains everything that allows us to meet our Forster Standard, and isn’t available from our regular supply chain and manufacturers.

In the bag are all sorts of little screws and clips and caps that for us produce a roof that we will never have to go back to. The one area in the recession that NHBC paid out more claims on than any other was roofing, but we’re confident that with this bag, we can deliver a defect-free roof every time.

For a bag of materials that costs less than £10, as a company we are saving around £200k per year on after care costs. That’s profitability through productivity.

Looking forward to the next 25 years, we now have an understanding and commitment to continuous improvement within our business, which has transformed our expectations of what can be achieved, with weekly activities that continue to increase our productivity.

Our target for 2017 is to increase the average output of every tradesman in our business by at least 10% and you can only do that when you’ve been on the sort of journey we’ve been on. We have skills innovation, we have quality innovation, we have customer satisfaction innovation, and we’re preparing for the next challenge which is digitisation.

Like every business, we are ultimately interested in sustainable profitability. We looked at our previous highest percentage level and set ourselves the target of doubling it on the back of our productivity work.

While we’ve not achieved that doubling yet, we are set to do it next year – and once we have achieved this, then we want to treble it. We’ve not changed the business we do – we’re just working differently and we can see real results since making these improvements.

So can other construction businesses achieve similar results? Most definitely.

My top five pieces of advice are: make a plan, collect and analyse your data, listen to and motivate your team, act on what you learn – and above all, aim high. If we can do it, so can you.