Understanding Revenue Per Person: Enhancing Staffing Efficiency in Construction

📅 3 days ago 🏷️ Bridgit

This article explores the significance of the 'revenue per person per month' metric in the construction industry, addressing overstaffing and understaffing issues while providing insights into effective staffing strategies.

The ongoing conversation around construction labor is largely centered on the shortage of skilled workers, with an alarming 92% of firms indicating challenges in recruitment. However, a deeper examination during portfolio reviews reveals another pressing issue: despite appearing fully staffed, many projects are yielding lower-than-expected profit margins. The underlying problem lies in a crucial metric—revenue per person per month—which highlights discrepancies between staffing levels and project revenue generation.
To calculate this metric, one must divide a project's total monthly revenue by the number of salaried employees assigned to it. This calculation provides insights into staffing efficiency at the project level. While traditional metrics like utilization rates and labor costs as a percentage of the budget offer valuable information, they often fail to indicate whether a project has an excess or insufficient number of personnel.
For instance, consider a project that generates $2 million in monthly revenue with eight team members, resulting in a revenue per person of $250,000. Conversely, if twelve team members are assigned to the same project, the revenue per person drops to $167,000. Although both scenarios may reflect healthy utilization rates, the second example reveals an overstaffing issue that can erode profit margins across an entire portfolio.
Further analysis across similar project types can enhance the understanding of staffing efficiency. For example, in a hypothetical portfolio, Healthcare Project A generates $1.8 million with six team members, achieving $300,000 in revenue per person. Meanwhile, Healthcare Project B, with a revenue of $2.1 million and ten team members, yields only $210,000 per person. Such comparisons are essential for recognizing inefficiencies and addressing them proactively.
The phenomenon of overstaffing often goes unnoticed until it manifests as declining profit margins. Projects are commonly staffed for peak activity during preconstruction or early phases, but as they progress into steadier construction periods, the same team size may persist without reevaluation. This misalignment can lead to inflated costs without corresponding revenue generation. As noted by Johnathon Grammer, Director of Operational Excellence at Rogers-O’Brien, effective planning can mitigate these risks, allowing contractors to take on additional projects without the urgency to hire excessively.
On the flip side, understaffing poses its own risks. While it may seem like a cost-saving measure, it can lead to schedule delays and quality issues that ultimately outweigh the short-term savings. A superintendent managing multiple projects may overlook critical problems, while a project manager handling several assignments may respond to requests for information too slowly, resulting in bottlenecks that disrupt workflows.
The attrition rate in the construction industry also plays a significant role in staffing efficiency. With a median annual turnover rate of roughly 20%, contractors aiming to increase headcount must account for expected departures. For example, to achieve a net gain of 100 employees, a contractor might need to hire 125, factoring in the anticipated attrition.
To effectively leverage the revenue per person metric, contractors should establish a baseline across project types. Historical financial data and team assignments can help identify what constitutes 'normal' for their organization, facilitating timely discussions about staffing adjustments as projects transition through various phases.
In conclusion, while the revenue per person per month metric serves as a valuable tool for enhancing staffing efficiency, it requires a commitment to operational discipline and proactive planning. By integrating this metric into regular discussions, construction firms can better navigate the complexities of workforce management, ensuring they maintain the right balance of personnel to drive profitability in an increasingly competitive market.

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