Can Construction Conquer Its Fear Of Digital Change?
Contractors are looking to save on more than just concrete and steel. A class of software known as Enterprise Resource Planning, or ERP, is helping today’s contractors save on some of the most time-consuming pieces of the construction process, from backroom accounting to front-line communication.
But to reap the full reward of ERP programs, contractors will have to jump in with both feet. For an industry that can be averse to change, the largest barrier to saving on operations isn’t cost or implementation. It’s the fear of the unknown.
“The biggest mistake I see is when companies invest in this great technology and then say, ‘We want it to work like our old system does,’” said Sarah Stegman, director of construction software consulting at CohnReznick. “You have to trust the business partners helping you through. You can’t be scared of the changes.”
At this point, most large contractors have some sort of software to help them with payroll, general ledger, and accounts payable and receivable. But in the last few years, software products have evolved specifically for the construction industry, with capabilities that extend far outside the accounting team.
Stegman gave the example of an on-site project manager submitting a change order. Without the right software, that change order might have to shuffle through six people in the head office to view and approve the order, make the preparations, and update the timeline and budget. With luck, the change order moves through the entire system without anyone dropping the ball.
“An ERP system can eliminate a lot of that duplicated work,” Stegman said. “The project manager can document a change condition on the construction site, and all affected areas can immediately reflect the potential change without delay or duplication.”
The system can also track the thorny list of compliance and insurance forms that contractors need to gather from the subcontractors, trades and other organizations that work under them and will notify the right contacts, including external partners.
The right software can help contractors cut down on busy work, eliminate costly mistakes and free up their back-office staff to focus on tasks that add value. With a more streamlined process, the company can grow its project pipeline without hiring more staff. Employees can also begin working from anywhere without kinks in remote collaboration.
But construction companies don’t always see the immediate benefits — often, they see strange spreadsheets and unfamiliar buttons. Stegman, who worked in the construction industry for 18 years before joining CohnReznick, knows firsthand that new software can be daunting.
“It’s rare that implementation is a big bang, where it happens all at once,” Stegman said. “It’s more like a slow roll. You need to establish a mindset that change is good.”
Companies that simply announce that they are transitioning to a new software suite risk a quiet revolt, with employees refusing to move their workflows over to the new system. Without proper implementation, the costs of waste can pile up.
Instead, Stegman suggests contractors focus first on low-hanging fruit — tasks that are easy to implement and have immediate time savings. Once employees begin to trust that new software can help them, they will get excited about some of the larger projects that require more time and resources to switch over.
“I have worked in most areas of construction, including implementing accounting software at a former employer,” Stegman said. “I’ve overseen enough implementations now that I’ve learned where the usual hang-ups and complaints are, and I know how to work through them.”
Another issue that can doom an implementation is a lack of endorsement from the top. If executives fail to champion the move to a new system, the process can devolve into a hodgepodge of competing systems, Stegman said.
One way to sell the C-suite on the importance of ERP is to focus not just on backroom efficiencies, but on project pipelines. The newest generations of contractor software can analyze older projects to make new predictions about budget and timeline. With a working ERP database, contractors can bid on new projects faster and more accurately.
That edge is becoming increasingly important as the building market begins to slow. While the construction industry has been on a bull run for the last eight years, projects may become scarcer as the economy flattens.
“When construction slows down, you need differentiating factors,” said Eric Rafail, a CohnReznick partner specializing in advisory and compliance for contractors. “That could mean better pricing, better budgeting and scheduling or better collaboration and project management. A contractor needs every advantage it can get.”
This feature was produced in collaboration between Bisnow Branded Content and CohnReznick. Bisnow news staff was not involved in the production of this content.