Building a Construction Business that Withstands Workforce Challenges
The last several years have demonstrated strong market demand for construction services, and contractors can’t keep up. It will take bold, innovative, and strategic moves to overcome these industry challenges, but the opportunity for growth is nearly unlimited.
Challenges in Construction Workforce Management
Finding skilled labor in the construction industry has been challenging since the 2008 financial crisis. Subsequently, industry growth has been hampered by a lack of skilled workers. According to Indeed’s analysis of 2018 Bureau of Labor Statistics data, pre-pandemic numbers show nearly two job openings for every job seeker.
The pandemic’s early months triggered a mini-version of 2008’s job loss: as restrictions halted building projects, workers left, and the supply chain was severely disrupted. But the demand for construction returned. Quarantining at home initiated a surging interest in starter homes as well as home expansions and improvements.
Industry Outlook for Construction Labor Needs
35% of contractors report turning down work due to a lack of skilled workers. Over the next three years, according to the Home Builder Institute’s labor-market report, over two million more workers will be needed to meet demand. Hiring competition means wage competition, and lack of labor means longer timelines and lower productivity. It all adds up to increased overhead and project costs, but smart strategies can help construction businesses with these challenges:
- Shift the hiring focus to availability rather than experience: The workforce is younger, and the available skill level has dropped. Adjust time-to-productivity expectations, and incorporate more training.
- Advertise jobs on newer social media platforms: Update messaging and company branding to address what matters to millennial and Gen Z workers: an organization that cares about employee well-being, is ethical, and has a diverse, inclusive workforce, according to Gallup.
- Take safety and health seriously to avoid losing workers to injury, stress, or lack of support: Workplace safety precautions are the starting point; don’t skimp on mental health resources. Worker burnout and stress is a significant factor in the great resignation.
- Adjust project timelines to accommodate reasonable shift schedules: Fatigued, overworked employees are more accident-prone. Pushing workers to the point of injury or breakdown will backfire.
- Go beyond basic benefits: Construction is one of the most dangerous industries for workers. To stay competitive, provide some level of disability insurance and consider matching the benefits offered to union members.
- Include personalization and fringe benefits: 91% of employees feel that companies should offer a personalized benefits package. Younger generations in the workforce are very aware of benefits and value supplemental offers from accident insurance to tuition reimbursement.
- Set up a mentoring program: Use incentives to get experienced, skilled workers paired with new hires.
- Set up a referral program with rewards: Incentivize every successful new hire or milestone reached in employment (six months on the job, certifications, etc.).
- Promote and offer apprenticeships: Offer younger hires alternatives to overpriced higher education or dead-end jobs.
Challenges in Construction Supply Chain Management
Pandemic supply chain disruption plus major weather events have led to supply shortages, causing “extreme cost escalation” across all construction verticals, according to the 2022 Construction Inflation Alert from the Associated General Contractors of America.
Delivery delays require longer lead times. Project timelines, already stretched due to a lack of skilled workers, have to stretch even more. Uncertainty in project planning causes subcontractor scheduling issues, interrupted workflows, and plummeting productivity. Like labor shortage, lagging productivity has been an industry problem for years.
The fundamental causes are a lack of project management and collaboration skills, according to Unearth’s literature review. Fortunately, strategies for solving supply chain issues require better organization, scheduling, project management, and site management. These are significant changes to make. But they could help solve major problems that have slowed construction productivity for years:
- Plan early, plan often, and plan flexibly: This is the foundational move. Contractors must invest in innovative technology and tools for detailed and collaborative project management.
- Plan and order in bulk and pay for expedited shipping: Dan Boaz for Construction Executive recommends offsetting the cost of expedited shipping by ordering for multiple projects at a time to fill every inch of cargo space.
- Track materials closely for better inventory management and reduce material waste: Newer software includes automated material use recommendations and tools for accurate material tracking.
- Look into alternative materials to reduce dependence on low-supply, high-cost materials: Specializing in certain alternatives—such as eco-friendly, natural materials—can create new opportunities and may allow for increased price points.
- Make communication easy for all stakeholders, from on-site workers to subcontractors to office staff: Staying productive through uncertainty requires more frequent communication. Updates and adjustments are more manageable when everyone can communicate on one or two platforms. For most contractors, mobile-friendly systems are the way to go.
Addressing Challenges and Opportunities with Aldrich
There are no quick solutions for these challenges. The construction industry is changing, and adaptation means doing things differently, from hiring to project management. But the growth outlook is phenomenal; construction businesses that build a solid foundation now have the potential to thrive.
If you have questions about managing your workforce, reach out to Evan Cole or one of our Construction Advisors.
Meet the Author
VP, Business Development
Aldrich Benefits LP
Evan Cole partners with his clients to advise and assist them with their employee benefit plans, specializing in group and association plans. Prior to joining Aldrich, Evan was a top producing employee benefits representative for one of the nation’s largest life, disability, and dental carriers. He holds licenses for life and health in the states... Read more Evan Cole
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