Last year, the construction industry declared a “war for talent.” Faced with a simultaneous increase in workload and decline in the workforce, the industry investigated its own management practices with regard to recruiting and retention strategies. In its white paper, “The War for Talent,” Arlington, Va.-based Building Futures Council (BFC), in alliance with The Associated General Contractors (AGC) of America, Arlington, Va., put forth a call to action to increase the industry's ability to attract, develop, and retain top talent in the management and executive ranks. One of the major obstacles, according to the report, is the general stereotype of the construction worker (and the industry as a whole), which stymies the construction industry's reputation as a field that is “progressive and able to change with the times.”
In another report on the war for talent, Raleigh, N.C.-based FMI Corp., a management consulting and investment banking firm, touched on all aspects of talent development, such as recruitment, retention, performance management, succession planning, and retirement concerns. Based on results of a survey of more than 50 construction company executives — 7% from electrical firms — the “2007 U.S. Construction Industry Talent Development Report,” highlights how firms are preparing themselves for battle, and which strategies may lead them to a more victorious future. “Is it possible to create and maintain a talent-focused culture while building employee commitment?” the researchers ask. “The answer is ‘yes,” but not without hard work, a clear vision, and supporting strategies.”
The construction industry is a huge segment of the nation's economy. The U.S. Department of Labor (DOL) has identified construction as one of the top industries in terms of projected job growth. In 2004, the Bureau of Labor Statistics (BLS) reported that the industry provided nearly seven million jobs, or more than 30% of the “goods-producing” sector, which also includes manufacturing, natural resources, and mining. Over the next decade, the BLS is forecasting the industry — the only non-services industry with a projected increase in jobs — to grow at an average of 11.4%, creating close to a million new jobs.
Contrary to this projected need for more workers, the primary working age group — between 25 and 54 years old — is estimated to decline by about three million. In addition, the National Science Foundation, Arlington, Va., estimates that 25% of the U.S. engineering and sciences workforce is older than 50 and quickly nearing retirement while the number of Generation X workers (currently ages 26 to 41) is 30% to 40% smaller. Although the BLS recently reported a slight increase in college enrollments in engineering programs, it attributes this to the popularity of information technology-related programs. Enrollments for architecture and construction management degrees remain flat or are on the decline.
Illustrated by these numbers, the construction industry's labor paradox means that strategies for recruiting and retaining talent over the next decade may be the key to survival for many firms. “With the reduction in available workers and the improving job market, many organizations will not only find themselves losing their stars to competitors but also having a difficult time replacing this talent,” the FMI report says.
There are potential dire consequences to losing the industry's war for talent, according to the BFC report. In addition to the collective disrepair of the nation's infrastructure — roads, energy plants, bridges, and sewer and water systems — a lack of designers and builders could lead to increased “management by crisis,” which is a business practice focused on only what is necessary to survive, and industry consolidation, meaning that companies not able to meet future project loads may be forced to merge, downsize, or go out of business, which, in turn, may cause a weakened ability of U.S. firms to handle overseas competition.
“In the short-term, companies with available resources have the opportunity to reduce risk and, hopefully, make some nice profits,” says Tom Sorley, president and CEO of Rosendin Electric, San Jose, Calif., as reported by the BFC findings. “However, the lack of additional talent coming into the pipeline is constraining business growth. To some extent, that will cause current or potential customers to look at other alternatives — including overseas providers.”
In 2005, the Society for Human Resource Management (SHRM), Alexandria, Va., released results from a survey of nearly 400 human resources executives in 18 industries on vital talent management practices. According to the report, critical factors for effective recruiting, development, and retention of key staff include building a deeper reservoir of successors at every level of the organization, creating a culture that makes employees want to stay with the organization, identifying gaps in current employee and candidate competency levels, and creating policies that encourage career growth and development opportunities. In preparing for a changing workforce, the construction industry could benefit from implementing a plan that encompasses these factors, among others.
When asked how they were preparing for a changing workforce, at least 75% of respondents to the FMI survey indicated they were: increasing recruiting efforts at schools, colleges, and universities; training to improve performance in specific competencies; promoting internally to key positions; and providing internships or co-op programs (click here to see Fig. 1).
Logan, Utah-based Cache Valley Electric is preparing for a changing workforce by providing a work environment that fosters a very low turnover rate, allowing the firm to identify employees with management potential for internal promotion to key positions through training. “These employees are given increased responsibility throughout their careers so they are able to seamlessly replace retiring employees,” says Nathan Wickizer, COO.
Active participation in various industry-specific organizations allows Houston-based Fisk Corp. to keep informed on the competitive trends in the industry. The firm's other preparations for a changing workforce are identifying key personnel and succession planning for these roles, as well as workload analysis on a quarterly and sometimes monthly basis. One strategy Fisk uses that is not mentioned in FMI's survey is networking. “It provides the ability to think forward with strategic staffing keyed to the needs of the business and the realities of the labor market in the future,” says Larry McTague, vice president and CFO.
Fisk also uses the following strategies: networking to recruit new employees; use of temporary to permanent hires in staff support positions; advertisements in trade-specific media; employee referrals; career-oriented Web sites, such as CareerBuilder and Monster.com; recruiting agencies; and direct applications through the company human resources link on the Web site. However, “branding” your company as a good employer may be the best way to attract top talent (“Winning the War for Talent” below). “We place a company profile in various industry-specific media,” McTague says.
According to the FMI report, internships/co-ops are the most commonly used recruiting tool, followed closely by internal employee referral programs, and posting job openings on the company Web site (click here to see Fig. 2). Effective recruitment may justify aggressive or non-traditional tactics. The faster good candidates are identified and hired, the less money a company spends on recruiting costs, such as advertising and interviewing. Therefore, companies shouldn't be shy about using psychological or other assessments. More than half of the respondents to FMI's survey revealed that they use personality tests, such as Myers-Briggs, DiSC, or the Predictive Index as part of their company's selection process. The Fisk hiring process may include a personality assessment, cognitive reasoning assessment, or third-party analysis/report on assessments.
Retention deficit disorder
Once your firm has found talented employees, it's imperative you manage their performance and career progression. In the FMI report, providing training opportunities tied with providing competitive salaries for how companies are retaining their key talent. The top answers were followed by challenging job assignments, enjoyable work environments, and tuition reimbursement.
Of the firms FMI surveyed, 82% responded that they included training in their budget for 2007. This is a jump from 74% who were budgeting for training last year, up from 54% in 2003. Yet, 86% of those surveyed determine training and development needs as a result of individual requests from their employees, and 77% of respondents determine training needs through informal discussions between managers and employees. Fortunately, 75% were also identifying training through evaluating job performance, and more than 50% were connecting these needs to their overall business plan.
With regard to training, union contractors may be ahead of the curve. At Fisk, all new entry-level employees are required to take a minimum of six years training to advance within the union. Additional years of training and experience are needed to advance to upper-level positions, such as foreman. “Craft employees are required to take technical courses through the union to progress to higher levels,” McTague says. “All new foremen are required to take an eight-week course that covers safety, labor analysis, material handling, tools, disciplinary process, required paperwork, and termination, and there are in-house seminars on various management best practices. Training for non-craft personnel is the responsibility of each division.”
Furthermore, Fisk provides career paths for its employees, a service only 11.6% of FMI respondents indicated that they provide for employees as part of their retention strategies. “Career paths are designed by human resources in conjunction with the divisions,” McTague continues. “New employees are assessed at the time of hire, and access to appropriate training is provided.”
Online training with a core curriculum designed according to skill path is available to all employees. Each division pays for training as directed by the local management team.
This year, coaching as a practice companies use to increase employee performance and development debuted in the top five of the FMI report. According to FMI, coaching is a highly effective method of helping people expand existing skills or gain new ones for the future. At Fisk, coaches are used to impart both the technical, specialized skills and the soft skills, such as company culture, values, and behavior.
“Each new employee is assigned a ‘training’ staff member as a go-to person,” McTague says. “For example, all new estimators are assigned to the chief estimator for training and coaching to ensure that not only the hard skills — education, experience, specialized skills — but also the soft skills are instilled in the employee. New craft personnel, according to their level, are part of a crew with a lead person to ensure that the appropriate skills and job knowledge are provided to the employee.”
Second only to training opportunities is competitive monetary compensation, yet the BFC report admits that a career in construction often does not offer pay and job development opportunities, compared to other technical or business careers. Employee stock ownership programs (ESOPs), performance-based cash bonus incentives, or other forms of cash and indirect compensation have not become standard practice in the construction industry like they have in other fields, particularly the high-tech market.
According to the BLS, in 2004 the median annual salary for construction managers and electrical engineers was about $70,000. The midpoint for civil engineers was about $64,000, and salaries for architects was around $60,000, whereas other engineering salaries, such as petroleum, nuclear, and aerospace, ranged from $10,000 to $20,000 more. Therefore, it's no surprise that careers offering more earning potential and more predictable schedules and working environments are more attractive to students with engineering, math, or science degrees.
Furthermore, a trend not favored by Generation X workers or families that rely on double incomes, according to the BFC report, is having to spend extended periods away from home. “A lot of work in the construction environment isn't always inside where it's warm and nice,” Sorley says. “It's often out in the middle of a field where the wind is howling and you're tromping around in the mud. That's a turnoff for some people, and a turn-on for others.”
To combat what may seem like disadvantages to working in construction, most firms offer a variety of incentives. Atlanta-based Cleveland Group offers competitive salaries, incentive compensation, challenging job assignments, tuition reimbursement, and training opportunities. Fisk performs an annual salary matrix review, additional benefit offerings, such as health, dental, prescription, vision, life, supplemental life and accident, disability, Employee Assistance Program, adoption assistance, medical spending account, direct deposit, commuter benefits program, 529 College Savings plan, 401(k) plan, a training and development program, flex time (when appropriate), annual discretionary incentive program, annual performance/merit reviews, employee referral bonus, employee of the month program, core online curriculum geared toward skill set (accounting, project management, etc.) with successful completion incentive, employee newsletter, and employee events, such as a family picnic, holiday party, and sporting events.
At Cache Valley Electric, non-bargaining employees are retained through top-of-the-line benefits and an enjoyable work environment. “We have an incredibly low turnover rate in these positions because the benefits offered are extremely generous,” Wickizer says. “All employees are treated as if they are a crucial component of the company's success. Our owner and managers are very skilled at making employees feel valued, respected, and appreciated. Despite long hours and challenging work, job satisfaction is very high because of this approach.”
To maintain a competitive edge, many construction firms may have to declare their own war for talent. It's no longer enough to be the best builder in your market. You must also be a great employer. “People are winning the war for talent and developing the future leadership of this huge segment of our economy,” says the BFC report. “But, reversing a decades-old image is not going to happen overnight, if at all, unless the entire industry and leadership teams in individual companies make human resources management a strategic priority.”
Sidebar: Primary Sources
To download the full text of the Building Futures Council's “The War for Talent,” visit the organization's Web site at http://www.thebfc.com/publications/BFC_War_for_Talent_Whitepaper.pdf.
For a copy of FMI's “2007 U.S. Construction Industry Talent Development Report,” call 800-877-1364 or send an e-mail to email@example.com.
Sidebar: Winning the War for Talent
Four recommendations to A/E/C companies for developing recruiting and retention strategies, as recommended by Arlington-Va.-based Building Futures Council (BFC), in alliance with The Associated General Contractors of America (AGC), Arlington, Va.:
Make succession and leadership development planning a strategic priority. When creating your strategic plan, make sure it includes a long-term human resources vision, including marketing, attraction, recruiting, orientation, development, recognition, compensation/rewards, and retention.
Be open to change. Demographic and marketplace challenges have forced industries to change their traditional approaches to talent management. Companies should review their existing management and HR practices to ensure they'll foster future workforce needs. Do they promote an environment focused on collaboration, professional development, personal accountability, and rewards for results?
Establish recruiting, training, and development programs that promote your company's culture. The little intangible elements that make your company distinct from others are as important as “hard business knowledge.” Promote that cultural knowledge when designing training and development programs.
Build your company's “brand.” Companies that play by the rules, encourage ongoing learning, demand accountability at all levels, and reward results earn an “employment brand” that markets itself through word-of-mouth in professional associations, colleges and universities, retired and former employees, and others who have good experiences with your firm.