Ingram’s 2018 Construction Industry Outlook

 

Ingram’s Magazine
January, 2018

LABOR PAINS: LAST YEAR, A HASSLE; THIS YEAR, A CRISIS

A decade ago, the downturn that devastated U.S. construction was just earning its name: The Great Recession. By 2012, things were looking up in that sector, and by 2014, contractors were airing concerns about where the next legions of construction workers would come from. Hard to imagine, but that tight labor market represents, by today’s standards, the good old days. Construction, never short on crisis moments as one of the most cyclical of cyclical industries, has a pressing challenge in front of it with this labor shortage, even as large-scale construction projects beckon across the region. On hand to drill deep into that topic at Ingram’s 2018 Construction Industry Outlook assembly on Jan. 3 were nearly three dozen executives from construction companies and related concerns like their trusted advisers in engineering, law and accounting firms. The two hours allotted flew by, under the direction of co-chairs Steve Miller of the Miller Schirger law firm, Rosie Privitera-Biondo of Mark One Electric, and Mark Teahan of George J. Shaw Construction. More than just talk, though, those at the table agreed: It’s time to take a more proactive approach, using new tools and messaging, to bring the next workers into the fold and to keep them there.

Pressing Issues

In his role as co-chairman of the assembly, Steve Miller of the Miller Schirger law firm set the parameters for the discussion. He identified a range of enormous projects looming for the region, including a new single-terminal international airport, billions of dollars’ worth of storm-water up-grades, replacement of the Buck O’Neill bridge connecting Downtown to the Northland, and projects flowing from last year’s passage of $800 million in general obligation bonds by Kansas City voters.

With demand already up, the construction labor market has been in a tight squeeze for several years; how, he asked, can contractors and subs find the necessary additional workers for those transformative projects if they’re having a hard time just filling their work-force pipelines with current demand? It would be a key question for these executives in particular, he said, “because none of the folks at this table are the ones out there doing the work.”

Mark Heit of McCarthy Building Company pointed to a thick strand of the  labor question’s Gordian knot—the huge numbers of skilled laborers who are on the threshold of retirement. “The experience that we lose is vast, and hard to replace,” he said.

On the flip side of that demographic challenge, Tony Privitera of Mark One Electric lasered in on the need to “attract younger project managers,” he said, “and teaching them the true meaning of the word ‘cost.’ ”

On the positive side, said Ramin Cherefat of McCownGordon Con-struction, office help and talent coming out of the universities today is easier to come by than field labor, but there is still “a lot of concern” about attraction and retention of the latter.

The assembly included perspectives outside contractors’ offices included those of law firms, accounting firms and labor and trade associations, demonstrating the broad impact that construction has on the regional economy.

From MarksNelson, one of the region’s bigger accounting firms, partner Angie McElhaney cited concerns about how major projects being added to the region’s agenda could affect current construction companies and the relationships they have with their employees, with potential impact downstream on trusted advisers. That’s also true for law firms, as Troy Hausner of Miller Schirger, noted, given that the current environment requires a deft touch to balance the short-term interests of clients with long-term relationships.

Jim Kissick of Kissick Construction said his company, too, continues to search for skilled craftsmen, “but something else that as important to find those guys and put them in our industry is our wages.” The movement in Jefferson City to eliminate minimum wage in Missouri, he said, would be a challenge for companies trying to attract young workers in particular.

Joe Privitera was concerned about how construction is perceived by potential workers “so that they’re wanting to work in this field, rather than it being a second choice.” Three decades or more of degree emphasis by high schools has given construction a reputation as the employer of last resort, and Privitera said “these kids have to know that it’s a profession they can make a good living in.”

Mark Iammarino of Turner Construction was concerned about fragmented efforts to find talent. “We need to do more collectively to address the issue.”

Shane Ham of Foley Equipment worried about the knowledge transfer that’s looming with work-force demographic changes, and Richard Wetzel of Centric Projects pointed to the democratization of technology as a key in work-force development. That, and “creating a culture of accountability all the way through the organization,” Wetzel said. “I think with the Millennials, that can be a challenge.”

Jay Hodges, of the Laborers and Employers Cooperative Education Trust in Kansas and western Missouri, pointed to everything from a tech explosion to an aging work force, but for his fund, “we need to figure out better ways to partner with contractors, subs, developers, cities and states” to foster more cooperation between various stakeholders in that space.

While a shortage of qualified talent was common around the room, Danny Anderson of Site Rite Construction said the number of apprentices he has on the staff have gone up 25-35 percent. The problem with that, he said, is that “they’re not ready to go yet.”

Carl Privitera of Mark One Electric was most concerned about improving partnerships with general contractors so that rather than perpetuating a low-bid, cut-throat market, companies took more collaborative approaches to drive growth.

Neighbors Construction Company owner Roger Neighbors said it was important for the sector to convey that “construction can provide a good livelihood,” and for companies to do more to drive that message, as well as help young workers develop a stronger work ethic.

Erika Moody, a principal at Helix Architecture + Design, mentioned how that specific work force had been hard hit during the Great Recession. But during the bounce-back, the emerging issue has been knowledge transfer from older workers and melding the tech-savvy talents of younger workers.

Mark Radetic of MarksNelson said his firm works with nearly 40 companies, and “we have to provide a great culture by providing opportunities, training, development and investing in technology that will be a big disruptor.”

Greg Carlson of Burns & McDonnell looked further down the road. “What happens five years form know when this unqualified labor and latent defects pop up in buildings.” Quality control, he said, is a big issue at the engineering firm now.

The Full Employment Council’s  president Clyde McQueen suggested that getting more workers in the pipeline starts with reaching the parents of students as young as middle-schoolers. “You just can’t create the workers for that stuff overnight,” he said, referencing the laundry list of major projects facing the region. “We must do a better job of educating those parents” with open houses, a presence at PTA nights and other outreach efforts.

Bob Jacobi of the Labor Management Council pointed to benefit costs for contractors. “If you don’t maintain good benefits, it’s going to be hard to attract and retain good workers.”

JE Dunn Construction’s newly-minted President of the Midwest Region Paul Neidein said the company also has a lot of open positions now, a challenge compounded by working through 20 offices around the country. “We’ve got a lot of opportunities, and losing people is scarier even than trying to find folks,” he said. Part of the issue for major contractors like Dunn is the need to send workers to projects out of town, given the impact on employee work-life balance.

Specialty metal fabricator Zahner, said executive vice president Robert Zahner, also does work all over the cou-ntry, and he was concerned about how to keep engineering talent, an element of the business that has grown significantly. With Millennials more inclined to move along after a few years, even though they’re good workers, “they’re not the talented 4, 5 or 10-year workers” that the company needs to develop.

Bridgette Williams of the Heavy Contractors Association worried about the funding mechanism for highway, road and bridge transportation, especially on the Missouri side. “It is not as robust as it needs to be,” she said. That leads to a thinner work pipeline that doesn’t offer assurances to new workers that they’ll have another project to work on once the current one is done.

She also looks at the loss of workers who fled the down-cycle a decade ago, and wonders whether their wealth of knowledge could be recaptured by attracting some back into the fold.

Attraction and Retention

Around the table, there was general agreement that the sector needs to connect with students at a younger age, and with the right message. What they are hearing in school, executives said, was a message that only a four-year degree will assure an income that can support a family.

Getting that message right starts with the schools, they said.

“Most high-school curricula don’t do a good job of providing a well-rounded view of construction,” said Dan Beutler. While there may be exposure in school to the potential of working for a general contractor, the subcontracting fields and areas of specialization are often ignored. It would help, he said, if there existed a pathway to let students find a construction niche they might enjoy, such as electrical or mechanical contracting.

Agreed, said Richard Wetzel. “We have to sell the sexiness—we are the people who build our cities. A lot of people who are not in this industry are fascinated by what we do.”

The numbers, said Jim Kissick, weigh in the industry’s favor. Using Center High School as just one example, only 25-30 percent of the graduates go on to college. “That’s 70 percent who don’t have a clue what they want to do,” he said, and for a group lacking college credentials, the trades offer potential for an income that dwarfs nearly every other non-degree line of work.

Even within that group, he said, the challenges to employment are considerable. For one, transportation—just getting to a job site. Another is a work ethic that shuns uncomfortable conditions that come with working outside. “When it gets to 100 degrees, they’re ready to go home,” Kissick said.

More than just the non-college cohort, Clyde McQueen said, a huge pool of talent is available with those who start college, but don’t finish. “Fifty percent of them don’t graduate from college,” he said. “That’s fertile ground for opportunities here.”

In addition, he said, the advances of robotics in industries like manufacturing, transportation and distribution could displace a veritable army of experienced workers with blue-collar backgrounds, who also could be the focus of recruiting efforts, given the likely presence of transferable skills.

Millennial desire to advance more quickly at work than their preceding generations is also a factor in turnover rates, and it’s changing the way all employers view their staffs, said Mark Radetic. “It’s talent over tenure; young kids want opportunities, and they master things earlier. We’re not going to hold them up” by denying them advancement just because a longer-tenured employee is in front of them, he said.

The industry can do more to make working conditions attractive by exploiting technologies that allow for more prefabrication work in controlled environments, said Greg Carlson. “The onus is on us to do more with it,” he said, and an incentive for doing so is that it produces work of better quality on the job site.

Phil Yelder, representing the city of Kansas City, expressed concerns that labor wasn’t as accommodating to minorities as it needed to be. He pointed to the workers on the Sprint Center project more than a decade ago, many of whom sported out-of-state license plates, while the local work force was overlooked.

Cracking the attraction nut will also require an end to the “who-you-know” aspect of lead generation for employees, said Bridgette Williams. Personal connections became more of a pathway to employment than skills, in part because vo-tech classes have been removed from so many school’s curricula. “That perception has to change,” she said, and other barriers must be addressed, including bridging issues of age, race and gender in the workplace.

“We’re still not culturally diverse in the work force—we’ve barely got 4 per-cent women,” said Rosie Privitera Biondo. “It’s our responsibility to shift that needle.”

A final barrier to attraction, said Bridgette Williams is that the various trades have differing academic requirements to qualify for hiring. Some want candidates who have taken algebra, some don’t. “Catching these students early means they can get the courses they need” for the types of careers that might interest them.

Once any of those hurdles can be overcome, executives say, the next challenge is to set up structures to keep employees on board. Take, for example, Mark Kettlewell, a Miller Schirger law firm associate who spent eight years as a carpenter. He drew laughs by telling the assembly, “I am part of the work force that you did not retain.”

Greg Harrelson of Fogel-Anderson construction sees employee retention as a bottom-line consideration: “How do you retain these people you’ve worked hard to recruit?” he asked, because that effort represents an investment that walks out the door when an employee leaves.

Dan Beutler said retention “is cre-ated by a good culture—every day, you want workers who choose to come back. Money isn’t everything.” The ideal work place, he said, holds onto an employee until retirement.

To address the retention issue, said Rosie Privitera Biondo, Mark One Electric turned to all of its senior supervisors, people with a decade or two of experience, and put the question to them: What will the future look like? “We created an internal course on how and who will train younger employees.

One of the great advantages the commercial construction sector has working for it, said John Snyder, managing partner at host law firm Dentons, is that “these jobs aren’t going overseas, and they aren’t going to be automated.”

Training

More than just construction and trade skills, said Clyde McQueen, the sector must address some soft skills lacking in too many potential workers, including financial literacy. “They have to be prepared for the layoffs that come or with seasonal work,” he said. “They need career mentors to help them understand these things.”

And that can be a thorny issue. As Rosie Privitera Biondo noted, a blue-collar worker who has labored for years to establish his place in the organizational structure is often reluctant to effectively train someone who might be considerably younger, out of fear that the company would replace them with cheaper talent.

But the nature of what constitutes training in this age has also changed, several participants said. Ramin Cherefat spoke for most contractors at the table when he referenced the way “training” was executed in days of yore: “Old school, if you missed budget, you were in trouble and likely to get chewed out,” often in colorful terms. These days, he says, “you have to focus on appreciation and inclusion.”

Today’s journeymen grew up in a time of “tough love,” said Bridgette Williams, “and you either conformed or you got out. Those days are gone.”

Which prompted Rosie Privitera Biondo to remark, “maybe we’re the ones who need the training.”

Jay Hodges suggested that organized labor could take on a more prominent role in training people to develop workplace relationship skills needed in this environment, but that was an immediate non-starter with Dan Beutler: “is it the trades’ responsibility, or the company’s? I have an issue with that. It’s not the trades’ responsibility to teach basic human decency.”

Solutions

All of those factors, said Don Greenwell of the Builders’ Association, call for a new paradigm in attraction, retention and training of employees for the sector. The labor shortage has been a fixture at these annual sessions since at least 2012. But Paul Neidlein and Rosie Privitera Biondo said the matter has moved beyond shop talk; companies at the table, working with other relevant organizations, must come up with a specific strategy and act on it.

Mark Iammarino suggested that his company and JE Dunn, both with national footprints, collaborate on a whiteboard session that would draw construction and design disciplines together with educational and trade associations to identify barriers and shared strategies for knocking down each one.

Iammarino’s suggestion didn’t generate universal enthusiasm; some at the table wondered privately whether smaller com-panies in the sector would reap comparable benefits from two industry giants setting an agenda and strategy for their concern.

Can the school districts effectively be a part of that, Philip Yelder asked if those at the table would be willing to fund a position within, say the Kansas City school district to coordinate programming that might address the labor needs. That he did not receive an immediate commitment most likely can be attributed to construction’s experience with schools. “We’ve tried curriculum for 15 years” in the public schools without success, Neidlein said.

No matter what those efforts look like, said Clyde McQueen, “everybody in this room needs to be in one place. You have the mass, the focus and the concentration” and can achieve shared goals without the bureaucracy school systems, city, county or state government. “I live with bureaucracy every day. It’s tough.”

Nonetheless, Steve Miller said in bring-ing the session to a conclusion, continued discussion along those lines could prove fruitful, and “that’s an agenda to start with.”

Categories

Archives