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Make Friends with Trends
We have been discussing managing construction companies profitably under post-pandemic disruptive market conditions. Studying what we labeled “disruptions” (run-away cost inflation, impending recession, supply chain interruptions, and a chronic shortage of skilled labor) we determined that some of these “disruptions” (like the shortage of skilled labor) are long-term industry trends that have been creeping up on us for years and that we have no control over.
Innovation
The construction industry has changed at its core. Most of the labor force that delivered construction services to the nation has retired and taken their unique level of expertise, productivity, and efficiency with them. Those of us left behind are charged with recreating our industry. We need to determine how we will deliver a renewed level of productivity, and efficiency to a legacy industry that tends to become “stuck in its ways”.
Game Changer
When Brady left the Patriots, that was a game changer. When Mahomes went to the Chiefs, that was a game changer. When the baby boomers retired from construction, that was a game changer. Let’s face it. The baby boomers built modern America and the construction industry along with it. Without them, we’ve got a whole new ballgame.
Adapting To Trends
If you’ve been with us since the first of the year, we have been discussing managing risk under the disrupted market conditions of 2023. The risk factors of inflation, recession, labor scarcity, and supply chain snags have combined to disrupt normal market conditions and put contractors at risk of financial loss. In addition, some of these risk factors have morphed from cyclical risk factors into long term industry trends. The shortage of skilled labor is one of the risk factors that has lasted long enough to become a trend. We make a distinction between market trends and cyclical risk factors because they must be managed very differently.
Navigating Trends
Contractors by nature are gamblers. In our minds, the bigger the risk, the bigger the payoff. The problem is that not every project pays off, especially in these times of skilled labor shortages, supply chain issues, and low-bid mandates. These are not one and done issues. They are trends and are not going away any time soon. So, what is a contractor to do? Successful contractors measure risk. They calculate the profitability with recognition of those risks. Successful contractors recognize risk in advance and navigate around it, they don’t try to dodge it at the last second.
Climate Change (in construction)
As the saying goes, denial is not just a river in Africa. Many general contractors believe that since hiring skilled workers is the sub’s job, there is nothing they can do regarding the skilled labor shortage in construction. As with most things, denial is just going to end up biting us in the rear end. Learning to live with it, is not of way of denying it. It means recognizing the issue, analyzing the impact on profits, and taking steps to mitigate the problem.. As with any journey, it starts with the single step.
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