Reaction to the Skilled Labor Shortage

Reaction to the Skilled Labor Shortage
Strategic Thinking

Small to mid-sized contractors across the industry are scrambling to participate in an expanding market that will become turbo-charged when the government finally gets its infrastructure act together.  Demand for workers in construction is expected to grow significantly through the next decade. The Bureau of Labor Statistics projects construction employment growth to be 11% from 2016 through 2026. How will the industry replace 2.3 million craftsmen much less satisfy labor demand increasing by 11%?

The Challenge

The deep recession of 2009 followed by the resurgence in construction beginning in 2013 has caught the industry off guard. As a result of the housing crash and the Great Recession, over 2.3 million workers left the construction industry through layoffs, early retirement, or to pursue careers in other industries. While job growth in the industry has been strong the past few years, most areas of the country are feeling the pinch of a skilled labor shortage.

Aggressive Tactics

The industry’s reflexive response to this challenge has been to mount aggressive tactical solutions. Stealing workers from competitors or importing them from underprivileged foreign countries has, however, proved to be a vain effort in this market. Head on competition for workers in a diminished labor pool will only caused wages to balloon and will leave contractors without sufficient craftsmen.  Aggressive tactics will not solve the current strategic problem but will exacerbate it by ballooning wages and shuffling available labor resources. The big companies will get bigger and the small and mid-sized contractors will struggle.

Strategic Thinking

If aggressive tactics won’t work, how should contractors respond?

(Aahh…the perfect opportunity to demonstrate the value of strategic thinking that I have been preaching to the industry for years.)

Therefore, permit me to put on a brief demonstration of a strategic approach to solving the expanding market/shrinking labor pool dilemma now facing the industry.

Let’s begin by:

Restating the Problem:

Restatement – Productivity in an expanding market.

wow! – Productivity – not head count. Very interesting…

The strategic solution is not simply trying to recruit more workers but rather to increase productivity.

Leads to Strategic Action:

A strategic action approach might look like this:

  1. Limit output to capability. (Don’t take more work than you can produce at a profit).
  2. Recruit and train new skilled workers in advance of production demands. (In other words, manufacture your own skilled workforce.)
  3. Improve productivity of existing and future workforce through the use of new technology.

For Example:

Let’s take number three for a slightly deeper dive.

Technology = Productivity

  • New technologies in construction are being developed at a breakneck pace. What seemed like future tech 10 or 20 years ago like: connected equipment and tools, telematics, mobile apps, autonomous heavy equipment, drones, robots, augmented and virtual reality, and 3D printed are here and being deployed and used on jobsites across the world.

While construction firms continue to underinvest in technology, venture capitalists are taking a strategic approach. A report from James Long LaSalle, Inc. released earlier this year shows that venture capital firms invested $1.05 billion in global contech (construction technology companies) startups during the first half of 2018. That’s a nearly 30% increase over the amount invested for all of 2017. Since 2009, investors have closed 478 funding deals totaling $4.34 billion. They are making strategic investments in future construction productivity in the following areas:

  1. Mobile Technology
  2. Drones
  3. Building Information Monitoring (BIM)
  4. Virtual Reality and Wearables
  5. 3D Printing
  6. Artificial Intelligence
  7. Offsite construction

The Main Point

Venture capitalists are, by their nature, strategic thinkers. Contractors, by their nature, are aggressive tactical thinkers.

Here is the point:

If we are to survive in the fluctuating, volatile market we find ourselves in, we must employ trained strategic planners to assist and inform our tactical aggression.

Read More: Help Wanted, Workboots and Skills Provided and Overcoming Resistance to Change