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FMI Quarterly/June 2014/June 1, 2014

Creating the Future

peoplegroup_imageCreating the future will require a comprehensive and integrated approach to performance management.

How do we define the future? Is it the economic residue left after the tidal wave of the Great Recession recedes? Is it the burdensome debt and financial hangover inherited from those overachieving baby boomers? These are just two dismal situations that we see as the envisioned future. But as eternal (or hopeless) optimists, those in the construction industry would prefer a more positive view of the world as it evolves over the next five, 10 and 20 years.

Many of us intend to pass this industry along to a capable group of young leaders who will apply their brand of creativity to overcome some of the same hurdles as well as conjure up innovative solutions to problems that we could never imagine. However, whatever scenarios we face moving into the next phase of the construction cycle, we will need to become more proactive with the next generation to help it prepare for the future.

Who will be around to run our businesses when we finally arrive at this imagined future? Are we developing the well-rounded managers and leaders with the broad-based skills needed to transition our companies into the next generation? In addition to keeping these future leaders engaged to do their current jobs, we must identify the select few who have the potential and build their skills to enable them to execute an effective succession plan and keep the business operating efficiently after the boomers and the Gen Xers are long gone.

For years, the impending shortage of skilled craft workers needed to keep pace with growing demand for services in the construction industry has been in the news. The recent recession provided a short-term reprieve from this gap, but the inevitable demand for workers has come roaring back as the construction market continues its recovery. This trend is occurring across the country and in many industry sectors, but it is most obvious in the Gulf Coast region, where $500 billion worth of projects driven by the oil and gas sector boom. During the next three to five years, this demand for new workers in this region will require an estimated 50,000 to 86,000 additional people in most of the skilled trades. Some are predicting a massive shortage of as many as 2 million skilled workers nationally by the year 2017.1

With this inevitably looming shortfall, many proactive contractors are implementing their own internal training programs in order to anticipate the demand and supply well-trained resources for their own projects. However, some contractors are concerned they will invest their hard-earned training dollars in these people, only to see them go to work for the competition. Not a great scenario, but just think about the alternative — not training them and they stay!

Perhaps the more significant challenge may be finding the people to manage across all of the various levels within a contracting organization. That is, finding people with the innate ability to lead and manage the multiple disciplines required to captain a company successfully through the risky seas of the construction industry. This combination of broad skills is often difficult to predict or assess in individuals, but invariably will include many of these elements of business acumen:

  • Appropriate risk tolerance
  • Decisiveness
  • Ability to evaluate and seize opportunity
  • Communication skills — written and verbal
  • Listening skills
  • Motivating and inspiring others
  • Strategic thinking
  • Leveraging competitive advantage
  • Customer empathy
  • Negotiating favorable contracts
  • Bias for action
  • Accurate project scheduling

HOW DID WE GET HERE?

Unfortunately, as the younger generation starts filling the management positions vacated by the retiring baby boomers, the industry has not provided the training and development needed by this group of emerging managers to prepare them to take over their companies. This crisis has been compounded by the construction boom of the past 15 years. As contracting firms have grown, company owners hired specialists to focus on specific functional responsibilities to help them manage relatively narrow aspects of the business. Thus, the industry’s expanding succession problem has been intensified by this practice over the years, since there are few generalists available with the broad skills to lead companies into the future.

WHAT CAN WE DO ABOUT IT?

Although FMI does not have a simple answer to this impending dilemma, we have developed a model that addresses several of the problems we are all facing. As a generation of seasoned veterans, we must force ourselves to accept new ideas about how we lead and motivate this younger generation, the most obvious candidates for future leadership roles.

INTEGRATED PERFORMANCE MANAGEMENT (IPM)

Creating the future will require a comprehensive and integrated approach to performance management. The influx of millions of members of the millennial generation will force company leaders and managers to proactively manage the performance and provide routine feedback for this needy group of future leaders. In fact, the construction industry has been woefully inept at providing meaningful feedback for any group throughout the years, and these folks just will not respond without this interaction.

Does that really matter? Considering that we are already competing with career choices in more attractive industries, it is imperative we modify our own behaviors to engage with this target pool.

There are many proven components we can use to create a comprehensive approach to managing and motivating people. Several of these are particularly beneficial in responding to the needs of members of Generation Y. Although we can implement these elements separately, FMI’s Integrated Performance Management (IPM) model is designed to link together these best practices in order to compound their impact when applied as a cohesive process (see Exhibit 1):

  • 2014q2_create_the_future_ex1Well-defined position descriptions to establish responsibilities
  • Individually crafted performance metrics to set expectations
  • Regular performance feedback to provide continuous reinforcement
  • Structured compensation plans, both baseline and incentive components to reward the right behaviors
  • Rotational assignments to keep them challenged and motivated to apply their creativity
  • Flexibility in work scheduling to validate their perception of work/life balance

Well-defined position descriptions
People want to do a good job, but must understand what is expected of them. We might think of these as the “tools without the tool belt” (i.e., the management and leadership skills needed to accomplish chosen tasks and leverage inherent talents to increase effectiveness). Since the majority of jobs in the engineering and construction industry are based on technical knowledge, we are able to establish the requirements for those positions with a fair amount of detail. However, it can still be a challenge to translate those desired skills into core competencies that are recognized universally as those needed to accomplish the job across the industry.

For example, not all project managers’ roles are the same, and the requirements needed to achieve specific goals may vary dramatically depending on a variety of factors, such as the type and size of project, specific  industry-sector focus, public versus private owners, or even an urban compared to a rural jobsite. Although they may require a similar technical foundation, the stellar performers tend to differentiate themselves when it comes to leveraging their management and leadership talents to get the job done. They also rise above the other technicians when they begin to use business-oriented acumen to truly act like a business manager and take on the role of driving the earnings of their profit center.

Hence, it is important to translate traditional project management competencies into behavioral components and business criteria to stretch the expectations of incumbents beyond just the technical elements of their roles.

Individually crafted performance metrics
Once you have identified the core competencies and skills required to execute a particular role, develop individual benchmarks against which to track the contribution each person is making to get the job done. These performance criteria must be representative of the overall strategic objectives of the company. These goals should be established as a team, with the active participation of both the individual and supervisor/manager. This joint process will result in better-defined targets with a greater commitment from both parties and a much higher potential for success in achieving the goals. Thus, when the Generation Y employee asks, “How am I doing?” there will be no confusion about the definition of the metric. Both parties will have a clear understanding of the expected performance. Eventually, both modify the targets, as the employee’s improving performance gradually becomes the norm, making it natural to set targets for the next phase in his or her development.

Regular performance feedback
Do not fall into the trap of waiting for a once-a-year event to let people know how they are doing. Not only does it intensify the drudgery associated with these annual trips to the principal’s office, but also it is particularly important for members of the new millennial generation to receive regular reinforcement that they are on the right track. In fact, if we do not provide regular and frequent feedback to members of this generation, we run the risk of alienating them or having them become bored in their roles and start looking for other opportunities. Do not be so naïve as to believe that this group will maintain loyalty to your organization and be happy just to have a job, as the baby boomers were. There will be a shortage of people in this generation, and they will be under constant pressure to jump to another job. It might not even be for more money, but for more of the perks and working environment that Gen Y’s are seeking to bring meaning to their lives.

Once again, baby boomers and Gen Xers were conditioned to put their heads down and keep working. They thought that if the boss believed they were doing a good job, surely he or she would let them know it. Worse yet, they carried on with the blind faith that the ultimate reinforcement would show up in their paychecks. After all, isn’t that really what matters? Or the reward for their sweat investment was evidenced by a promotion or, at the very least, a new title to demonstrate to others that they had achieved the next level of performance. Work your tail off, put in lots of hours to prove that you can outwork that other Type A lunatic in the next office, and the boss will surely reward you handsomely.

But let’s be realistic … Gen Y’s are not programmed to respond to this kind of grind-it-out work environment. We must establish a culture that is more conducive to the creative mentality of this new group of workers. If we get over our own perception of “hard work,” we just might realize the potential contribution that this generation can make to our long-term success.

Today’s new workers need constant reinforcement that they are on the right track. If you neglect to work with them to craft appropriate targets, they will choose their own goals and might end up focused in the wrong direction. You owe it to them and the organization to translate corporate strategies into short-term milestones that will drive desirable behaviors in younger team members.

Structured compensation plans
While there are intangible benefits of offering positive feedback to motivate and retain key employees, a market-driven compensation plan also is needed to keep the best and brightest focused on doing an outstanding job. In order to reward the right behaviors, this plan must be representative of realistic marketplace comparisons. People have instant Internet access to a wide range of wage and salary data to compare their pay packages. Net surfing may not always result in an accurate or realistic analysis of positions and responsibilities, but it might create enough dissatisfaction in people if they think they are being underpaid and unappreciated that they will jump at the next opportunity to test the grass-is-always-greener theory.

Any plan must be structured and provide specific targets for each individual. It is not necessary to have a “one-size-fits-all” reward plan. In fact, if you think about your employees, they all make distinctive contributions at various levels and should receive incentives commensurate with those results. Each person’s incentive package must be tied directly to three elements:

  1. Company profits
  2. Divisional or project success
  3. Individual performance as defined by the aforementioned performance metrics.

Ensure the plan has been challenged and tested so that it can be explained and justified when driven by actual scenarios. Although you may be tempted to break down the reward into smaller increments, some of which could be granted at monthly or quarterly intervals to gain more impact, this process can be cumbersome and create more tracking work for your accounting department. In fact, it could backfire if you were to pay interim bonuses and then find that an individual’s performance falls off later in the year and he or she finishes “in the hole” at year-end. As an alternative, devise appropriate methods of nonmonetary recognition for your team members and grant those throughout the year, as opposed to just a once a year.

Rotational assignments
If developing well-rounded managers and leaders in construction is a necessary strategy to support the long-term growth of successful construction companies, then it is logical to implement a program consisting of rotational assignments designed to represent all facets of the business. In addition, this process will serve to keep this next generation challenged and motivated to apply its creative talents productively as it builds its own inventory of practical management skills. After identifying the individual capabilities and the gaps that might keep these employees from excelling at their jobs, create tailored development plans to provide the training and mentoring that will propel them quickly up the career ladder.

We must focus on management, leadership and business-oriented skills development that will prepare this group of future leaders to take on the heavy burden of providing inspired guidance and leadership for the construction companies of the future. In addition to building the foundation of the rotational assignments, provide an in-depth training curriculum consisting of core courses designed to develop skills in several basic competencies.

Flexibility in work scheduling to enhance work-life balance
What is this work-life balance thing and why should I care about it? Once again, the boomers provided a bad example of how to work day and night because they thought it was the only way to get ahead in the wicked world. Now here comes a group of people who have the nerve to expect to go home to honor their commitment to their families at night. Or maybe they will resist pulling up stakes and moving to work the oil patch in North Dakota where there is little social or cultural infrastructure to support their families. Where is their sense of commitment and sacrifice for the good of the order?

Maybe this is an extreme example, but where do you draw the line? How do organizations and leaders change their behavior and culture in order to create an environment conducive to keeping and growing newer generations? It does not have to be the holistic playground of software developers in Silicon Valley, but managers must be cognizant of the real objective, and that is to get the job done right. Just because the new 28-year-old project engineer is not at her desk at 6:15 a.m., when you show up, does not mean that she has not figured out a more technologically efficient way to get that job cost report done in half the time it takes you to grind it out.

WHAT DOES ALL OF THIS MEAN?

Considering the expansive scope of these developmental needs to prepare our next generation of leaders and managers, it is not realistic to implement all of them simultaneously. In order to reduce the effect on the organization, create a prioritized list and rank those initiatives that will generate the most immediate results for people and ultimately will benefit your company overall.

Take it one step at a time. Some of these processes could conceivably be launched on parallel tracks, depending on the resources required and who will need to participate. Above all, do not be tempted to be carried away with your own enthusiasm and risk alienating your loyal employees by launching too many changes at once. The payoff will be worth the patience in the end.


Ken Wilson is a director at FMI Corporation. He can be reached at 919.785.9238 or via email at kwilson@fminet.com.

1 Urbain, C. (2013). Stand up to the coming skilled worker shortage. Contractor’s Tool Source, May/June 2013, p. 6.

 

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