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Blog/December 28, 2017

The War for Talent — A Key Contractor Advantage

Monthly Metrics

The war for talent continues and exacerbates. Many industries seek the logical, orderly minds that are the hallmark of our industry’s best project managers and field leaders. Work in all companies is trending to be more project-based. Many companies in other industries have also discovered the work ethic, the ability with tools and the problem-solving magic of “farm boys.” Medical schools are among our new competitors; the dexterity with tools and the common sense of these young people make for great surgeons and realistic diagnosticians. Many now fish in one of our historically best ponds.

These realities force us to get better at recruiting, at telling our story, and at articulating the benefits of working in our industry or at our company. We have so many advantages. Our work is interesting and critical to our community; it has visible human purpose, which appeals to millennials. We build those structures where our neighbors work, worship, learn, heal, celebrate and play. Our work is ever-changing and challenging. Most of the time, we are building “one-of-a-kind” structures, out in the weather, for a fixed price, over a rigidly defined time frame. It takes real competency to do this year in and year out. Our technology is exciting too. We now use phone-based apps everywhere, drones, virtual and augmented reality masks, Wall-Bot sensors and, increasingly, XO suits that give us the strength of Superman. We have as much to offer career seekers as any other industry.

We have one major advantage, too — one that we often overlook, one that differentiates us, in most cases. Most construction companies are privately held corporations, often family-owned. Many have been in business for two or three generations; several, beyond that. Many have become solid organizations with defined divisions, multiple levels of leaders and managers, detailed financial reporting, and an inclusive annual budget process for operations and capital expenditure. These firms increasingly have career paths, formalized training, and coaching and mentoring for most roles. They have structured compensation plans with short- and long-term incentive plans. Continuity thinking pervades the senior leadership team; succession planning is an ongoing imperative. Opportunities to purchase equity can occur. They are as sophisticated as any public corporation, but with a major, positive differentiator. They are not slaves to the quarterly earnings reports and an unrelenting mandate to increase shareholder value in short-term increments.

What a difference this makes in the culture of the reorganizations. Most of these privately held companies build their cultures on values reflecting how they will treat employees and customers, not on daily stock prices and insatiable shareholder demands. They realize they will grow shareholder value over a longer time horizon by delivering their projects, year after year, on time, in budget with quality workmanship, not by financial engineering or manipulation.

As a result, successful privately held companies have much more predictable and stable environments in which to build a career. These companies know “who we are and how we behave,” FMI’s definition of culture. In public companies, “who we are” can change frequently, as directors bring in some new wizard, and “how we behave” is exclusively financially driven, in most cases. For the solid, hardworking, career-seeking young person, established, respected construction organizations are the best option. In this escalating war for talent, we have an often overlooked, yet very powerful, weapon.

 


 

Houston’s Monthly Metrics

The second Friday in December, as the snow from the storm the night before still lingered, Patrick Jankowski, vice president of research at the Greater Houston Partnership, outlined his employment forecast for Houston in 2018— 45,000 in employment growth. A month earlier, Dr. Bill Gilmer from the Institute for Regional Forecasting at the University of Houston gave an employment growth range of 20,000 to 70,000 with the weighted average hitting at 41,000 jobs. Both projections, thoroughly researched and scrubbed over, are heavily contingent on the price of oil in the year ahead. In Jankowski’s presentation, he stressed that what is good for the U.S. and the global economy is good for Houston, as we are a global city, with thousands of companies doing business around the world. In looking at the breakdown of Jankowski’s projected employment growth by sector, the base employment markets – those serving outside of the city such as manufacturing – are projected to do much better than nonbasic employment sectors – those sectors which rely on the local economy, like construction.

As Jankowski outlines in the chart below, the falloff in construction in the office, industrial and retail construction markets is sizable. Granted, and particularly in the case of office and industrial, the starting point was an anomalous high. Nevertheless, these markets are considerably slower than a few years ago and are expected to remain around their current levels in 2018. Likewise, multifamily, vibrant in 2015, finally began to slow in 2017 and will likely remain depressed in 2018, as those displaced from Harvey return to their homes, creating vacancy in the market. Heavy industrial, also a superstar over the last few years, is expected to decline as well, with the value of construction work projected to fall nearly 12%, according to Industrial Information Resources.

 

Hurricane Harvey’s impact has been primarily on the residential market. An influx of day labor workers can be seen around town, and so the true scope of repair costs will never be known. The long-term trend of a decline in homeownership rates continues, as investors swoop in and buy up damaged properties for renovation and landlord opportunities. For the commercial sector, Harvey has been, for the most part, a blip. Along with the World Series, it brought in some additional sales tax revenues to help METRO and the city, but for most contractors, did not dramatically impact their backlogs. Where Harvey’s impact could be seen going forward is at the polls. Both METRO and the Harris County Flood Control plan to go for bonds next year. Likewise, there are already discussions about the redrawing of the flood plan, and some homeowners are being required to raise their home level as a part of their rebuild process —a costly step. When consumers feel poorer, they spend less. They eat out less. They cut expenses where they can and look for lower-cost alternatives. They delay the purchase of big-ticket items. The same mentality can affect business spending as well. There are butterfly-effect implications for the Houston economy, as those nonbase industries will have consumers looking to spend less until they feel their balance sheets are again restored.

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