A Sustainable Workforce Starts With You

Houston: Managing the Changes Ahead – The Opportunity and Challenge of 2019

The following article originally appeared in the newsletter to clients of FMI Corporation.  Reprinted with permission.

A new year is weeks away.  It begins with basic optimism.  The national economy is projected to remain strong into 2020, perhaps beyond.  Houston’s population is growing because it is in a strong job creation period, again.  Nothing drives construction more than these three variables: People need residences, companies need space, the city and country need infrastructure.  These positive trends are forecasted to continue, perhaps accelerate.  Projections for population, employment and GDP growth over the next 20 years imply the Greater Houston Area could move from its current level of $26.5 billion per year of total construction put in place to a level of between $45 billion and $50 billion by 2040 – a staggering number.  Even if these numbers, issued by a highly regarded economic organization, are off by 10-15 percent, there will be growth opportunities for the construction firms that are prepared.

However, “preparing” will take different strategies than for prior growth periods.  The construction industry is changing.  There is a surveyed and studied consensus that the industry will change more in the next five years than it has in the past 50!  Many things are driving these changes.  Perhaps the two primary ones are the skilled labor shortage and the march of job-site-related technologies, but there are other forces as well.  These include the era of “big data;” the retirement of the boomers in senior leadership roles both in construction and client companies with their replacements being younger, technology natives; and talent acquisition and development programs that are creating truly differentiated cultures with teams who outperform by multiples.  It is the embrace and effective integration of these real and accelerating trends that will define survivors and create the winners, moving forward.  There are three highly relevant forces that require senior leadership focus.

The first force, already in its adolescent stage, is prefabrication.  More and more things are being built off-site and installed on-site.  Owners see the cost and schedule value of this approach.  Some are specifying it and are even leasing facilities to allow multicraft application.  Craftworker retention and labor productivity are enhanced in air-conditioned warehouses.  Modular units for hospitals, hotels, and apartments are increasingly being built this way.  Companies are being formed that have no roots in traditional construction.  These companies are well-funded by technology investors and well-received by owners with multiple, similar projects.  Katerra is a prime example.  It has over a billion dollars in revenues and an even larger market capitalization.  It is only three years old!  Full Stack Modular is another.  These companies have tapped into the power of robotics and 3D printing for some components.  There is growing use of the interesting new term “constructing,” borrowed for the manned space station builders.  Surely there are challenges, warranties, inspections and the like, but they are being solved.

The second force is the growing percentage of construction company workforces that are made up of millennial workers.  As the baby-boom generation (78 million strong) retires, there are not enough Generation X workers (49 million) to replace them, so Generation Y, the millennials (75 million), are taking up the slack.  Demographers state that millennials will make up 50% of the workforce by 2020, and 75% by 2025.  Enlightened companies are welcoming their differences and their significant capabilities, especially with technologies.  These organizations often partner a tech-savvy millennial with a seasoned field builder, creating a powerful productive team.  These same organizations are finding reasonable ways to accommodate this cohort’s desire for more work-life balance, developing specific deliverables with deadlines for key roles, monitoring performance over presence.  How companies integrate the millennials will be a key, positive, competitive differentiator.  Remember, there will be millennials in key roles on the client side too.

The final force is an amalgam of torrents that, together, are reforming the senior executive teams, now frequently with three generations as members.  They are leveraging the myriad technology-enabled devices to collect more data than ever before.  They are increasingly data-driven, making well-researched and analyzed decisions and challenging traditional approaches to hiring decisions, strategy development, and workforce management.  They want real data on the talent they hire and the markets they serve.  Resumés are becoming passé; internet information searches, more prevalent.  They know where to play and how to win, because they have gathered data on their truly assessable markets, customer behavior, and competition.  These winning C-suite teams develop and live a talent-magnetizing, empowering culture.  They are quick in eliminating culture killers, but invest heavily in tailored coaching, mentoring and leadership development programs for their high potentials.  They manage by metrics and seek comparatives and road maps to the future through peer groups, boards, and strategic hires to guide them to their growth milestones.  This exciting future will belong to those leadership teams willing to make the investment in talent, training, technology and research.  They will navigate these Level 5 rapids of change that are just beginning to rock our traditional boat.