It’s no secret that construction is facing a significant labor shortage. Sure, the uncertainty in the industry brought on by COVID-19 didn’t help, but labor shortages are nothing new. Since the home-building boom in the early 2000s, a lack of labor has been the norm. With an aging/retiring pool of skilled workers and an increasing demand for labor, the industry is now facing roughly 25% more unfilled positions than hires.
Contractors will need to be more strategic than ever with the projects they choose to pursue, and forecast their team’s future capacity to maximize output. The problem is that these are incredibly difficult tasks to do accurately without the right tools for the job. More often than not, contractors use manual tools (spreadsheets/whiteboards) to track their people. Tools that don’t consider pursuit projects and opportunities and lack any form of forecasting.
In a survey done by Bridgit, 70% of contractors indicated they plan their workforce less than two months into the future. Additionally, 46% said that they don’t have adequate time to hire when the project needs it.
These statistics highlight a reactive business model that keeps contractors stuck rushing to fill gaps in the eleventh hour, delaying projects due to lack of labor, and onboarding and training new employees that may not be a good fit for the company.
There will always be a need for reactive planning in construction, but being proactive and having insight into your workforce months or years in advance can help mitigate these kinds of problems. Even reactive planning can be done more effectively if contractors are able to understand the future impact of their decisions.
3 ways contractors can combat labor shortages by planning their people strategically in 2023
1. FILLING SKILLS GAPS
First off, it’s important to understand that labor shortages don’t necessarily mean that there is a lack of people to complete a job. It could just mean that a specific kind of labor or skill is missing. According to Associated Builders and Contractors (ABC) in 2022, entry-level laborers increased by 72.8%, but the total number of laborers only increased by 25%. This indicates a sizable skills gap. One solution to this is developing the needed skills internally with the current workforce.
Contractors need to have systems where they can track their people’s career trajectories, experience, certification, and education. With siloed systems in place and limited transparency into data at the operational level, workers aren’t developing as they should because they’re being used to fill gaps in a reactive way.
With more insight into the development of the workforce – not just where people need to be at any given time – managers can put workers in situations where they’re expanding their skill set and futureproofing their workforce.
For example, you may have a carpenter that’s interested in becoming a superintendent. By tracking their skills and helping them get the needed experience and certifications, your carpenter is suddenly qualified to fill a superintendent gap that arises as a new project begins.
Doing this effectively will require that you zoom out of the reactive daily management of projects and begin looking at your workforce long-term. Having a common-data strategy, where everyone can access insights on projects and people will certainly help. However, a data strategy will fall short if the tools being used weren’t built to provide that kind of dynamic depth.
On the surface, the best way to combat a labor shortage is to be prepared with (and have HRs visibility on) your recruitment strategy before a project comes up. However, having systems in place that can provide visibility into when people are coming off jobs and when jobs are starting will be critical to staying ahead of your pipeline demands.
This visibility also gives your HR team enough leeway to put together a full recruitment plan – the job description, publishing the job, working with recruiters and job boards, conducting interviews, and screening applicants.
Effective recruitment is also a cost-saver. It helps mitigate the steep costs of replacing a new team member that wasn’t a good fit. According to Busy Busy, the turnover cost for laborers making $30,000 or less can be up to 16% of their annual salary. For employees earning about $50,000, the turnover cost is 20% of their salary and for specialized jobs like superintendents, engineers, and project managers turnover costs can be as high as 213% – that’s a cost of $213,000 on a $100,000 salary.
Planning for recruitment early will help deal with delays around labor shortages and allow time to recruit the right people – an essential part of combatting the high costs of employee turnover.
3. DON’T JUST PLAN PROJECTS, PLAN YOUR PURSUITS.
A common oversight many contractors make is not planning for their pursuit projects that aren’t awarded yet. In the same Bridgit survey, 86% of contractors indicated that they’ve bid on projects only to find they don’t have the proper workforce to deliver it. This alarming statistic points to the difficulties of predicting and planning labor. Filling this gap by planning pursuits can immediately alleviate labor shortages that seem to occur by surprise.
Another benefit to planning pursuits is an improved bid-hit ratio (or bid-win ratio). According to 1st Source Bank, the bid-hit ratio is “the winning rate at which you successfully bid or propose on construction projects.” For example, a 5:1 bid-hit ratio means for every five projects you bid on, one is awarded.
Having a lower ratio is ideal, but the ideal ratio will vary from contractor to contractor. Planning labor for pursuits can improve this ratio because contractors are able to better understand their capacity to take on new jobs. As they find an ideal capacity, winning bids happen more often and the opportunity cost of losing bids is curtailed. Understanding where and how work is won can help contractors grow sustainably while mitigating labor shortages.
Tools like Bridgit Bench are designed to help general contractors develop this common data strategy for their workforce by collecting people and project data in one place. In Bridgit Bench, changes are updated in real-time making it easier to collaborate and stay informed about workforce needs.
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