Tackling skills shortages: What your construction firm can do

The construction industry has the highest rate of failure out of all businesses within the USA—due in part to skills shortages.

It’s a dubious “badge of honor”—but the good news is there’s loads of help available for Small and Medium Businesses (SMBs) within construction.

This guide will help you find out how to attract and retain labor to get ahead of the competition now and protect your bottom line in the long term.

Here’s what we’ll cover

The challenge of skills shortages for construction SMBs

All too often, it’s the big numbers that grab the headlines in construction:

• “The US needs 500,000 more construction workers.” News Releases | ABC: 2024 Construction Workforce Shortage Tops Half A Million
• “We need multi-billion dollar projects like California High Speed Rail.”

But what’s reported far less often is the critical role of SMBs in underpinning the industry—which make up 99.9 percent of all US businesses.

“Mom and pop” shops—often specialist suppliers—play an essential part and act as supply chains for critical sectors including manufacturing, EV battery plants, power and energy, data centers, and transport infrastructure.

As such, SMBs are also on the front line in tackling skills shortages.

But it’s no easy task when you’re managing other major challenges like inflation, supply chain disruptions, economic uncertainty, and increasing requirements on sustainability and health and safety.

According to the Associated General Contractors of America (AGC)—the leading association for the construction industry—70% of respondents are concerned about skills shortages.

Meanwhile, a detailed report published by the U.S. Chamber of Commerce and the USG Corporation showed that 95% of contractors have serious problems finding skilled workforce for their projects.

But help is at hand.

Here are 6 steps you can follow to attract and retain skilled construction labor to protect your construction SMB in the long term.

1. Research grants and funding

Tackling skills shortages in the long term requires investment—and this is one opportunity where the U.S Federal Government offers grants and funding to support workforce development within critical industries—like construction.

The Economic Development Administration (EDA) prepares American regions for growth and success in the worldwide economy.

It runs multiple and growing grant programs and funds workforce planning, as well as targeted training projects addressing hiring and skills needs, and creating high quality jobs.

In an industry plagued by low margins and cash flow challenges, it might be worth seeing if you can get additional financial support.

From there, it’s time to take an objective look at how you can optimize your people, processes, and tools to help you get ahead.

2. Assess where are you now

According to Procore, construction labor represents up to 60% of total costs. Whether you use your own people or subcontractors to deliver work, it’s a function that needs to be managed very carefully.

Map out your construction work pipeline for the coming months and years to identify which specialist people you will need, and when, as well as predicted market shifts and changes.

This enables you to plan the use of expensive experts—and ensure everyone is working at optimum capacity.

From here, you’ll identify potential gaps—and can recruit, train, and upskill proactively ahead of problems.

3. Attract talented people

According to McKinsey, annual hiring in the US for critical skilled roles could be 20 times the projected annual increase in net new jobs.

A major reason is churn—with older people leaving the workforce and a lack of young people joining.

It’s estimated that this costs companies more than $5.3 billion every year in talent acquisition and training costs alone.

In addition, the AGC reports that labor shortages are severe within construction because most job candidates are not qualified to work in the industry.

A shocking 68% of firms report applicants lack the skills needed.

So, here’s what to do:

Start early

It’s worth building relationships with trade schools and colleges, to develop a pipeline of talented and motivated new starters.

This might include creating apprenticeship programs which include hands-on experience

Get marketing

make sure you invest in marketing your construction SMB to win over the skilled workers that everyone’s competing for. Find the unique story that helps your business stand out.

Follow your target candidates by promoting yourself on job sites, social media, and careers fairs.

Don’t forget underrepresented groups, who are often a valuable untapped resource.

According to the AGC, 81% of firms have raised base pay rates for their workers during the past year.

In addition to raising base pay rates, 44% are providing incentives and bonuses, and a quarter of firms (26%) have also improved their benefits packages.

4. Retain your best people

The US construction industry is juggling an ageing workforce, combined with increasing demand.

Between 1984 and 2027, the ratio of post-working-age individuals to working-age individuals is projected to rise by about 75%.

So we need to do everything we can to keep the people we do have.

Recognition

Everyone loves reward, recognition, and development, so make sure you do recognize the achievements and hard work of your existing staff.

Upskilling

You may also want to offer in-house training and continuous education, to develop existing workers, incentivize them to stay, and keep your business ahead of developments within the industry.

To stand out, you may also want to create a formal career development program—so people can see clear paths for progressing through your business to maximize their personal and professional growth.

According to the AGC, 41% of firms are boosting spending on training and professional development programs, 25% are enhancing their online and video training capabilities, and 14% are using augmented and virtual reality technology to better train workers.

Let people shine

Your retirement age workers might love the chance to share experience via mentoring and supervising newer entrants.

Valuing and using the skills of your more senior employees to train up newer ones is a no brainer.

5. Create a more “human” culture

Creating a positive and more “human” work culture is a way of attracting not just any people, but the right people.

Building in flexibility and inclusivity only benefits your business in the long run.

Flexible working

Since Covid-19, many people expect the option to work remotely or hybrid to accommodate personal commitments.

By being flexible, you’ll also appeal to a bigger talent pool.

When they do have to be on site or in an office, consider ways to make it worth the added expenditure of a commute or childcare arrangements.

Be part of the big picture

Many find work more rewarding when they can see how they’re making a difference.

It might be worth networking, building relationships, and forming partnerships to access new opportunities and influence wider industry conversations.

According to the AGC, 25% of firms report teaming up with a craft staffing firm, and engaging with a government workforce development or unemployment agency.

Create a great culture

Consider investing in your mission, values, and internal communications to make people feel positive and safe, maximize engagement, and reduce turnover.

Consider a regional approach

Some construction firms have adopted a regional approach to tackling skills shortages.

They do this by working collaboratively with other companies, as well as authorities and clients to attract entrants and deliver relevant work placements.

6. Use intelligent tools

It’s widely accepted that the construction industry is “behind the curve” when it comes to digitalization.

But industry is ramping up. According to AGC, 91% of firms agree that their employees need to possess digital technology skills to be successful as firms adopt new labor-saving technologies.

And nearly three-quarters of firms say that at least half the people they are hiring have the technology skills they need.

The numbers show that there’s rarely been a more compelling case for adopting new technologies than workforce development.

Three out of four respondents agree that their use of cutting-edge technology helps them recruit talent into their firms, while a similar share agrees that diversifying their current workforce is critical to strengthening their future business.

So why not check it out?

• Construction technology—it might be worth looking at whether you can redeploy people from manual tasks onto higher value activities. Solutions such as Building Information Modeling (BIM), drones, and automation not only improve efficiency, they can also reduce reliance on manual labor.

Using online project management tools also enables you to streamline operations, improve communication, and enhance productivity.

That’s good for everyone because smart workplaces are often also rewarding workplaces motivating your people to stay.

And while the skills shortage challenge is great—so is the outlook for the construction industry.

According to the AGC, despite labor shortages, most firms expect to expand in the next 12 months. 69% of firms expect to add employees in the next 12 months, while 27% expect no net change.

If you break it down step by step, there are many ways you can get ahead of the pack and secure a talent pipeline that will give you a long-term competitive advantage.