The Labor Shortage

For years industry experts have predicted a workforce shortage spanning the design and construction industry, from engineers to skilled labor to firm leadership. Some have argued that there is no such deficiency, particularly in STEM-related disciplines, but in 2014 the real shortfall of qualified talent became apparent. It will be a major trend in 2015 and for several years as the marketplace seeks viable solutions.

Availability of Labor at All Levels is a Major Concern

The shortage of skilled labor at all levels is no surprise. The construction industry first recognized the declining supply of construction labor as early as the mid-1980s. Organizations, including the Associated Builders and Contractors, Construction Industry Institute, Business Roundtable, Construction Users Roundtable and others, began warning the industry of the inevitable shortage of not only skilled craftsmen but also project managers, estimators, superintendents and senior managers. Now that the industrial segment is expanding, the issue has become critical. A 2012 report from FMI stated that two million jobs disappeared from the design and construction industry during the downturn that followed the Great Recession. This accounted for about 20% of all jobs lost during that period. There have been many reasons for this reduction: „ During the recession, many in the industry found careers in other sectors and have no desire to come back to the construction field. As younger workers encountered the cyclical nature of the industry for the first time during this recession, many opted to seek employment in other industries less impacted by economic cycles.

Baby boomers are retiring at an astounding rate. Approximately 10,000 baby boomers are retiring each day and members of this group heavily populate most industrial, engineering and construction firms. Boomers represent 26% of the U.S. population. While the loss in numbers of workers within this group is significant, the loss of experience, knowledge and leadership is more alarming. „ Fewer young workers are entering the industry, both in the field and in management. The U.S. has fewer construction and engineering graduates than at the peak just six years ago, with many construction management and civil engineering programs running below maximum enrollment. Additionally, fewer young people are entering the skilled trades. „

The industry, particularly at the craft level, is highly dependent on Hispanic labor. This demographic has historically deep roots in the industry, and with typical values such as a strong work ethic and pride in craftsmanship, this is not surprising. The growth of Hispanic workers is projected to be about three times that of all other workers. This drives the need for bilingual personnel at all levels. The current immigration policy (or some would argue, the lack of a policy) has clouded the ability to fully predict what ongoing impact Hispanic labor will have on the segment. Current proposals, and their likely effects, are all over the map. With no immigration reform proposal becoming law before the 2014 midterm elections, immigration will likely be a key campaign element of the 2016 presidential race.

Engineering and Architecture Firms Battle for Limited Talent Pool

Design firms have anticipated with great concern the impact of talent drain on the profession. Just as with construction, a plethora of experienced individuals departed the profession during the Great Recession and, having taken up other work, are unlikely to return. With new projects becoming available and those long on hold starting up again, the need for talent has returned. Many engineering and architecture firms anticipated the seriousness of this issue and have established strong programs for recruiting. With a limited pool of talent available, many of these programs focus on acquiring experienced staff from competitors. Design firms that looked ahead to this day have already established robust engagement and retention efforts to protect current staff. Firms that remained cautious about hiring must now quickly take a defensive position and beware of losing key staff to competitors. With the pipeline of future college graduates, especially in engineering disciplines, insufficient to supply the entire industry, all firms must find ways to improve effectiveness for the long term or face an erosion of capacity over time.

Trade Contractors

With the building sector already facing significant shortages of talent, the industrial construction boom will further exacerbate severe shortages among several trades in the building markets. This trend is of even more concern when considering that the oil and gas companies are typically able to afford higher wages than other sectors. For tradesmen capable of working in either of the industrial or building sectors, the wages and opportunities being created by the oil and gas industry may be too attractive to pass up

In addition to a significant shortage of trade and craft workers in the field, most trade contractors are finding it equally difficult to find, attract and hire professional and management-level talent. Finding talented project managers, operations managers and successors for aging presidents and CEOs is as challenging as finding talent in the field. As a result, the companies that implemented aggressive and ongoing internship and college recruiting programs five to seven years ago are finding it considerably easier to fill midlevel and senior project management positions today. Having a system that injects new young talent into the firm every year is proving to be a more successful approach than trying to hire a qualified project manager or operations manager off the street.

For many trade contractors that did not pursue a talent and leadership pipeline strategy years ago, the options for finding and hiring management succession candidates are limited. The marketplace is resilient, and solutions will emerge over time. For the short term, responses to the worker shortage may be twopronged. First, as firms return to more normal work levels, they will seek new methods of increasing efficiency and productivity to better leverage existing teams; second, firms will enhance recruiting and retention efforts to keep top talent in-house and lure desirable workers to the firm.

By Michael D. Clancy, R. Huntley Davis, Scott C. Duncan, Steven J. Isaacs, Scott L. Kimpland, Brian A. Moore, Randal G. Stutzman, R. Huntley Davis and Lee D. Smither - FMI Corporation