By: Nemanja Simic on October 25th, 2022
3 Ways General Contractors Can Combat Labor Shortages
The labor shortage in construction is something contractors have dealt with for decades. The pandemic certainly exaggerated the impact of shortages, but there were fewer and fewer recruits even before the Great Recession. With an aging labor force and a huge demand for labor, the shortage has reached an all-time high.
Being strategic with the workforce is more important than ever before to maximize current efforts and predict labor capacity for the coming months/years. The difficulty of the job is amplified because of inefficient manual processes that silo data, making it hard to collaborate. In a survey done by SmartBrief and Bridgit, 70% of surveyed contractors said they’re allocating their workforce for the next two months, and not much after that. Also, 46% said they don’t have adequate time to hire when the project needs it.
These statistics tell us that workforce planning has become reactive, leaving operations teams and human resources scrambling to fill gaps, causing project delays due to workforce limitations, and rushed hires that may not be the best fit for the company.
Being proactive and planning your workforce months, or years, in advance can prevent these problems and equip contractors with the foresight to handle constraints before they arise.
3 Ways to Combat Labor Shortages
Planning for Project Pursuits Is a Must
Many contractors make the mistake of only planning awarded projects. Including pursuits and projects that are likely to be awarded can provide proactive insight into staffing complications that may arise. In the same Bridgit survey, 86% of contractors said they have bid on projects only to find they don’t have the people to actually complete the job. Clearly, the difficulty of predicting and planning labor is pervasive throughout the industry. Labor shortages can be immediately alleviated by adding pursuits in your planning, avoiding complications that can catch your team by surprise.
Another benefit to planning pursuits is an improved bid-win ratio. According to 1st Source Bank, a bid-win ratio is “the winning rate at which you successfully bid or propose on construction projects.” For example, a 6:1 bid-win ratio means you win one out of every six projects you bid on.
Because of the resources that go into each project bid, having a lower ratio is ideal, but this changes from company to company. Planning labor for pursuits can help to improve your ratio because you’ll have a wider view of your capacity to take on new jobs. As this capacity improves over time, winning bids happens more often, and the cost of losing bids declines. Understanding how you win work can help you grow sustainably and stay proactive with hiring and upskilling internally.
Labor shortages can also be mitigated by having a recruitment strategy informed by your project plans. The more time and foresight your HR and recruitment teams have, the more likely they will find a quality candidate that fits well in your company. Having systems in place that provide insight into when people are coming off jobs, when jobs are starting, and what the workforce demands for pursuit projects are is the best way to provide that foresight.
Hiring can be rushed, but if you’re looking to attract and retain skilled workers, HR needs enough leeway to develop a recruitment plan. This plan includes the job description, publishing the job, working with recruiters and job boards, conducting interviews, and screening applicants.
Proactively recruiting mitigates the costs of replacing an employee 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. 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.
Not only will planning for recruitment early help combat the labor shortage, it'll help combat the high costs of employee turnover.
Filling Skills Gaps
Labor shortages aren’t always about the sheer volume of people needed to complete a job. It could mean there’s a shortage of skilled labor, which is the case right now. According to Associated Builders and Contractors, entry-level laborers increased by 72.8% in 2022, but the total number of laborers only increased by 25%. This indicates a sizable skills gap. Solving this problem should include the development of the people you already have.
Contractors need to have systems where they can track experience, certifications, career trajectory, and education for current employees. With siloed systems and limited transparency into this kind of data, workers aren’t developing as they should because they’re being used to fill gaps reactively.
With more insight into the development of the workforce—not just where people need to be at any given time—your managers can put your people into situations where they’re gaining skills and futureproofing their workforce.
For example, a contractor may have a mason who’s expressed interest in becoming a superintendent. By tracking their skills and helping them get the necessary certifications, the mason could fill a superintendent gap that arises as a new project begins.
Doing this effectively requires contractors to retreat from reactive daily management of projects and look at their workforce long-term. A common-data strategy, in which the whole company can access insights on projects and people can help. With the current tools in their arsenal, it’s difficult to do this because they aren’t designed to provide that kind of dynamic depth.
Workforce management tools for construction like the ones built by Bridgit, or even non-vertical specific tools like Monday.com can help general contractors develop this common data strategy for their workforce by collecting people and project data in one place.
Nemanja Simic s a content writer at Bridgit. He started his career in business development, where he spoke to contractors daily, providing him with a deep understanding of the problems around workforce planning in the construction industry. Using this insight, Nem developed an approach that aims to provide digestible, data-backed advice to help contractors get the most out of their workforce strategies.