With the national unemployment rate at its lowest level in 54 years,1 the engineering and construction (E&C) sector continues to be heavily impacted by persistent labor shortages. More than 90% of E&C firms can’t find qualified talent, and more than 50% predict that the shortag es will either highly or severely affect their organizations, according to FMI’s latest research.2
With the labor shortage expected to intensify for both field manager and executive roles over the next five years, this article dives into key findings from the 2023 FMI Talent Study3 and discusses the current state of recruiting, hiring, and retention for the E&C sector.
The effects of the pandemic, Baby Boomers exiting the workforce, the Great Resignation, and the fierce competition for talent among E&C firms are all making it more difficult to find, recruit, and retain employees, managers, and leaders. As Anirban Basu noted, the number of construction workers aged 25-54 fell 8% from 2011 to 2021, which means that one in five construction workers are now older than 55 and quickly approaching retirement.
Higher-than-average quit rates are another factor. In construction, these rates remained steady at 2.4% after rising to a high of 3.3% last year. Similarly, the transportation, warehousing, and utilities sectors reported 3.1% quit rates; however, these rates compare to just 0.9% for the information services sector.
On a positive note, the Associated Builders and Contractors (ABC) reported slightly higher inflows of construction staff in 2021 than outflows.4 The downside is that incoming workers often lack the necessary experience, skills, and training needed to be able to manage their current work backlogs and grow their businesses.
The Exit Plans Are in Place
According to FMI’s 2023 survey, construction companies anticipate an increase in exits at all levels over the next five years. The high rate of people leaving the industry will likely be felt for some time, as robust backlogs continue in the nation’s nonresidential sector and organizations deal with wage pressures, burnout, and other issues that could throttle growth.
Although finding and keeping talent is an industry-wide problem, FMI’s survey also found that organizations could do more to address the issue. With just 19% of companies having succession plans in place for key strategic roles, most companies are overlooking the chance to plan and develop talent to fill field leadership and other crucial positions. These results align with previous FMI surveys,5 which have historically highlighted the lack of succession planning in E&C firms.
Ignoring future leadership needs could spiral into an even bigger issue since many skilled field leaders report that they’re disillusioned and frustrated with growing workloads and lacking support. Similarly, taking a fresh, formal approach to succession planning beyond the C-suite can also substantially enhance emerging leaders and support broader, strategic thinking that drives long-term growth.
Talent is available, but finding and recruiting leaders requires a deliberate and strategic approach. Technology companies like Google, Amazon, Microsoft, Yahoo, and Zoom, for example, have laid off more than 168,000 people in 20236 and will likely add more to that total as the year progresses. If E&C companies can demonstrate to workers the value and longevity of transferring their skills to construction from other industries, then they could expand the pool of available talent.
Once onboarded, those employees need support, training, and advancement opportunities, with younger workers being particularly interested in issues like work-life balance. These are all important considerations for companies in the built environment to consider as they create more inclusive work cultures and improve their hiring and professional development practices.
Combatting the Talent Shortage
The E&C industry has been struggling under the weight of a labor shortage for years. Construction employment peaked at just under eight million jobs before the Great Recession but dropped to about five million by 2010. A slow rebound in employment numbers took place over the following decade with industry employment finally surpassing prefinancial-crisis levels in 2022. Still, staffing remains an uphill battle for most companies. The number of job openings remains high at a time when the national focus on infrastructure spending has intensified.
The latter is expected to create an even bigger demand for E&C workers in the near future. According to a proprietary model developed by ABC, “the construction industry will need to attract an estimated 546,000 additional workers on top of the normal pace of hiring in 2023 to meet the demand for labor.”7
Smart companies are taking a multipronged approach to the talent crisis by attracting younger candidates, recruiting individuals from other industries (particularly those that may not be faring as well as construction right now), and putting more effort into cultivating tomorrow’s leaders.
“The labor market has shifted since the pandemic in ways that may make it even more difficult for contractors to attract and keep workers,” said AGC’s Chief Economist Ken Simonson in a recent interview. “Other industries now offer flexible hours, remote or hybrid locations, and the possibility of taking a break on short notice. These conditions aren’t possible for onsite construction jobs.”
Filling the Talent Gaps
As veteran workers retire and the pool of skilled workers continues to decrease, E&C attrition is rising exponentially. According to FMI’s survey, respondents are forecasting a 22% turnover for executives and senior managers as well as nearly 30% for field managers between now and 2028. And while 19% of companies surveyed have plans for key strategic roles, more than 60% show very little to no strategic thinking around succession planning. Since it can take 5-7 years to train successors, this oversight could have significant ramifications for the industry.
As companies formalize their succession plans, they must also think beyond key roles. “You’ve got to be training the 35-year-old project manager to think beyond project execution/project management and task orientation,” said Rob Pulley, a Senior Consultant with FMI’s leadership and organizational development practice.
“As deep as you can go into the organization, your people need to be thinking about what’s ahead if you’re going to excel and create a competitive advantage. That’s how you develop people into the enterprise leaders that you need for the next 10 or 15 years.”
For example, one multibillion-dollar general contracting company needed help identifying the leadership competencies to guide the organization through a complex, faster-paced future. The company wanted to be able to measure its next generation of leaders against those differentiators.
“Framing their development around enterprise thinking and how to be successful in their markets will allow the next generation to find their skill gaps and focus on specific developmental areas,” Pulley explained. “We’re not replacing one person — we’re building a team of five or six enterprise leaders who can build, sustain, and preserve the business continuity ecosystem. That’s what’s going to drive their executive development process.”