With more than a year into the COVID-19 pandemic, construction companies are looking beyond the resiliency that saw them through the worst months of 2020 and incorporating strategies to build on the recent mixed economic signals.
Yes, construction employment is still down; the industry’s unemployment rate in January 2021 was 9.4% compared to 5.4% in January 2020.1 On the other hand, the Associated General Contractors (AGC) of America noted that residential building and specialty trade contractors had recouped all of their early 2020 employment losses by January 2021.2
Nonresidential construction employment still lagged at 5.5% lower in January 2021 than in February 2020.3 Only 60% of the job losses in nonresidential construction in 2020 had been erased by the beginning of the year.4 Still, although backlogs were down 0.9 months from January 2020 to January 2021, they inched up at the beginning of 2021 to 7.5 months, according to Associated Builders and Contractors (ABC).5
Companies that paid attention to their key relationships when COVID-19 cases were rising, jobsites were closing down, and backlogs were dwindling should continue nurturing these crucial connections but with a focus on growth. These key relationships and crucial connections include the company’s relationships with the following:
- Strategic leaders
- Project owners and design professionals
- Subcontractors and suppliers
- Professional services providers
- Banks and financial lenders
- Trade associations
This article explores questions that contractors should consider asking of their internal and external stakeholders in order to successfully adapt to the new environment.
Given the challenges of the current environment, many contractors that are successfully adapting to the changing conditions are those that provide their strategic leaders with the support, resources, and team members to help navigate these conditions. Successful company leaders are those who are willing to adjust how they run the business. The pandemic provided a stark test on how agile companies could quickly pivot in response to changing economic, political, and public health conditions.
While most business planning is normally 3-5-year plans, today’s strategic leaders should also have short- and micro-term plans, spanning a period of months rather than years. Regardless of the time horizon, a key element of successful business plans is to clearly identify the key performance indicators (KPIs) that are critical to the company’s success. Once the KPIs are identified, can company leaders effectively measure them and ensure transparency across the organization?
Successful leaders also align those KPIs to compensation. Instead of traditional discretionary bonuses, companies should be thoughtful in their approach by aligning compensation with performance.
Savvy business leaders are embracing technology by focusing on business systems and processes that add value. According to the “The Pandemic’s Growing Impacts on the Construction Industry: The 2021 Construction Hiring and Business Outlook” survey conducted by AGC and Sage, 62% of construction companies “indicate they currently have a formal IT plan that supports business objectives, up from 48% in 2020. An additional 7% of contractors plan to create a formal IT plan in 2021.”6
Technology will also help companies deal with the perennial shortfall of qualified employees. Robots and autonomous vehicles are becoming more common at building sites, and the International Data Corporation forecasts that demand for construction robots will grow about 25% annually through 2023.7
Changes in day-to-day life during the pandemic may have convinced some business owners and C-suite leaders to accelerate plans to sell the business or retire. Companies should revisit their continuity plans for decision-making and control of the business.
Questions to Ask
- Which business practices do you need to adapt, and which will you retain moving forward?
- As your business practices evolve, do you have the technology in place to support your organization?
- Do you have the right incentive compensation structure?
- Is there a business continuity plan in place for decision-making and control?
- What KPIs are critical to your success, and do you have a way to measure them effectively?