Four Ways to Address the Labor Shortage

Four Ways to Address the Labor Shortage

Isn’t it ironic? Just when prospects for record-setting spending in construction lay on the horizon thanks to the infrastructure law, you’re likely short on workers due to a labor shortage that is hitting the construction industry harder than most. What can you do?

While construction has been facing labor shortages for decades, the number of construction workers ages 25-54 decreased 8% in the last ten years alone. With an average retirement age of 61 and nearly 20% of current construction workers over age 55, the gap between the number of jobs and workers available is likely to widen.

According to a model created by the Associated Builders and Contractors, this year the construction industry will need to attract almost 650,000 new workers – that’s in addition to regular hiring demands.  Shortages are reported to cause project delays, quality issues, worker safety concerns, productivity decreases, and higher payrolls. Even though spending on construction is currently sluggish, the talent shortage remains the industry’s top challenge.

As reported by McKinsey & Company, construction companies must proactively address the labor challenge on three fronts: productivity; talent attraction and retention; and senior leadership engagement.

Productivity

Focus on new ways to approach project planning and delivery, with an eye towards reducing labor required by rethinking project design and reinventing how work gets done.

  • Off-site and modular construction offers numerous benefits.
  • Digital technologies and analytics can help identify the best way to work and keep projects moving.
  • Adopting lean construction practices can shrink waste while driving sustainable improvements.

Talent Attraction and Retention

Every step in the talent attraction, acquisition, and retention process presents opportunities to improve.

  • Know where to find talent, with targeted job sites like iHireConstruction.com; CareersinConstruction.com; and ConstructionJobs.com.
  • Accelerate recruiting, interviewing, hiring, and onboarding by reducing timelines, cutting out extra steps, and automating with technology (the longer the process takes, the more likely you’ll be ghosted – a.k.a. blown off – especially by the younger generation).
  • Strengthen retention by finding out what your employees want beyond competitive pay – there’s growing interest in autonomy, flexibility, support, and upward mobility. Focus groups and surveys can help you gain insights into what matters most.
  • Build a talent pipeline with programs that support and promote skill development. Build relationships with high schools, trade schools, and colleges to create pathways to careers. Mentoring and apprenticeships are growing in popularity.
  • Consider non-traditional talent pools like veterans or formerly incarcerated individuals or returnships for people looking to return to the workforce after retiring. Diversify with more women and under-represented groups.

Senior Leadership Engagement

Protecting income and profits is a senior leader priority so getting them involved in supporting talent acquisition and retention shouldn’t be hard because of the direct link between the two.

  • Invite a senior leader to sponsor talent acquisition and retention as a strategic priority.
  • Work with leaders to establish Key Performance Indices (KPIs) to track and measure progress specifically related to talent and addressing labor costs across the value chaing.
  • Work with leaders to create a culture employees want to be part of and contribute to.
  • Invite leaders to celebrate and recognize talent.

What About the Fourth Way?

That’s only three ways – the title says four. We know, we’re accountants. We’re taking liberty to add the fourth category: technology. While it’s inherent in the first three, it bears having its own discussion, because beyond solutions that can help drive productivity, streamline recruiting and retention, and track KPIs, there’s big perception value around having state-of-the-art technology.

Up-and-coming workers don’t know a world without it. They understand how to use it better than anyone else to streamline communications, processes, intelligence gathering and sharing, project management, and more. If you want to show new workforce entrants that your company is a place where they can leverage higher skillsets and continually develop knowledge, the latest in technology is like food, water, and air to them – they can’t live without it.

 

While focusing on your staffing challenges, why not partner with RBT CPAs to handle all of your accounting and tax challenges? We’re the largest CPA firm in the Hudson Valley and recognized as a Great Place to Work. You can trust that we’ll do everything right the first time, so you can focus on other priorities – like labor. Find out what we can do for you — give us a call.

Measuring Success

Measuring Success

After decades of working with leaders across many industries, one best practice that stands out from all others in driving business success: setting, monitoring and measuring key performance indicators (KPIs).

A KPI measures activity that is critical to successfully compete in the marketplace. A company may have its own KPIs and require business functions, departments, and individual employees to set KPIs as well. This way, all efforts are aligned to drive common goals.

A company may have three or four KPIs; the same holds true for departments and employees. In addition to evaluating critical activity, a KPI must:

  • Be realistic – a KPI to eliminate downtime is not realistic. An effective KPI would be “to reduce downtime by 5% through scheduled maintenance days.”
  • Be specific to meet goals: “delivered on time” is not specific. A better KPI is “to complete delivery within three days of receiving the customer’s order.”
  • Be quantifiable, such as tracking the rate of returned product.
  • Highlight areas where increased efficiency/decrease in use of resources can be achieved.
  • Illustrate the progress toward attaining a goal by presenting data in a chart or graph.

Implementing and tracking KPIs provides management with reliable data to streamline decision-making, encourages teamwork by promoting inter-departmental cooperation, and offers clarity for workers in terms of performance expectations. (As an added bonus, they can also help identify seasonal trends.)

Setting a KPI is just the start – the real value comes from regularly checking in to see if progress is being made and having a clear course of action once the results of the KPI are known.

So, lets say a company has a goal to provide superior customer service through quick delivery. Here’s what a related KPI and measurement may look like:

KPI: Lead time (the length of time it takes from the beginning of the manufacturing process to the time the final product is delivered to the customer).

How it will be measured: Tracking the customer waiting time, which is the length of time between when a customer places an order and the customer receives the product.

Target: To reduce lead time by 2 percent.

Implementing KPIs can increase the entire organization’s efficiency and production capability. An added benefit, KPIs can generate a positive attitude among team members by letting individuals know how they contribute to a company’s overall success. Setting, monitoring and measuring KPIs regularly can reenergize your team and ensure all departments are synchronized in their daily, monthly, and quarterly objectives.

Get Ready to Bond: Prepare Financial Statements for the Building Boom

Get Ready to Bond: Prepare Financial Statements for the Building Boom

While waiting for Infrastructure Investment and Jobs Act (IIJA) projects to get underway, it’s a good time to consider whether your construction company can and should get bonded for upcoming projects and, if so, to get your financial statements in order.

The construction industry is facing one of the most challenging and exciting eras in its history. It’s challenging as a result of supply chain issues, material shortages, increased cost of materials, project delays, and the tight labor market. It’s exciting because of the coming building boom thanks to the Infrastructure Investment and Jobs Act (IIJA). (Even firms not interested in IIJA jobs will no doubt benefit from the sheer volume of jobs competing for limited construction resources.)

Construction companies interested in bidding for federal and state projects (per the Miller Act/Little Miller Act of NY) – and even a growing number of private jobs – should be getting their financial statements ready to secure the bonds that can help them be eligible to apply for and win new work.

Construction bonds are issued per project and protect the project owners from financial losses (whereas insurance protects the construction company). Typically, the cost of securing the bond is passed on from construction companies to project owners, and can add an estimated 1% to 3% to final bills. Although a construction company may feel like this makes it less competitive, bonding actually provides project owners with added peace of mind that work will be completed and comply with federal, state and municipal regulations, while mitigating risks.

What kinds of risks? There are a variety that can impact a job, from companies walking off a project or going out of business to not paying vendors so timing and supplies are delayed, or not having enough funding to complete a project.

When your company applies for a bond from a surety company, that company is going to do rigorous prequalification checks on licenses, past work, current workload, and finances to ensure your company can deliver what it promises and is a good risk. Because of this screening, project owners get an added level of confidence that they have the right contractor for the job. (Not being bonded can be inadvertently construed as a sign of weak finances, an inability to complete jobs, poor performance, and more.)

There are different types of bonds, with two main ones being for performance (delivering what was promised on time and in budget) and payment (ensuring suppliers, laborers and subcontractors get paid). Others include bid, maintenance, public works, site improvement, and more. The premium for a bond is typically 1% to 5% of the total value of the bond, but can be as high as 20% if a construction company has bad credit.

So, what do you need to have in hand to apply for a surety bond? A bonding company will typically look for your annual financial statement for each of the last three years, including balance sheet, income statement, and cash-flow statement. They’re interested in factors like profitability, net worth, cash flow, billing, debt, and more.

If you need help getting your financial documents ready to secure a bond, give RBT CPAs a call. We are a leading accounting and tax firm in the Hudson Valley and have extensive experience supporting businesses in the construction industry. Plus, we like to bond with our clients, and help them grow.

Adapting to Accounting in the time of COVID-19

Virtual Meeting

Adapting to accounting at the beginning of the COVID-19 pandemic meant embracing new norms for the accounting industry as a whole.

It was a Friday afternoon in March when the RBT team was instructed to pack up within a few hours and prepare for a remote work from home shift. By the following Monday morning we had entered into uncharted territories. Many of the challenges our team experienced likely echo adjustments every industry felt. Creating “work” spaces at kitchen tables, falling into new routines, communicating with team members who we were used to meeting with daily. ZOOM quickly became an essential tool, as we were able to seamlessly connect with many clients and reclaim some of the energy we had lost with in person interaction. However, not every client has access to technology equipped with a camera, so limitations were established right off the bat in our new remote settings. How could our team members conduct inventory observations without our newfound favorite ZOOM tool? Additionally, some clients (primarily government agencies) are entirely reliant on physical documentation, so when they shut down and went remote, their lack of digital workflow created additional and unforeseen roadblocks in the auditing process. Some clients had designated staff members head into the office on an as need basis to scan and send documentation to our team. Thankfully for everyone, certain deadlines were pushed back to enable these entities to get all of the necessary paperwork submitted, but it undoubtedly created additional stressors for our clients at an already hectic time.

This has been (and continues to be) a learning process for everyone at RBT.

Thankfully, our IT department was strong enough to help us effortlessly transition to remote work and coordinated safe digital document transfers – but we recognize not every business has the capability or the software necessary to go completely digital. While we always strive to be in the field and look forward to the day when we can safely interact with clients once again, we recognize that many may remain remote indefinitely. As more businesses adopt work from home flexibility, we will adapt to accommodate our clients. We embrace the mentality that even though we’re not physically sitting together, we can still successfully interact and serve clients. We pride ourselves on the personal relationships we’ve developed over the years, and now it’s more important than ever to be proactive about staying in touch.

Our recommendation for clients, is to invest in updated IT capabilities so your business can be completely paperless in the event of new unforeseeable circumstances.

In order for future remote audits to be successful, safe paperless programs are key. Beyond convenience, it can mean a big cost savings for you down the road. Investing in modern technology now that can result in remote zooms for inventory counts could result in major cost savings for clients – cutting down on audit team travel costs among other preventable expenses. Overall, our team views the open door into remote auditing as a positive for our clients and us, too.