How to Prioritize Talent as a Strategic Imperative
Originally printed in CFMA Building Profits Magazine, January/February 2018 edition.
Developing and engaging employees, as well as managing their performance and providing clear direction for their careers, are critical steps toward company success. However, achieving that goal in today’s tight labor market has become exceedingly difficult.
While the national unemployment rate hovered around 4% in 2018 – the lowest since December 2000 – and continued to decline, the number of active engineering and construction (E&C) projects continued to increase exponentially. In turn, this has placed added pressure on companies to optimize current labor pools, develop strong leaders, and attract the Millennial generation to join their ranks.
Further highlighting the talent crisis as a global issue, Duke University interviewed 850 CFOs in a survey, nearly all of whom pinpointed “attracting and retaining qualified employees” as their top concern. In addition, 89% of CFOs also said “they don’t expect their companies to be able to pursue the full panoply of value-creating projects that they’d like” thanks to this dearth that has ultimately hindered industry performance and productivity. “In especially short supply are the managerial competencies needed to implement ambitious growth initiatives.”
In FMI’s 2017 Talent Development in the Construction Industry Survey, which reveals the key talent-related issues plaguing today’s companies, pinpoints what companies can do to overcome these issues, and demonstrates the value of prioritizing talent development as a strategic, organization-wide initiative. This article will explore survey findings and provide recommendations to help contractors address talent development challenges.
Implementing a Systematic & Strategic Approach
Findings from FMI’s 2017 Talent Development in the Construction Industry Survey paint a mixed picture of how companies currently address people development. Leading organizations recognize the need for more systematic and strategic approaches and are investing in the people and resources required to establish long-term talent management programs. However, most companies fail to address talent development as a strategic priority.
For example, most organizations do not have comprehensive career management approaches and wrestle with ways to change their existing programs to meet new needs.
According to the survey, 89% currently grapple with talent shortages, but 43% admit that they don’t prepare a yearly training and development budget. This finding underscores the stark reality that talent development is still not treated as a top strategic priority in the construction industry. Unfortunately, many talent initiatives remain underfunded, and talent initiatives in place are rarely linked to strategic business goals.
Finally, nearly 60% of companies report that their training and development programs “aren’t very effective.” This number is eye-opening in a world where employee engagement is a necessary initiative.
Just 39% of companies surveyed measure employee engagement in a work environment where 51% of all workers are currently looking for new jobs, and where only 33% feel as if they are truly engaged on the job.
Integrating Talent Development into Company Culture
In order to address the talent shortage, companies must intentionally measure and build strong corporate cultures that integrate talent development. While organizations with the highest employee retention have committed to rich professional development cultures with effective processes, performance management isn’t always implemented effectively – nor are organizations identifying and developing high-potential employees. The latter represents a major missed opportunity to push young people into leadership roles and create a sustainable leadership pipeline.
A foundational element of all strong, successful companies is the presence of strong leadership. Not surprisingly, in the absence of a brimming pool of leaders from which to pick, companies face mounting challenges regarding both their current leadership ranks and future prospects.
“Historically, many of our leaders have focused mainly on putting out fires and managing things, not leading people,” reported one HR professional who participated in the survey. “We are now trying to create an environment in which leaders are selected and rewarded based on how well they build teams and set goals, and how well their teams achieve goals.”
To accommodate this shift, companies must focus on creating cultures of feedback, leadership, continuous development, teamwork, and collaboration. Perhaps more importantly, progressive HR leaders and courageous CEOs should reframe talent development as a function of leadership.
An Organized System & Strong Leadership Drives Talent Development
Despite the talent crisis and its negative consequences, sourcing, recruiting, attracting, selecting, motivating, developing, and retaining talent are often reductively viewed as initiatives only HR functions address. As such, few organizations adequately prioritize talent development.
To begin building out the next generation of leadership, company executives must play effective roles in aligning corporate culture with talent efforts. While recruiting from a narrowing talent pool remains an issue, organizational leaders can instead look internally to retain and grow talent.
Meanwhile, some organizations might prioritize talent initiatives but lack a system-wide approach, instead reactively trying different methods. FMI calls this tactic the “spaghetti effect,” as it mimics the action of throwing ideas against the wall and “seeing what sticks” without rationalizing logically or strategically.
Although any movement toward implementing a talent strategy may appear to be steps in the right direction, such unfocused efforts do not generally result in effective programs.
Put simply, winning the war for talent requires a holistic, long-term planning approach that incorporates learning, development, and a comprehensive talent management program that purposefully links the organization’s vision, strategy, key roles, and skills needed to make progress on specific business objectives.
Such a focused approach requires leaders to think strategically about their companies’ futures and ask themselves these questions:
- What do I want my company to look like five or 10 years from now?
- What must our culture, talent processes, and systems look like to achieve that vision?
- What skills and competencies will my employees and future hires need to demonstrate to achieve company talent aspirations?
- Given my talent aspirations, am I investing in the right skills and competency development to create a pipeline of top-tier talent?
- Have I created a culture where feedback and learning are expectations and a part of everyday work?
Answering these questions will help company executives and HR leaders systematically plan for retaining and developing future talent.
Such deliberate planning has become vital, as FMI’s study participants expect to lose between 14-20% of certain employee groups including executives, field managers, senior managers, and project managers over the next five years due to attrition or retirement.
6 Action Steps to Take Now
As the industry continues to undergo a rapid digital transformation, leaders must continually assess their talent needs and adapt their talent strategies. It’s important to note that the industry is not only competing with its own talent pool, but is also going head-to-head with leading companies outside of construction.
Here are six steps that contractors can take to stand the best chances of rising above these opportunities and creating a substantial inflow of new talent into the industry.
- Take a Talent Inventory
Contractors should first take stock of their current resources, including skills and competencies across the organization and readiness to take on future roles (i.e., strong succession clarity).
Utilize dedicated resources to address talent issues, and don’t rely solely on often overworked and under-budgeted HR departments to handle everything.
- Ensure CEOs Are Engaged
It is critical for CEOs to be highly involved in the programs that address talent shortages, gaps, and potential.
While they may not be involved in the blocking or tackling of talent initiatives, CEOs must know the issues and understand strategies for dealing with a talent crisis, get behind initiatives to address the issues, and communicate to their teams that addressing talent is a competitive differentiator and strategic imperative.
- Plan for the Future
Start by forecasting the talent supply for a given role (e.g., field managers, craft labor, leadership) or in a specific market and/or geography. Then, create action plans for more effective talent recruitment and selection, and enhance existing talent through performance management, feedback, training, and stronger leadership.
- Stay Focused
It’s imperative that contractors do not compromise on talent just because of a shortage or high volume of work; a true talent initiative goes beyond simply addressing skill deficiencies. For example, hiring someone who may not be a culture fit but has the technical chops might ease immediate operational concerns, but it does not fulfill a long-term talent strategy.
- Build Out the Leadership Pipeline
Best in Class companies focus on building internal systems and structures that ensure their next generation of leaders is continually developing its skills. When companies invest in their employees’ long-term potential, it cultivates a greater sense of loyalty to their organizations.
To be most effective, a high-potential program must include clearly defined competencies and a group of high-potential employees from which to select. A compelling and skill-enriching high-potential program moves designated participants from their current states to their desired future states.
- Monitor Forecasting Activities to Adjust Resources
Companies should implement learning tools, such as formal and informal mentoring, individual coaching, clearly defined career paths, or ongoing performance feedback – all of which are particularly critical for developing high-potential employees.
It’s Not Getting Any Easier
Recruiting talent has long been a challenge for the construction industry, and it will only become more severe in the future. Since 2013, talent shortages across the U.S. construction industry have been worsening, with a record 89% of participants reporting talent shortages in this year’s FMI survey.
According to a recent World Economic Forum report, these labor trends could prove troublesome in the future, thanks to the volatility of workforce demand and composition, skilled labor scarcity, and tech-related demand for new and broader skill sets at all levels.
Going forward, the construction industry must redefine the role of human resources in a way that gives HR professionals a seat at the executive leadership table.
Tomorrow’s successful construction leaders will find ways to effectively blend the strategies, practices, and processes needed to overcome people obstacles and create a sustainable, competitive edge for their organizations.
