Melius will be releasing a series of articles on this subject, beginning with the introduction below. These are industry issues that require professional discussion, debate and alignment in order for the industry to move forward. In addition to your comments, please forward these articles to your network so we can engage as many professionals as we can on this issue. We look forward to your feedback.
Part 1: Overcoming the Labor Challenge
Over the 30+ years I have worked in construction, the science of project management has become increasingly complex as the projects have become larger and more complicated. There has been a move towards better planning and execution technology to improve Workface Delivery Systems (the processes responsible for delivering required resources to the workface) and to actually perform schedule-driving work. This is a much-needed shift as the construction industry has been woefully behind other industries in its application of technology. In doing so however, there seems to be an associated waning of attention on the most expensive and oldest of project cost variables, LABOR.
Meanwhile, there was already a shrinking supply of construction labor before the pandemic. The following chart from the Bureau of Labor Statistics shows Construction Unemployment rates over the last decade. Other than the big jump in unemployment during the height of the pandemic, there has been a steady decline in unemployment that has now resumed on the tail end of the pandemic.
Meanwhile, there was already a shrinking supply of construction labor before the pandemic. The following chart from the Bureau of Labor Statistics shows Construction Unemployment rates over the last decade. Other than the big jump in unemployment during the height of the pandemic, there has been a steady decline in unemployment that has now resumed on the tail end of the pandemic.
Figure 1. Unemployment Rate – Construction Industry 2012-2022
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Source: U.S. Bureau of Labor Statistics
In addition to plummeting unemployment of construction labor resources, it is projected that 41% of the US Construction Skilled Labor Workforce will retire by 2031 (McKinsey & Company June 2020). In combination these statistics are screaming that the workforce is aging and retiring, and new workers are not replacing them in sufficient quantities to meet demand. As mentioned, the construction industry has turned its focus to technology to combat this dilemma. Investments in construction technology were $25B between 2014 and 2019 compared to just $8B the previous six years (McKinsey & Company October 2020). While the prospects of technology are exciting, none of them will be ready to replace the depleting labor pool in sufficient numbers by 2030 (CII-CURT Joint Conference Sept. 2021).
"41% of the US Construction Skilled Labor Workforce will retire by 2031."
-McKinsey and Company
The issue has become so critical, a recent joint Construction Industry Institute (CII) and Construction Users Roundtable (CURT) team, RT-370, was chartered to report what the construction workforce would be like in 2030. The team presented their results at a joint CII/CURT conference in Fall, 2021. Portions of the full presentation will be referenced throughout the series of articles MPC will release on this subject of Project Labor Management. For those interested, here is the full 45-minute presentation (CII-CURT Joint Conference Sept. 2021).
The intent of these articles is to build on that team’s findings by facilitating discussion and by adding information on different tools and strategies available to Project Management to help them best manage the skilled labor dynamics they face on projects. There may be other tools available we are not aware of, so everyone in the industry is encouraged to participate and add to the discussion where you feel something is important. Most everyone has an opinion about how best to manage labor, so your thoughts and opinions are welcomed and encouraged as we move through this series of articles.
To frame this discussion, we have created the Venn Diagram below and titled it Project Labor Management (PLM). It focuses on four key elements of managing just the LABOR component of projects. For example, material management is included but only in the context of how it impacts the management of skilled craft labor.
The intent of these articles is to build on that team’s findings by facilitating discussion and by adding information on different tools and strategies available to Project Management to help them best manage the skilled labor dynamics they face on projects. There may be other tools available we are not aware of, so everyone in the industry is encouraged to participate and add to the discussion where you feel something is important. Most everyone has an opinion about how best to manage labor, so your thoughts and opinions are welcomed and encouraged as we move through this series of articles.
To frame this discussion, we have created the Venn Diagram below and titled it Project Labor Management (PLM). It focuses on four key elements of managing just the LABOR component of projects. For example, material management is included but only in the context of how it impacts the management of skilled craft labor.
Figure 2: MPC’s Project Labor Management (PLM) Venn Diagram
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Please bear in mind all of the definitions, opinions, etc contained in this series of articles are completely in the context of Project Labor Management. This is done to have the reader focus completely on labor in their thoughts and comments.
The four elements of Project Labor Management (PLM) are:
1. Recruitment & Onboarding
2. Culture
3. Effectiveness
4. Efficiency
1. Recruitment & Onboarding
2. Culture
3. Effectiveness
4. Efficiency
Recruitment & Onboarding includes all efforts involved in targeting, finding, hiring, orienting, retaining and allocating skilled labor crews to the workface. The major contractors have large Craft HR departments that are responsible for the recruitment and hiring of craft personnel. Most in the construction industry are familiar with these organizations and their responsibilities. The focus of this PLM element discussion will be front-line supervision. How are they chosen and more importantly, how are they prepared for their assignments? Has Project Management structured their role in a way that maximizes their availability to their crews? As we have studied work all over the world, this is one of the most recurring themes, and one that could make a huge difference in overall project performance if managed effectively. Other elements to discuss are aligning the workforce with project goals and implementing mentorship programs during the onboarding process.
Culture is the work environment of the project. What do project employees value at the workplace? Do project employees know and support the goals of the project? Safety, productivity and quality are all significantly impacted by project culture. In today’s environment, labor is in short and dwindling supply, giving it leverage. Skilled workers are able to pick and choose where they want to work. Someone will always pay more, but one thing Project Management does control in recruiting and retaining their workforce is facilitating a great project culture. The most important thing Project Management needs to know about culture is that if you ignore it, one will evolve regardless. Sadly, it probably won’t be one that facilitates a successful project.
Effectiveness is how well Project Management utilizes labor while it is on-task. By “on-task”, it means the crew member is actively working on the assignment given to him or her. "Doing the Right Things Right" is a common mantra associated with effectiveness. Bad plans and methods lead directly to ineffectiveness, as does good plans and methods that are poorly supported. Great plans conveyed poorly also lead to ineffectiveness. Many things impact effectiveness such as the respective skill of the workers, the quality of the tools and materials being used, as well as the clarity and accuracy of the information required for execution of the work. Rework for example is a good measurement of effectiveness. A high amount of rework is the most prolific red flag that labor is not being managed effectively.
Efficiency is how well Project Management maximizes the amount of on-task time. This means mitigating the wasted time and effort that takes away workers’ available on-task time during the shift. The Workface Delivery Systems have the most impact on labor utilization efficiency. Interestingly, the number of resources assigned to a task can impact efficiency or effectiveness. If too many are assigned to the task, efficiency is affected as resources end up standing around and can't work during available productive time. If too few are assigned, effectiveness suffers as a lot more work could be completed during available productive time. Foreman Availability at the workface was mentioned above as a key consideration in structuring front-line supervision's role on the project. Throughout execution it remains a key management variable that impacts both efficiency and effectiveness. We will share a way to not only measure that variable but also how to make foreman availability a priority in your project culture in a future article in this series.
Finally, Productivity is the measure of how well Project Management effectively and efficiently utilizes skilled labor.
The overlaps in the PLM model represent the application of different delivery plans, as well as improvement tools & strategies at the workface. This is followed by feedback loops to measure then continuously update and engage the workforce. Subsequent articles will highlight an array of these topics.
In absorbing the PLM Model, the intent is that the successful management of the four elements manifest in optimizing productivity from a labor standpoint. In other words, as projects optimize recruitment & onboarding, deliberately facilitate a positive project culture, and utilize its skilled labor both effectively and efficiently, Project Management is doing what it can to optimize its productive utilization of available project labor. Until technology can fill the void, every project should be managing their skilled labor with these four elements in mind.
In the coming weeks, Melius will be releasing a series of articles expanding on these topics. First up... Recruitment and Onboarding. Be gathering your thoughts on this issue and look for the article coming soon… Our team can’t wait to hear from you!
Culture is the work environment of the project. What do project employees value at the workplace? Do project employees know and support the goals of the project? Safety, productivity and quality are all significantly impacted by project culture. In today’s environment, labor is in short and dwindling supply, giving it leverage. Skilled workers are able to pick and choose where they want to work. Someone will always pay more, but one thing Project Management does control in recruiting and retaining their workforce is facilitating a great project culture. The most important thing Project Management needs to know about culture is that if you ignore it, one will evolve regardless. Sadly, it probably won’t be one that facilitates a successful project.
Effectiveness is how well Project Management utilizes labor while it is on-task. By “on-task”, it means the crew member is actively working on the assignment given to him or her. "Doing the Right Things Right" is a common mantra associated with effectiveness. Bad plans and methods lead directly to ineffectiveness, as does good plans and methods that are poorly supported. Great plans conveyed poorly also lead to ineffectiveness. Many things impact effectiveness such as the respective skill of the workers, the quality of the tools and materials being used, as well as the clarity and accuracy of the information required for execution of the work. Rework for example is a good measurement of effectiveness. A high amount of rework is the most prolific red flag that labor is not being managed effectively.
Efficiency is how well Project Management maximizes the amount of on-task time. This means mitigating the wasted time and effort that takes away workers’ available on-task time during the shift. The Workface Delivery Systems have the most impact on labor utilization efficiency. Interestingly, the number of resources assigned to a task can impact efficiency or effectiveness. If too many are assigned to the task, efficiency is affected as resources end up standing around and can't work during available productive time. If too few are assigned, effectiveness suffers as a lot more work could be completed during available productive time. Foreman Availability at the workface was mentioned above as a key consideration in structuring front-line supervision's role on the project. Throughout execution it remains a key management variable that impacts both efficiency and effectiveness. We will share a way to not only measure that variable but also how to make foreman availability a priority in your project culture in a future article in this series.
Finally, Productivity is the measure of how well Project Management effectively and efficiently utilizes skilled labor.
The overlaps in the PLM model represent the application of different delivery plans, as well as improvement tools & strategies at the workface. This is followed by feedback loops to measure then continuously update and engage the workforce. Subsequent articles will highlight an array of these topics.
In absorbing the PLM Model, the intent is that the successful management of the four elements manifest in optimizing productivity from a labor standpoint. In other words, as projects optimize recruitment & onboarding, deliberately facilitate a positive project culture, and utilize its skilled labor both effectively and efficiently, Project Management is doing what it can to optimize its productive utilization of available project labor. Until technology can fill the void, every project should be managing their skilled labor with these four elements in mind.
In the coming weeks, Melius will be releasing a series of articles expanding on these topics. First up... Recruitment and Onboarding. Be gathering your thoughts on this issue and look for the article coming soon… Our team can’t wait to hear from you!