Ep 39: Construction Leadership Problems: 4 Hot Takes Debated

 

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Episode Transcript:

The Rules of Engagement

Adam: All right, welcome to Construction Hot Takes. We’re going to try something different today. We’ve got cards in front of us that go from “strongly agree” all the way through “strongly disagree.” And I’m going to make a suggestion that we take “neutral” and we throw it out. We’re not allowed to use it today.

This is a new segment. Our producer is going to say something controversial about the construction industry, and we’re going to see who agrees, who disagrees, and then we’re each going to get up to 30 seconds to justify our position. And then if there’s not a consensus, we’ll have a deeper conversation around that to see if we can come to agreement or if we’re just going to agree to disagree.

This is a true hot take because we have not heard what the topics are, what the statements are. We don’t know what he’s going to say.

Jeff: Let’s do it. Let’s roll. Let’s do the first one.

Greg: My anxiety is just pinging like crazy right now.

Jeff: I think it’s fine. Okay, let’s go.

Adam: This is — I live for this stuff.

Hot Take #1: Labor vs. Leadership

Greg: Most construction companies don’t have a labor problem. They have a leadership problem.

Adam: Three, two, one — show.

Oh, Greg and I agree on our disagree.

Jeff: Strongly agree.

Adam: Strong. So wait — you agree? So wait a minute, what was the question? I’m agreeing that most construction companies have a leadership problem, not a labor problem.

Jeff: Okay. Yes. Right. You’re right.

Adam: I want to make sure — I think you think they have a labor problem, not a leadership problem.

I think people who have a labor problem in general have probably overbid their capacity without taking that into consideration. They’re just out there trying to win as much work as possible and they’re not paying top dollar to keep their people. So they’re not creating a culture of retention and they’re trying to win as much work as possible and figure it out later — and that’s why they’re having labor issues. If they right-size their bid strategy and right-size their attitude around their culture, they probably wouldn’t have a labor problem.

Jeff: So I think realistically, actual factually in the industry right now, there is a labor problem. There is not enough skilled, competent labor in the market. So although I agree with you from a leadership standpoint that you have to own your problem and solve it, the reality is there is a lack of skilled labor in the market. It’s been going on for decades now and it’s just getting worse.

Greg: That’s exactly why I went with what I went. I agree with Jeff almost exactly. I think there’s an actual labor problem. It’s not about whether you have a bid that’s set up right or whether a job’s set up right. I don’t think there’s enough skilled labor, and I think people are leaving the industry — whether it’s on the lower level or the middle or the high level as people age out. I think there’s a labor issue itself. Not necessarily caused by leadership. It just is.

Adam: All right. Do you all want to discuss further?

Jeff: I do.

Adam: All right. I want to go a little deeper on this because I’m going to build off of what you said — that there is a skilled labor shortage. Why do you think there’s a skilled labor shortage?

Jeff: Because they haven’t made the industry appealing or competitive pay enough to entice people to join the ranks.

Adam: And I would say, yeah, there’s a huge volume of work that’s available to do, but you don’t have to bid on everything and win everything. And some projects just won’t get built because maybe you have to raise prices so much to pay enough people to come join your company to go get more construction workers to build the project.

The whole construction industry has suffered from — they aren’t glamorous. They’re construction jobs. They’re not glamorous, and people don’t realize how much money you can make as a skilled construction worker. They have not publicized that enough. I think organizations like the ABC and the trade unions have tried to bring more people into it, but notoriously it’s about the low bid wins the work. And so they don’t have enough money to pay people properly.

If all construction companies just raised the wages for their employees and reflected that in the pricing to the developers and the banks, that volume of work might go down for a time because they have to get adjusted to how much the work actually costs. They’re still operating from a mindset of “there’s not enough to go around and we can’t pay everybody what they’re worth.” And I think that comes back to a leadership problem in the industry.

So I think you kind of attack that from two different leadership positions. One is at the company level — an individual person who runs a business. And then there’s more of an ethereal, industry-wide thing, like there’s one guy, a “construction president” in charge who makes decisions or something — which doesn’t exist. Which is kind of part of the problem.

Jeff: I think you touched that. It is a desperate, disconnected industry. We don’t coordinate well, never have. What’s interesting is the unions have set scale for union jobs, and when the government wants to do work and they have to use union labor for that, they know that’s the price for that work. It’s the private market that hasn’t organized at that level.

Greg: That’s true. I also think there’s a training issue itself inside of organizations. You don’t need some big “construction president” overseeing all construction, because each individual company and each individual leader could say, “We’re going to do more training.” But that takes money, that takes time, that takes effort. It takes scheduling. It pays dividends. But it’s a long-term play.

Jeff: It’s a long-term play. And if you don’t have the training, then people train out or they don’t know anything new. But there are organizations like the IEC, AGC, ABC — they train as a professional organization. They provide the training in the background to create a more skilled labor force, and they earn that money through memberships of companies who pay them dues to help build the skilled workforce.

Adam: So I still think we could bring this back to: there is a skilled labor shortage, but I don’t think that’s the skilled labor’s fault. I think it’s the leadership of the industry, leadership in the companies, that could be tied back to the root of it or could be the source of the solution.

Jeff: It’s a big issue. It’s one of those circular things. Kind of where does it start and where does it end? You kind of keep coming back to the same two or three things.

I mean, all these construction projects — if they’re commercial private projects, somebody wants to invest money to build something to make money, right? There’s an investment they have to make to get the building built — a data center, a multifamily property — and the cost of that, they’re weighing that out on the return on investment. How long does it take to fill the multifamily property with renters and make their money back? If the cost of the building goes up because you have to pay the people more, then it’s a longer ROI cycle, and the banks are involved in how long they want to loan the money for. This is the economics of construction.

Greg: Robert, you’re making the assumption that by paying people more, they will somehow find the skill level they need to do these jobs.

Adam: If the positions pay more, it might be easier to recruit people to come to the trades and rebuild that workforce.

Greg: But there’s still a training issue, and it’s what you said — do people know this is a long-term, consistent career for themselves? Like they did three generations ago. You were a plumber, you were an electrician, you were a master. I think to a large degree that’s lacking.

Jeff: There’s honor in work and all of that. When you can go make the same amount of money working in an Amazon warehouse as you can out building a project as a construction worker, most people want to take the easier route and go work in the warehouse. Maybe it’s better benefits. It’s less skill.

Adam: I don’t 100% disagree with what you’re saying, but you’re taking a really hard stance way over here. You’re basically saying — you’re doing the “I just graduated, I got my MBA from Columbia, and I got an idea. Have you tried raising revenues? That’ll fix everything.” That’s sort of the argument you’re making.

Jeff: Yeah. It’s a little deeper than that.

Adam: Well, you’re building a hill over here and you’re dying on it. I get what you’re doing.

Jeff: Well, I had to take a position to defend. I could take your side and defend your side too.

Adam: I know. I had to pick. We are all debaters.

Hot Take #2: GCs vs. Subcontractors

Adam: Going on to the next round. That was a good one.

Jeff: All right. Next one.

Adam: Hold on. What’s the order we’re going to go in?

Jeff: This one is Jeff, Greg, Adam.

Adam: I’m going last. All right.

Jeff: I like how you want to calculate that in. You’re playing poker for God’s sakes.

Adam: Well, you’re thinking about how you’re going to answer because you’re trying to figure out what we’re going to do.

Jeff: I’m trying to figure out — do I actually agree with it or not? And if I can’t tell, I have to pick a side and then defend it. So, I’m trying to think.

Adam: And you’re calculating what we’re going to do.

Jeff: No, I’m calculating what I’m going to say. Like, how could I defend this position? We’ll see.

Adam: I don’t believe you.

Greg: We blame subcontractors for delays, but GCs create the chaos.

Adam: Three, two, one — show.

Wow. Oh. Oh, this is a good one.

Okay, so just to be clear — I’m the trade contractor. I said I strongly agree. So I’m saying that the general contractor is the one that’s creating the chaos. The way I was trained was the general contractor hires the subcontractors. It’s your responsibility as a GC to put a plan together. Cut a good deal with the client, the owner, whomever. Have a good plan. Execute that plan with your subcontractors. They’re your partners. If it’s not going well, it’s because you’re probably not running your three-ring circus well.

Jeff: I chose “agree” instead of “strongly agree” because I kind of agree with you, but I also think that there is chaos at the subcontractor level. Having worked at a subcontractor for a long time, I don’t think it’s just as simple as “well, the plan doesn’t work and so it’s the GC’s fault.” There’s enough chaos to go around between a general contractor and a subcontractor for me to have taken a less strong stance.

Greg: I disagreed with that slightly, having been mostly a trade contractor. And your argument is persuasive. I would say, yeah, when I’ve been on jobs that didn’t go great, a lot of times it was because I didn’t have a strong GC. Nobody driving the car. But as a trade contractor who’s been part of a whole big team, we create a lot of our own problems. We don’t staff it right. We don’t plan it right. We don’t execute cleanly. We don’t get out in front of things and we get impacted.

Adam: So I want to expand on this. Because I debated this one. I could have taken the other side. But I didn’t want to come off as a GC crapping on subs. So I crapped on GCs. I’m the trade contractor and I decided to crap on myself.

But I think you’re right — Greg took a little bit of the middle road there, but I think you’re right. There’s plenty of chaos to go around. But it is symbiotic. If the general contractor doesn’t have a good plan, cut a good deal, you’ve got a problem.

Greg: Even if you cut a good deal and you pick good subs, we could still screw the whole thing up.

Adam: Well, that’s true, right? Yeah. So, that was my point.

You pick a good sub, you go through a good precon process, you go through a good scoping, it’s a really good partnering process. It’s not adversarial. And then you go win three more jobs and my job doesn’t mean anything to you anymore and I can’t get your manpower — then you’re the problem.

Jeff: This goes back to the earlier one where it’s like if I’ve oversold my capacity and now I’m struggling to keep up on all these different projects and they’re all suffering — or I decide to de-escalate yours and focus on somebody else who’s a more impending fire to put out — then your job suffers. It has nothing to do with you as a general contractor. It’s me who caused my own chaos. And if I’m not coordinating well with the other trades, I can also cause more chaos.

Greg: That’s what I was going to come at it from. Let’s say in some strange world that would never happen — that a GC is perfect. It’s a perfect plan. It’s a perfect schedule. It’s a perfect scope. That is a reach. But if that existed, there are plenty of subcontractors who you hire as a GC who then fall down on the job. They’re overextended, they don’t have enough people, you gave a better price and they fell down, the people weren’t well-informed, the plans changed and we didn’t get those new plans to our people in the field and they start building off old plans, and then they have to rework, then there’s damage because we run into other people’s stuff or we’re cutting holes in sheetrock. We cause our own chaos, and I don’t think it’s fair to hold the general contractor responsible for our stuff.

Adam: And conversely — I mean, if you have perfect subs and everyone is well bought out and everyone has the people they need and everything is planned perfectly and everyone works well together, if you have a bad GC, that’s chaos. So I just feel like it’s two sides of the same coin that make a project go south.

Jeff: I think about it like there’s a spectrum. On this end, I used to say a project will actually kind of build itself. If there’s no one driving the car, but there’s a bunch of subs out there showing up, they’ll slowly start to kind of go — as long as they’re getting paid. Something’s going to happen. It may not be pretty and it’ll suck, but it’ll happen, kind of.

Then on this end, you’ve got a GC that’s got a really good plan, but hires subpar subs for any reason. And most of them land kind of in the middle where you’ve got to drag somebody across the finish line because of any number of reasons — he oversold himself or maybe whatever. Could be things he couldn’t control. Could have a project manager who never shows up at the job. That’s possible.

Adam: We had one of those.

Jeff: We did have one of those.

Hot Take #3: BIM Didn’t Fail — Leadership Did

Greg: Building information modeling — BIM — didn’t fail. Leadership failed to implement it properly.

Adam: Three, two, one — show.

Oh, look at there. Complete agreement.

Jeff: Yeah. I mean, the Supreme Court has spoken.

Greg: I don’t think it’s an assumption to say that BIM has failed. That’s a blanket statement. It may or may not have failed. If someone is using it well, then it hasn’t failed for them. It hasn’t really become maybe the end-all be-all that people thought it was going to be. But I don’t necessarily think that you can make a blanket statement that something has failed. That’s my point.

Adam: I mean, BIM to me is just a tool. It’s like saying my hammer failed. If my hammer failed, it’s because I didn’t use it right. So BIM doesn’t fail as long as the model was built properly — there’s nothing to fail. It just wasn’t applied right.

Jeff: I think we’re all 100% on this. It’s an inanimate object. As long as two comes after one and three comes after two and four comes after three, the machine worked. Then we didn’t apply it well.

Greg: If you’ve got an accurate model, the hammer’s a good analogy. You just didn’t use it. And if you did use it well, then it didn’t fail for you. That’s the point. If it works for you, then it works.

Adam: I will say this — just because we agree on the statement, the application of it has a lot to do with going back to the “president of construction” concept, the industry not really understanding how to apply it in a good way. Forget costs and all that other stuff. I think there’s just a lack of creativity. Is that a good way to put it?

Jeff: Yeah, it’s kind of a lack of creativity and understanding how to apply it. This industry — this is true for AI, BIM, name a technology in the last 30 years, anything.

Adam: We just don’t apply things. We’re not early adopters as an industry for some dumb reason.

Hot Take #4: Safety as Culture or Liability Shield

Greg: Most safety programs are liability shields, not culture builders.

Adam: Three, two, one — show.

Do we mostly agree?

Jeff: Mostly agree.

Adam: We did a previous episode about this, you and I did, and we talked about it. I firmly believe that safety as a culture driver is a great idea. And the majority of companies don’t apply it that way. It’s still more of a check-the-box, make sure we’re not putting people at risk because we don’t want the injuries and the claims.

Jeff: I think that’s right. And I see a lot of people in my career and with clients who use external safety as something they have to have as opposed to something that’s meant to drive culture and really keep people safe. That’s just how the industry has gone.

Adam: So I agree with you guys. I picked up on the “most don’t.” It has such an opportunity to be a good driver — not just culture, but production and everything else — and people don’t get it. They think it’s a bolt-on.

So I want to know — what’s the difference between “agree” and “strongly agree” for you?

Greg: I didn’t feel like it was “I strongly agree.”

Adam: You weren’t ready to fight about it.

Greg: I mean, I think there’s companies out there that do a very good job of integrating safety into the culture. That’s why. And I think the trend is going towards more and more companies are realizing safety is a positive thing and not just something we have to do. I think there’s a long way to go. I also think size of company is probably a driver here. Because if you’re a billion-dollar general contractor, it is part of your culture. It has to be. You don’t have some third-party guy coming to one of your job sites once a month.

Adam: Let’s be realistic, though. That’s a risk calculation.

Greg: Which is what I think part of culture is. If we’re a risk-averse company, then let’s get a really world-class safety program. If you’re a smaller company in the small to mid-range, you might not be able to afford it. You might not think it’s important. That’s not a cultural driver. But if you’re a huge company, you have a safety program.

Adam: So this is a really big thing for me. I drank the Kool-Aid a long time ago. I think universally, large or small — especially small, actually. Forget the culture part. Just think about it in terms of: if you just planned how to do it well as opposed to figuring it out later. The argument that there’s a financial implication to it is true, but that’s the product. That’s not the reason.

You have such an opportunity as a small company. I would argue that your risk as a small company is way greater. You could lose your entire company for one accident, whereas a large company has resources, great insurance. It’s tragic if there’s a bad accident, of course, but they’re not going to go under. Whereas a small company absolutely could lose their house, their boat, their car, their wife — all of it.

I just think this is not a cost issue. This is just a “how you do business” kind of a thing to me.

Jeff: I would just add that though — if it was cultural and you were a certain size business, and one injury could really put you under, if it was your culture, then you’d have a better safety program.

Adam: Yes. Right. It’s not cultural because it’s a mindset. It’s part of the business as opposed to just “this is something we have to do.”

Closing

Adam: Well, that was the first round of this. This was a lot of fun.

Jeff: We’re doing more of these.

Greg: I enjoyed that.

Adam: That’s the first time that I didn’t feel like I was fighting for oxygen in the room.

Jeff: It’s because you had to — we had to shut up. You were allowed 30 seconds and vice versa.

Adam: Check us out on YouTube, Spotify, Apple Podcast — wherever you get your podcast. We’ll see you on the next one. Thanks.