Recession concerns are always a pressing issue for construction leaders, and for a good reason: the construction industry tends to take a massive hit during recessions and economic downturns. Think back to the period between late 2017 and mid-2009, when almost 2.5 million jobs were lost, and 150,000 construction firms went under.
While it's not a given that another economic slump is on the horizon, you should still implement proactive measures to recession-proof your business. Taking these steps isn't about fear or pessimism—it just means you're prepared.
In this article, we'll unpack the essentials of building resilience in the construction sector. We'll cover the key steps you can take to stay prepared during times of uncertainty and be ready for a possible worst-case scenario.
Here’s a not-so-fun tidbit: according to PwC, “91.5% of projects go over budget, over schedule, or both.”
Keeping your projects within budget consistently is undoubtedly a challenge, especially in today’s environment where firms struggle with financing, costs, and labor shortages.
But the good news is that with the assistance of technology, construction teams can get a stronger handle of their budgets and timelines. Here are some of the ways construction technology helps teams achieve better cost control.
Industry data shows that rework accounts for 2% to 9% of a project's total cost, so reducing it can help you significantly boost your profit margins and deliver projects within budget. Enter construction technology. The right software simplifies design processes and improves communication while giving teams access to accurate project data in real time.
All of that can have a massive impact on construction rework prevention. Streamlined communication means everyone from architects to subcontractors remains informed, reducing misunderstandings and misalignments that lead to errors.
Take, for example, design and preconstruction. Modern BIM solutions enable teams to create 3D visualizations to give stakeholders an understanding of the project's design, structural, and service details. Any discrepancies or potential conflicts can be identified and resolved before construction begins.
On the data side, having the right info at the right time enables you to make timely decisions, adjust strategies as needed, and anticipate potential issues before they escalate. A study by FMI and Autodesk found that $7.1 million dollars in avoidable rework are caused by bad data. So, investing in accurate and real-time data tools not only cuts costs but also drives project efficiency and success.
Your estimation practices significantly impact project costs. That's why adopting robust estimating methods and tools helps ensure that your budgets align closely with actual expenses.
To that end, see that you have a solid estimation process. Standardize your procedures and ensure everyone uses the same methodologies, templates, and software.
Speaking of which, set your sights on cloud-based estimating tools that offer real-time data and collaboration tools. There are several solutions in the market that provide cost databases and automated workflows, which then simplify estimating and preconstruction activities.
Job security is top of mind during uncertain times; people want to make sure that they're working for solid firms that can stay resilient—and support their workforce—in any economy. You definitely want to hang onto your key players. And with the construction industry already experiencing a labor shortage, losing your go-to team isn't an option.
The following pointers can help you improve worker retention.
Teams and firms need the latest and greatest construction skills to thrive today and in the future. Keeping up with modern construction practices and tools requires you to upskill and reskill your team so they can be adaptable and equipped to handle emerging challenges.
From a worker retention standpoint, learning and development offer valuable opportunities and incentives to those hungry for career growth.
If you're looking to upskill your team, you can do so by taking the following steps.
Tap into learning opportunities offered by trade groups. Most organizations provide specialized training, workshops, and events to help construction pros level up their knowledge and skills.
Explore education programs at colleges or technical schools. Set your sights on courses designed to equip students with the latest construction techniques and tools.
Leverage the resources of your technology partners and vendors. Take Autodesk, which offers a wealth of resources—including forums, webinars, and master classes—to help users maximize the potential of their tools.
Enhancing pay and benefits boosts employee satisfaction and loyalty, making it more likely that they'll stay committed, especially during challenging times.
So, reevaluate your current compensation packages and strive to offer highly competitive salaries and benefits. You could also consider additional incentives and perks, such as flexible work hours, transportation allowances, or childcare services.
These investments not only help you retain your existing construction workforce, but they also attract other skilled workers to your firm.
Which brings us to our next tip…
Attracting and hiring top-performing individuals can significantly elevate your team's overall performance and drive project success. Aside from regularly delivering A+ output, these standout professionals often inspire their colleagues, which then helps teams (and ideally, your firm as a whole) stay even more resilient even in a lackluster economy.
Industry data shows that companies with high levels of diversity are more resilient and profitable—two attributes that are particularly vital during economic downturns.
When it comes to diversity and inclusion initiatives, one of the best ways to start is to listen actively to your employees. Foster an environment where your entire construction workforce feels comfortable sharing their experiences and perspectives, and use the insights you gain to create meaningful and impactful programs.
Such programs can come in the form of:
Already have initiatives in place? Ensure you're tracking and sharing any diversity-related data and updates to hold your firm accountable to its goals and progress.
Does your firm specialize in specific sectors, trades, or building types? Then it's a good idea to play to your strengths. Bidding will become more competitive, so focusing on the jobs or areas where you have a proven track record gives you a distinct edge and increases your likelihood of winning more contracts.
Aim to create a consistent flow of work (even a backlog) so your teams stay active and engaged, and you won't have to worry about the lack of projects.
On the flip side, now is also a good time to identify any gaps in skills or expertise. That way, you can diversify your teams and cover more ground. Identify any platforms and business models that align with your future goals (but have yet to be your forte), then strategically invest in training or partnerships to enhance your readiness.
As a construction leader, your mindset and disposition during a recession are just as important as the strategies and tactics you take. The leadership team's attitude sets the tone for the entire organization, influencing team morale and, ultimately, the resilience and adaptability of your company.
Strive to develop mental toughness both in yourself and in your team. Adopt a growth mindset and stay confident you'll do well even during a recession. It may not be easy, but the steps above will help you be more prepared.
And remember, challenges can also present opportunities; staying proactive and resilient will pave the way for your firm to emerge stronger on the other side.
Navigating the murky waters of a recession (even if it hasn't happened yet) requires resilience, adaptability, and a strong mindset.
By taking better control of your costs, fortifying your construction workforce, and leading with conviction, you'll not only weather economic downturns but thrive amidst them.
Ultimately, the construction landscape may ebb and flow, but your firm can remain competitive and consistently navigate challenging times with proactive measures.