I spoke to three construction CEOs this week and each of them confided separately that their number one concern right now is finding qualified people to do the construction that’s picked up as the Great Recession shrinks in the rearview mirror. At the same time, our team was finalizing a detailed report (which appears below) on insurance market conditions.
This got me thinking about the changing role of risk management in the world today and some opportunities that might be presenting themselves to those of us in the business of enabling construction in the 21st century.
Of course my CEO colleagues aren’t as worried about insurance at the moment: an ongoing soft market makes it a bright spot in a very complex environment. On the other hand, the talent shortage is creating big headaches:
- Difficulty staffing jobs with project management personnel
- Inability of subcontractors to hire enough labor, impacting schedules, quality and safety results
- Cost of attracting qualified people rising faster than margins, creating a daunting war for talent
The talent shortage is not hitting us out of the blue and it’s not just affecting the construction sector. For years, labor experts having been warning that the retirement of the Baby Boomers will leave a knowledge and experience gap that may not be readily filled by the Generation Xers and Millennials behind them.
Harder to predict was the impact of the Great Recession on the construction workforce. Many workers left the sector for good, either finding other industries or leaving the workforce altogether. Meanwhile, construction as a field did not evolve sufficiently to capture the imaginations or match the work ambitions of a workforce eager to start careers.
As the problem has come into clear and alarming focus, solutions have taken shape. Our clients are each trying various strategies;
- Reinvigorating hiring and training of entry-level construction people
- Working closer with unions to encourage qualitative training and expand their ranks with the younger generations
- Rethinking construction career paths to address younger workers’ workplace goals:
- A window, if not inclusion, into decision making
- Telling the story that construction is becoming steadily more tech-centered and an exciting, quickly evolving field with a wide range of career paths.
One CEO in particular, a 35-year construction veteran, noted that the pace of innovation is increasing geometrically and new thinking and new technologies will be needed to pull it all together. He, and his colleagues, also agree that all of the strategies being put in place to address the talent shortage will take time to implement – and there is no guarantee that they will work.
So where in all this do I see opportunities? Three places. The first is in the industry itself. The pace of innovation and the drive toward new technologies that’s already front and center for construction will in turn drive several of the changes in the works: training for the new technology, career arcs for people who master that technology, and a new sense of what construction is today – a thriving field in the digital age.
The second opportunity is for risk Management professionals – and in that I include both risk managers and broker/advisers. For years, we’ve been saying that risk management is a lot more than buying insurance and the place that risk professionals need to be is in the C-Suite talking at the highest strategic level.
Here we see that one of the biggest risks construction companies face relates to talent and that’s where risk managers should be involved. They should be doing what they do best: assessing risk and figuring out options for addressing that risk and helping their organizations attain their most fundamental objectives. They may not necessarily be invited to make this move, so the first steps may need to be taken with some forethought – and with some boldness.
We’re talking here about a change in mindset that breaks down the borders between the traditional Property and Casualty risks and human capital risks. We’re talking about taking a more active and open minded approach that brings new ideas to recruiting, compensation and talent management.
For broker/advisers like Willis, we’re talking about a different kind of conversation with our clients. On all sides, we’re talking about a challenge to risk management business as usual.
The third opportunity is in the marketplace. The ongoing soft market means a predictable insurance spend for the foreseeable future. That takes some of the pressure off of the risk professionals responsible for buying the right insurance at the right price, which in turn frees up time and resources to realize the second opportunity outlined above.
Of course, we can’t take our eye off the ball in terms of the hammer-and-nails basics of the insurance transactions, which remain crucial to the success of every construction endeavor.