Employee retention is the process by which an organization ensures that its employees remain with the company for a long period of time. If a company can lower its turnover rate with skilled employees it creates a desirable working environment. There are 5 main factors that contribute to employee retention in the construction industry:
This blog is dedicated to providing real-life experience with Isaac Barlow, CEO of the #1-time tracking app for construction, and helping decrease your company’s employee retention rate.
I’ve been studying the construction industry for a long time now, and have done a ton of research on why contractors succeed and why they fail. In fact, a lot of what we do here at busybusy is based on a pretty extensive body of research. One of the big factors in the success rate of construction businesses is employee turnover.
That’s true for all businesses, but in construction, we have more of a challenge with it. Traditionally, construction is a pretty tough business on several levels. It’s tough in general, just to compete and be successful. But we’re also tough on people. It’s a natural tendency since a lot of us are type-A personalities and we’re all working hard to get jobs done. But in the process we’re often hard on those who work for us, demand a lot of suppliers and subs, and we’re tough on ourselves. So it’s easy to forget about taking care of people in the right way – about how important people are to our businesses.
This certainly contributes to the construction industry having one of the highest employee turnover rates, averaging around 25% per year. This is a real challenge, since losing employees – especially key, skilled crew members – has a big ripple effect, negatively affecting the productivity of the entire company. And of course, large employee turnover rates lead directly to big retraining costs. It’s not uncommon to spend thousands of dollars, even tens of thousands, to retrain someone to replace a skilled employee who left to go somewhere else. So, this isn’t about just “touchy-feely” stuff to make people feel good. Improving employee retention in the construction industry especially impacts the company’s bottom line and ultimately affects entire industries and our whole economy. It’s really important.
ESTABLISHING A POSITIVE CULTURE
Whenever I advise a business, one of the first things I talk about is the need to create a positive company culture – and a vision of what the company is about. Why does someone want to work in your business? What’s the grand vision that motivates them? What are you trying to achieve? Everyone wants to feel pride in their work. It’s interesting that as a basic measure of fulfillment, many people rank job and career satisfaction higher than religious faith. We want to feel that we’re really achieving something. This is very prevalent in construction. We build things, after all. And we’re proud of what we built.
So what is it that your company is building? What is the grand scheme, the great blueprint that you’re building on? When you can clearly articulate that, people will want to be a part of it. We all want to be proud of what we do. We want to be able to go home and brag about it to our families. When a company’s vision and culture satisfy that need, it’s a very powerful thing. When you have that vision and have put into place the elements of a positive culture that promotes mutual respect, team values, high performance, and loyalty up and down, it will draw in quality people. It will help you put together a high-caliber team that shares your vision and will work hard to advance the business.
Many larger companies get this culture thing. They spend time on it, spend resources to get it right. But in my experience, medium and small businesses often skip over it. They just don’t see the immediate value in developing their culture. But this is a fundamental mistake in my view.
Building a culture involves not only attracting motivated individuals but also training new ones to become the top talent. In a good company culture, team members want to recognize who’s doing what and collectively help make the best better.
Whether you’re conscious of it or not, some kind of culture will take hold in your company. And without purposely working on it, it can develop in ways that aren’t so good. So it doesn’t matter how big a business you’re in, real thought needs to be invested into this area. To really be successful over the long term, you need to take time and develop a strong and lasting positive culture that helps attract, motivate and retain great people.
When people see themselves as part of a high-performing team, working towards shared goals, they get incredibly motivated and productive. That’s the kind of environment top talent people want to be in. That’s what we should be creating in our companies, departments, or whatever organization we’re part of.
I’m a fan of Dave Ramsey’s book, “EntreLeadership” where he talks a lot about this. One of his main approaches to hiring and leading people goes something like this (I’ll paraphrase): “Employees show up late, leave early, and steal from you. So we don’t hire employees. We hire team members.” Dave encourages business leaders to change their mental model, away from treating your people as “employees” (which many feels carry a negative connotation). Instead, we need to think of them, treat them, as real team members, and create an environment that fosters a team approach.
So think about how you’re treating people. Do you treat them as team members? Do they see themselves as an essential and contributing part of your team? If not, maybe it’s time to look at the structures and systems you’ve set up. What message do they send to the people you’re depending on to make the company a success?
STRUCTURE & SYSTEMS
Emphasizing a team-centric approach isn’t just lip service, though. You need to have the necessary systems, procedures, and day-to-day practices in place so that things run smoothly and team members know what their objectives are. The main reason we started busybusy was to help companies succeed by “systemizing” their business. That is such a key factor, to get the structure in place so you can focus on improving and growing in a smart way.
It’s really important for employee retention as well. Your team needs to have some sort of structure, a set of standard guidelines to follow. Without that, key things fall through the cracks and your people can get pretty uncomfortable. For instance, if a new crew member comes to work but there’s nothing to tell him what he’s supposed to do, what the procedures are or what the expectations are, he’s going to have a hard time settling in and being effective. And that can be very distressing.
I know that in a lot of small businesses, there’s no desire or need for a “human relations” program. And I’m not suggesting you should create a formalized HR position. But, at a bare minimum, I’d suggest setting up defined procedures for communicating the following to everyone in the company:
Review the company’s core mission, vision, and culture. This can be a powerful motivation.
The basic organization of the company. Describe the different elements, and who runs them. Who is responsible for what?
If there’s a defined leadership structure, lay that out. Who will employees report to? Are there specific reports that need to be turned in? How are they prepared & submitted?
Detail the company standards of behavior, such as standard work hours, safety practices, etc. If something is off-limits or frowned on, say it clearly. More importantly, what kind of things are encouraged and rewarded? Don’t just focus on the negatives.
For larger companies with an HR position or program in place, take a fresh look at these things. At least once a year, review your structures to make sure they’re accomplishing what you want them to, or what you think they’re doing. Is your HR program helping or hurting the team-centric approach? Is it building team members?
In simple terms, it pretty much boils down to letting people know where they stand. When you provide them with a system to work within, clear expectations, and defined standards of performance, you’ll usually be pleasantly surprised at how much they’ll accomplish.
We were just talking about the team approach, and how powerful it can be. Well, the company owner is also part of that team. Like the guy or gal who put the company together, it can be tempting to put yourself above the team. But I encourage owners to resist that attitude. Yes, you have more authority. But by the same token, you have more responsibility and an obligation to lead effectively. Likewise, if you have other leaders you’ve established, you’ve got to let them lead in those areas you delegated to them – without micromanaging.
Don’t be the boss when you shouldn’t be. I’m not the CEO in the breakroom, I am a part of something bigger- a team.
And a big part of that leadership role is establishing job security for the whole team. That’s part of your responsibility. When people perceive that their job is on the line, or the company can’t offer much of a future, they react to that pressure. They start looking for the next thing, for a situation that’s more stable. Can you blame them? They’ve got bills to pay and families to take care of.
This is another area where our industry can be pretty rough. In construction, we’re very focused on results and the bottom line. We’re constantly getting after it, and we get fixated on the immediate objective. Layoffs are common. People get fired. Tempers can flare easily. So in this kind of environment, it’s easy to put a lot of pressure on employees (I should say, team members).
That pressure can come from just pure economics when the market’s down and things are tight. Or from a high-pressure situation where performance standards are high and deadlines are short. Some of that pressure just comes with the territory. But often the leader/owner can generate volatility through his personality, by getting too emotional at the wrong times. And that kind of emotion, that kind of pressure, has a big impact on people. That’s the kind of insecurity that can cause havoc with improving employee retention.
If you’re the kind of volatile boss that throws around threats or gets angry too much, you’re creating instability for your people. Your volatile behavior is threatening their livelihood, whether you mean to or not. Often it’s not the guy you were yelling at that gets the message. It’s the others who were in earshot or heard about the incident. Whether you realize it or not, they’re making judgments about the future of the company – and their place in it – based on your conduct.
Leaders need to keep their emotions in check. They need to stick with the plans they’ve made, and the structures that have been set up. The standards that have been established are how you gauge employee performance. Don’t let an isolated incident negatively affect a team member’s standing in the company, and don’t let it get blown out of proportion so it ripples through the company. People respond positively to leaders who stay calm in tough situations and establish a stable environment where they can feel they have a future and don’t have to be out there constantly looking for another job.
Recognition and Incentives
A few years ago, I was up in Salt Lake City visiting one of the area’s prominent excavation companies, and talking with some of their heavy equipment operators. I was fascinated because these were some of the most talented operators around, and they were the real backbone of the company. It was obvious that they could go elsewhere and make more money, but they were really loyal and happy in that company even though they had other opportunities. When I asked, “Why do you stick around?” they said, “Well, because they just treat us so good.” And then they showed me some of the perks they got, like the nice branded jackets the company gave out at the Christmas party, and their personalized coffee mugs.
Now, these were relatively small, simple things. In monetary terms, the combination of everything they were showing me probably didn’t add up to more than a few hundred dollars per employee. But to those guys, they meant a lot. It showed the company cared about them. It meant they were valued on a personal level. In every setting, people want to feel that. It gives them a sense of pride, of belonging. Each of us really craves that.
Of course, when you talk about how a company values and rewards its employees, financial compensation will always be important. Hats, mugs, and birthday cards won’t make up for significantly underpaying your people in a competitive labor market. But compensation shouldn’t just be based on a straight salary. There is great value in structuring compensation to include incentives. This is an approach more companies can constructively utilize, in my view.
Performance-based incentives are always best because it allows team members to see the goals and associated rewards before them. When people can see the concrete – that is, monetary – the payoff for performing to a certain level, by meeting a deadline or reaching defined milestones, that’s a powerful motivator.
I also advise that companies go further, and offer team or division-level incentives tied to production/performance. As we’ve already discussed, creating a team-centric culture is hugely important and this is a very effective way to do that. Set up tangible benefits for effective and productive teamwork, and you’ll quickly see more of it.
And then there can be those very personalized incentives that help team members feel like they’re really being paid attention to. Those are where you say, “We see you’ve been kicking butt this week, or this month. Here’s a gift certificate for this nice restaurant. Take your wife out to dinner.” That goes a long way. It helps someone feel like their contributions are appreciated. It’s not so much the actual incentive that matters. It’s that someone cared enough to offer it. It says, “we notice the things you’re doing”. And that’s a big deal.
Start thinking about their home life. Are you providing an environment where they want to thrive in? Men feel guilty about doing things for themselves. Send your employee and spouse on a vacation!
ADVANCEMENT & TRAINING
The other important component of this is to give people opportunities for advancement and for professional training. If team members feel like they’re in a dead-end job, with no realistic chance of promotion, greater responsibility, or better compensation, that’s a big DIS-incentive. It’s a negative motivator.
I recently visited with a gentleman working for a construction company where it was clear he didn’t have any advancement potential. He was well-qualified and skilled, but he’d seen that every time a better position would come open he’d be passed over in favor of a brother, a cousin, or a friend of the company owners. He was discouraged and negative about working for that outfit. His potential was being wasted.
Again, business owners and managers need to realize that their actions are either sending positive or negative messages to their people – whether or not they realize it. It’s a free market, and when a talented employee feels like the deck is stacked against him, he’ll be looking elsewhere. And here’s the thing. Others will see that. Word gets around. You may never realize it, but the negative message spreads quietly. Retaining good people in that kind of environment becomes very difficult.
Training opportunities go hand-in-hand with advancement potential. Good team members want to know that they’re increasing their own capacity and their potential. They want to know they’re advancing professionally and not stagnating in terms of knowledge. So whenever possible, look for ways to provide professional training. Sometimes it may cost a bit, but in the long run it’s usually worth it. If cost is an obstacle, look for creative ways to provide it in an affordable way. There may be online courses, community college classes or local experts that can provide what you need.
Another factor for employee retention is your investment in, and support of, new technology. Our industry is kind of schizophrenic when it comes to tech. Many people in construction are conservative by nature, and reluctant to jump on the latest bandwagon. But, we’re also so driven by the latest materials, methods, and tools for improving our output, productivity, and (especially) profit.
And that’s really how we need to look at IT and mobile tech. They’re not just something for the “geeks” to play with, but they’re important new tools that let us do our jobs better. They help us run our companies better. That’s the attitude I really push for, and I hope is catching on in the construction world. I see encouraging signs.
Recently I was at a conference in LA for associated general contractors, where Kevin Heinichen from CDM Smith was one of the featured speakers. CDM is a large, nationwide contractor with several thousand employees. They’re influential in the industry. In his remarks, Kevin focused on the need for construction companies to advance their technology and how that is important for attracting and retaining talent.
I’ll paraphrase a bit here, but Kevin’s main point was that younger workers now entering the industry are accustomed and comfortable with tech solutions. They think in those terms. They’re used to doing things on their smartphones, on their mobile apps. They’re always thinking about finding the new, best way and they have limited patience for just doing something because “that’s the way it’s always been.” The next generation of top talent wants to know what they’ve achieved; provide them with the software to do so.
If you take a guy who is very aware of the advancements in information technology, and tries to push him back 20 years and tries to get him to do his job with outdated tools and obsolete methods, he’s going to feel frustrated because he knows what’s out there. So – besides the inherent benefit of using tech to advance the business – if you want to attract young talent, you’re going need to keep your technology on the cutting edge.
CDM has been in the business for a long time, maybe 80 years. And they are constantly recruiting and looking for qualified talent. So they’re quite familiar with the key trends in the industry. So it was encouraging to hear that a company like CDM, with that size and reach, recognized the importance of this.
And this is where busybusy comes in. The tools we’ve developed, which we’ve been perfecting for several years now, fit exactly into that niche. Our mobile time tracking app brings tech to bear in an elegant, easy-to-use way that fits well with the needs of most construction companies. It enables employees and managers. Team members know their hours and accomplishments are getting recorded, they know what their paycheck will be. It allows owners, leaders, and decision-makers to get the real-time data they need to accelerate their business.
What we find, each time we bring the busybusy app to a new company is that when you have tech-savvy talent in your company (and they’re not always the youngest, by the way) you can leverage them to good effect. If you give them the chance, they will introduce it to the rest of their crew. They’ll help people get comfortable with it, and help spread it throughout the company.
This is all part of the process of integrating new tech into a company’s process, of adapting to new methods and new ways of doing business. And, just as the other factors I’ve mentioned: Company Culture, Building a Team, Job Security, and Incentives, it becomes a key part of your approach to finding, retaining, and building the top talent in your company.
In conclusion, employee retention is becoming increasingly important in the construction industry. Knowing how to both attract and retain talent will put you above your competitors. busybusy has developed tools that fit well into this trend, helping companies to run their business more efficiently. As tech-savvy workers become more prevalent in the industry, they can help to spread the use of these tools throughout their companies.