Owners are the undisputed leader of their projects and the driving force in the construction industry. Yet the support and participation of the owner to drive workforce improvement through metrics and benchmarking is missing. Owner leadership is crucial to effective labor risk management because without their commitment to standards of excellence, those standards become optional.
The Labor Risk Management (LRM) program is a transformative, collaborative, leadership-driven solution addressing the systemic construction labor challenges which lead to labor shortages and increased project risk. The LRM is project-based and deploys cutting-edge resources and tools to help owners ensure they are doing business, on every project, with contractors who invest in training, grow the skills of their workforce and continuously improve.
The current approaches to addressing skilled labor shortages and competency challenges are not working. Labor problems are worsening as we manage the impact of workforce symptoms but ignore the root cause – leadership. Consistent, effective craft labor development and training must be addressed immediately.
Meaningful change will only happen through active owner leadership. When owners declared safety to be a core value and business imperative, innovation was unleashed and change occurred. Similarly, when owners make meaningful workforce development standards a business imperative, real change will follow.
Skilled labor challenges threaten our ability to meet basic project objectives like safety, cost, schedule and quality; and owners have the most to lose when this happens. Leading industry research demonstrates that contractor pre-qualification, training, metrics and benchmarking significantly improve overall project delivery and risk.
Market uncertainty and a depleting labor pool have eliminated the ability to rely on past data to produce an accurate project budget. The skilled labor challenges are increasing cost and schedules and resulting in lower quality, more accidents and missed project objectives. Current forecasts indicate no relief based on the current project pipeline and industry age distributions. Seasoned, productive craft professionals aren’t born; they require training, time and investment, without which there will not be sufficient labor to meet future demand.
Each stakeholder has a role. Owners need to pre-qualify contractors for each project based on their labor risk profile and then work collaboratively with contractors to ensure sufficient resources are available and established goals are met. However, contractors are the employers of craft labor and must take the lead in developing new skilled resources for current and future projects.
The LRM identifies labor risk and uses key data to drive improvement. The gathering of this performance data is essential to produce predictive analytics, which improves risk management, and should be the expectation of owners.
Too few construction firms effectively evaluate their workforce programs or internally measure the ROI for their craft training efforts. Yet measurement workforce development and training is both achievable and essential for improvement. Passive workforce development is unlikely to transition a conscientious contractor from current-state to best-in-class.
CII RT-231 research demonstrated that investing 1% of the labor portion of a project's budget into craft development and training can produce an ROI of up to $3.00, and much more, on a single project, in the areas of budget, safety, schedule, quality, turnover, absenteeism, rework and more. This investment continuously by multiple owners and contractors, on multiple projects across the industry, exponentially increases the ROI for all stakeholders.
Picking the right general and sub contractors is crucial to delivering a project on time and within budget. Therefore, while the LRM may be implemented in nearly any phase of a project, the ideal time for implementation is in the early planning phase (FEL-2) of a project because this is when labor risk issues impact key decisions like site selection, modularization and contracting strategy. The LRM is also critical in FEL-3 when evaluating bids, identifying risk, establishing metrics and selecting contractors.
LRM implementation late in a project is doable, but more difficult, because labor challenges are harder to overcome, and an owner has less influence since contracts are complete. Robust communication and agreement among the stakeholders are critical to ensure success.