March 14, 2006

Polls of construction companies nationwide have shown that the number one issue facing the industry today is shortages of skilled workers. Construction firms have found it more and more difficult to find qualified, experienced personnel.

Companies committed to success and growth will likely perform the following: Ensure that the right personnel are retained through a broad range of benefits.

Proactively manage bidding processes and growth strategies to ensure that the Company does not place excessive burdens on staffing levels.

Ensuring that the right personnel are retained is essential to any organization. A variety of options are available to keep retention rates as high as possible, these include:

1. Provide a range of benefits that appeal to a range of employees.

Surveys of employees over the past few years have consistently shown that employees respond to benefits that are linked to performance, or that provide individuals with training and opportunities beyond the normal working environment. The construction industry typically has not embraced employee programs such as policies for education or community service, seminars and workshops (on topics such as stress, nutrition, smoking, communication), access to fitness facilities, etc. However, these ideas have been successfully implemented in other industries, and similar ideas may offer potential for construction companies to differentiate themselves from their competitors.

2. Offer incentives that vest over time.

Employees will be more inclined to make a long-term commitment to the company in order to reap the rewards of the benefit. These plans can also offer owners a tax efficient way of managing their succession plan. For example, incentive plans that offer future benefits through vesting include Employee Stock Ownership Plans (ESOPs), Phantom Stock Plans, Deferred Management Bonus Plans, Annuity Contracts, and Insured Security Option Plans (ISOPs).

3. Provide personnel with the right training at the right time.

Most employees want to grow in their careers. Companies need to work with employees to develop personalized training programs that meet both the developing needs of the individual and the long-term strategies of the company.

Companies also need to ensure that their workload is commensurate with their staffing levels. Bidding processes and growth strategies need to take into account the company’s access to labor. The company needs to consider its current labor capacity, the quality of the project, the quality of the owner and potential profitability (not just cash flow) of the job. All of these considerations will allow the company to target its limited labor resource to those activities that provide the greatest rewards.

Successful companies are committed to retaining qualified people, rather than relying upon their ability to hire. As the shortage of good employees continue, employee turnover and retention rates are likely to be just as important performance indicators as gross margin, current ratio or backlog.

If you would like additional information on developing employee retention strategies, please contact your local Moss Adams office.