Volume 24 Number 3/4 2001

HUMAN RESOURCES ISSUES IN THE CONSTRUCTION INDUSTRY

by Lubka Yankov and Brian H. Kleiner Shortage of Skilled Employees Human resources (HR) are vital to all industries, including the construction industry. As claimed by Paul Manning, the chief operating officer of the construction firm C. Raimondo & Sons, maintaining and attracting quality people is a priority (Tulacz, 2000). This issue has become especially important in the construction industry in recent years because there is a growing shortage of qualified workers in that field. Levy, for example, notes a disturbing trend in construction in which there is a growing shortage of skilled workers and experienced managers. As Levy further claims, the scarcity of both skilled trades-people and experienced managers will place more emphasis on the need to increase the quality and quantity of training in order to produce more effective and productive workers (Levy, 2000). Modifying Labour Market T. Michael Goodrich, the CEO of BE&K Inc. (one of the top ranking construction firms in the U.S.), agrees that the construction labour market is changing, but he believes this is due less to a decrease in the number of qualified workers than it is to the changing demographics of the workforce. As Goodrich says in this regard: We have more women and more Latinos working in the construction industry today, and we must be prepared to respond to these changes. Goodrich also mentions the fact that the construction workforce is growing older over the course of time (Leonard, 1998). These changes make human resources management more important to the construction industry than ever before. Yet another reason for the importance of human resources management in this industry is the fact that there is a high rate of burnout among construction workers who find they must put in long hard hours in the course of their daily work (Tulacz, 2000). HR Management Theories in the Construction Field Experts in the field of construction work have developed specific theories regarding the use of human resources management in successful building operations. For example, Nesan and Holt describe a New Construction Philosophy, which is largely concerned with the idea of increasing levels of employee empowerment (Nesan and Holt, 1999). Similarly, the Lean Construction Philosophy described by Olomolaiye, et.al., is concerned with combining existing techniques and principles in a new dimension for productivity improvement and cost reduction by stimulating employees (Olomolaiye, Jayawardane, and Harris, 1998). Employee Motivation The key to making such philosophies work is finding ways to motivate workers. As Olomolaiye, et.al., claim, motivation, aptly described as an inner generator of actions and reactions, is of interest to managers as a means to an end - the optimisation of the human resource in the production process (Olomolaiye, Hayawardane, and Harris, 1998). The key to motivating employees is to find ways to satisfy their needs. Each individual has different needs, of course; yet, these needs can be broken down into a few basic categories. Workers Participation For example, many employees are motivated when they are empowered and feel that their participation is important in making the company successful. When employees feel empowered in this way, they will work in ways that meet not only their own needs but also the needs of the company as a whole. In the words of Nesan and Holt, the participative approach addresses development of good supervisor-subordinate relationships and cohesive work groups in order to satisfy both social needs and the needs of business demand (Nesan and Holt, 1999). To encourage worker participation, managers are advised to make use of a system that recognises and rewards workers who do a good job. For example, construction workers can receive a financial bonus for identifying ways to improve the quality of their companys operations (Jahn, 1996). Olomolaiye, et.al., agree that money is a

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powerful motivator and claim that a well-designed reward system will lead to higher productivity for the employer and extra pay for the employees for their efforts (Olomolaiye, Jayawardane, and Harris, 1998). Recognition Aside from financial incentives, recognition is also regarded as a powerful means to inspire enthusiasm among employees. Nesan and Holt note that positive reinforcement is especially effective when it is applied to teams, rather than individuals, and they recommend, for example, giving an award of recognition to the crew of the Month. According to these authors, although financial incentives are useful in motivating construction employees, studies have also revealed that several people had achieved significant success with recognition as opposed to rewards (Nesan and Holt, 1999). Team Belonging Another powerful motivator in the construction industry involves the use of teams. According to Jahn, workers feel more motivated when they belong to a team where they are free to make suggestions, because the feeling of participating in a group is one of the basic needs of the human spirit (Jahn, 1996). Nesan and Holt note that teams are especially motivated when they are given the opportunity to be self-managed. This situation allows participation among the group members, while the group as a whole is given increased responsibility for decision making (Nesan and Holt, 1999). A related concern is that of cultivating good relationships among all the members of the organisation. As Olomolaiye, et.al., say in this regard, harmonious and positive relationships among all workers tend to reduce gang interference, leading to improved productivity, through exchange of ideas, tools and advice (Olomolaiye, Jayawardane, and Harris, 1998). Jahn agrees that a smoothly running and efficient construction job site must have harmony and co-operation as its goals (Jahn, 1996). Jahn makes the practical suggestion of posting an organisational chart on the site, which contains photographs and information about all the workers and managers (Jahn, 1996). This will help increase co-operation because it will enable the various people of the organisation to get to know each other more easily. Management Commitment and Leadership There are still other factors that construction firms need to take into consideration when developing an effective human resources management programme. For example, there needs to be commitment and leadership on the part of management, and there needs to be efficient communication between managers and workers (Nesan and Holt, 1999). The managerial role is a very important one, for example, Olomolaiye, et.al., warn that feelings of disrespect has been ranked in surveys as the highest demotivator among construction workers (Olomolaiye, Jayawardane, and Harris, 1998). Effective Training Another important factor in implementing human resources management in construction is the need for effective training. Managers also need to develop ways to measure the performance of their workers. As indicated by Nesan and Holt, a system of performance measures is needed in order to monitor improvements (or lack of improvements) among construction teams. These authors advise managers to then display these quality indicators on the job site, which creates awareness amongst and encourages the participants to achieve improvement (Nesan and Holt, 1999).

Successful Construction Organisations S. J. Amoroso Many cases can be found that show successful construction organisations making use of the principles of human resources management. For example, S.J. Amoroso is a profitable contracting firm located in Foster City, California. In an interview in California Construction Link, the firms owners, Paul Mason and Dana McManus, quickly answered a question regarding the key to their success by saying, Without a doubt, its having terrific people (Kopochinski, 2000).

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BE&K BE&K, of Birmingham, Alabama, is another highly successful construction company. T. Michael Goodrich, the chief executive officer of BE&K, has claimed that human resource professionals play an important role in the strategic planning processes of the construction industry. This is because human resources management helps managers to understand their employees and to thereby match the skills of those employees to the organisations overall needs (Leonard, 1998). Goodrich makes the further point that workers are more efficient when they feel that they are important to the organisation and thus have passion for their jobs. This is true not only of construction employees in general, but also of the human resources professionals themselves. Thus, Goodrich claims that the best results occur when the HR professionals he works with have a burning desire to see our employees succeed and build better lives for themselves (Leonard, 1998). Centex Corporation Centex Corporation, of Dallas, Texas, is yet another construction company that has attained a high level of success by making use of the concepts of human resources management. A 1999 issue of Forbes included an article on Centex and its chairman, Laurence Hirsch, which was primarily concerned with how Hirsch had increased his companys profitability by diversifying its product and service offerings. However, the article also included a reference to the idea that Centexs success was due in part to the fact that Hirsch had spread out his management power (Palmeri, 1999). As stated in this article, the home building operation is split into 40 profit centres run by local presidents who take full responsibility for things other large builders do at headquarters (Palmeri, 1999). By running their own offices, these local presidents are able to find their own ways to increase company profits, and to thereby obtain larger salaries for themselves. Thus, the management system at Centex Corporation motivates individual managers by increasing their organisational responsibility and by rewarding them for turning in larger profits. Both of these elements (responsibility and reward) are key factors in effective human resource management. As further indicated in the Forbes article, the rewards of Centexs management system also help to retain high-performing executives who might otherwise go to other companies, or start their own companies (Palmeri, 1999). TDIndustries TDIndustries, a Dallas-based contractor, has made use of human resources management concepts in order to cope with the growing problem of retaining employees in the construction industry. In fact, the organisation has been rated as an excellent place for people to work as a result of its servant as leader management philosophy. Ben Houston, the president of TDIndustries, is said to be continually seeking new ways to train and empower TDI partners to make their work more fulfilling (The Top Newsmakers, 2000). This statement shows that the companys success in retaining employees is due in large part to its efforts to meet the needs of its employees, as well as the company as a whole. In addition, Houstons management philosophy has helped to create a corporate culture in which there are strong, co-operative relationships. In this regard, a report in ENR (Engineering News Record) noted that TDIs shop executives are able to feel comfortable about taking the philosophy - and doughnuts and coffee - out to union picketers at an Associated Builders and Contractors convention to initiate friendly dialogue (The Top Newsmakers, 2000). Webcor Builders Webcor Builders, with its main office in San Mateo, California, has attained phenomenal success in recent years, going from revenues of $60 million in 1994 to more than $600 million in 2000 (Kopochinski, 2000). An interview in California Construction Link with Webcors president, Andy Ball, revealed that this success has been largely due to the implementation of human resources management techniques. For example, Ball places a great deal of emphasis on the importance of giving his employees effective training. Prior to their work at Webcor Builders, most of the employees have received training primarily in college. As a result, they are not yet prepared for the special challenges that they will face when they start to engage in construction work in the field. Thus, in training project managers, the company will often have them go out in the

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field and work for a concrete crew doing surveying, form design and layout to gain an understanding of how things go together in the field and see the problems the workers face on a daily basis (Kopochinski, 2000). With this type of training, the project managers are able to attain job satisfaction more quickly than they might have otherwise. As further indicated in the California Construction Link interview, one of the most notable things about Webcor Builders is its extremely low turnover rate in employees. When asked how he attained this feat, Ball answered: Quality, integrity, exceptional follow-through in service, employee satisfaction, morale and training are very important to us (Kopochinski, 2000). As Ball further indicated, his organisation seeks to understand the goals and feelings of each employee and to thereby increase their ability to participate in the success of the company as a whole. In addition, Webcor makes use of financial incentives in order to improve employee performance. Thus, as claimed by Ball, the valuable key employees also get stock options (Kopochinski, 2000). Thompson-McCully Thompson-McCully, of Michigan, is yet another company whose success is related to the use of the principles of human resources management. Many years ago, when he first became an asphalt contractor, the companys owner, Robert Thompson, had already learned the importance of people in making an organisation successful. Thompsons uncle and former co-owner, Wilford McCully, was also aware of the value of good people in an organisation. Regarding the influence of his uncle, Thompson has claimed: The one thing he taught me that I never forgot is the value of good people (Krizan, 2000). An example of Thompsons awareness that a concern for people can lead to greater profits can be seen in his 1966 purchase of the Ann Arbor Construction Company. Owner Virginia Ratliffe had decided to sell the business because her husband was having health problems. One of the conditions of the sale was that the new owners would provide her husband with an office and send him to an annual convention (Krizan, 2000). Other potential buyers rejected this provision, however, Thompson was happy to accept it, and thus he attained a huge opportunity for increasing his business. In terms of human resources management, Thompson has also long recognised the importance of finding ways to motivate his employees. As quoted by Marlene Van Patten, an office manager at Thompson-McCully, Thompson challenges people to achieve more by giving them more responsibility (Krizan, 2000). Calling Thompson demanding but also fair, Van Patten continued: He always has wanted to be the best and he has wanted his people to be the best (Krizan, 2000). Along with his effort to motivate his workers, Thompson has also shown his concern for their safety by developing the use of a device to divert asphalt fumes away from their work sites (Krizan, 2000). In 1999, Thompson decided to sell his company because he was experiencing heart problems. However, his condition for selling it to the Oldcastle Materials conglomerate was that they retain the employees of the company. Thompson received $422 million in the sale, and he decided to use some of the money for the establishment of some scholarship funds. In addition, he decided to set $128 million aside to share with his former employees, in return for their years of hard work and loyalty. 550 of his employees received bonuses, some as high as $2 million.

In order to discourage younger workers from leaving the firm, Thompson arranged for them to receive annuities of at least $1 million after reaching the age of retirement (Krizan, 2000). As claimed in ENR, Thompsons act sends a message that employees who help build company wealth also should be rewarded for their hard work (The Top Newsmakers, 2000). In addition, there were certain practical benefits to be found in this action. In particular, the motivation of the rewarded employees was greatly increased. As noted by Dennis Rikard, the new president of the company, the bonuses will make it a lot easier for him to manage the company because people come to work not because they have to but because they enjoy it (Krizan, 2000). Another example of the motivating influence of the bonuses can be seen in the gratitude of one of the companys division managers, Dean Agozino. Regarding Thompsons concern for his workers, Agozino claims: The greatest thing he gave me was opportunity. I plan on staying on and making this place successful (Krizan, 2000).

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Conclusions Human resources are essential to the construction industry. Through practicing the philosophies of strategic human resources management, it is possible to develop a high level of consistency between organisational and individual needs. The most successful leaders are those who possess a fine balance between companys interests and employees welfare. Proactive managers will continue to emphasise on creating workersfriendly environment, and on developing more effective and productive employees. Finding ways to motivate workers is the key to making the philosophies of human resource management work. Motivation being the inner power in the process of human resource enhancement is of interest to managers as a vehicle to achieve the bottom line - greater profits. References Jahn, Bart. McGraw-Hills Best Practices for Housing Construction. New York: McGraw-Hill, 1996. Kopochinski, Lisa. Millennium Contractor. S.J. Amoroso [Interview with Paul Mason and Dana McManus]. California Construction Link (March 2000), p.40. Kopochinski, Lisa. Millennium Contractor: Webcor Builders [Interview with Andy Ball]. California Construction Link, (May 2000), p.36. Krizan, William G. Award of Excellence: Robert M. Thompson. ENR (Engineering News Record) 244, (April 17, 2000), pp.52-59. Leonard, Bill. What Do CEOs Want from HR? HR Magazine, 43, (November 1998), pp.80-86. Levy, Sidney M. Project Mangement in Construction. New York: McGraw-Hill, 2000. Nesan, L. Jawahar, and Gary D. Holt Empowerment in Construction: The Way Forward for Performance Improvement. Baldock, Hertfordshire, England: Research Studies Ltd., 1999. Olomolaiye, Paul O., Ananda K. W. Jayawardane, and Frank C. Harris. Construction Productivity Management. Harlow, Essex, England: Addison Wesley Longman, 1998. Palmeri, Christopher. Home Building Plus Forbes 163 (March 8, 1999), p.89. The Top Newsmakers, 1999 ENR (Engineering News Record) 244 (January 3/January 10, 2000), pp.68-70. Tulacz, Gary J. The Top 400 Contractors: Business Before Celebrations, ENR (Engineering News Record) 244 (May 22, 2000), pp.82-93.

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