Leadership challenges in the construction industry

Gary Payne explains how US construction executives will need to adapt to meet the pandemic’s challenges

Like many industries, the coronavirus pandemic has caused what can only be described as transformational change in US construction. Construction activity has continued for most existing projects but as we move into the next phase of the pandemic, it’s expected that many of the current operational and workforce changes will remain in place for the foreseeable future, especially worker safety. A number of new factors are also coming into play that will be a critical focus for leaders as the industry emerges into the new world.

Without a vaccine, all construction firms will need to implement new site measures to ensure worker health and safety. For this same reason, the likelihood of increased labor union activity in the industry is high and both factors will almost certainly lengthen project schedules and impact profitability in the short and medium-term. These challenges will need to be balanced with the redesign of supply chains, nearshoring and onshoring certain operations traditionally outsourced to China, which – pre-virus – provided an estimated 30% of all building materials in the US. At the same time, construction leaders will need to manage an increased focus on offsite construction processes that enable modular designs and the use of sustainability as a competitive advantage – two trends that emerged before the pandemic and will continue during and after it.

Safety has always been a priority in construction however, Covid-19-driven changes are adding complexities. Social distancing measures, staggered shifts, allowing only one trade on site at a time, employee temperature checks, a ban on carpooling, and mask and glove requirements at all times will take a consistent leadership focus to ensure these new safety standards are kept in place and adhered to. The ability to jump into the detail of operations and then back out to more strategic focuses will be a hugely beneficial skill in managing ongoing workforce changes.

Due to these safety measures, project timelines will only be lengthened, adding significant project cost with the potential to eat heavily into profitability. Many ‘fast-track’ strategies will no longer be viable and schedules will need to be completely overhauled. It will require executives to develop more partnership-like relationships with project sponsors and suppliers rather than the traditional client/vendor relationships, which have been ingrained into the culture of the industry for years. This requires a complete shift in leadership style; executives who are collaborative, approach relationships with a sense of ‘we’re in it together’ and are unafraid of going against the grain will have an advantage over their competitors.

Union involvement in the construction industry has significantly declined over the past 50 plus years. However, unions have yielded significant influence over members during the pandemic. What’s more, pandemic-led stimulus plans in the US have made it more economically viable for construction workers to remain home and earn unemployment benefits rather than return to their normal wages. The disincentive to work has been capitalized on by unions and their presence in the industry is growing. This is a novel situation for many executives, and they will need to gain more experience in managing unions as a result. What’s more, they’ll need the emotional intelligence, an exceptional ability to communicate and genuine authenticity to engage and motivate workforces who have serious anxieties around health and safety and can therefore be influenced by union agendas.

Widespread disruption to supply chains is another critical leadership challenge. Many suppliers up and down the construction industry supply chain are having serious difficulties remaining viable when they are unable to source or supply business critical components or materials. Strategic partnerships, buying stakes in critical suppliers who are financially struggling, offering payment in advance and sharing risk assessments, are becoming increasingly common as a result. Likewise, it will soon be a standard for general contractors to require five or more backup suppliers to qualify for a project. This will require genuinely collaborative leaders; those who can think laterally about relationships and are agile in their approach to supply chain management – especially when the future is looking like a mix of onshore, nearshore and offshore solutions.

Two ongoing trends construction executives will also have to grapple with are off-site modularization and sustainability. The former will become a standard and executives will have to develop stronger more integrated processes so that all suppliers are working with the same systems and tracking workflows that are being done in remote environments. The latter is an issue that was just recently beginning to take a foothold in the construction industry as executives realized the benefits of sustainability programs to the bottom line. However, most of the companies that have the resources to implement sustainability programs have been large, multi-national organizations; but to remain competitive, these programs will also become a necessity for small and medium sized businesses. Typically, these companies used price or sales relationships as differentiators. In the future, the quality of one’s sustainability credentials will serve as a make or break difference in landing contracts.

In our recent Leadership Confidence Index (conducted before the pandemic), only 15% of senior executives had confidence in their own leadership team’s ability to navigate through disruptive times. The construction industry will need an intense focus on leadership development efforts to meet the requirements executive teams will face in the near and long-term future. Industry executives have addressed multiple challenges over the years: labor shortages; constraints on materials and consistent force majeure incidents. However, they have never needed to make so many dramatic, long-term changes in such a short space of time. To succeed, the industry needs agile leadership thinking to manage successive waves of change, intense utilization of emotional intelligence skills that engage workforces and help bring often contentious supplier relationships into more of a true partnership, and an innovative approach to supply chain resilience. The way forward is uncertain. What is clear however, is that it will take a flexible new dynamic in leadership for companies to effectively position themselves for the immediate future and beyond.

Gary Payne is a Partner at Odgers Berndtson US. For more than 50 years, Odgers Berndtson has delivered executive search, leadership assessment, and development strategies to the world's biggest and best organizations. Odgers Berndtson's 250+ partners cover more than 50 sectors and operate out of 59 offices in 29 countries. The US wing of the firm launched in 2011 and is one of the fastest growing search firms in the Americas.

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