The U.S. residential construction contracting industry is composed of about 160,000 firms (single-location companies and units of

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The U.S. residential construction contracting industry is composed of about 160,000 firms (single-location companies and units of multilocation companies) that renovate and build residential facilities amounting to $425 billion in annual sales. General contractors (those who build for others), operative builders (those who build for themselves), and specialty trade contractors (usually work as subcontractors) compose the industry market segments.(1) Economic and population growth are the key determinants of housing demand. Hoovers indicates that housing demand and pricing have increased due to U.S. economic growth and changing interest rates. Demand in local markets can be even more dramatic, given the differences in local economic conditions. The housing market in the United States moves in cycles. Home construction reduced 40% from 1986 to 1991 yet grew 75% from 1995 to 2005. The cycle continued with a 65% drop from 2006 to 2011; the market is currently in recovery.(2) “Home building is a key driver of the American economy,” said the chairperson of the National Association of Home Builders (NAHB), Granger MacDonald, who is from Kerrville, Texas, and, in his own right, a home builder and developer. “Housing creates new income and jobs, purchases of goods and services, and revenue for local governments.”(3) That’s the general industry backdrop as potential homebuyers in Denver, Colorado, pile up and the supply of homes for sale continues to fall. Fierce competition pushes home prices higher at one of the fastest rates of any local market in the nation. Denver’s average sales rate would normally be about 15,000 homes per year, and the market is now operating at just over half that rate.(4) With all of this demand, why such a low supply? Housing industry veteran Gene Myers says he could be adding 50% more homes if he just had the people to build them. After weathering more than one recession, not to mention the worst housing crash in history, Myers says he has never seen anything like this. “Especially the fact that it seems like we’re at capacity at such a low level of actual absorption [sales],” said Myers, CEO of Thrive Home Builders, a midsized, privately owned builder in Denver. “In previous recessions, when we’ve recovered, we tend to see prices go up and labor starting to get tight after we’ve recovered to at least an average absorption.”(5) Thousands of construction workers left the industry during the recession, many of them heading to the energy sector. The assumption was that they would return when energy lagged and homebuilding recovered. The Bureau of Labor Statistics Employment projected that construction laborers and helpers would increase quicker than most other occupations: from 2014 to 2024 by 13%. This growth would be similar for helpers and laborers who supported the industry.(6) They did not. The labor shortage in building actually worsened in 2016—a surprise to most analysts. Labor is the top concern among the nation’s builders, according to an NAHB survey, and worry over its cost and availability is growing. “We thought we’d see a flow back of workers from the energy sector,” said Rob Dietz, chief economist with the NAHB. “The labor shortage has basically grown and accelerated. It’s the top challenge in the building industry right now.” “These jobs, Americans don’t want,” Myers said. “We have a hard-working Hispanic labor force here in Denver that really is the foundation for the construction industry.” Dietz points to both an immigration and a generational challenge. The workforce is aging, with the typical age of a construction worker now 42. More Americans are going to college now, and so they are less likely to pursue a career in construction. Simply put, young Americans do not want to build houses anymore and would rather have white-collar, college-based, technology-driven employment. That leaves the business to immigrant laborers. Immigrants make up about a quarter of the overall construction workforce, but that share is likely higher for residential homebuilding, partly due to a large number of undocumented workers. Builders say they make sure their contractors are legal to work, but they have less control over the subcontractors who often move from site to site. Even that group is shrinking, as President Donald Trump tries to impose travel bans and threatens to build a wall between the United States and Mexico. “There is a fear to get out into the labor force. I think there is an uncertainty,” Myers said. “I had one of our trades who became a citizen last year ask me if that could be taken away from him. Even for the people who are legal and documented, it’s a factor that is holding back the labor force.” And it’s costing builders more money. Wages in the residential building industry are growing at twice the rate of wages in the overall economy. Charles Kimmel of Kimmel and Associates observed that those employees who exited during the industry 2007–2009 decline transferred their skill set and careers to other industries; millennials (under the age of 34) were left to fill the job gap. Yet this group has differing career aspirations and therefore requires targeted recruitment tactics. He recommends the following recruitment tactics: Change your target market Veterans—veterans’ ages 18–24 who had career aspirations in the military have the highest unemployment rate, partially based on military workforce reduction, and they represent a trained workforce with long-term career aspirations. High school and college students—get to them while they are in school through apprenticeships, on-the-job training, career days, summer jobs, and job-shadowing programs. Scholarships (i.e., one year’s tuition) are great inducement for employment. Change your recruitment strategies Implement employee referral programs for youth, conduct jobsite tours, use social media, reach out with contests, and brag about on-the-job high technology. Company branding Reputation is everything, especially for brand-aware millennials. Wanting the best in goods and services, millennials also want to work for the “best” employers (i.e., Google) and the hottest industries (i.e., fashion). Having a branding campaign, especially for a less “sexy” industry and firm, will positively impact recruitment efforts. Enhance and promote your company culture Peter Drucker, the guru of management, has been known to say that culture eats strategy for breakfast. Millennials are looking for far more than just great compensation; they want a fun place to work with special perks. No suits are required in this industry, dressing down is necessary, and much of the work is in the great outdoors!(7) “Because the building industry is highly decentralized—there are 40,000 homebuilding companies in the country—you do see poaching. There are situations where you can recruit a worker, and they can work for you for a quarter or two, and then they’re working for another subcontractor down the road,” Dietz said.(8)

Questions

What are the external forces acting on the recruitment effort for construction workers?

What are some viable alternatives that homebuilders can use in lieu of employee recruitment?

Social media recruiting is one of the methods recommended by Charles Kimmel of Kimmel and Associates to reach the millennials (high school and college students). What are the issues involved in using social media, and how can they be overcome?

What external recruitment methods are discussed in the case?

What are the challenges and constraints in recruiting construction workers?

What are the different methods for evaluating the success of a recruitment program, and what methods are described in the case?