The most important college class not taught

Oct. 4, 2010
We know from our conversations and research in the industry that most universities don’t offer a specific course in managing construction labor. They should.

What is the most important college class not taught? Let me say it more directly: What is the most important skill a construction professional should have? Our answer: Managing construction's craft and labor.

The labor component of any construction project represents the largest opportunity to increase speed, lower cost, increase quality and improve safety. It is the line item on any job cost or profit/loss statement that determines meeting, beating or failing any project's goals. However, it is not taught as a focused course in most college programs.

Our country will scrutinize all standards in the coming years; colleges and universities are not immune just as management advisors are not. The question we ask: are students obtaining this critical skill needed to be effective in the industry?

Since fewer qualified craftspeople are available than in the past, managing the existing pool more efficiently makes sense. Managing construction labor is a particularly sensitive, complicated subject in our industry. However, our firm honestly feels a discussion is needed. Once a conversation takes place, we predict an improvement will be made.

More than a psych class
Some may say this subject is taught in universities' business and liberal arts colleges. Yes, parts of it are — psychology, social science, organizational behavior, management science, etc. These are great courses, but we think more is needed. Some college programs may offer a “managing labor” class. We know from our conversations and research in the industry that most universities don’t offer a specific course in managing construction labor. It is time for a larger conversation.

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If you read my work, you know how I assert that the construction industry is unique. I hope you agree. Construction labor is different just as the construction business is unique in comparison to a general business. We may need to “unlearn” some things to be more effective in the construction industry.

What we are suggesting is the science and art of managing construction labor taught by a construction professor or professional — someone who can speak and teach the realities on the jobsite.

Next question: Should it be a one-semester course? A minor? A major? I know when we start a new venture, a small and modest beginning is essential if you want to learn and grow. A one-semester course is where I would start. It may be awkward, but so are many things at first. Colleges that get an early start in this field, however, will be ahead of others.

In 10 years, we see the same outcome that has been the case with the leadership phenomenon. Managing construction labor will be a well-known skill and an area of excellence. This industry and its professionals will be superior at it — or, as a friend says, will have “really figured it out.”

Currently, schools of higher learning may be off-loading this education to the U.S. military, or to people who grew up playing team sports or to coaches of sports teams. Great people-management skills emanate from the experience of the military or sports world. Colleges should contribute.

I had a conversation with a younger construction professional who is a college graduate. He was mildly upset with me for saying, “construction is not an industry that is based on having a college education.” We talked about the qualified craft hour being the most valuable unit in construction. Without those professionals, projects suffer. Obviously, a college degree accelerates learning and a person's career prospects. College degree or no college degree, his view was that you, “bought labor on a piece rate or subcontract basis.” Furthermore, he argued that a profitable construction business was based more on negotiation skills and a sales process than on a craft understanding.

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We agree to disagree. We assert that craft understanding translates into knowledge of constructability. High constructability lessens time and cost and increases quality and safety.

I speak from experience. I have been a practitioner, working for two specialty-contracting firms and two general contracting firms. Both benefit from a labor/management understanding.

Labor-intensive contracting
We ask a fair question of everyone: Why is the net profit percentage of labor-intensive contractors double that of subcontract-intensive contractors?

From a business perspective, it is important to know that you can make a profit the first year by subcontracting all the work, but there is an upper limit to the profit percentages you will make long term.

There are many reasons for this, not the least of which is that your customer can talk directly to your subcontractor and other subcontractors and ascertain the price of work. This happens often and makes your client margin sensitive, thus your profit limited.

Labor-intensive contractors may lose money the first year in business, but long term, as they grow a strong labor-management expertise and craft skill, their net profit percentage can reach double digits.

Long term, I like the second strategy. It makes for a more profitable business and a great retirement program.

We have such a complicated algorithm in a labor-intensive environment to arrive at a final price that few outsiders can put it together. Craft skill gives a subcontractor a more flexible price in the mind of a user or consumer. This translates into a larger profit opportunity.

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The risk of managing labor is rewarded. Risk in construction should be rewarded. Over the long term, if mastered, you will double your reward over a subcontract-centered business.

The business is about people and processes. Construction processes are taught very well, but what about construction people skills? The good news is that any weakness, if improved, has the greatest impact.

Your goal should be to be the type of manager who attracts and leads craftspeople and operators. All construction professionals talk to each other. Field people are no different. If a manager is seen as organized, fair and a good leader, others will seek to work for him, pay notwithstanding. Having a solid understanding of beneficial management behavior takes time. Beginning this learning in college makes sense to us due to the many years it may take to become superior.

In general business, the subject of leadership has been well documented and discussed. This country and its citizens have shared tremendously helpful insights about making things happen. Can we not do the same with management of construction labor?

The construction industry is the second largest employer in the country, and we have dozens of people and professors in each college town that could teach this skill. If the industry is fortunate, they will write textbooks about the subject as well.

What’s wrong with curricula?
Universities have industry advisory boards that make certain that students’ academic requirements are balanced with the industry's need for practicality. We assume the topic of construction labor management has come up in meetings, but we’ve seen it in few college curricula. Why?

· Are construction programs hamstrung by university administrations?
· Are they forbidden from entering the world of managing labor and human development?
· Are business schools protecting their management turf?
· Do psychology courses suffice?
· Are construction programs discouraged from offering an elective course(s) to start students on the path to superior labor management skill?

There are three times as many specialty contractors as general contractors. The world of construction is significantly affected by a construction firm’s ability to build custom work in a unique place. A portion of building always involves labor. Project owners are not immune. They have to be labor sensitive if they want projects consistently built on-budget and on-schedule with safety and quality and without litigation or much conflict.

From others' analyses and from ours, it is clear for a specialty contractor that a 10% increase in labor productivity doubles net profit before tax. For equipment intensive (“yellow iron”) contractors, it is an even greater leverage point as efficient operators affect equipment utilization and cost. Great labor productivity or labor savings transfers readily to project budget compliance and schedule adherence.

We don’t know all the struggles that universities will go through to make this a valuable college course. But looking at standards and asking long-term questions is fair. In a broad sense, it is necessary if we are to grow as a country.

Some college programs will never be great compared to others. This is reality; any organization or individual would be wise to be realistic about its/his ability and talent. We all have greatness in some things we do. However, it is also true some people and organizations do many things well. It is no shame and no surprise that everyone is not in the Top 10.

Regardless of a college's standing, if I wanted to attract the right kind of attention from construction firms that will hire a majority of my graduates, my goal would be to make graduates “industry ready.” This is the way to go, especially because a lot of colleges like to teach the theoretical instead of the practical. Our industry loves and embraces practical skills.

Construction management/building science programs in this country have grown in number and in size. Currently, according to the American Council for Construction Education (ACCE) website, there are approximately 60 accredited programs that offer a bachelor or four-year degree. Seven more are candidates for that honor. (Disclosure: our firm is a member of ACCE). As important, there are 11 accredited programs that offer an associate or two-year degree. Three are candidates for that sign of excellence.

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Most have no college
It is noteworthy that all education levels are acceptable in our industry. According to the U.S. Department of Commerce, there are approximately 2.7 million U.S. construction firms. According to the U.S. Census Bureau, 28% of citizens ages 25 and older have a bachelors degree. As we look at the construction industry and apply this percentage, 72% of construction firm owners do not have a four-year college degree. If I can extrapolate, managers who do not have bachelors, masters or doctorate degrees are leading more than 1.8 million construction firms.

I don’t write this without a previous suggestion; see my article, “Letter to the Dean of a College Construction Program,” in the July 2007 issue of CONTRACTOR magazine. I am certain I am not the first person to note such a class or course work is needed. Clearly, I made my feelings known to the industry more than three years ago.

Most cost overruns occur in the labor arena. Craft skill and the efficient management of it differentiate one contractor from the next. Building owners want work completed on time and budget, with safety and quality. To deliver this is a team effort, but field labor is where approximately 30% of construction costs reside (more if you consider equipment operated by labor) and it is the great wild card in meeting project goals.

As a critic, I should offer direction. Here are our firm’s thoughts:

Construction labor is different from the general labor pool in many ways. We continue to attract a significant amount of immigrant labor. Also, qualified journeymen and women are rare and they have many opportunities to work for others. They have a specific necessary skill and must be served as well as managed. Many are not looking for the next rung on the corporate ladder, but are certainly open to better pay and working conditions. They work to provide for their loved ones. Again, a different approach should be considered than a general business one.

A DISC Assessment (a psychological inventory) should be used in any course teaching people skills. DISC is bullet-proof as a starting point in understanding people. It is a common, tenured and well-understood method. As an industry contribution, our firm has done specific research on the relationship between DISC and the best craft people. That custom study is published in my book, “Managing a Construction Firm on Just 24 Hours a Day” (McGraw Hill, 2007). We humbly feel that any course on managing construction labor should include a discussion about that study.

An analysis of different generations working in the construction industry would make graduates more sensitive to people's work styles and how to manage them.

Some cultural or ethnic information should be shared. If history is any guide, we always have a significant percentage of immigrant labor.

We suggest part of the course touch on the four basic types of managers. It is interesting to note that in construction we shouldn't be “coaches” to everyone. It would cause many problems, including lower productivity and higher risk. Our research suggests that each manager needs to have the skills to be all four types for our diverse labor population.

The class might include the process of forecasting labor needs/availability. This has a high value in the construction industry. It increases utilization and efficiency.

Students should understand the great opportunities — financial, schedule, safety and quality — in learning how to better manage construction labor. Statistics and quantitative analysis would be a large part of this course.

I offer these as starting points for a potential syllabus. Certainly, any serious curriculum has many more. Labor is the means of production in our industry. We suggest construction labor is the pink elephant in the room and we need to talk about it.

College construction programs have made many contributions to the industry. They have partnered well with contractors and other industry professionals. Our clients and we are asking them to make one more contribution.

Managing construction labor is a rare skill. Learning associated with this critical piece of construction's overall processes is never complete. It is complicated and parts might not be definable. This will not be easy. However, we believe starting at an earlier point in a professional's career serves everyone's goals.

Matt Stevens has been a management advisor to construction contractors since 1994. He has worked in the construction industry more than 30 years. His firm is Stevens Construction Institute Inc. He authored “Managing a Construction Firm on Just 24 Hours a Day” (McGraw Hill, 2007, 406 pages). His next book is titled “The Practical Construction MBA.” Stevens Construction Institute Inc. is located at www.stevensci.com. Reach Matt at [email protected].

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