Talent may be the most coveted commodity for contractors today, but a new study says that many firms have yet to craft strategies for attracting and developing individuals who will make up the next generation of leaders. And that, experts say, increasingly threatens those contractors’ ability to compete and ultimately to survive.

A recent construction industry survey from management consultant FMI illustrates the severity of the talent development shortfall. Nearly 90% of the 245 architecture, engineering and construction firms surveyed said they face talent and workforce shortages. Yet more than half (55%) reported having no formal processes in place for identifying and developing high-potential employees.

And even firms that have identified their future leaders may be falling short in preparing them for new responsibilities. Although three quarters of FMI survey respondents report changes to their companies’ training and development programs over the past two years, 43% don’t budget specifically for such efforts.

Despite the seemingly lagging response to what has been a long-recognized need to cultivate talent, FMI principal and survey co-author Andy Patron says that engineering and construction companies are starting to strategically align training with other organizational priorities, rather than using it primarily to build competencies. Many efforts remain fragmented, however, and are further complicated by a stagnant pool of CM talent.

Citing meetings with a variety of industry groups, Patron says nearly everyone admits to having turned down work because of personnel shortages. “Internal development alone won’t solve the problem,” he says. “Firms need to look outward.”

That can be a tall order for small and mid-sized contractors, particularly those that haven’t paid close attention to changes in workforce demographics.

“The industry’s culture is operations-focused,” says Dan Wooldridge, strategic leadership advisor for industrial and specialty contractor APi Group, New Brighton, Minn. As a result, “the internal investment isn’t there,” he says.

In addition, many contractors have yet to adapt their corporate cultures to a workforce increasingly influenced by millennials, a technology-immersed generation that craves coaching and regular feedback. Many firms appear to be operating under the misperception that millennials have yet to fully arrive in the workplace.

“They’re already running all or major portions of many construction firms,” Patron says. “So, it’s not so much what to do when they come; they’re already here. Now, the challenge is to engage them and create opportunities to grow and advance.”

But, according to Brett Walsh, vice president of human resources for industrial and commercial contractor Graycor, Oakbrook Terrace, Ill., many contractors continue to rely on the “muscle memory” of past talent-development practices. Along with assuming that there will always be potential professionals in search of good jobs, they often start new hires with basic “transactional tasks” such as document control and drawing mark-ups.

That might well leave a young person wondering if there might be an easier way to do things, Walsh adds, and if so, why isn’t the company using it?

“The environment people walk into is so important,” he says, adding that without proactive support from management, “they won’t move the needle” on their personal growth.

Culture Creation

Employee engagement issues are by no means limited to engineering and construction. A Gallup survey cited by FMI found only 21% of all U.S. workers believe they are being managed in a motivating way.

But for an industry where the median age edges further north of 40 each year, an engineering or construction firm’s preference to stick with “old school” engagement and motivation approaches seems counterproductive, given the preferences of the emerging workforce.

Admitting the dangers of making overly broad generalizations about large groups, Jackson, Mich.-based recruitment consultant Juli Smith nevertheless says millennials do want to be managed differently from their predecessor generations. Where baby boomers were happy to have a job, for example, millennials and younger Gen X workers won’t sacrifice themselves for a company.

“Having seen what their parents went through, work-life balance is very important,” Smith says.

Similarly, Walsh disputes pervasive misperceptions that millennials are leisure-oriented and in constant need of coddling.

“What they want is evidence that the company cares about them as individuals and is willing to provide the tools needed to do the job,” he says. “They’re also savvier about the long term than people give them credit for and focused on competing and being compensated appropriately.”

On the other hand, millennials tend to exhibit impatience to learn and advance, which Walsh says carries a potential risk of giving responsibility to those who are unprepared for it. “The role of manager often brings more challenges and requires more skills to deal with it than they thought,” he adds, noting that many newly minted young managers aren’t fully versed in communication and cultivating relationships. “They need to be able to say ‘no’ without sacrificing a way forward, which can be more art than science,” he says.

Absent a thoughtful planning and implementation approach, many talent development tactics will fall short. The key for contractors is to make talent development a priority, and support it with thoughtful, strategic approaches tailored to both near-term and long-range objectives.

“The firms that are succeeding recognize they have to make a shift in that process,” Smith says. “There’s no one magic bullet. They need to use different tactics.”

Wooldridge cites the experience of his own firm, which over the past five years has sought to enhance its talent development and engagement processes. “We looked at everything,” he says. The effort has ranged from evaluating and tapping new sources of potential recruits to establishing coaching and mentoring resources to ensure employees feel recognized for their work.”

“This may seem basic,” he adds, “but often the difference between high performance and mediocre performance is the superlative execution of the basics.”

Different Is Good

Contractors should also become attuned to opportunities to differentiate themselves to recruits. Smith recalls her own experience with job candidates unimpressed with her consultancy’s match of retirement-fund contributions, a traditional employee benefit.

Recognizing that millennials are often saddled with college debt, Smith discovered Gradifi (www.gradifi.com), a similar method for paying down student loans.

“They really liked that,” she says of the response, adding that while many Fortune 500 firms are using Gradifi, the system has yet to catch on with AEC firms. Smith adds that the program could prove to be “an inexpensive way to not just attract good talent but also retain it.”

Whether engineering and construction firms’ talent development and engagement approaches require mere tweaking or a full overhaul, they can take comfort in the fact that “they won’t be trailblazing, as other firms have already been through this,” says Walsh.

In addition to consulting industry organizations such as FMI and AGC, Walsh suggests consulting peer companies that aren’t competitors, “and ask how they handle it.”

Patron admits that while some baby boomers and older Gen Xers may find transitioning to the next generation of leaders somewhat disconcerting, “it’s exciting to see how millennials are thinking differently, learning to drive companies and get better.”

That will be particularly important in the coming years, as disruptors such as robotic construction, virtual reality, autonomous vehicles and other technology continue to upend the traditional construction business model.

“How we provide value will be significantly affected over next five years,” Wooldridge says, adding that when it comes to developing the talent to handle that change, “you have got to invest.”