The construction industry has always been marked by its sensitivity to economic cycles, with periods of growth often followed by inevitable slowdowns. While the current outlook includes a mix of optimism and caution, the volatility of the industry underscores the importance of preparation. By embracing tried-and-true practices such as sophisticated forecasting, scenario planning, and building contingency reserves, construction companies can strengthen their ability to weather uncertainty and position themselves for success in any market conditions.

Today’s business leaders can draw on forward-looking approaches that have proven effective in navigating past periods of uncertainty — such as the early COVID-19 era and the 2008 market collapse. By learning from these examples, companies can better prepare for the challenges and opportunities that lie ahead.

Today’s Challenges

Creating a workable, forward-looking plan starts with a clear-eyed understanding of the moment’s most influential issues. The 2024 National Construction Survey — which analyzes economic trends and polls construction industry leaders for their insights into the prior year and future expectations — asked respondents about the top threats facing construction businesses today (Exhibit 1), uncovering that approximately 37% of respondents reported that labor issues were their top threat.¹

Understanding the Persistent Labor Issue

For years, the industry’s labor concerns have been inescapable, from the difficulties of hiring and retaining talent to reconciling rising salaries with ever-tightening margins.

In fact, the worst of the labor crunch could still be coming. A Brookings Institution report puts the issue in stark relief, projecting that infrastructure job creation rates will continue to increase steadily but will be dwarfed by the hiring demand generated by job separations, including the retirements of senior specialists (Exhibit 2).²

What may come as a surprise to many is the degree to which the tight labor market extends far beyond the jobsite.

It’s been nearly as tough filling back-office roles as it has been sourcing qualified tradespeople. Accountants, lawyers, and administrative professionals may not be the top hiring concern, but they still play a big part in running a successful business. And just as we’ve seen with manual laborers, the reservoir of talent is drying up.

There are several factors contributing to this problem. For one, financing team growth has become more challenging for many companies, with tighter lending standards and economic uncertainty making access to capital less straightforward. In some sectors of the industry, fluctuating demand and uneven profit margins have made it less appealing for individuals to pursue the technical and demanding skill sets the industry requires.

Furthermore, the pandemic era’s considerable investments in human resources drove up salary demands, particularly for those with substantive experience and proven skills. As a result, even staffing at a sufficiency level can represent a serious challenge to a business’ cash flow.

Mitigating the Labor Challenge’s Impact on the Back Office

Thankfully, the interest and labor environments are not the only factors shaping the industry — the back office is one area where emergent technologies are making a big impact by enabling teams to accomplish more with fewer human resources.

Importantly, specialty technology and ultra-hyped advancements like artificial intelligence (AI) will not eliminate your reliance on human expertise; they will, however, empower your best and brightest to get more done in less time.

The following are a few examples of how integrated technologies can help your employees get more done in less time.

Coordination & Geocaching Software

Project managers (PMs) can cover more ground with assistance from programs that allow workers to track their onsite hours via a phone or other device.

Processing

A sophisticated back-end system can enable a more time-efficient and accurate payroll process. By linking coordination and geocaching software to this type of system, site data can be processed and employees can be paid out accordingly.

Scheduling staff on jobs through geocaching can also reduce travel time and increase work time.

That said, while technology investments are increasingly recognized as essential for boosting efficiency, they still require a shift in spending habits.

Outsourcing

Not every role needs to be handled locally. Outsourcing certain functions can help control costs, improve efficiency, and mitigate some of the financial impacts of a highly competitive local labor market. In addition, outsourcing with a specialized provider can deliver the experience and skill of industry veterans for a fraction of the cost.

Some of the common uses of outsourcing in construction are to supplement human resources, tackle specialized projects, and fabricate certain components offsite. Additional forms of outsourcing might include assistance complying with government initiatives, particularly legislation relating to environmental incentives; the operation of specialized software and equipment, like BIM or drones; and the integration of modular construction methods.

Of course, embracing the change that these technologies represent is easier said than done, especially for an industry rooted in traditional practices. However, data reveals that the industry has yet to fully capitalize on the potential benefits of integrating promising technologies. Even though the adoption of cloud and software technologies is increasing, Exhibit 3 shows that there’s still a long way to go in fully embracing these changes.³

As the industry prepares for potential challenges ahead, necessity remains a powerful motivator for innovation. Tech-based solutions can help stretch the value of each dollar — an advantage that is hard to overlook. Those companies that remain protective of existing processes should recognize that complex markets are typically more friendly to those willing to embrace change rather than those that hold out.