FMI: Greater Competition for Talent, Uncertain Economy and Value-Centric Contractor Selection Driving the Industry

December 2015

FMI Corp released on Nov. 16, 2015, its fourth and final 2015 Quarterly report. The delayed impact of Federal Reserve actions on the E&C industry, a shift toward value-based contractor selection and renewed emphasis on the importance of retaining millennial employees are among key topics in the latest FMI Quarterly.
“The industry is experiencing a fundamental shift as contractors are asked to provide more value beyond competitive pricing as well as recruit and train a younger workforce to meet tomorrow’s challenges,” said Chris Daum, president and chief executive officer. “Companies that achieve these competitive advantages will not only stay ahead of the curve but also maintain success in the long term.”
Featuring eight articles from top FMI advisors, the report takes a deep dive into issues important to E&C firms’ bottom lines, including capitalization of earnings, pricing structures, hiring and retaining talent and risk associated with mergers and acquisitions. Each article provides E&C firms with the opportunity to reflect on strategies and tactics, as well as to consider what new forces are driving organizational change. The report also takes a fresh look at key findings from the latest installment of FMI’s M&A Advisor report and the Talent Development Survey.

Fed’s decision on interest rates will have a delayed impact on the industry. A possible increase in the federal funds rate should not be a concern for construction companies, according to the report. Rather, an increase in the real or inflation-adjusted interest rate will negatively impact contractors’ capital investment decisions and have a delayed influence on the environment in which they do business. However, in the short-term, improvement in the economy and increases in backlogs due to owners advancing projects based on lower rates will offset any negative impact stemming from modest rate increases.
Contractor selection shifts toward value. The contractor selection process is changing from one based primarily on price to a process that takes into consideration the total value a contractor provides. Competition for talent is a key driver of the shift, allowing contractors to become more selective in terms of the customers and projects they pursue. Companies that want to stay ahead of the curve need to provide a premium in services based on experience, unique systems, depth of process, client knowledge and capabilities of staff and project teams.
Millennials are great for the construction industry. A majority (74 percent) of millennials surveyed by FMI expect to remain more than five years with their company, and almost all (96 percent) express willingness to work beyond what is required to help their business succeed. Millennial hires’ loyalty, dedication and innovative thinking are key reasons why companies in the E&C industry should emphasize strategies to keep millennial workers. Companies should also consider other benefits that millennial employees bring, including tech savvy, work-life balance, influence on companies’ culture, and collaboration and communication skills.