The Garrison Report #2006-11

How to Deal With the Skilled Labor Shortage!

The labor shortages of skilled workers and managers are probably the great challenge facing the construction industry, but that's not really surprising when you consider there are labor shortages in China. Even a bigger shock may be the solution because for many it many seem counterintuitive. The solution is to increase the complexity of jobs and focus on using what Peter Drucker referred to as knowledge workers at all levels, instead of trying to simplify the tasks so less-skilled people can perform them.

The author has discussed many times that the construction industry has become an undesirable profession in the eyes of many. For example, Jobs Rated Almanac rates every craft trade in the bottom 20 percent of career opportunities. This is due, in part, to the harsh working conditions: physically demanding work, working outside in undesirable weather conditions and high stress. The simple answer to these challenges is higher wages, but it's not just a matter of throwing money at the problem even though Economics 101 teaches that undesirable jobs must receive higher wages. The author explores higher wages in greater detail on his blog at www.ncs30.com.

The author doesn't believe that throwing money at a situation is ever the solution. However, if additional compensation is needed to create equilibrium in the marketplace, it's foolish to think you don't have to pay it. The problem is unless the construction industry addresses the real issues facing the business, there will never be enough money to solve the labor shortage. Instead what's needed is a fundamental change in the way the construction industry looks at its workforce.

Greater productivity is the solution

The suggestion that greater productivity is the solution probably raised a few eyebrows. Yet it is the answer, but to achieve that goal requires a paradigm shift in thinking. In other words, it requires looking at labor from a different perspective.

The construction industry doesn't operate in the mass production or assembly line fashion, as manufacturing does, but it shares the same mental attitude toward the worker. Namely, the belief that to deal with low-skilled workers, the industry must dumb down the job so, with only a minimum of training, virtually anyone can perform the job. Unfortunately, history proves this approach is not an effective solution.

When Henry Ford introduced mass production, he substantially improved productivity. Mass production significantly lowered the cost of a car while at the same time significantly raising the wages of the workers. In this way, Ford created a middle class through the benefit of increased productivity. Unfortunately, the mass production approach has some serious flaws.

Ford's initial workers were primarily immigrants. His workers had limited education and often struggled with the language but could still manage to perform the rather simple tasks with limited training. The job offered workers wages they had only dreamed about, so they flocked to the assembly line. Unfortunately, the job was very boring. As the immigrants assimilated into the society, the job became more and more boring, which caused morale to decline. The workers realized that they were in a dead-end job, and once they adjusted to the high wages, the earnings became less of an incentive to perform. The result was increased absenteeism, lower quality and an overall deterioration of performance. This necessitated a large workforce dedicated to fixing cars that were made incorrectly and filling in for absent workers. This significantly increased the cost of a car. However, in an environment without competition, the cost was simply passed on to the consumer.

After WWII Europe switched to mass production. Due its labor shortages, European manufacturers were forced to rely on immigrants to fill their worker positions. Europe then experienced the same cycle of decline that the U.S. manufacturers experienced several decades earlier. Today the U.S. construction industry is trying to do the same thing with the Mexican worker. Unfortunately, the prospect is not good since this approach doesn't work.

In contrast, when Toyota introduced lean production to its manufacturing process, it started a revolution. In fact, Toyota cut the number of worker hours required to build a car in half. Toyota recognized the need to get their workers involved by converting them to knowledge workers instead of dumbing down their tasks.

These results are not limited to the auto industry. In the 1960s U. S. Steel required approximately 120,000 people to create its annual volume of steel. By the 1990s they were able to do that same volume with only 20,000 people. This reduction of people was a result of modernizing their facilities and improving their processes. However, despite these fantastic gains, U. S. Steel still could not compete with mini mills.

The mini mills can produce the same volume of steel as the integrated steel mills with about one-sixth of the workforce. Using only 3,500 people, today's mini mills produce what U. S. Steel did in the 1960s with 120,000 people. Now that's increased productivity.

Knowledge workers

Knowledge workers are workers that use their knowledge and experience to constantly improve the processes they are working on, instead of merely move it or do the task. In other words, it's about making jobs more complex and, therefore, more interesting. While this approach may seem counterintuitive, Toyota and mini steel mills have demonstrated it works. First, the approach changes the attitude of the employee. Studies indicate that the top two worker motivators are appreciation (a simple "thank you") and a feeling of being in on things. Therefore, turning workers into knowledge workers empowers the worker, and that's what he or she wants.

Further, in a value-based economy, only knowledge workers can add significant value. Several factors contribute to this increased value. First, numerous studies have found that centrally based decision making doesn't produce the highest productivity; in fact, it often impedes productivity because it frustrates the worker. However, truly knowledge workers take responsibility for their performance with some outstanding results because they have been converted to problem solvers instead of mere doers.

When the knowledge workers are left alone to perform, their performance is superior to the old command-and-control approach. The reason is simple: they understand the process better than management will ever understand it because they do it day in and day out. They improve the process in three distinct ways. First, there are constant improvements and adjustments to current practices. Second, they take current processes and significantly change or improve them. Third, the greatest improvement comes from true innovation by adopting totally new approaches.

In essence, the knowledge worker is at the heart of lean construction or best value. When companies understand this concept and move in this direction, the benefits are almost limitless, as demonstrated by the mini steel mills. If the construction industry can increase its productivity as the mini mills have, suddenly the need for workers will drop drastically and significant wage increases to those remaining would have minimal, if any, impact.
Of course, some are skeptical. However, U. S. Steel and Bethlehem Steel said they couldn't compete because of the low productivity of their workers. However, the problem wasn't the workers; it was management's ineffective systems. Some people have tried to explain to the author that dumbing down the job for Hispanic workers who can't speak English is necessary and is not a problem because the Hispanic worker is happy with that arrangement. Unfortunately, they are in denial. Following their approach will see history repeat itself. In fact, when Toyota introduced lean production into Mexico, it was well received by the workers. The reality is workers all around the world want the same things: an interesting job that is both stimulating and provides a good wage. Just because some people will take an undesirable job because it's an improvement to their current situation doesn't mean they are satisfied with that option.

The time for change is now. It's time the industry focused on providing the best value for all stakeholders in the industry. Only by creating a positive and knowledge-based environment will all the stakeholders prosper and enable the industry to reach its full potential.

Future newsletters will explore lean construction and best value in greater detail. You can also visit New Construction Strategies (www.ncs30.com), where these topics are discussed.

 

* * * * * THE END * * * * *

Previous: The Garrison Report #2006-10
Next: The Garrison Report #2006-12

original site by jack out of the box designs inc. | © Copyright 2010 Ted Garrison | Site Map