Post-Covid-19 construction crunch – From survive to thrive

Many construction businesses took away lessons learnt from their Covid-19 experience as the ability to respond and adapt to trying conditions was tested.

-Stephanie Pretorius, Intent Group

New Zealand’s construction industry has been heavily disrupted since the arrival of Covid-19 to our shores. A relief package is now available, with the New Zealand Government investing heavily in the industry to the tune of $3B.

Funded infrastructure projects include a significant amount of ‘shovel ready’ projects identified to support the short-term pipeline over the next 12 months.

Despite extra funding, certain segments of construction are likely to still be negatively impacted. As an example, Auckland alone recently lost $500m from Council revenue budgets; the flow on effects are still to be determined.

The funding pipeline may be affected for multiple years and there is risk of misalignment of capacity as funding may swing between years.

The intent of the fast tracked ‘shovel ready’ projects is to quickly stabilise cashflow, as well as the pipeline for the industry, and to help construction survive in the short term.

But how can we take this further and help construction to thrive in the long term?

As a sector, construction has been ‘sailing close to the wind’ for a long time with tight margins and low productivity. The Construction Accord (Accord) has set the tone for the future, outlining goals for improved productivity, capability and resilience.

Now is the time for industry players to take ownership of the direction for their own long-term sustainability. If improving productivity is an Accord goal – who will be the first to take bold action?

Staking a claim to become excellent at what you do, and getting better every day, is going to pay dividends in terms of preferred supplier status, higher profitability, people retention and development, and ultimately long term survival.

Many construction businesses took away lessons learnt from their Covid-19 experience as the ability to respond and adapt to trying conditions was tested.

A sense of urgency for being in a stronger position for basic survival is one of these lessons. Positive lessons to come from Covid-19 might include how the experience built stronger leadership foundations, or that leadership demonstrated together a deep resilience, or how the team pulled together creating outstanding teamwork to meet the challenges faced.

Perhaps the learning was how close to the wire you’re flying. This learning should not be allowed to just fade away now the immediate impacts of Covid-19 are reduced.

Lessons learned should drive the desire for a significant shift from ‘just making ends meet and getting the job done’ to wanting long term sustainability and survival by becoming excellent at what you do and taking better control of your destiny.

It’s likely your team stepped up during Covid-19, working together towards a common direction; if this is the case, don’t let those gains go.

Your team are how you achieve results. Instilling a culture of excellence is key to transforming your business performance. It starts with developing discipline, accountability and the capability of your team to lead and improve.

In construction, with known skills shortages currently exacerbated by border restrictions around the globe, your people remain your biggest opportunity, and one of your biggest risks.

Holding on to your team’s skills is survival, foundation 101, when the labour market is constrained, and is closely followed by your ability to use your people every day to get better, faster, and more efficient.

The winners will be those who have identified and taken action early to: build a financial model that will allow them to meet market labour rates; plan how to retain their staff; and invest in growing key skills internally within the team.

The Industry Training Organisations (ITO’s) and education providers have a role to play here too, in helping support industry by producing a skilled workforce that has a grasp of good problem solving and understands the basics of value-added versus waste activity.

Use some of the recent demand for urgency to set goals and drive change within your business. Cascade your business goals to your team and maintain forward momentum.

Regardless of your place in industry, leading organisations are always able to improve and adapt better ways of doing things.

For contractors, pursuing excellence in core operations is a clear guidepost. For clients, pursing meaningful collaboration, creating a functioning market, ensuring excellent planning processes that deliver stable pipelines, and establishing appropriate risk sharing, are all essential to delivering strong performance.

For some segments, there is risk of reduction in revenue and multi-year pipeline effects. Regarding the Auckland Council revenue shortfall – what flow on effects that has to construction are still unclear, but don’t underestimate them – they will be felt.

In the current environment, creating a competitive advantage through active pursuit of continuous improvement is a lifeline for long-term sustainability.

With the uncertainty of pipeline, and potential reductions in spend in some segments, there is a need to rally around the intent of the Accord.

Pursuing continuous improvement as your competitive edge is the best defence against an uncertain world. A continuous improvement capability will help you to become more efficient, more productive, more profitable and will allow you to problem solve to adapt as conditions change.

And conditions will continue to change. Becoming excellent at what you do is a meaningful goal whether that is as a world class contractor, sub-contractor or agency. As Jack Welch said, “The best way to predict your future, is to create it.”

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