How the Recession Is Affecting the Commercial Construction Industry

The ‘Great Recession’ theoretically lasted about 18 months, from 2007 to 2009. Recovery has been agonizingly slow in many industries but we are now in 2015 and the construction industry is more rapidly shrugging off the residual effects of the recession.

How Bad Was It?

Even though construction industry is cyclical and recession typically follows a boom period, nothing could have prepared it for the harsh and widespread reach of the recession:

Residential: Homeowners defaulted on homes and others delayed buying homes, leading to a glut of residential real estate languishing in realtors’ inventory.

Commercial: Commercial construction also was hard hit, severely impacted by the federal budget sequester and eventual-but-temporary shutdown, followed by scaled back government spending, and sharply reduced lending practices.

Institutional: Institutional construction remained stagnant, affected by the same limitations and funding problems that the commercial construction sector faced.
How Were Construction Workers Affected?

Nevada, California, Florida, and Arizona are typically areas with plenty of construction work. But the recession changed that:

Nevada employed an estimated 146,000 construction workers at the peak of its construction boom. That number was reduced by 59 percent.

Arizona’s construction employment dropped 50 percent from its pre-recession industry peak.

Florida was close on the industry-related unemployment heels of Nevada and Arizona, losing 40 percent of its construction workforce.

California fared better but still recorded a 28 percent drop.

According to the U.S. Bureau of Labor Statistics (BLS), approximately 2.3 million construction workers lost their jobs in the recession (nearly 30 percent of the total number of lost jobs).

The overall construction industry has an estimated 1.4 million fewer construction workers in 2015 than it did in 2007.
The Construction Outlook in 2015 and Beyond

Happily, the U.S. and its construction industry continue to move away from the harshest effects of the Great Recession. Industry observers expect to see these improvements:

Non-residential construction: picking up and looking more solid, especially with the expected 2.6 percent real GDP growth in 2015. This sector may rise by 8 percent with growth in office buildings, hotels, and industrial facilities.

Single family housing: expected to increase by 11 percent in the number of residential units, thanks to easier access to home mortgage loans.

Manufacturing plant construction: will probably drop about 16 percent after huge increases of 2013 and 2014.

Institutional construction: expected to continue its moderate upward trend and increase 9% over 2014 results.

Residential construction: called the potential ‘wild card’ of 2015 because of rising interest rates. Existing home sales may climb toward 10 percent.

Public construction: growth will remain low due to ongoing federal spending constraints. However, transportation spending is expected to grow by about 2.2 percent.
Ironically, construction workers may not be rushing to return to new jobs. Many left the industry altogether, retraining for other employment.

Texas and North Dakota both show significant increases in construction employment. North Dakota now needs to recruit construction workers. Texas’ construction employment is up 10 percent, nearing its pre-recession peak.

Economists don’t expect the construction industry to return to its peak level (2006) until 2022 or later. However, the BLS anticipates that the fastest-growing jobs now and 2022 will be in healthcare and construction.

So while the Great Recession did a considerable amount of damage to the overall economy, individual incomes, and morale, 2015 and beyond are looking considerably more favorable in the commercial construction industry.

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Change Management In Projects – 10 Success Factors

According to change guru Peter Senge (1999), most change initiatives fail simply because they fail to produce hoped-for results. Given that project management is all about changing the status quo, effective change management is critical to project success.

Whether this is the latest ‘flavour of the month’ programs that senior management rolls out, implementation of an IT system or an internally-driven team initiative, it is important that the change and expectations are effectively managed.

Current thinking indicates that good managers are the key to successful change management. In general, managers who see the need for change are usually correct in their assessment. Senge (1999) says: “companies that fail to sustain significant change end up facing crises. By then their options are greatly reduced.”

It can be quite difficult for managers to view their work on change in a holistic fashion. Personal attitudes and political agendas can lead to bias towards HR issues or IT issues specifically preventing the big picture focus.

Based on this I have constructed 10 success factors to help project managers manage change in small projects or large organisations:

Factor 1 – Plan first

Take time to understand the central need for change. Know what you are trying to do and why. Think about the links of the change to real-life problems and create a vision of what it will look like when those problems are resolved.

Factor 2 – Involve the Team

Create opportunities – especially in the early stages – to discuss change with the team. This will not only create enthusiasm for change but also be a source of ideas for improved processes and ways of communicating to others. Negotiation will be easier if the team is on board from the start.

Factor 3 – Support the Team

Introduce the change clearly to the team. Explain the current performance level and why the change is needed, what it will involve and the objectives. Reassure staff throughout the change process – particularly around issues of changing roles.

Factor 4 – Lead by Example

Showing your own commitment to the change will act as a signpost for others in the team to also commit. Make your commitment evident in the decisions you make.

Factor 5 – Put Yourself in the Team’s Shoes

Try to anticipate what will be the key issues that concern team members. Plan how you can best deal with them should they arise. Concerns will most often be about changed ways of working, new reporting structures, changes to job roles and services and unfamiliar systems or tools.

Factor 6 – Manage Resistance with Compassion

Resistance to change may be frustrating but it is a natural human reaction. Team members might resist change if they think that job security, the way the work, or work patterns will change. Managers need to source, analyse acknowledge, respond to and deal with staff concerns throughout the change process.

Factor 7 – Communication is Essential

Tailor your communication to the audience and their needs. Make it frequent and use different methods tailored to different preferences and accessibility. Methods might include one-on-one briefings, workshops, formal training programmes, advertising, briefing papers, blogs, RSS-feeds, e-mail and intranet postings.

Factor 8 – Review and Evaluate

Review and evaluation throughout the change process is vital. Continually check objectives and achievement against them. Celebrate ongoing success with the team and identify where you can improve.

Factor 9 – Know What You’re Up Against

Change fails most often due to lack of understanding of the need for change, setting unrealistic goals, poor planning, and insufficient communication. Failure to properly manage change leads to problems with trust in change in the future.

Factor 10 – Don’t Forget PM Tools

Great project managers use good tools to achieve outcomes. Tools such as SWOT, Gantt charts, Risk Assessment, Communications Planning and a realistic schedule will be useful in planning and delivering the smooth transition to success.

The Upshot

Change is all around us, and is happening every day. To some, this is exciting; they find it thrilling to be part of the action and to keep up with trends. But, to others, it can be threatening or even frightening.

As greater focus is placed on achieving business success and as projects are becoming more complex, project managers need to adopt the principles of change management in order to deliver the desired outcomes. If done right, change can be a force for ongoing innovation, growth and success. Implementing the right factors to manage change successfully gives teams and organisations new skills that set them up to be change ready in the future.


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