CONSTRUCTION Accounting ARTICLE -
How Do You Look To Your Surety?
Target Audience: Construction Industry Professionals, Business Owners, Project Managers, Contractors, Construction Accountants
A general contractor in a highly competitive urban market had fallen on tough times. Jobs were dwindling and his cash flow was slowing to a crawl. Although it pained him to consider certain options, staff downsizing seemed like the easiest, most viable cost-cutting solution. Before he did anything too drastic, however, he asked his financial advisor about the potential downsides to layoffs.
Reasons to retain
His advisor began by saying that labor costs are indeed a huge expense for any construction company, so cutting them should never be completely off the table. But there are also plenty of reasons not to.
In a time when downsizing is rampant, holding on to his best employees could put this GC in a better position to emerge from the recession far ahead of his competition. Plus, maintaining top talent might allow him to better recruit and attract other top performers who have been laid off by other companies.
This could turn out to be a huge factor in that the construction industry was struggling with a skilled labor shortage before the recession hit. As the economy recovers, this problem could arise all over again.
How to keep them
The advisor recommended that, for the time being, the contractor focus on retaining his best staffmembers rather than cutting them. Of course, she admitted, there isn’t much of a science to attracting and retaining good employees.
Employee benefits, for one, can help. Medical and dental plans, 401(k) plan contributions and paid time off may seem like discretionary expenditures, but getting rid of them can have severe long-term effects on financial viability. Not only would the GC risk losing talented people, but he could also damage his reputation among the skilled workers looking for work and hurt his current employees’ morale.
Although benefit plans can be pricey, the advisor continued, he might find that some employees value benefits more than higher pay — and might even be willing to work for slightly less money in exchange for other fringe benefits. For example, by subsidizing continuing education (including safety training), certifications and other career opportunities, the contractor could show employees that he values both their personal well-being and their professional aspirations.
The advisor also suggested being honest and open about his company’s financial health and any other issues that could directly or indirectly affect staff. He should also solicit and listen to employee feedback.
Off the ledge
The contractor thanked his advisor for “talking him off the ledge” and admitted that maybe staff cuts weren’t as cut and dried as he initially thought. He returned to work to refocus on ways he might get the most from his staff without lessening their number.
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