Reducing Employee Turnover

American workers’ median tenure with their employers is 4.6 years. However, younger employees (those ages 25 to 34) have a median tenure of only three years.* A revolving door of employees can be a major problem for companies.

Consider the Costs

If your construction firm has experienced high employee turnover, then you know first-hand the high costs of recruiting and training replacements. A study by the University of California** reports that it costs about $2,000 to replace blue collar and manual labor workers and up to $7,000 to replace professional and managerial employees.

But financial costs are not the only concern. Disrupted schedules, additional work for other employees, and high stress levels also can be problems. You can avoid the expense and the work associated with high employee turnover by implementing strategies that help new hires settle in and become valuable, long-term employees.

Mentor New Hires

Very few employees will hit the ground running. The majority will need time to adjust to learning new skills, absorbing company protocols and procedures, and developing new relationships. That’s why creating a structured process of welcoming and acclimating new employees can go a long way in increasing employee retention rates.

Consider assigning an experienced mentor or coach to each new hire for at least 90 days. Providing new hires with an organizational chart with names and titles that illustrates the company’s hierarchy is also helpful.

New hires need to know that they will have a future in your company. Providing them with a career development plan that outlines short- and long-term goals can help reassure them about their future prospects.

Over time, the mentor should introduce new hires to managers, supervisors, and coworkers to facilitate team building and encourage a sense of belonging. Also, it’s important that owners and managers deliver regular performance reviews, provide regular feedback, and answer any questions a new hire may have.

The ultimate goal of this process is to give employees the resources they need to do their jobs effectively and to help them reach their full potential. Engaged, motivated employees who feel their efforts are valued are more likely to be satisfied and productive long-term employees.

* U.S. Department of Labor, Bureau of Labor Statistics, News Release, Employee Tenure in 2014

** Arindrajit Dube, Eric Freeman, and Michael Reich (2010), “Employee Replacement Costs,” IRLE Working Paper No. 201-10,

“If your construction firm has experienced high employee turnover, then you know first-hand the high costs of recruiting and training replacements.”

Maximize the Impact of Your Company’s Website

Your company’s website is an important marketing tool. For many people, your website may be their first point of contact with your construction firm.

An effective website can help you generate business, establish your reputation for quality work, and showcase your company’s skills and abilities. However, you are not leveraging the power of the web if your site is tough to navigate, lacks contact information, and provides little in the way of content specific to your firm’s area of expertise.

You can maximize the marketing and branding power of your website if you:

  • Provide an easy-to-navigate and intuitive format
  • Create a mobile-friendly design for your site
  • Ensure your company is represented in keyword search results
  • Include contact information in a prominent place
  • Offer practical information that is relevant, up to date, and directly targeted at your market
  • Use pictures and graphics
  • Educate visitors with content that focuses on your company’s expertise and highlights the range of projects it can undertake
  • Display customer testimonials prominently

Delivering a steady stream of up-to-date, relevant content across different web platforms can help boost your website’s ranking in search engine results.

Developments in Tax and Business

Work Zone Safety Issues

Eighty-nine percent of highway contractors believe stricter enforcement of existing laws would reduce the number of work zone crashes, injuries, and fatalities, according to a recent survey by the Associated General Contractors of America. Highway contractors also said that a stronger police presence on highway work zones (85%), an increased use of barriers (79%), and more frequent safety training for workers (69%) would be beneficial.

Construction Employment by Occupation

There were more carpenters (516,340) than electricians (424,810) in the U.S. in 2014, according to data released by the U.S. Department of Labor’s Bureau of Labor Statistics. The data also shows that there were 697,980 construction laborers, 215,140 operating engineers and other construction equipment operators, and 180,640 construction managers.

Warning Signs in Your Financial Statements

A regular review of your company’s financial statements can help you catch warning signs that may alert you to future problems. Detecting problems early can help you prevent long-lasting damage to your firm’s financial health. Here are five warning signs you should be on the lookout for.

Issues with Available Cash

Cash flow is the lifeblood of a business. You should be concerned if your cash flow is insufficient to cover expenses because payments for a project are slow in coming. Another red flag is when your cash reserves accumulate rather than being spent. Excess funds may be parked in short-term investment accounts, but ideally, they should be used for ongoing projects.

High Underbillings Ratio

The underbillings-to-equity ratio measures the percentage of your business’s net worth represented by project work that is underbilled.

Essentially, it is a snapshot of the level of contract volume being financed by the owner. Substantial underbillings may be caused by inadequate estimating or poor billing systems.

Excessive Capital Expenditures

Since new equipment is such a significant expense, you need to carefully manage your equipment needs. Frequent purchases of expensive equipment may impede cash flow, raise debt levels, and limit your ability to take on new projects. In addition, consider how financing a large purchase could affect your ability to obtain credit for other needs.

Before committing to any large capital expenditure, you should analyze your upcoming cash needs and try to match purchases of equipment to existing cash flow. Or, you could consider leasing.

Leasing rather than buying equipment allows you to budget payments over an extended period. You may also be able to tailor the payment schedule to your normal cash flow patterns. Essentially, leasing is a good option if your cash flow is not as good as it should be.

Declining Gross Profit Margin

If you notice that your gross profit margin is shrinking over several periods, your production costs may be rising at a faster pace than your prices. Or, it may be due to the fact that you may be charging less for your services than in the past. Both possibilities present a real threat to the financial health of your business.

Receivables Growing Faster Than Sales

If your receivables are growing faster than sales, then this is a sign that your customers are not paying what they owe you in a timely manner. It’s also a sign that you should evaluate and potentially tighten up your collection procedures.

A good first step is to be proactive and consistent about issuing invoices and providing any necessary supporting documentation. In addition, contact customers as soon as you detect any delays in payment, and stay on top of accounts that are past due.