A close look at the human capital planning process in construction

A close look at the human capital planning process in construction

Labor is one of the most important resources in the construction industry. Beyond day-to-day workforce management, human capital planning lays the overarching strategy for a team’s success. Keep reading to learn more about the human capital planning process and steps in construction.

What is human capital planning?

Human capital planning is the process of managing the skills and abilities of your workforce. Concrete examples that can be managed and invested in include:

  • education

  • training and ability

  • mental health

  • specific skills (i.e. communication, tradesmanship)

Rather than thinking about these concepts in abstract terms, strategic human capital planning pushes construction management professionals to put a monetary value on them and the associated investments.

The concept of human capital was created by University of Chicago economists Gary Becker and Theodore Schultz. They identified two types of investments:

  • Specific human capital investment involves providing training that will benefit workers at your company (i.e. teaching them to use proprietary software or processes)

  • General human capital involves providing training that will benefit workers no matter which company they work for (i.e. teaching them industry-standard software or processes)

According to Becker and Schultz, companies have a tendency to prioritize specific investments. The rationale is simple: general human capital investments open companies up to the possibility of workers leaving and benefiting another company.

While workers can certainly leave and negatively impact specific investments, the upside is that a competing company won’t benefit.

A construction company’s human resources (HR) professionals take these and many other factors into consideration when conducting human capital management.

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Strategic human capital planning process and steps

While human capital is arguably more abstract than a construction company’s physical assets like equipment and property, incorporating it into your planning isn’t overly complicated. Here are the general steps construction human resource professionals follow for strategic human capital planning.

Step 1: Assess your current human capital strategy

First, it’s important to assess your company’s current human capital situation. This can include taking inventory of your investments in human capital (i.e. salary, benefits, and training) and comparing it to your workforce’s output (i.e. how much revenue they generate and their utilization rate).

Keep in mind that not all investments have a price tag attached directly to them. For example, while you can certainly invest in human capital by paying for an employee workshop, you also need to consider “fuzzier” costs such as the decrease in worker output during that workshop.

Another aspect of assessing your current situation is documenting personnel, their skills, experience, compensation, productivity, and age. Much like keeping careful track of your vehicle fleet’s condition, this will let you see which departments or personnel require additional investments or defensive action to protect existing investments.

This step is much easier when you have a reliable construction resource management application to pull data from.

Step 2: Forecast future human capital requirements

Construction companies are constantly on the move, bidding for new projects, strategically expanding into new markets and more. Effective human capital management is absolutely critical for keeping up with future demands. Consider investing in a proper software that features a People Gantt chart to better manage human capital.

Construction HR professionals monitor a variety of metrics to help with this, including:

  • turnover rate

  • projected retirements

  • attrition

  • promotions required to keep workers motivated and growing

These metrics contribute to making a construction company’s human capital situation fluid. Therein lies the importance of going beyond the first step (assessing the current situation) and actively thinking about the future.

Step 3: Make note of skill gaps

In assessing your current situation and forecasting future needs, it’s very likely you’ll identify skills gaps that need to be addressed. As we discussed in this article, savvy construction companies keep skill gaps in mind when hiring. Many hiring decisions are made with the explicit purpose of reducing skill gaps for the company’s benefit.

Skill gaps can also often be addressed by making strategic investments in existing personnel. As with most aspects of construction and performance management, there are many potential solutions. Good planning helps companies identify the best ones.

Step 4: Document and implement a strategy

With the previous three steps, you’ve made significant strides toward identifying your company’s human capital situation and needs. The next step is to turn your assessments into a concrete implementation plan that will ensure you have a capable workforce for years to come.

Exactly what this implementation plan entails will depend on your findings. For example, if you noticed that your company employs a large number of people who will be retiring soon, your plan might consist of hiring younger workers and investing in training that will get them up to speed quickly.

To give another example, let’s say you discover that your turnover rate is exceptionally high. You might plan to make investments in more attractive benefits, compensation, and management practices in order to retain workers.

The beauty of strategic human capital planning is that it will be very easy to propose these investments when you have concrete data demonstrating the merits. Your work assessing your human capital and making plans to strengthen it will have produced plenty of such data.

What makes a successful human capital strategy?

While it’s tough to give specifics regarding what a human capital plan looks like, there are a few very clear characteristics all good plans exhibit. Let’s take a look at them.

It ties human capital to actual business outcomes

While human capital planning allows companies to track assets that would otherwise be fairly abstract, it still all comes back to generating positive business outcomes.

As such, a good human capital plan demonstrates how ongoing investments will produce positive results, such as by increasing revenue or minimizing the cost per employee in the long run.

It’s tailored to your specific industry

The nature of human capital differs from industry to industry. In construction, for example, human capital can include things like licensing for the operation of specific job site equipment. This is very different from human capital at, say, a marketing company.

It plans ahead

As mentioned previously, human capital is far from static. It’s very fluid, which is why a good human capital plan looks ahead to proactively address inevitable changes.

It is constantly being revised

As companies see the results of their strategic human capital planning, it’s very normal for them to take that data and adjust their plans accordingly, ramping up investments that are producing results while scaling back ones that aren’t.

It involves all key parties

Human capital plans aren’t just for human resource professionals. Smart companies involve project managers and other staff members as well, incorporating their unique knowledge into the process. Read more about tools that facilitate collaboration in construction.

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Strategic human capital management in construction requires considerable effort and is an investment on its own. However, done correctly, it can produce tremendous results and company growth.

We hope this article has been helpful in showing you how construction management professionals think about human capital strategies. For more resource management-related tips, visit our blog.

Lauren Lake headshot

Lauren Lake

Lauren Lake is the COO and co-founder at Bridgit. She holds a degree in Civil Structural Engineering and is well-versed in construction workforce management and resource planning processes. Lauren has been named to the Forbes Manufacturing & Industry 30 Under 30 and Best Of Canada Forbes Under 30 Innovators lists. Lauren has presented at industry events and conferences, including BuiltWorlds, Canadian Construction Association, Procore Groundbreak, and more.

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