The trade shortage gets worse before it gets better
In the first part of this two-part series, based on our nationwide survey on the trade shortage, we examined feedback from 167 builders in response to five questions about the impact of the trade shortage on their business. There were no real surprises, just an almost universal affirmation of the issue’s severity. Virtually all agreed that trade availability is a critical issue that has inflated schedules, increased direct costs, compromised quality, and limited deliveries and growth. The sole minor deviation was that “only” two-thirds of respondents indicated that quality has gotten worse. Overall, the responses were in line with what we’ve seen in the 20 or so week-long Lean implementations we run annually, with an average of around 25 suppliers and trades participating in each one.
In Part 2, we consider the results of the second group of five questions, and although the responses generally skew the same way as in Part 1, the feedback on a few of the questions isn’t quite as clear. Let’s take a look.
6 ] The shortage of trades is worse than this time last year
Overall, two-thirds of respondents said the trade-shortage problem worsened in 2016 compared with 2015, with strong weighting toward “Agree” and “Strongly Agree” responses. But 21 percent of respondents were neutral, reporting that the problem is pretty much the same as it was last year. We can’t know for sure if “the same” describes a good situation or a bad one, but our considerable field experience suggests it’s the latter. We do, however, have 14 percent, about one builder out of seven, reporting that the shortage has lessened compared with a year ago. These results may come from a market where the trade shortage isn’t as severe, such as Salt Lake City, which is among the very few that might qualify. Or it could come from those few builders that are in markets with serious shortages, yet they’ve figured out how to beat the reaper. We have seen it done, albeit rarely, and those builders have developed an incredible competitive advantage.
7 ] The shortage of trades will be worse one year from today
Will the trade shortage grow in 2017? A slight decrease in the strength of agreement on this question is seen in the shift of the cumulative agreement (green box) distribution to the left. Yet that’s tempered by a slight shift of the level of overall disagreement (red box) to the right. Meanwhile, a quarter of participants are expecting no change in the “situation”; that situation being that the availability of trades is a “critical” issue—as shown in Graph 1 in Part 1 of this series, where 93 percent of respondents agreed. Putting this all together, we can conclude that 88 percent of respondents expect the 2017 trade shortage to be at least as bad as today, with 62 percent expecting it to be even worse. Sobering, to say the least.
8 ] We suffer less from the trade shortage than our competitors
This is where the answers get more curious. Here we have a distinct majority of 57 percent stating that they suffer less from the shortage than their competition. With just a quarter showing some disagreement and a large neutral of nearly 20 percent, what do we conclude? Are these builders really doing better overall dealing with the crisis they all subscribe to compared with other builders? The distribution of these surveys is perhaps slightly weighted toward TrueNorth clients. Knowing that, it may be more likely those builders would answer yes, as the vast majority of them have been working to some degree on solving the trade shortage. Do they truly represent a “better than average” group? Or is this just human nature? I’m reminded of how in training-needs surveys that we’ve conducted over the years, respondents always set the need for training in the overall company as greater than their own personal need. When we see a broad problem, do we always think it doesn’t affect us as much as the other guy(s)? At this point, the answer remains a mystery, but feel free to email me with your conclusion—or at least a couple of clues.
9 ] We have taken specific, tangible steps to help build the trade base
Although the results here show the greatest disagreement among respondents, I still feel a bit incredulous at the response. I hope it’s true that 57 percent of our builders have taken specific, tangible steps to build the trade base. Yet in almost countless presentations, ranging from Builder 20 groups with about 20 people in attendance to groups at association meetings—NAHB, IBS, or PCBC, numbering as many as 300—I ask this same question very directly. “If I went to your town today and asked your people as well as your trades to show me evidence that you have taken specific, tangible steps to build the trade base, how many could do it? P.S. Anecdotes do not count as evidence.” Most often, I get no hands, and in large groups I rarely get more than two or three. So where are the 57 percent hiding? Perhaps it’s definitional and those responding to this survey are simply thinking of their own local efforts to find trades, whereas the question was intended to address the issue of building the more macro trade base in any given market. Similar to question 7 above, there is no definitive conclusion to draw here, but I encourage each builder to take a long hard look in the mirror and ask the tough question: Are you doing enough?
10 ] The majority of our trades consider us as genuine partners with them in the business
Perhaps it’s fitting that the final survey question causes the most consternation. We have a huge builder plurality of 84 percent stating that the majority of their trades consider them as genuine partners in the business, with just 5 percent disagreement. Can this be true? We’ve had more than 4,500 suppliers and trades involved in Lean implementation weeks over the past 10 years, during which we’ve been able to closely watch how they work with builders. My analysis of the “genuine partner” question, if we ask the trade directly and in confidence, is at best a third. That is, one-third of trades will agree that both parties solidly meet the terms for what being a “genuine partner” requires from each party. Another third, or perhaps a bit more, will hedge on this, saying they have a productive relationship but something less than a “genuine partner.” A final third, or perhaps a bit less, will describe the working relationship as one of convenience for both parties, lacking in true commitment.
My stand-alone analysis of the final survey question left me uneasy, my assessment being so far off from the responses of our builder participants. I harp on taking supplier and trade feedback at face value, so should I not apply the same standard to responses from our builders? I decided to send an emergency email to our four TrueNorth senior associates, who average better than 30 years’ experience each, asking them the same question: Do trades consider builders to be “genuine partners?” Keep in mind, those builders who work with us to implement Lean are clearly demonstrating their desire—or, at minimum, their intent—to work as partners. The median response by our TrueNorth field consultants was that only 25 percent of trades consider their builders to be genuine partners with them in the business. Was I being generous? You may disagree, but the deep experience of five industry professionals—each in their 60s, by the way—is tough to dispute. We’ve worked with those builders who rate at the top of the scale on genuine partnering, and we know the difference between the real deal and the also-rans.
In some ways, the feedback from these 10 questions is what we expected. As stated at the start of this column, it’s clear: Trade availability remains a critical issue that has inflated schedules, increased direct costs, compromised quality, and limited deliveries and growth. The somewhat surprising feedback, however, is that most of the participants feel they’re better off than the average competitor, that they have taken significant steps to build the trade base, and that the great majority of their trades consider themselves genuine partners in the business. Serious questions remain, though, from those with considerable experience in trade partnering and working to solve the trade shortage. Are a huge number of builders kidding themselves? I’ll leave that for you to decide. Regardless, there is tremendous work to be done. I hope you’ve followed the recent columns where I reported on how builders, builder associations, and schools have teamed up to produce impressive results in helping solve the trade shortage. Meanwhile, how about sometime in 2017 I find myself compelled to write about you and your firm’s success solving the trade shortage? Let me know. No survey required.