How can the construction industry cope with rising inflation?

Inflation has reached levels not seen since the 1980s, and the construction industry has been hit hard, according to constructionexec.com. In addition to inflation issues, construction leaders are combatting supply chain challenges and labor shortages.

Vistage’s recent research shows 96% of construction CEOs are experiencing increased vendor prices because of inflation. Eighty-seven percent report higher costs for raw materials and other inputs, and 84% anticipate their prices will rise during the next year.

Following are three top considerations for managing through inflation.

1. Think big picture. Efficiency is crucial. Construction leaders can invest in their businesses with technology and software that increases productivity and reduces project time. It may cost more upfront but can benefit the company, employees and customers.
2. Hiring starts with retention. Although hiring and recruitment strategies are vital during labor shortages, leaders should dedicate equal time and money to employee retention. Leaders who adjust internal salary bands, offer programs for leadership development and invest in upskilling/reskilling can see a more engaged workforce. Employees who feel valued by their organization likely will stick around longer.
3. Seek low-hanging fruit. Look for cost savings opportunities wherever possible. You can review contracts with top vendors and identify opportunities to price freeze or renegotiate. Talk with employees to see whether they can identify small costs that add up over time for items that no longer are useful.

Despite industry challenges, Vistage research shows 41% of construction CEOs expect to increase revenue during the year ahead. And a 2022 Deloitte survey of U.S. executives and other senior leaders in construction found 91% of respondents characterized the business outlook for their industry as somewhat or very positive, which is 23% higher than last year.

Managing thoughtfully through ongoing inflation, labor shortages and supply chain issues can help your company face future challenges.