Ten years ago, small business owner Anne McPherson saw an opportunity and ran with it. Her former employer, a mechanical insulation contractor, was transitioning from commercial to industrial projects—leaving a void in the commercial insulation marketplace in central Missouri.
With five colleagues from her former company, McPherson started Thermaltech, Inc. , in Union, Mo., to take advantage of subcontracting jobs for the University of Missouri-Columbia, as well as banks, shopping centers, schools and other public building owners in the area. Today, she is the sole owner of the company, manages 15 to 20 employees, and continues to grow the firm’s presence as a go-to subcontractor.
Even during a tough economic year, McPherson stayed on the pulse of upcoming work and was one of the first called when new jobs came online.
But when the company first opened, funds were tight, and procuring materials was a significant challenge. Through a mentoring arrangement, her former employer bought materials for Thermaltech’s first job and allowed McPherson to pay back the debt over time.
Without that support, the company wouldn’t have had the jumpstart it needed to become an established, financially secure participant in the local construction economy. Also, relationships with local mechanical contractors like Questec Constructors, Inc. and J. Louis Crum Corp. in Columbia, Mo., and Central Missouri Plumbing Company in Jefferson City, Mo., have proven invaluable.
This year, McPherson is the chair of Associated Builders and Contractors’ (ABC) Diversity Committee, a leadership group that brainstorms ways the construction industry can improve its inclusiveness in contracting and hiring.
“The focus on minority and women-owned contractors has lowered the barriers of entry to help them at least get their foot in the door,” McPherson says.
Small Businesses in Trouble
Although new opportunities and set-asides are being created for small businesses and minority- and women-owned business enterprises (MWBEs) to perform federal and state contracting work (see story Pursuing Federal Government Contracts), many of these companies are struggling more than ever to create cash flow in a troubled economy.
Many banks are denying additional lines of credit, even if the emerging contractor shows a solid credit history and makes prompt loan payments.
In addition, many small subcontractors are struggling to get paid as they wait for prime contractors to receive payment from owners or government entities.
Small contractors also face roadblocks when it comes to breaking into the new territory of public work or larger projects.
Adding to these barriers, some prime contractors shy away from the risk of pairing with an emerging subcontractor that might be unfamiliar with the myriad documentation requirements of public work or the challenges of working under a more complex project delivery system.
“When a small company grows from a staff of five people to a staff of 20 or more people, a new set of labor and employment laws apply,” explains Deborah Wilder, owner of her own
law firm in San Mateo, Calif., and immediate past president of
Women Construction Owners and Executives. “And, such things as certified payroll, prevailing wages, apprenticeship and safety compliance bring not just new requirements, but also more complicated paperwork.”
While most small firms have mastered the skill sets required to perform the work itself, these documentation challenges can distract from the main focus—getting the job done on budget and on time, Wilder says.
“It’s not so much core competency issues as the peripheral challenges like cash flow and paperwork education,” she says.
Despite the extra time it might take to bring emerging contractors up to speed, many large firms see a bottom line benefit to mentoring these companies.
“As a prime contractor, it actually benefits the company to make sure all subcontractors are well-educated and working together as a team,” Wilder says.
But a sea change is never easy. Some prime contractors make the argument that they get a larger return on investment by pairing with more established subcontracting firms, versus investing in training and mentoring for smaller, less established firms.
But ultimately, this attitude is shortsighted.
“As companies pay attention to their own balance sheets, they’re looking at where they can create savings, and that might leave some smaller businesses out,” says Linda Edwards, manager of diversity and equal employment opportunity (EEO) at
Mortenson Construction, Minneapolis, and a member of ABC’s Diversity Committee. “But we have to make sure we’re doing the things that bring them in.”
Company-Wide Inclusiveness
In any project, a plan must be designed before the structure can be built. This was the case for Mortenson Construction, which recently began a strategic planning process to improve the company’s diversity in contracting and hiring.
Company executives realized it was time to ramp up inclusiveness efforts—to implement real, action-oriented plans for reaching out to MWBEs and create team reporting requirements to track the company’s progress. Edwards was hired last year to help with the company’s strategic initiative.
“This effort started prior to my being hired, and it was amplified when I came in,” she says. “We’re shoring up the foundation for everyone before we start building upon it.”
Edwards is in charge of building inclusiveness “champions” in all of Mortenson’s national business groups. These vice presidents, managers and superintendents drive diversity programs on a local level.
“When I can educate those leaders, they will let it cascade through the organization,” Edwards says.
Mortenson is rolling out a best practices guide for its federal contracting group to help it leverage existing relationships with MWBE subcontracting firms. The plan also emphasizes partnering with firms that employ veterans and disabled persons.
Edwards is training talent acquisition managers to communicate these “good-faith efforts” through binders that track what’s been done, where managers have encountered difficulties and how they’ve achieved results.
Edwards admits, for an industry that’s often set in its ways, diversity in construction is a work in progress. The key, she says, is getting the conversation started. For example, plans are in the works to start a women’s resource group that is open to all employees, including men, to encourage dialogue about opportunities for women and build their confidence in becoming future leaders in the industry.
A Push from the Top
As the nation’s demographics shift, construction companies that don’t embrace a diverse group of team members simply won’t be able to compete in an increasingly cutthroat marketplace.
The motivation isn’t necessarily rooted within the construction industry itself; rather, the industry is responding to demands from project owners that contractors make an effort to reflect the diverse makeup of the communities in which they do business.
“I think the construction industry is definitely paying increased attention to inclusiveness in contracting because the emphasis has shifted beyond government-mandated programs to the fact that private owners are pushing toward inclusion,” says James Threalkill, senior national director of diversity at
Skanska USA Building, Inc. “Owners are being selective on the front end to find out if the general contractor is involved in diversity and inclusion. They want a shown track record of this.”
Whether the project is public or private, diverse partnerships are an advantage for winning contracts.
“Skanska is prepared to demonstrate that we have those capabilities, and it ends up being the differentiator in winning work,” says Threalkill, who was hired six years ago to manage the company’s inclusiveness programs on a national basis.
While Skanska employs only a small group of people dedicated to diversity at its New York headquarters, each of the company’s 33 national offices have local diversity councils, and individual project managers implement diversity programs and maintain dialogue with minority subcontractors on their respective jobsites—putting the number of people dedicated to diversity at the company in the hundreds.
“It has grown into a successful, award-winning process,” Threalkill says. “We know that there is a continuum of MWBEs in the industry, and we want to tap into that resource moving forward.”
Supporting Self-Sustainability
Skanska USA Building is setting the tone for the entire company—and the rest of the industry—by investing significant resources in minority contracting partnerships. The top-down mentality compares to the way Skanska manages its jobsite safety program—putting the initiative in the hands of individuals and encouraging employees to take ownership.
“We have pushed for inclusiveness to the point that everyone is pushing the effort throughout the organization,” Threalkill says.
The company’s Rockville, Md., office recently received a Commitment to Diversity Award from the Washington, D.C., chapter of the
National Association of Minority Contractors.
In October, Skanska hosted a Diversity Outreach Summit at Philadelphia University intended to engage local, minority-owned subcontractors in the Delaware Valley and show them the opportunities they have to bid on the company’s regional projects.
Ultimately, the summit’s purpose was to build long-term relationships with area subcontractors and better equip them to ride out the current economic downturn.
Efforts like these have helped Skanska go above and beyond minority contracting benchmarks (i.e., minimum 15 percent participation by MWBE firms) on projects throughout the country.
To help broaden its contracting pool, Skanska uses reduced barrier packages that break down large contracts into bite-sized portions so firms can bid on select parts of the project. This helps lessen the intimidation some MWBEs face when contracts seem beyond their scope of work.
Because bonding and insurance capacity is an issue for smaller firms, Skanska provides umbrella insurance for subcontractors on certain projects. In addition, the company helps its subcontracting firms overcome technical barriers, such as website design, to polish their marketing efforts.
The ultimate goal is to support MWBE self-sustainability.
“There are some challenges any time you look at preparing firms without a lot of experience to do significant amounts of work,” Threalkill says. “The training and mentoring programs we run help them in their business operations. Once they gain that experience, they improve their business acumen and capability to work not only for us, but also for other contractors.”
The Next Generation
Once MWBE contractors get their foot in the door, they must work hard to maintain the respect of their contracting partners.
For McPherson, the secret to success has been fulfilling promises, meeting all the conditions of the contract and getting the job done on time. Also, she’s willing to push past her comfort zone.
“I’ve never been afraid to take on a job,” McPherson says. “Many smaller firms are afraid of the next-level job and may pass on it. I don’t do that; I keep on it. This is one of the reasons I’m successful. I work at getting the work as a first priority.”
In addition, McPherson has a fiscally conservative mindset. Keeping healthy cash reserves is essential, especially if owners or general contractors are slow to pay.
While being a woman-owned firm helps Thermaltech win contracts for projects with MWBE requirements, McPherson doesn’t rely solely on this status. Instead, she relies on old-fashioned business ethics.
“My customers choose me because I give them a quality product at the best price,” she says.
Medium and large construction firms should assume the next generation of business owners will include women and minority executives, and these partners will be an asset when the industry hits another boom cycle.
“The makeup of our nation is changing, and gradually more women and minorities are going into the construction industry,” Threalkill says. “More are studying engineering and building management. With many industry leaders retiring soon, that new talent is going to come from a more diverse pool of candidates.”
For many companies, diversity programs have been on the backburner for too long, with worries about the economy as a major distraction. Many firms simply don’t have the budget, or the extra staff time, to implement a diversity plan from scratch.
“I’m impressed with how some contractors really try to focus on MWBE contractors,” says Anne McPherson, owner of Thermaltech, Inc., Union, Mo., and chair of Associated Builders and Contractors’ (ABC) Diversity Committee. “But I also see the other end of the spectrum, where contractors haven’t addressed diversity and need help in that realm.”
To help both small and large contractors overcome this challenge, last year ABC launched its
Employer Guide for Diversity and Inclusion, with phase two of the guide published this month.
“We have great examples to learn from, and we’re trying to get the companies that do things well to get their message out there so other companies can benefit from their knowledge,” McPherson says.
The guide provides direction, information and reference materials to help companies initiate or further develop existing diversity and inclusion programs.
The resource, which is free for ABC member companies, can be requested by visiting
www.abc.org/diversity.
ABC also offers CD-ROM safety tool box talks in English and Spanish, an English-Spanish pocket dictionary and CD, and a safety orientation video in English and Spanish.
ABC supports diversity efforts at the chapter level by providing grants so local leaders can provide education to MWBE firms and help them attract women and minorities into the workforce. In 2009, ABC’s Eastern Pennsylvania, Massachusetts, Mississippi, TEXO and Western Washington chapters received diversity grants.
In addition, ABC’s chapters offer local courses on topics like prevailing wage and equal employment opportunity compliance.
“I would encourage ABC members to look at these diversity programs to find things they can do at their companies for little or no money,” says Deborah Wilder, owner of Wilder Law Firm, San Mateo, Calif. “Also, they should create alliances with women and minority construction groups that can assist them in finding quality contracting partners.”
Associated Builders and Contractors:
www.abc.org/diversity
Hispanic American Construction Industry Association:
www.haciaworks.orgNational Association of Minority Contractors:
www.namcnational.org National Association of Women in Construction:
www.nawic.org National Minority Supplier Development Council:
www.nmsdcus.orgSmall Business Administration:
www.sba.gov The Surety and Fidelity Association of America:
www.surety.org
U.S. Chamber of Commerce:
www.uschambersmallbusinessnation.com Women Construction Owners and Executives:
www.wcoeusa.org