COVID-19 Presents the greatest health challenge facing New Zealand in a century, coupled with unparalleled economic and social disruption.
Construction has a history of disruption
While everything feels different, for construction, we have experienced economic disruption before with the boom and bust cycles in the 1980s, 1990s and 2000s.
These constant cycles highlight the importance of building business resilience. With every bust cycle, we lose experienced and quality people from the sector. This means not only the sector but New Zealand can’t tap into their skills.
Our sector is often the first industry impacted by economic downturns. Like it or not, we are the proverbial economic canary in the mine. In saying this, the sector generally begins to recover from economic downturn much faster than other sectors in New Zealand.
Building better resilience
Historically, the sector has played a significant role in national economic recovery, like the state house roll-out in the Depression of the 1930s and the substantial transport investment post the global financial crisis.
These experiences are because of government intervention to stimulate the economy – public sector investment helps to instil economic confidence in the private sector
We need to move past the effects of these repetitive boom-bust cycles and their corresponding high/low confidence levels. The focus needs to be on building better business resilience to navigate these periods of economic uncertainty.
Key issues to think about
Businesses need to be thinking about their resilience right now. While COVID-19 is producing significant short-term uncertainty, it is important that we begin to plan for the long term. Our people are our greatest asset. The best thing businesses can do right now is retain staff.
The brain drain from the 1990s and 2000s is a lasting legacy and teaches us that we cannot afford to lose skilled people from our industry. We need these people to help deliver projects once the economy begins to recover.
The sector also needs to be thinking about creating sustainable cash flows, pricing jobs properly and developing robust communication throughout the chain, from the client to the plasterboard stopper. The sector will not be able to build resilience without addressing the issues that have continuously impacted growth.
Work on building sector resilience
Master Builders, through the Vertical Construction Leaders Group, has been working with PwC to help build sector resilience. This work focuses on classifying the characteristics of a good construction company.
The goal is to build resilience in New Zealand’s construction sector through the leadership of its businesses, big or small. The characteristics focus on more than just business finance and cash flow – they prioritise people, systems and skills.
What matters is how you set up your business, your investment in your people and how you manage risk. While the initial project focuses on larger commercial companies, the aim is to be able to scale the characteristics to all parts of the industry and all business sizes.
These characteristics are clear signs of a company’s resilience and potential ability to face international economic instability and come out stronger. The next stage of this work is to create a platform for businesses to voluntarily benchmark themselves against the good characteristics and other similar-sized construction businesses in New Zealand.
Pipeline of work
Beyond our work with PwC, the government has signalled the importance of the construction sector to the post-COVID-19 economic recovery. The Infrastructure Investment Reference Group is seeking to invest in shovel-ready projects.
While this investment is encouraging and councils have put forward a range of short to medium-term projects in their communities, the sector needs a long-term pipeline with certainty. Historically, too, many larger projects suffer from stop-start due to politicking, which in turn can impact construction companies and their ability to plan accordingly.
Sector working together to keep people
What has the COVID-19 disruption showed me? That the sector is willing to come together to develop and roll out initiatives to save jobs and protect businesses.
The Construction Sector Accord is driving this collaboration. It’s critical that this sharing of knowledge, information and skills continues in the long term to improve business resilience and the health and vitality of the sector.
Resilience will rely on meaningful culture change. All parts of the sector must rise out of their silos to work together and focus on the retention of and investment in people. We cannot afford to lose another generation of leaders when there are many more challenges ahead of us.