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1999 Construction & Equipment Forecast


1999 Construction & Equipment Forecast
March 8, 1999

Diversity: new realities for construction companies

Nesby & Associates

The United States Census Bureau reports that from 1960 to 1990, Americas minority population climbed from 15 to 24 percent, and recent evidence also confirms that the 1990 Census may have underestimated the number of minorities living in the U.S. By 2010, one-third of the population will be minorities.

Demand for construction services is growing in many regions, with new buildings, stadiums, transportation systems, infrastructure and homes being built.

Large construction companies are now forming alliances to compete for these large projects. This trend creates a major challenge for minority- and women-owned construction companies. Larger companies want to control costs by aligning with larger general contractors and subs that can offer volume discounts. Consequently, large, mostly White male-owned companies tend to do business with each other, and companies with less capitalization are left to bid on relatively small projects.

This strategy places pressure on Minority and Women Business Enterprises, squeezing them out of the business opportunity fold. Many highly talented minority- and women-owned construction companies lack access to capital for the acquisition of equipment, labor and bonding.

MWBEs are forming alliances with other MWBEs and majority-owned companies, a strategy which increases their overall competitiveness. Larger construction companies and mid-sized prime contractors find larger minority- and women-owned businesses to be good sources for joint ventures, partnerships, primary contractors and sub-contractors.

Challenges ahead

  • Shortage of qualified people

    At the same time the construction industry is growing, the supply of qualified crafts persons and laborers has dropped. This shortage has created many opportunities and challenges for construction companies. Attracting and retaining people with the right skills and attitudes to do the job requires resources, effective recruiting and hiring strategies.

    Larger companies tend to hire most of the best and brightest because of their access to resources. They are in a better position to offer more security to prospective employees and sub-contractors. Smaller construction companies tend to have fewer resources, and have had to select qualified candidates from a smaller pool of applicants.

    While this labor shortage has created a more volatile supply and demand atmosphere, it has created opportunities for highly talented minorities and women to enter the construction field.

  • Legal changes

    Applying diversity practices to construction companies has been a cornerstone of the construction industry since the 1960's. President Lyndon Johnson issued an executive order on affirmative action to insure that persons of color are not systematically screened out of contracting opportunities and construction employment. Today, California and Washington have been successful at removing elements of this executive order from state law.

    Progressive contractors that wish to expand their market share are exploring creative approaches to ensure that their workforce and subcontractors represent the diversity within the communities they serve. They do not want to be perceived as a company that devalues the inclusion of minority and women.

  • Cultural connection

    Eight steps for increasing diversity in construction

    1. Have senior management issue a statement of commitment to diversity, including a policy outlining the company's strategic intent, with key goals and responsibilities.

    2. Set a budget for building a MWBE contractor and supplier development program.

    3. Publicize the program within your company and in the community.

    4. Form alliances and build relationships with community-based organizations that focus on business development for women and people of color.

    5. Provide supplier and contractor diversity education to all employees. Include stakeholder teams (general contractors, sub-contractors and MWBEs) in the education. Hire a professional consultant to assist in the development and roll out of the educational strategy.

    6. Network with minority and women associations to find qualified women and people of color as candidates for employment and contract opportunities. Some progressive organizations include Black Contractors Association, National Association of Women in Construction, Black and Hispanic chambers of commerce and state commissions for minority affairs.

    7. Make diversity a criteria in all business decisions.

    8. Track and monitor your challenges and successes.

    Building projects involves a lot of money. Because the investment is so high, people tend to want to work with people they can relate to and trust. There is a natural kinship bond between people of the same race, culture and gender. In other words, men tend to be more comfortable working with other men, particularly when it involves large sums of money. In the past, women that entered the construction field worked very hard at emulating the behavior, language and customs of men, even if the language was insensitive to women. Their primary focus was to fit into the crew.

    For many decades the construction industry has been dominated by men, and in most cases, White men. It has been defined as a macho tough guy work culture; traditionally people of color and women have not been a part of it. It took laws, pressure and a genuine desire for change by some contractors, their customers and the business community to motivate the industry to change.

    In the past, there was a lot of denial about the issues and benefits of diversity. When questioned about diversity, many contractors would ask: What does diversity have to do with the construction of buildings? They would say that as long as a sub-contractor or worker does a job safely and effectively they didn't care who that person or sub-contractor was.

    They wanted to avoid the diversity issue: If the situation was not broken why fix it? This type of mentality does not motivate people to be creative or push the envelope for change. It tends to reinforce the status quo.

    Today, more successful women-owned construction companies are emerging. Progressive contractors are not allowing gender bias to be a factor in selecting employees and subcontractors to work on projects and many projects have been successfully completed with the inclusion of women and people of color.


    The average household income is a little more than $36,000 per year. Construction jobs often pay much more than other jobs because multiple qualifications are frequently required. A typical position may require strict adherence to safety, two or more trade skills, physical fitness and a willingness to work odd hours in dirty conditions and in all types of weather. The results of a worker's efforts are visible and easy to measure. If one can perform the work, it is a rewarding occupation. Many women and people of color have determined that a career in construction will afford them better opportunities.

    As the marketplace becomes increasingly global in nature, a critical success factor in the United States' competitiveness is the encouragement of entrepreneurs. Small businesses fuel our economy by creating jobs, developing technology and offering innovative strategies. Since MWBEs are increasing at a rate four times faster than other businesses, it follows that these entrepreneurs will make up a larger percentage of the United States businesses.

    However, many construction companies have hesitated to establish minority and women contractor and supplier development programs for a variety of reasons including:

  • Low priority: Because profit margins are so thin, many construction companies are in survival mode, forced to reduce their workforce, subcontractors and supplier base. Other contractors work load has increased so much it forces them to be in a reactionary mode, relying on traditional methods for recruiting and hiring personnel.

  • Value conflict: Minority and women contractor and supplier development programs are often viewed as unfair practices or reverse discrimination.

    Developing such programs requires new cultural competencies, such as ways to recruit and hire persons of color and women, how to find qualified MWBEs, using language that supports diversity, and ensuring that behaviors and operational practices are not discriminatory or exclusive. In addition, managers must learn techniques for resolving cross cultural and gender conflicts, and develop policies and practices that embrace diversity.

    More construction companies are realizing that diversity practices add economic value for their customers. They are establishing mentoring programs for minority and women contractors and employing consulting firms to assist them in acquiring these new cultural competencies.

    Benefits of diversity

    A minority and women contractor and supplier program gives companies a broader base from which to select competent suppliers and contractors. Since MWBEs are usually small, they are more flexible and can readily respond to changing demands. This makes them ideal candidates for outsourcing functions. An established minority and women supplier and contractor program also reduces costs and provides entry into the fastest growing population segment in the U.S.

    Since MWBEs tend to employ more minorities and women, they provide an economic infusion in diverse communities. The increased prosperity allows these communities to contribute back to the economy by purchasing the goods and services produced by the corporations that utilize MWBEs. It is a cycle of economic growth and development for all involved.

    The most successful minority and women supplier and contractor development programs do more than just award contracts. They establish relationships, which allow the MWBEs to grow and increase their core business competencies. In turn, this grows the economy and strengthens the supplier and contractor chain. These relationships not only assist MWBEs, but also allow corporations to develop their own "cultural competency."

    Many large construction companies have developed workforce and sub-contractor diversity programs, including strategies for increasing employee awareness of cultural and gender differences, progressive recruiting and hiring practices, and mentor strategies for preparing people of color and women to enter and succeed in management positions.

    Finding and hiring qualified minority and women contractors presents new challenges and opportunities. Many government, state and municipal agencies require minority and women business participation on the development of projects. Even though Initiative 200 passed, many organizations are developing new strategies for including persons of color and women in the advertising and selection of bids.

    Private sector companies, especially those that sell consumer products and services, include MWBEs in their contracting selection criteria, realizing the value of connecting to current and potential customers.

    Progressive construction companies realize that incorporating diversity practices into their operation will increase their profit and market share. Diversity of ideas, talent and competency add to their competitive advantage in a demanding economic climate. Advancing the cultural competencies of all people will increase their value to society and the companies and organizations in which they are employed.

    Tom Nesby is president and CEO of Nesby & Associates, Inc., Renton. He has over 31 years of experience as a manager and consultant, providing management, organizational development and training services to both the public and private sectors.


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