Editor's note: This article is part of Construction Dive's 50 States of Construction series, in which we talk with industry leaders across the U.S. about the business conditions in their market.
Minnesota may be famous for its frigid winters, but contractors in the state are accustomed to that challenge. A bigger obstacle, and one they're currently figuring out how to adapt to, however, is renewed strong demand that is straining resources, especially labor.
Still, the work ethic of Minnesota companies and employees is allowing the state's construction industry to continue to see strong growth, according to Tom Emison, vice president of strategy and innovation for Minneapolis-based Kraus-Anderson. The construction management firm, which operates across the Midwest, specializes in the healthcare, K-12 education, multifamily housing, senior housing and public sectors.
Construction Dive spoke with Emison about what parts of the state are seeing the strongest construction activity, what his company is doing to win the war for talent and what he thinks sets Minnesota's workforce apart from the rest of the country.
Editor's note: This interview has been edited and condensed.
Which regions in Minnesota are seeing the strongest activity?
EMISON: The markets we’re seeing as the hottest are Minneapolis and St. Paul. [The Twin Cities are] very large and are the economic and cultural center of the state. A very interesting market for us is Rochester, which is just south of the Twin Cities. It’s home to both the Mayo Clinic and IBM operations. It’s a very fast-growing market, but it's not very large. We see a lot of work in the cities proper. Around those cities are second- and third-tier municipalities that are seeing all kinds of activity — the little towns you’ve never heard of that are getting a new hospital or a new fire station.
How would you describe demand across the state?
EMISON: We are experiencing our fourth year of double-digit revenue growth and total managed volume growth. There is more demand than capacity for the general contractors and the construction managers like us. I thought, therefore, that margins would be rising, but the subcontracting and prime contracting community is also in very high demand. We don’t self-perform a great deal of work, so we count heavily on our trade partners and our specialty contractors. They are in very high demand.
What kind of impact does that kind of demand have on your business?
EMISON: It’s going to mean continued pressure to win the war for talent. It’s raging, this war for talent. It starts to bring into question the role of modular construction and prefabricated construction work. We haven’t got our feet wet yet in that discussion because we feel that based on the evidence that we observe, the companies making those forays into prefab and modular construction are losing money right now on those initiatives. We’re a close follower or an early leader, we’re not a bleeding-edge kind of company.
Another dynamic is that [the busy marketplace] puts some owners in a difficult position — they’d like to get more bids and proposals, and maybe they can’t. Maybe a typical decision-maker needs to explain to their supervisors that [they're] going to move forward with [a certain company] because of our relationship, [instead of going] to market to bid this out. It would slow down the entire process.
How are you addressing that "war for talent"?
EMISON: The ultimate solution is a talent management strategy of professional caliber. A year and a half ago, we developed and filled a position called vice president of HR. This is not a reactive HR position; it’s a proactive, strategic position where the woman in that role is a senior executive. She has a seat at the table and is helping our leaders understand that the entire talent management strategy includes identification, recruitment, selection, development, training and continued improvement all the way to succession planning. In May, we hired 44 people, and we’re only a 500-some person organization.
What sets Minnesota apart from other construction environments?
EMISON: We’ve got the seasons — everybody knows what I’m talking about. We say that we have two seasons in Minnesota: there’s winter and there’s construction. As a contractor, we have learned to excel during the cold winter months and to keep our work program steady throughout those months. That’s a dynamic that’s true to any of the northern-tier states.
What else makes Minnesota's construction market different from that of other states?
EMISON: The quality of our workforce is incredible. It’s a best-kept secret that we have a highly educated workforce in Minnesota, a great work ethic in the people, a can-do ingenuity and resourcefulness that allows us to deliver. The downside is that because of that highly educated workforce, it makes it difficult on our trade contractors to fill trade roles and find field personnel and equipment operators. A lot of young adults today would rather be in the healthcare industry or bioscience or accounting making the same kind of money [as they would in the construction field]. A highly educated workforce cuts both ways.
There’s another unique challenge in that we have a very large number of Fortune 1000 companies headquartered in Minnesota — larger than our population would suggest — like Cargill that are global leader. As a result, we’ve got some pretty sophisticated owners. I’d prefer a sophisticated owner over an unsophisticated one, but it does make it challenging for us to innovate at the project level, the relationship level and the functional level.
Are there any state regulations that have a significant impact on your business?
EMISON: From a regulatory and legislative environment, it seems to me that things are better for contractors now than they have been. For the longest time, South Dakota was trying to poach business owners to leave Minnesota and our high corporate tax bracket and relocate there. They’d run TV and radio ads here in the Twin Cities to do that. Those have slowed in recent years.
Are there any other characteristics of the Minnesota construction industry that set it apart from other states?
EMISON: The quality of the workforce. It may not be as deep as we want in certain markets, but it’s the caliber of the people. I’d put Minnesota construction executives and workers up against any such executives and workers in the country when it comes to work ethic, ingenuity and educational background. They’re just really something.