NECA TransmissionsNotes from the front lines of the electrical contracting industry
  • The Sound of a Stagnant Economy

    Posted on Jun 13, 2013 by John M Grau

    Thud! The national jobs report has landed and it’s not an encouraging sound. Instead of gaining ground on job growth and lowering the unemployment rate, we’re moving backwards. The rounds of self-analysis and blame have begun.

    The timing was good for the Jobs for America Summit which I attended earlier this week. It made national news because Jeff Immelt, General Electric CEO and chairman of the Council on Jobs and Competitiveness, addressed the group. The highlight for me, however, was the release of a new small business outlook survey conducted by Harris Interactive.

    The survey of small business owners (annual company income of $25 million or less) tracks their attitudes about the impact of the political environment on the business environment and also includes their forecasts for upcoming business and hiring. Most NECA members fit this profile, so I assume it is at least partially reflective of their thoughts and forecasts.

    Economists claim that small businesses are the engine for job creation and growth. So what are the hiring forecasts? Nearly 65% said they have no plans to add employees this year and about 15% are reducing their workforce. That means 80% are not hiring and only 20% are creating new jobs.

    Why aren’t they hiring? Well, lack of work/orders/sales is the primary reason, but what’s behind the stagnation? The number one reason cited by small business owners is economic uncertainty. And the causes of economic uncertainty are the federal debt and deficit, regulations coming out of Washington, tax rates and tax code changes, and the requirements of the healthcare bill.

    While small business owners are by nature an optimistic group, only 39% said that their own business’s best days are ahead of them. And an even more sobering number is that only 20% believe that the country’s best days are ahead.

    While the debt and deficit are now the top agenda items for Congress and the White House, it doesn’t seem that our government leaders are doing much to confront the other causes of economic uncertainty. And until the uncertainty is resolved, it doesn’t look like small businesses will grow and create new jobs. Expect another thud next month.

  • 'Tis the Season

    Posted on Nov 21, 2008 by John M Grau

    No. not that season. At least not quite yet.

    It’s the season for 2009 construction economic forecasts. The reports are coming across my desk, and they don’t paint a pretty picture.

    I mainly rely on the annual forecast produced by McGraw-Hill Construction. Other groups that try to crystal ball the construction economy are the U.S. Dept of Commerce, the Homebuilders association, the General Contractors, the Architects and the Portland Cement Association.

    I look most closely at the forecasts for non-residential markets because that’s where the bulk of NECA members earn their bread and butter. Those markets had been doing well the last few years — until now. Overall, non-residential building is predicted to decline by about 10 percent next year.

    The biggest decreases are predicted for office buildings, hotels, retail stores and manufacturing facilities. The more stable markets are power, transportation, and health care and educational buildings.

    One ominous note in all these forecasts is that they present a best-case scenario. In other words, they assume that the government efforts to unfreeze credit markets and stimulate the economy will work. It they don’t, all bets are off.

    An economist at a recent meeting of the Construction Users Roundtable predicts that after the current downturn runs its course, there will be a steep increase in construction and that workforce shortages will be greater than ever. That’s a warning to us that we can’t stop hiring and training apprentices even in a down economy.

    So my read on all this is that contractors will be burning through their backlog in 2009. The last half of next year and a good part of 2010 may be tough times. Bidding for projects will come back in 2010, with construction starts rebounding sharply in 2011.

    This all presumes, of course, that you believe economists know what they’re talking about.

  • Pension Perils

    Posted on Oct 27, 2008 by John M Grau

    I hate to add to the pile of bad financial news, but have you checked your local defined benefit pension plan lately? If it wasn’t underwater before this current stock market crisis, it is now. At least in terms of the funding standards under the new pension regulations established a couple years ago.

    Add private and public pension plans to the list of institutions that Congress needs to save from technical bankruptcy. I say “technical bankruptcy” because in most cases the plans themselves are not bankrupt. They just don’t meet the funding standards established by the government. While funding standards are good and necessary, in times like these strict interpretation of the regulations can lead to even more disastrous results.

    To my way of thinking the solution is fairly simple. Allow pension plans to spread their liabilities out over a longer period of time. That way, they work their way out of the hole as their investments recover over time.  (Right now, it looks like that might be a long time). 

    This isn’t a bailout.  It shouldn’t cost the government or the taxpayer anything. The alternative would. If plans ultimately fail, they fall back on the Pension Benefit Guaranty Corporation (PBGC) to pick up the pension liability and payments. Then it does become a bailout, and we all pay the tab.

    The problem is, Congress seldom does it the easy way. There is already talk of finding ways to make 401(k) participants whole for their losses. This has lead to more talk about re-engineering the whole pension system in our country, including a government take-over of all pension and 401(k) plans. Private pensions and savings plans would cease to exist.  A government-mandated plan, skewed toward lower-income participants, would be substituted.

    So far this it just talk. But some kind of Congressional action will be required in the months ahead, which opens the door to all kinds of ideas.

    NECA has already moved pension issues to the top of its government affairs agenda. We will not only be actively monitoring the situation, but proactively working with other like-minded organizations in coalitions to promote sensible solutions while fighting off harmful alternatives.

    Small businesses, like all citizens, have a big stake in how the government addresses our current financial mess. NECA won’t hesitate to jump into the fray to represent the interests of electrical contractors. Your support, advice, and guidance will be needed as with deal with some issues we have never had to confront before.

  • Family Business, Family Association

    Posted on Jul 08, 2008 by John M Grau

    On a recent NECA trip, I headed downstairs to the hotel bar at the end of the meeting to see who might be there. I ran into a NECA-member contractor and sat down to have a drink with him. 

    Our conversation drifted onto the subject of his business and some challenges he was facing. His workers’ comp modification rate had gone up, and he was having difficulty convincing his electricians of the need to control workers comp costs. He took over the business from his father about ten years ago and was now questioning that decision.  Was it worth the risk? His two sons (one just out of college and the other with two years to go) had decided they didn’t want to work in the business. They heard about all the problems over the kitchen table at night and decided there are better ways to make a living.

    With some variations, I’ve had this conversation before. It’s a pretty typical scenario for many NECA contractors. By and large, they are small, family-owned businesses with all the problems and opportunities inherit to that type of business.

    I realized in this conversation that disappointment with family loomed large. There is the sons’ lack of interest in the business, of course, but there’s also the lack of cooperation from the workforce. Small businesses consider their long-term employees like part of the family. It’s hard for them to understand why family members won’t pull together for the good of everyone in the business.

    During our conversation, another NECA contractor came by and joined in. He was nearing retirement from his family’s third-generation business. He had gone through a bunch of the same experiences and offered both sympathy and advice to my original bar mate. 

    I mentioned to them both that this was one of the real advantages of belonging to an association, like NECA. Where else can you find someone who truly understands the challenges you face on a daily basis? Where else will you find competitors willing to share their knowledge and experience with you?

    NECA members become part of an extended family. Sometimes there’s the weird cousin or the good-for-nothing son-in-law, but overall it’s a caring and supportive family.   Successful NECA members have learned how to use these relationships to their advantage. In fact, many have told me it is the secret to their success.

  • Next Generation of Project Managers

    Posted on Jun 12, 2008 by John M Grau

    The Academy of Electric Contracting held its annual meeting at a resort near Austin, Texas, last week. The working group session at the meeting featured a presentation by Dr. Cindy Menches of the University of Texas.

    The subject was “Hiring the Next Generation of Project Managers.” The most interesting part of the session was when Professor Menches brought in a group of five graduate students from the university’s Construction Management program to sit on a panel. These students were out interviewing for jobs and they gave us some insight into what’s important to them in a job search.

    The first question to the panel put everything in perspective. When asked what they knew about electrical contracting, their answers indicated that they knew basically nothing about our industry. The University of Texas doesn’t have an Electrical Construction program. The lesson to us is, if we want to attract young talent from universities, we need to promote an Electrical Construction curriculum as part of the Construction Management degree program.

    Some years ago, NECA, working through ELECTRI International, developed an Electrical Construction management curriculum. It’s being taught in a number of universities around the country. The best way to get the program initiated into your local university is to form a NECA Student Chapter. We have 15 right now and we hope to double that number in the next few years.

    Some other interesting insights from the student panel at the Academy meeting focused on what’s important to these students when interviewing and accepting job offers.

    Money, of course, is important. But my sense is that NECA electrical contractors can be competitive in this regard.

    More problematic may be dealing with the issue of company reputation. One of the students was very frank in admitting that a big factor for him was being able to brag about the company he works for when he gets together with family and friends on a weekend. By this, he meant that if he works for a big-name company like Bechtel or Exxon, his friends will think of him as being important as well. It’s harder to explain what Tri-State Electrical Service Company is.

    This isn’t meant to degrade our industry in any way. We just have to do a better job of making prospective management talent aware of our industry’s unique advantages. For one, a project manager of an electrical contracting company can become a significant player in a project — and in the company. He may also have a good chance of running or owning the company some day. He or she may only have a bit part in a big-name company.

    We can also promote the fast growing and more technical nature of electrical construction. Many young people are attracted to companies that provide cutting-edge environmental solutions. Professor Menches said that in her opinion electrical contractors are the most professional of the construction trades. We need to capitalize on that.

    All in all, the Academy working group session was very enlightening. I’m encouraged that our industry has a good chance to attract some of the best talent out of our nation’s Construction Management programs. But we have some work to do if we want to beat the competition.

  • Crystal Ball or Construction Forecast?

    Posted on Apr 15, 2008 by John M Grau

    In the last six weeks, I’ve attended meetings in Chicago, Hawaii, New Orleans and Florida (twice).  I’ve participated in 10 conference calls with local NECA chapter boards of directors. I mingled with industry leaders from across the country at former IBEW International Secretary-Treasurer Jon Walters’ retirement dinner, and I talked with local business agents at the annual IBEW Construction Conference in Washington, D.C.

    So I feel pretty much in touch with what’s going on around the country, industry-wise. But the one thing I still can’t get a handle on is where the construction economy is headed. 

    If I read the papers and listen to economists from McGraw-Hill and other industry reporting services, I heard that we’re in a slump. Construction employment is down. That’s to be expected with the contraction in the residential sector.  But these reports say it’s impacted the non-residential sector as well.

    When I talk to NECA members directly, they seem very positive about the near-term (next year or so) work picture. Hardly anyone talks about an imminent slowdown. 

    I was at a reception with some executives of national trade associations a couple weeks ago, and I ran into my counterpart with the Associated Builders and Contractors (ABC). He confirmed the same outlook from his members. We both wondered when the other shoe will drop.

    At first I thought this sub-prime mess might only impact financial markets. The newspapers often equate what happens on Wall Street with what’s happening on Main Street. A credit crunch eventually works its way throughout the economy.

    I am interested in hearing from readers of NECA Transmissions. What’s the electrical construction work picture in your area? Do you expect to be busy for the next couple years? Are there any rumblings of delayed or cancelled projects?

    If I get a sufficient response, I’ll report back with the state of the electrical construction industry economy in a future posting.

  • Field Rep 2010

    Posted on Apr 07, 2008 by John M Grau

    In my last two posts, I’ve written about the NECA Field Service – its history and the challenges it confronts today. But what about the future?

    Will the job description for a NECA field representative of 2008 meet the needs of NECA members and chapters in the years 2010 and beyond? What will be expected of field reps then? What skill sets will be needed and how will they be organized?

    These are questions we are tackling right now in a project labeled Field Rep 2010. A small task force of NECA staff and chapter managers is working with me to create a profile of the skills and experience that the NECA field rep of the near future will need. Using that profile, we will lay out a plan to create the field service that our members will need in the year 2010 and beyond.

    NECA members can weigh in on this discussion. I recently sent an electronic survey to chapter executives to learn about what field staff services they find most valuable and what services they think we need to improve or provide. That same survey can be taken by NECA members reading this blog.

    Just click here, and you'll be directed to the brief online survey. If that link doesn't work, you may need to copy and paste the URL http://www.zoomerang.com/Survey/?p=WEB227N2X6N9VK into into the address bar of your web browser to access the survey. 

    As we move forward with Field Rep 2010, I will keep you informed of our progress and plans. 

About NECA Transmissions

NECA Transmissions is a collaborative effort from CEO John Grau and NECA staff to provide insight and feedback on key issues from the front lines of the electrical contracting industry.

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