United States: Managing Construction Claims Risk In The Age Of Gen Z And The Great Resignation

Construction and design professional firms that ignore how to effectively manage their workforce during this Great Resignation and post-Covid remote-work era will likely experience a significant increase in professional liability and construction defect claims.

In late 2021, the nation's "quit rate" reached a 20-year high and hasn't really slowed down. Surprisingly, some studies of the "Big Quit" put professional and business services at historic rates of almost 4 percent, only slightly below food service and retail industries.

Turnover rates among the design team or the general contractor side of construction can have devasting impacts on errors in development of the plans and specification, project scheduling, and onsite relationships that avoid lawsuits before they happen. For decades, we've known that an inexperienced workforce or under-staffing is a major contributing factor in construction-related lawsuits.

This exposure may only increase during the Great Resignation as the oldest of Generation Z (those born between 1997 – 2012) start graduating from college and professional schools just as their Millennial (born between 1981-1996) colleagues begin moving into senior management roles. Gen Z will become the largest generation to date (estimated in the U.S. at 86 million, as compared to the 72 million Millennials).

"Businesses should prioritize understanding Gen Z to maintain engagement with future employees and customers — developing a strong "Plan Z," according to the global accounting firm EY. "The world is changing faster than ever, and this digitally native and globally conscious generation . . . is prepared to adapt to the rapidly transforming environment. Numerous other studies confirm these findings, including the Deloitte Global 2022 Gen Z and Millennial Survey, now in its 11^th year.

So, how can the construction and design professional industry mitigate its risk against liability during period of high turnover and a changing workforce, especially when widely held belief persists that these two younger generations lack the construction industry's historic commitment to excellence, attention to detail, and job stability?

Dispel The Gen Z And Millennial Myths Among Upper Management

First, design professionals and the construction industry must make a commitment to dispel the popular myths among the public about their Millennial and Gen Z workforce, especially among senior management.

Millennials are not lazy. Numerous studies debunk this popular myth.

The HR Policy Foundationfound that far from being lazy, more than two-thirds of companies surveyed reported their Millennial employees immediately made significant contributions because of their drive to innovate and superior ability to use technology.

Nearly one-third of Generation Z consider themselves the "hardest-working generation" in the workforce, according to The Workforce Institute at Kronos Inc. report titled, Meet Gen Z.

According to the University of Michigan annual Monitoring the Future survey, high school seniors claim to be willing to work overtime at rates more than their Millennial peers, at levels that are on par with Americans in Generation X (born 1965–1980).

Whether this willingness to work overtime continues as Gen Z ages remains to be seen. Unfortunately, numerous also studies show that Gen Z is experiencing an exhaustion level never before seen. More than a third of current high school students are sleeping less than six hours a night. Future supervisors will need to understand this change in sleep schedules to manage against risks made by physically and emotionally exhausted workers on a construction project or job site.

Additionally, there will be difficulty in managing the current disconnect between current senior manager opinions in the construction industry of what constitutes a good employee and Gen Z's expectations. For example, Gen Z workers will demand far greater control over their work schedule than any prior generation. More than one-third say they won't tolerate being forced to work when and where they don't want to or being denied the vacation days they request. Such data signal that significant conflict is just around the corner as the number of Generation Z in the workforce grows.

Reward A Firm Commitment To Excellence

To thrive in the next decade, successful construction, architectural, engineering, and design firms must establish a top-to-bottom, relentless pursuit of excellence that rewards every employee at every phase of the contract, design, and build phase of construction for their contributions to the company.

For example, historically, the mundane task of developing and reviewing construction contracts is the first step to protecting the company. The contract establishes the clear scope of services, assigns liability, and addresses issues such as indemnity. Often the contracts are one-sided in favor of the owner or contractor.

Too often, in the rush to get started on a new project, senior management fails to place sufficient emphasis on and pays little recognition of employees involved in the time-consuming and mundane task of contract review. It is, however, exactly this detailed contract review and understanding of the contract before the project starts that provides the company's first line of defense when something goes wrong.

Millennials and Generation Z can be particularly effective in developing and reviewing contracts involving new, innovative project delivery methods, especially those that may involve innovative technologies and processes little understood by older management.

Going forward, construction industry professionals must make a committed effort to explain to their Millennial and Generation Z workforce how risk management processes at every level fit into the overall goals and success of the company. Those that do will be surprised by the creative and excellent results obtained from their younger workforce.

Strive To Inspire

We have long known that claims frequency and severity is directly related to how experienced and tenured a construction company or design team on project is. The Great Resignation has turned the old system of growth from within on its head.

To achieve long-term, sustainable success, construction industry professionals and companies must deliver early opportunities for meaningful participation by and contributions from their Millennial and Gen Z workforce if they hope to retain talent long-term.

The next generation of workers come from a "connected" generation that values collaboration, teamwork, and social opportunities over money. It is more imperative than ever that supervisors and upper management demonstrate a genuine interest in their younger workers careers, families, and personal lives. Generation Z especially has developed a unique ability to ferret out anything and anyone "fake."

Numerous investigative studies have found that Millennials rank base pay as the most important factor in selecting and staying in a job, just as the other three generations do. A paycheck, however, simply doesn't motivate this new generation of workers like it may have done past generations.

According to a recent study by Psychology Today more than 70 percent of Millennials say that they want economic job security, but they are not motivated by it. Today's Millennials are motivated more when they believe they are making a difference in an organization for which they are proud to work rather than simply receiving a paycheck.

According to EY's 2021 study, money is an even less important factor for Gen Z. Between 2020 and 2021, "making money" declined in importance and was eclipsed by this generation's desire to "be the best" and "make a difference." This runs contradictory to the popular myths of a slacker generation.

A study by Fails Management Institute (FMI) revealed that companies that spent the time to inspire their younger workforce by clearly communicating the company's vision, and employees' roles in it, saw a 25-percent increase in retention of their younger employees.

Innovative companies should re-evaluate old job descriptions and develop new policies that encourage younger workers to create value for their employers in traditional and non-traditional ways. Companies have found success when they actively seek ways to put Millennials and Generation Z in charge of projects, no matter how small, and explain how those leadership roles translate into advancement within the company.

Numerous studies, for example, have established that smart companies are empowering younger workers to take the lead in the company with things such as community outreach and volunteerism, including paid time off. The traditionally boring construction industry may be surprised to learn that one study revealed that 56 percent of Millennials will not accept a job from a company that bans social media related to the job, especially opportunities to promote the company. In some circumstances a small company could solve two problems by enlisting younger employees to run its social media.

For Millennials, respect doesn't automatically come with age, experience, or job title; it has to be earned. They want to work for a company that listens to everybody's point of view.

There also can be significant returns by providing the younger workforce a seat at the table and getting their input on the decision before it is made. Companies' senior management must be prepared to explain the factors and thinking that went into a company decision, and how it benefits everyone.

Research is finding that Generation Z members in particular fear their education didn't prepare them for workplace activities such as negotiating, networking, confident public speaking or working long hours. Nor do many of them feel prepared to resolve work conflicts or be managed by another person.

In one national survey of the Gen Z members who are starting to graduate from college, 92 percent believe that they have not developed the necessary social skills to succeed. These skill sets are important in every profession, but especially in architecture and engineering firms where the relationships with colleagues and clients often define a firm.

It is universally agreed that more training reduces the number of professional liability claims. Companies in the construction industry that implement ongoing training and education programs will be rewarded with more loyalty among their Millennial and Gen Z workforce.

Finally, companies that fail to consider ways to change their work environments, team configurations, and incentives to inspire their youngest workforce will continue to find themselves facing high-turnover, low morale, poor performance, unhappy clients, and a corresponding increase in professional liability and construction defect claims.

Remote work is not going away. It's here to stay. Companies must develop internal procedures and system to connect young workers working remotely with senior, experienced mentors to avoid mistakes that could be avoided with regular, in-office contact and communication.

Four Immediate Steps To Take

Fortunately, construction companies and design professional firms can implement a few simple steps to address these new problems.

First, resist the trend to speed up. Slow down and focus on what is important. Reinforce for Millennials and Generation Z that within reason, the company values the tortoise over the hare if that is what is required to achieve excellence. This will be even more critical where a project has significant turnover on a project. Additionally, time must be built into the schedule.

Second, sign a solid contract. Create a company culture that establishes a clear message that contracts that protect the company are a priority. Younger workers should be rewarded, not criticized, when they ask more senior staff member or an outside attorney to get involved in the contract review of a non-standard contract or a particular phase of the project itself.

Third, involve Millennials and Generation Z workers in the negotiations of new, innovative project delivery systems where the old lines of responsibilities and indemnity may be blurred. This is especially true if the project involves innovative technology where the Millennial and Generation Z may have an advantage.

Younger workers asked to provide meaningful contributions and made to feel like they are a part of emerging technology and opportunities in the industry will be more like to stay on board, gain experience, and eventually grow to become the company's future leaders.

Fourth, make sure that projects are properly insured. We live in a litigious society. Mistakes are going to happen just like they always have. A company can reward its own young workforce for a culture of excellence, but it will not prevent lawsuits arising when other companies on the project do not.

The more we learn about Millennials and Generation Z in the workplace, especially in the complex and high-risk construction industry, the more we learn that construction industry professionals and managers must be willing to re-examine antiquated ideas of seniority and archetypes of what makes a "good employee" if they want to manage professional liability and construction risks in the future.

Companies need to think beyond a one-size-fits-all approach to managing people. For example, it's not just work from home or work in-office.

Managers and project leaders need to dig deeper to understand why some segments within Gen Z and Millennials thrived remotely while others didn't and understand how that will affect that worker's contribution to a specific construction project' success.

Construction industry professionals and companies that develop and implement a long-term strategy for managing their Gen Z and Millennial workforce in this post-Covid environment by embracing their new perspectives and approaches to loyalty through development, recognition, and trust will experience unrivaled success and a corresponding decrease in construction-related claims. Those that do not, likely will not survive in this post-Covid business world.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.