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Building a strong foundation: Proven strategies for employee retention in construction

By: Josh Eby
05.02.25

Employee retention is crucial in construction, where turnover can delay projects, increase training costs, and reduce efficiency. Statistics show that turnover in construction is approximately 21.4%, and with the industry facing an estimated labor shortage of 430,000 workers as of 2023, retaining skilled workers is vital. Here, we’ll look at proven strategies, backed by industry data and case studies, that small to medium-sized construction companies can use to reduce turnover and improve employee satisfaction.

1. Understand the root causes of turnover

In construction, common reasons for turnover include physically demanding work, extended hours, safety risks, and limited paths for advancement. According to the US Chamber of Commerce, around 89% of construction firms face labor shortages, which often places extra pressure on current workers, increasing turnover.

Best practice: Conduct an annual formal survey of employees, formally or informally, to gauge employee satisfaction and take proactive steps to reduce common causes of turnover. 

Example in action: A construction company in New England makes a point to formally recognize employees who are helping make up for labor shortages to help retain those employees during tough times. Recognition can be financial, additional benefits like comp time, or non-monetary rewards like gifts or prizes.

2. Offer competitive wages and benefits

Fact: A study from the National Bureau of Economic Research found that construction firms offering a 10% increase in wages saw turnover rates drop by 15-20%. Companies that implement regular wage reviews to stay competitive report increased loyalty among workers.

Best practice: Benefits like health and wellness support also improve retention. Randstad reports that 66% of workers across industries prioritize benefits like paid sick leave and health coverage over salary alone. In construction, this can be achieved through modest investments in health incentives or wellness programs.

Example in action: A mid-sized construction company in Texas introduced a quarterly safety bonus program, rewarding employees who demonstrated excellent safety practices and accident-free performance. Within the first year, the company observed a 25% reduction in turnover, as workers felt more recognized and motivated by these benefits. In addition, incident rates decreased, reducing project delays and insurance costs. The extra wage cost more than paid for itself in time and resources spent recruiting, hiring, and training new employees.

3. Prioritize training and career development

Fact: According to the Construction Industry Institute, firms with structured onboarding and training programs experience up to 30% lower turnover. Providing safety training and mentoring programs for new hires not only reduces early turnover but builds loyalty as workers feel more supported and prepared for their roles.

Best practice: Construction firms that establish career ladders see higher retention rates. Research from the Center for Construction Research and Training (CPWR) indicates that companies offering promotion opportunities have a 24% higher retention rate than those without.

Example in action: A company in California created a “Field Leader Program,” where entry-level workers are eligible for additional training to become team leads within two years. Employees in the program reported higher job satisfaction, and the company saw a 30% improvement in their retention rate. This approach not only retained employees but allowed the company to promote from within, reducing recruiting and training costs.

4. Foster a supportive work environment

Fact: The AGC reports that companies emphasizing a positive, respectful team culture experience a 15% improvement in retention. Employees who feel respected and included are more likely to remain, as a supportive environment can offset demanding job conditions.

Best practice: Companies that regularly check in with employees—whether through surveys, performance reviews, or informal feedback sessions—experience better engagement. According to a Gallup study, companies that implement regular feedback sessions reduce turnover by up to 14%.

5. Recognize and reward hard work

Fact: The Society for Human Resource Management (SHRM) reports that companies with structured recognition programs see a 31% decrease in voluntary turnover. For construction firms, rewards can include simple recognition tactics, such as monthly shout-outs for high-performing workers or project completion bonuses.

Best practice: Recognizing anniversaries or successful project completions can boost morale. Research shows that employees who feel valued are up to 28% more likely to stay with a company.

Example in action: A company implemented a “Milestone Recognition” program that celebrates project completions with team lunches and small bonuses. As a result, they saw employee morale and retention rates improve by 20% over two years. Employees cited feeling “seen” and appreciated as a primary factor in their decision to stay with the company.

Read more best practices for workforce well-being in the construction industry. 

Investing in retention strategies tailored to the construction industry benefits both the workforce and the business. Companies that prioritize competitive wages, career development, and employee recognition can reduce turnover, cut costs, and build a committed team ready to drive projects to success. At BerryDunn, we take a comprehensive approach to our workforce and well-being work, considering how business needs, organizational capacity, and the employee experience work together to drive your business forward. Learn more about our team and services. 

Topics: Construction

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  • Josh Eby
    Colleges and Universities, Healthcare
    T 207.347.6476

In a closely held business, ownership always means far more than business value. Valuing your business will put a dollar figure on your business (and with any luck, it might even be accurate!). However, ownership of a business is about much more than the “number.” To many of our clients, ownership is about identity, personal fulfillment, developing a legacy, funding their lifestyle, and much more. What does business ownership mean to you? In our final article in this series, we are going to look at questions around what ownership means to different people, explore how to increase business value and liquidity, and discuss the decision of whether to grow your business or exit—and which liquidity options are available for each path. 

While it may seem counterintuitive, we find that it is best to delay the decision to grow or exit until the very end of the value acceleration process. After identifying and implementing business improvement and de-risking projects in the Discover stage and the Prepare stage (see below), people may find themselves more open to the idea of keeping their business and using that business to build liquidity while they explore other options. 

Once people have completed the Discover and Prepare stages and are ready to decide whether to exit or grow their business, we frame the conversation around personal and business readiness. Many personal readiness factors relate to what ownership means to each client. In this process, clients ask themselves the following questions:

  • Am I ready to not be in charge?
  • Am I ready to not be identified as the business?
  • Do I have a plan for what comes next?
  • Do I have the resources to fund what’s next? 
  • Have I communicated my plan?

On the business end, readiness topics include the following:

  • Is the team in place to carry on without me?
  • Do all employees know their role?
  • Does the team know the strategic plan?
  • Have we minimized risk? 
  • Have I communicated my plan?

Whether you choose to grow your business or exit it, you have various liquidity options to choose from. Liquidity options if you keep your business include 401(k) profit sharing, distributions, bonuses, and dividend recapitalization. Alternatively, liquidity options if you choose to exit your business include selling to strategic buyers, ESOPs, private equity firms, management, or family. 

When it comes to liquidity, there are several other topics clients are curious about. One of these topics is the use of earn-outs in the sale of a business. In an earn-out, a portion of the price of the business is suspended, contingent on business performance. The “short and sweet” on this topic is that we typically find them to be most effective over a two- to three-year time period. When selecting a metric to base the earn-out on (such as revenue, profit, or customer retention), consider what is in your control. Will the new owner change the capital structure or cost structure in a way that reduces income? Further, if the planned liquidity event involves merging your company into another company, specify how costs will be allocated for earn-out purposes. 

Rollover equity (receiving equity in the acquiring company as part of the deal structure) and the use of warrants/synthetic equity (incentives tied to increases in stock price) is another area in which we receive many questions from clients. Some key considerations:

  • Make sure you know how you will turn your rollover equity into cash.
  • Understand potential dilution of your rollover equity if the acquiring company continues to acquire other targets. 
  • Make sure the percentage of equity relative to total deal consideration is reasonable.
  • Seller financing typically has lower interest rates and favorable terms, so warrants are often attached to compensate the seller. 
  • Warrants are subject to capital gains tax while synthetic equity is typically ordinary income. As a result, warrants often have lower tax consequences.
  • Synthetic equity may work well for long-term incentive plans and for management buyouts. 

We have found that through the value acceleration process, clients are able to increase business value and liquidity, giving them control over how they spend their time and resources.

If you are interested in learning more about value acceleration, please contact the business valuation services team. We would be happy to meet with you, answer any questions you may have, and provide you with information on upcoming value acceleration presentations. 

Article
Decide: Value acceleration series part five (of five)

What are the top three areas of improvement right now for your business? In this third article of our series, we will focus on how to increase business value by aligning values, decreasing risk, and improving what we call the “four C’s”: human capital, structural capital, social capital, and consumer capital.

To back up for a minute, value acceleration is the process of helping clients increase the value of their business and build liquidity into their lives. Previously, we looked at the Discover stage, in which business owners take inventory of their personal, financial, and business goals and assemble information into a prioritized action plan. Here, we are going to focus on the Prepare stage of the value acceleration process.

Aligning values may sound like an abstract concept, but it has a real world impact on business performance and profitability. For example, if a business has multiple owners with different future plans, the company can be pulled in two competing directions. Another example of poor alignment would be if a shareholder’s business plans (such as expanding the asset base to drive revenue) compete with personal plans (such as pulling money out of the business to fund retirement). Friction creates problems. The first step in the Prepare stage is therefore to reduce friction by aligning values.

Reducing risk

Personal risk creates business risk, and business risk creates personal risk. For example, if a business owner suddenly needs cash to fund unexpected medical bills, planned business expansion may be delayed to provide liquidity to the owner. If a key employee unexpectedly quits, the business owner may have to carve time away from their personal life to juggle new responsibilities. 

Business owners should therefore seek to reduce risk in their personal lives, (e.g., life insurance, use of wills, time management planning) and in their business, (e.g., employee contracts, customer contracts, supplier and customer diversification).

Intangible value and the four C's

Now more than ever, the value of a business is driven by intangible value rather than tangible asset value. One study found that intangible asset value made up 87% of S&P 500 market value in 2015 (up from 17% in 1975). Therefore, we look at how to increase business value by increasing intangible asset value and, specifically, the four C’s of intangible asset value: human capital, structural capital, social capital, and consumer capital. 

Here are two ways you can increase intangible asset value. First of all, do a cost-benefit analysis before implementing any strategies to boost intangible asset value. Second, to avoid employee burnout, break planned improvements into 90-day increments with specific targets.

At BerryDunn, we often diagram company performance on the underlying drivers of the 4 C’s (below). We use this tool to identify and assess the areas for greatest potential improvements:

By aligning values, decreasing risk, and improving the four C’s, business owners can achieve a spike in cash flow and business value, and obtain liquidity to fund their plans outside of their business.

If you are interested in learning more about value acceleration, please contact the business valuation services team. We would be happy to meet with you, answer any questions you may have, and provide you with information on upcoming value acceleration presentations.

Article
The four C's: Value acceleration series part three (of five)

This is our second of five articles addressing the many aspects of business valuation. In the first article, we presented an overview of the three stages of the value acceleration process (Discover, Prepare, and Decide). In this article we are going to look more closely at the Discover stage of the process.

In the Discover stage, business owners take inventory of their personal, financial, and business goals, noting ways to increase alignment and reduce risk. The objective of the Discover stage is to gather data and assemble information into a prioritized action plan, using the following general framework.

Every client we have talked to so far has plans and priorities outside of their business. Accordingly, the first topic in the Discover stage is to explore your personal plans and how they may affect business goals and operations. What do you want to do next in your personal life? How will you get it done?

Another area to explore is your personal financial plan, and how this interacts with your personal goals and business plans. What do you currently have? How much do you need to fund your other goals?

The third leg of the value acceleration “three-legged stool” is business goals. How much can the business contribute to your other goals? How much do you need from your business? What are the strengths and weaknesses of your business? How do these compare to other businesses? How can business value be enhanced? A business valuation can help you to answer these questions.

A business valuation can clarify the standing of your business regarding the qualities buyers find attractive. Relevant business attractiveness factors include the following:

  • Market factors, such as barriers to entry, competitive advantages, market leadership, economic prosperity, and market growth
  • Forecast factors, such as potential profit and revenue growth, revenue stream predictability, and whether or not revenue comes from recurring sources
  • Business factors, such as years of operation, management strength, customer loyalty, branding, customer database, intellectual property/technology, staff contracts, location, business owner reliance, marketing systems, and business systems

Your company’s performance in these areas may lead to a gap between what your business is worth and what it could be worth. Armed with the information from this assessment, you can prepare a plan to address this “value gap” and look toward your plans for the future.

If you are interested in learning more about value acceleration, please contact the business valuation services team. We would be happy to meet with you, answer any questions you may have, and provide you with information on upcoming value acceleration presentations.

Next up in our value acceleration series is all about what we call the four C's of the value acceleration process. 

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The discover stage: Value acceleration series part two (of five)

This is the first article in our five-article series that reviews the art and science of business valuation. The series is based on an in-person program we offer from time to time.  

Did you know that just 12 months after selling, three out of four business owners surveyed “profoundly regretted” their decision? Situations like these highlight the importance of the value acceleration process, which focuses on increasing value and aligning business, personal, and financial goals. Through this process, business owners will be better prepared for business transitions, and therefore be significantly more satisfied with their decisions.

Here is a high-level overview of the value acceleration process. This process has three stages, diagrammed here:

The Discover stage is also called the “triggering event.” This is where business owners take inventory of their situation, focusing on risk reduction and alignment of their business, personal, and financial goals. The information gleaned in this stage is then compiled into a prioritized action plan utilized in future stages.

In the Prepare stage, business owners follow through on business improvement and personal/financial planning action items formed in the discover stage. Examples of action items include the following:

  • Addressing weaknesses identified in the Discover stage, in the business, or in personal financial planning
  • Protecting value through planning documents and making sure appropriate insurance is in place
  • Analyzing and prioritizing projects to improve the value of the business, as identified in Discover stage
  • Developing strategies to increase liquidity and retirement savings

The last stage in the process is the Decide stage. At this point, business owners choose between continuing to drive additional value into the business or to sell it.

Through the value acceleration process, we help business owners build value into their businesses and liquidity into their lives.

If you are interested in learning more about value acceleration, please contact the business valuation services team. We would be happy to meet with you, answer any questions you may have, and provide you with information on upcoming value acceleration presentations.

Read more! In our next installment of the value acceleration blog series, we cover the Discover stage.

Article
The process: Value acceleration series part one (of five)

Executive compensation, bonuses, and other cost structure items, such as rent, are often contentious issues in business valuations, as business valuations are often valued by reference to the income they produce. If the business being valued pays its employees an above-market rate, for example, its income will be depressed. Accordingly, if no adjustments are made, the value of the business will also be diminished.

When valuing controlling ownership interests, valuation analysts often restate above- or below-market items (compensation, bonuses, rent, etc.) to a fair market level to reflect what a hypothetical buyer would pay. In the valuation of companies with ESOPs, the issue gets more complicated. The following hypothetical example illustrates why.

Glamorous Grocery is a company that is 100% owned by an ESOP. A valuation analyst is retained to estimate the fair market value of each ESOP share. Glamorous Grocery generates very little income, in part because several executives are overcompensated. The valuation analyst normalizes executive compensation to a market level. This increases Glamorous Grocery’s income, and by extension the fair market value of Glamorous Grocery, ultimately resulting in a higher ESOP share value.

Glamorous Grocery’s trustee then uses this valuation to establish the market price of ESOP shares for the following year. When employees retire, Glamorous Grocery buys employees out at the established share price. The problem? As mentioned before, Glamorous Grocery generates very little income and as a result has difficulty obtaining the liquidity to buy out employees.

This simple example illustrates the concerns about normalizing executive compensation in ESOP valuations. If you reduce executive compensation for valuation purposes, the share price increases, putting a heavier burden on the company when you redeem shares. The company, which already has reduced income from paying above-market executive compensation, may struggle to redeem shares at the established price.

While control-level adjustments may be common, it is worth considering whether they are appropriate in an ESOP valuation. It is important that the benefit stream reflect the underlying economic reality of the company to ensure longevity of the company and the company’s ESOP.

Questions? Our valuation team will be happy to help. 

BerryDunn’s Business Valuation Group partners with clients to bring clarity to the complexities of business valuation, while adhering to strict development and reporting standards. We render an independent, objective opinion of your company’s value in a reporting format tailored to meet your needs. We thoroughly analyze the financial and operational performance of your company to understand the story behind the numbers. We assess current and forecasted market conditions as they impact present and future cash flows, which in turn drives value.

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Compensation, bonuses, and other factors that can make or break an Employee Stock Ownership Plan (ESOP)

Read this if your CFO has recently departed, or if you're looking for a replacement.

With the post-Covid labor shortage, “the Great Resignation,” an aging workforce, and ongoing staffing concerns, almost every industry is facing challenges in hiring talented staff. To address these challenges, many organizations are hiring temporary or interim help—even for C-suite positions such as Chief Financial Officers (CFOs).

You may be thinking, “The CFO is a key business partner in advising and collaborating with the CEO and developing a long-term strategy for the organization; why would I hire a contractor to fill this most-important role?” Hiring an interim CFO may be a good option to consider in certain circumstances. Here are three situations where temporary help might be the best solution for your organization.

Your organization has grown

If your company has grown since you created your finance department, or your controller isn’t ready or suited for a promotion, bringing on an interim CFO can be a natural next step in your company’s evolution, without having to make a long-term commitment. It can allow you to take the time and fully understand what you need from the role — and what kind of person is the best fit for your company’s future.

BerryDunn's Kathy Parker, leader of the Boston-based Outsourced Accounting group, has worked with many companies to help them through periods of transition. "As companies grow, many need team members at various skill levels, which requires more money to pay for multiple full-time roles," she shared. "Obtaining interim CFO services allows a company to access different skill levels while paying a fraction of the cost. As the company grows, they can always scale its resources; the beauty of this model is the flexibility."

If your company is looking for greater financial skill or advice to expand into a new market, or turn around an underperforming division, you may want to bring on an outsourced CFO with a specific set of objectives and timeline in mind. You can bring someone on board to develop growth strategies, make course corrections, bring in new financing, and update operational processes, without necessarily needing to keep those skills in the organization once they finish their assignment. Your company benefits from this very specific skill set without the expense of having a talented but expensive resource on your permanent payroll.

Your CFO has resigned

The best-laid succession plans often go astray. If that’s the case when your CFO departs, your organization may need to outsource the CFO function to fill the gap. When your company loses the leader of company-wide financial functions, you may need to find someone who can come in with those skills and get right to work. While they may need guidance and support on specifics to your company, they should be able to adapt quickly and keep financial operations running smoothly. Articulating short-term goals and setting deadlines for naming a new CFO can help lay the foundation for a successful engagement.

You don’t have the budget for a full-time CFO

If your company is the right size to have a part-time CFO, outsourcing CFO functions can be less expensive than bringing on a full-time in-house CFO. Depending on your operational and financial rhythms, you may need the CFO role full-time in parts of the year, and not in others. Initially, an interim CFO can bring a new perspective from a professional who is coming in with fresh eyes and experience outside of your company.

After the immediate need or initial crisis passes, you can review your options. Once the temporary CFO’s agreement expires, you can bring someone new in depending on your needs, or keep the contract CFO in place by extending their assignment.

Considerations for hiring an interim CFO

Making the decision between hiring someone full-time or bringing in temporary contract help can be difficult. Although it oversimplifies the decision a bit, a good rule of thumb is: the more strategic the role will be, the more important it is that you have a long-term person in the job. CFOs can have a wide range of duties, including, but not limited to:

  • Financial risk management, including planning and record-keeping
  • Management of compliance and regulatory requirements
  • Creating and monitoring reliable control systems
  • Debt and equity financing
  • Financial reporting to the Board of Directors

If the focus is primarily overseeing the financial functions of the organization and/or developing a skilled finance department, you can rely — at least initially — on a CFO for hire.

Regardless of what you choose to do, your decision will have an impact on the financial health of your organization — from avoiding finance department dissatisfaction or turnover to capitalizing on new market opportunities. Getting outside advice or a more objective view may be an important part of making the right choice for your company.

BerryDunn can help whether you need extra assistance in your office during peak times or interim leadership support during periods of transition. We offer the expertise of a fully staffed accounting department for short-term assignments or long-term engagements―so you can focus on your business. Meet our interim assistance experts.

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Three reasons to consider hiring an interim CFO