How Driving Diversity Can Strengthen the Construction Ecosystem

The construction industry remains largely dominated by white males, but the racial and gender makeup is changing, with more minorities and women entering the industry each year, and many starting their own successful businesses. In 2020, minorities comprised about 37% of all construction workers, and women made up about 11% of workers, up from 27% and 9% in 2003, respectively.¹

Ownership is also becoming increasingly diverse. In 2020, nearly 63,000 construction firms were listed as Hispanic-owned, and an estimated 13% of construction firms were owned by women, up from 8.5% in 2017.²

Construction firms are taking notice, and increasingly finding that diversifying their workforce and contracting with minority- and women-owned business entities (MWBE) not only better positions them for bidding on projects, but also expands innovation and strategic thinking that can improve the bottom line.

The federal government has made no secret of its priority to advance racial equity, and an increasing number of government contracts — and even private-sector construction projects — are offering better access to bidding opportunities for MWBE-owned firms or those who work with MWBE-owned contractors. The federal government alone spends more than $600 billion annually on contracts and currently requires that no less than 5% of those contracts be awarded to “disadvantaged” businesses.³ In addition, U.S. companies have committed $50 billion to working with MWBEs over the next decade.⁴

Consider the construction of the Obama Presidential Center underway in Chicago: Nearly a third of current contracts were awarded to diverse vendors from the city’s south and west side communities.⁵ But beyond incentives for bidding, companies with gender, ethnic and cultural diversity also outperform their peers. Firms with highly diverse teams see as much as 2.5 times better cash flow per employee, 19% higher revenues attributed to innovation and average earnings 19% higher before interest and taxes (EBIT).⁶

What it takes

Achieving a diverse workforce and supplier base requires a focus on growing both the business and trade skills of employees and partners.

Some larger construction firms have made diversity, equity and inclusion (DEI) a key component of their recruitment strategy, partnering with unions, high schools and trade schools to introduce construction as a rewarding career option, particularly for underprivileged youth. One Missouri-based construction firm created a program that hires recent high school graduates from underserved communities for full-time jobs while they attend college or trade school. Once hired, each new worker is paired with an experienced project manager, who acts as both a supervisor and a mentor. After one year on the job, these workers are eligible for a tuition waiver and a post-graduation transition to a salaried job with the construction firm.

Another area where construction firms are increasing their focus on DEI is with their choice of partners. While newer MWBE subcontractors may lack the resources to fully negotiate rates for supplies, materials and equipment, a larger construction firm willing to partner with these budding entrepreneurs can make a big difference that can benefit both sides. One Ohio-based construction firm launched a program to focus on minority contractors more than 15 years ago.⁷ Each year, participating offices train about 10 minority-owned contracting firms in all facets required to manage a successful construction firm, from leadership to finance to bidding. Since the program’s inception, more than 500 MWBE firms in 13 cities have been trained, resulting in more than $250 million in contracted work.

Construction companies seeking to improve the diversity of their workforce and among their subcontractors and suppliers should:

• Begin a conversation at the top. Make sure top management understands both the sociological and business benefits of hiring more women and minority workers and working with MWBEs. Communicating your objectives and articulating your DEI goals will help all levels of the firm embrace your approach.
• Let new workers help build a culture of DEI. With today’s construction worker shortage, construction firms with the funds to recruit, train, mentor and support high school and trade school graduates from underprivileged areas will not only create a more diverse workforce but will inherently create a more inclusive and equitable environment as seasoned workers mentor the next generation.
• Expand your network of subcontractors. Focus on networking to develop relationships with a more extensive network of subcontractors and look for MWBEs that align with your construction company’s business processes to find potential partners for future projects.
• Consistency is key. Creating a diverse workforce and base of partners for projects requires ongoing effort and commitment.

Contact HUB International’s construction insurance specialists to learn more about partnering with diverse firms to promote profitability and reduce risk.

¹ U.S. Bureau of Labor Statistics, The Construction Industry: Characteristics of the Employed, 2003-2020, accessed December 19, 2023.

² The Center for Construction Research and Training, Demographics of Construction Business Owners, 2017, accessed December 19, 2023.

³ City Journal, “Welcome to the World of Minority Contracting,” Spring 2023.

⁴ McKinsey, “Expand diversity among your suppliers and add value to your organization, “ May 17, 2022.

⁵ Obama Foundation, Construction Blog, May 5, 2023.

⁶ Built-In, “50 Diversity in the Workplace Statistics to Know,” March 28, 2023.

⁷ JE Dunn, Diversity, Equity Inclusion, accessed November. 1, 2023.