Why EMCOR’s CEO doesn’t want his crews to only have the best tradespeople

Financial services firm D.A. Davidson & Co. earlier this month hosted its 24th Annual Diversified Industrials & Services Conference in downtown Nashville, where it hosted a hatful of executive teams for meetings and fireside chats. Among the companies represented was EMCOR Group Inc., one of the country’s largest players in mechanical and electrical construction, industrial and energy infrastructure and building services—i.e., several of the sectors that have wrestled most consistently and deeply with issues of talent development and quality.

So we naturally sat up and paid a little extra attention when D.A. Davison analyst Brent Thielman steered the conversation with Chairman, President and CEO Tony Guzzi toward workforce issues. One of Thielman’s questions was short and sweet—in which areas is EMCOR still most constrained?—and produced an insightful response.

Here, lightly edited for brevity and clarity, is Guzzi’s response:

“It’s supervision, right? Someone asked me a really good question after first-quarter earnings […] They said, “How do you make sure that you have the A team on every job?”

Of course, you want to reflexively say, “Well, here’s how we make sure we have the A team on every job.” Well, you think about what we do: If we put the A team on every job, we never develop people. So what we try to do is make sure we have a good B, B+ team on every job so we can develop people. I think our B, B+ team is probably someone else’s A+ team; I may be a little biased that way.

But that’s how we develop a workforce, right? You bring new foremen on jobs […] Maybe there are five experienced foremen on that job and three that are just the first time out. Well, if they’re learning from the right people, the right superintendent, the right project manager, now you’ve built three new foreman that they can go do that on another job as a project manager.

And then, if you are really good at sharing best practices and really good at peer learning—where you can send people to one of your other companies to see a job start up, to help with the estimating—you can build that supervision, that estimating, that project management faster than you could [otherwise].

Large jobs have allowed us to do that. And [so has] some of the contract structure. The owners intentionally do this sometimes so that we can build capability when we go into a new market. They’ll give us a [guaranteed maximum price] contract and say, “Look, we want you to do this. We want you to build the labor force. And maybe you’ll take the next job’s fixed price, but we can do this together.”

That’s new. That really wasn’t the case […] five, six years ago. So in a lot of ways, the more thoughtful owners, coupled with the unions, coupled with us and the training we do… We’re all trying to build out a workforce that’s sustained over a long period of time. But our constraint is actually not the individual tradespeople. Our constraint is actually supervision.”