Dashboard: Something Is Going to Happen

[Music] welcome to another 21 hats dashboard I'm Lauren Feldman and I'm here today with Mel Gravely who is CEO of triversity a construction company in Cincinnati welcome back Mel oh that's so good to be back I'm excited to be back on 21 hats oh it's great to have you here uh some of our listeners may recall that I did speak with you about a year ago when uh you published your excellent and very brave book Dear White friend I I do want to follow up on that in a moment but but first I I I want to talk business with you we're we're getting so many mixed signals these days on the economy uh and I just I've been reaching out to people kind of asking what does it look like from where you sit so Mel in Cincinnati running con a construction business what does it look like from where you sit yeah I tell you what if there's a word that is more complex than mixed signals we should find it because the signals are all over the place so let me just give you the facts I've got a 2023 backlog that I Rivals any in the history of our business wow so our blog for 2023 is solid um and I'm excited about that that's great um we are uh probably down you know um 8% of the people we need um and we are facing material cost escalation that continues to happen um pretty much across the board um if you name it the cost is is up and unstable so so it's not just up and predictable it's up and you know it can only get fixed price for just a few days and um uh so when you say labor costs are up and labor market you know constrained and you've got um strong backlog of interest and you got a lot of money at play um you got interest rates Rising uh so here's I don't know what to make of it but so here's what we've decided we have decided that something's about to happen and um and we don't know what it is um but it is not positive right so I don't know where it's going to come from but we cannot sustain the inflationary pressures around labor and and raw materials and um and supplies that we are seeing at some point our customers are going to say if it costs that much I'm not going to do it at some point our customers are going to say I can't make that pencil out to do a multif family home or to do an office complex or to do you know um whatever it is they want to do so so we have decided that um something's going to happen we don't know if it's 6 days six months but it's probably probably not 12 months from now well let let me ask you a couple questions about that one if correct me if I'm wrong but if I remember correctly you have something of a specialty in uh constructing hospitals um and that sounds like the kind of business that might hold up even in a in a downturn uh uh is that why your 2023 is looking so strong or is it across the board Arc 2023 is strong across the board I mean there's no segment you know about 40% % of our business is Healthcare the balance is other stuff it's all up it's all up and I believe you know we're going to still continue to have good healthc care performance through through 2023 because of how those businesses are funded there's a couple of exceptions there's some public hospitals here that I think are going to you know um lose some capex dollars but but other than that I think I think we're going to be okay in healthcare but keep in mind I mean when you're running a business if it's down 10% or 15% I mean it it can it can get pretty dicey pretty quickly so um that's what I'm worried about and and everything we do people say well once they design it and they you know submit the budgets for it they're going to build it that's just not true it's just not true you can stop building even after you start I mean that's rare that you stop after you start but right up to the moment we start throwing dirt or we start renovating a a floor because we do a lot of large scale renovation as well you can decide to wait you could have the architectural drawings and be all permitted and just decide not to do it so we're planning to to to to uh to be prepared I guess is what I should say shouldn't say worry how does that work on your end looking at the business for for 2023 do you have to lock in a price or can you be flexible given the inflationary environment and the cost of Labor yeah we're just unable to lock in prices we can lock in our fee you know the percentage of our of our margin but we cannot lock in subcontractor numbers at this point almost anything we are doing a few things to to mitigate cost on things we know are going to go we're pre- buing some supplies and storing them for customers um to to make sure of two things one that we can have them there when they want them and also that we can guarantee the price on them so we're doing some of that when we can but for the most part the the costs are going to end up passing through at time of construction when did you start doing that that's really interesting was that a a supply chain snafu uh thing for you that you just decided you had to have more material on hand yeah no not really because I you know I'll only take the risk if the customer wants me to customer's willing to ride the risk with me I'll take it so I'm not buying material in in hopes there's work I'm buying material because customer is saying go buy that material because we want it but what's forcing that though is we're showing customers the inability to lock in prices the inability to guarantee lead times and when I say guaranteed lead times I mean if you make a mistake on a toilet partition let's just say you measure it wrong and it comes in you could be waiting months to get a replacement toilet partition wow because it's got to be refabricated it's got to be made and it's got to be shipped and you get back in line like you started all over so those things are just so disruptive and you know what used to be 2 3 weeks is now you know what's your bet on on how long it can take so so those disruptions are making making it hard so if you listening to all of that as your listeners are listening if you're a customer It's just tough to make good decisions when you don't know what it's going to cost and when it can be delivered right tell me about the labor situation you said you're you're short now is this as good as it's been or is it consistently been bad for the last year or so what's that been like yeah so uh it's it's been so so in our industry it's especially in the in the uh the craft labor the the the folks who are actually building things that wear tool belts um that is a um that is a a troubled uh area of our industry meaning that the number of folks exiting by age and interest does not equal the the smaller number of people coming into the industry as new participants in becoming carpenters and laborers and and the like so we've had that inbalance for probably 15 20 years um and the only way to fix that is either entice more people to come which I don't think it's going to happen or increase productivity and I think that's where the industry's got to go so so we start with a tight with a dynamic that is you know out of balance what what makes it even more constrained is uh just acutely over the last few years we've had increased amounts of people exiting um still the trickle of people entering and theand being up so we are um uh struggling to hire particularly carpenters and struggling to keep them I mean they can they can go across the street and make more money and then if they don't like it over there they can come back because I'll take them back because I need them so so we don't have much leverage but I am seeing that um I wouldn't call it easing it's just less crazy still crazy but a bit less and that's across the board Even in our professional hires our four-year degree you know construction engineers and the like um it's still very very robust but uh what I told the team is we're looking for rock stars now not rocks so we're not just filling jobs anymore we're we're looking for rock stars and we'll pass over people who are just kind of mediocre well that's a better position to be in well but wait now I want to make sure but that means I'm also likely accepting slower growth for my company oh interesting I just think something's going to happen Lauren I I think that uh uh Market's going to soften I don't think it's going to slow down I think it's going to come to an AB BR kind of jolt and I want to have on my team um the very best and folks I'm willing to ride it out with and um and invest in over that period of time because whoever does that the best is going to come out of the back end of whatever happens they going to come out stronger Are there specific metrics that you look at either in terms of your own business or the economy as a whole that that are telling you something bad's going to happen well so the short answer is no um of course we look at backlog um and of course we talk to our customers about you know how solid so we stress test our projects to see you know what the funding sources are and are those funding sources sources solid no matter what um but but I can't tell you there's one set of of metrics but but let me tell you the anecdotal things I'm seeing on top of the Dynamics I described earlier where it's just got to be hard for customers to make decisions but I'm also hearing that marketing firms are slowing their hiring and and even stopping their hiring shedding some people well marketing is one of those discretionary expenses right that I wonder why are they why are they doing that so what do they see that I don't see um but you know right now if I look at all the traditional things we would look at we would look at what the Architects are drawing and all those numbers are at least on par with good years of the past so there's no reason to believe it um I just don't trust the traditional metrics anymore I I don't think there's too many Dynamics going on in our economy including you throw a little Co and international instability in there to believe what the experts tell me about what they know from previous um erors in our economy do you think your experience with this is pretty representative of the industry as a whole I mean I did just read a story I think it was in the Dallas Morning News about a uh construction business in uh Texas that's you you know the owner just said the last 12 months have been their best 12 months ever um they're selling everything they can get in uh business have been never been better and they don't see anything changing yeah I'm hearing that uh that too from a lot of folks so no I think we're I think everybody's talking about what's going on but I don't know if people are reacting to it um you know our organization is a purpose-driven people first organization and I'm not trying to maximize uh profitability over the short run I'm trying to build an enduring company over the long run and part of that is how you treat people so so imagine if I just continue on my hiring my Merry hiring way and I you know I pursue every opportunity I can I sell this sucker out I stress my people to you know to do more and faster I'll make more money in the short run but if if anything happens in the economy and I've got to bring those numbers down swiftly you do something to your culture that I think is problematic and so um you know if you hire people in your organization that aren't a cultural fit you it's problematic and so we're just taking a more paced approach to this and uh it's probably driven a little bit by my personality but um I'm just not trying to maximize the short run are there things you can do to prepare for a downturn uh to put you in a position to seize opport o unities that may present themselves yeah uh we are redoubling our efforts on our core customers um to make sure that if they do anything they do it with us um uh so because we we make the most money with the people we know the best and who know us because we've got value with them um we are investing in the the top talent to make sure that we have them available and then we're managing our money in ways that um will allow us to um to sustain ourselves through you know a couple of years of of um things going sideways and I want to be clear I don't want your listeners to think man this guy's gloom and doom I'm really not I just don't I I just don't know yeah and I'm not willing to bet the the longterm of the organization based on something I just don't know and again it might be my personality or my Approach as a CEO we're just we're just going to adjust our growth and therefore our earnings expectations and um and if we left some money on the table we'll we we'll get it up in the next 50 years when we we're around that I like that attitude all right well that's that's very uh helpful and and very interesting um I do want to go back and and talk about uh your book um for those listening who who haven't read it uh it it's a terrific book and if I encapsulate it really quickly and please feel free to add to this but to to me what I remember best having read it a year ago is you really focused on the issue of uh intentionality of looking for ways to make this situation uh in your life in your business in this country uh better where you can you were very honest about uh pointing out places where people had been intentional about helping you in your own uh journey and about you wrote about what people can do uh to to help others and I I found I I've actually repeated what you wrote to a to a lot of people and it's um I mean a lot of people think about it in terms of hiring looking to you know hire diversity you pointed out in the book that you know that is difficult and there it doesn't always go smoothly there are other things you can do like you don't have to hire people you can uh you can pick uh suppliers and contract actors uh and do the same thing there with intentionality and and have a real impact and I I know that's opened eyes from some of the people I've talked to who hadn't really thought about that um did I do okay with that you did a great job you know the the the book really um I'm trying to to have a uh to provide an on-ramp to have a more productive conversation about race so instead of accusing and blaming and naming and shaming I I'm just trying to have a better conversation a more productive conversation about it because when I when we can effectively do that my experience is we find common ground that we can make a difference to get together so the book really is trying to do three things it's trying to help people in a very quick way understand what the heck is really going on with race second why people should care and third what they can do about it and you talked about intentionality um that part of it is just so so so important but people can't get intentional until they understand framework of how do we get here what's really going on why is why is this persisting and I try to lay that out in an easy to understand format and uh so far the response has been uh uh generally pretty good well tell me about that generally pretty good yeah oh well I mean if you find me on if you go out and and and uh look at where I've uh where posts come up come up about me or things in in uh in social media yeah there's some people that don't appreciate what I'm doing so so um well you you put yourself out there and we all know unfortunately in this environment what can happen yeah we got an email the other day and it it came through our website so it went to my assistant and she brought in the office she was very upset um and um some guy lit into me pretty good uh but but what I said to her is first there's no responding to this because he's not making any points he's just upset about something so I'm trying to figure out why I even read the book but second um you can't write a book called Dear White friend and not expect to have some people not like that idea that's how that's where we are in this nation so so uh I can't say it doesn't bother me at all that would be lying to you being disingenuous but I have figured out a place to put that and um and really focus my attention on others you know so so 80% of America understand something's going on they may not know the depth and realize that you know there's maybe something they can do about it I'm just trying to help Enlighten and Inspire that 80% uh and people are doing things that I hadn't even thought about guy called me up he wanted to meet for breakfast and so I I met with him for breakfast and he was building a fund to invest in some in some real estate properties and he said we're going to build this fund it's going be $100 million but we're not going to do it without 10% black dollars in it and I thought wow um he said the problem is I don't have any black friends so if you could introdu some people that can help me do that he didn't need that money to make his fund work right but he wanted to make his difference he took his sphere of influence and said I can make a difference here it slowed them down mightily he had to find the friends you had to explain the fun to them they really didn't know this guy she had to build some trust you know he took an extra four to six months of just that effort but that's the difference he can make now the beautiful thing is first it worked second the next time he goes he's got he's got black friends who have learned to trust him who they've invested together got another guy in California who who knowed that African-Americans other people of color in the architectural uh engineering space they kind of get up to a level in in in companies and they just don't rise up to the very top and so he wanted to do something about that so he and got us some friends together and and they created a um a a nine-month kind of leadership development program for folks not just in his company but across the industry and and they're focusing on giving these folks the intangible skills they need to or exposures that they need to to climb up in organizations and they're staying with them as mentors and you know I thought okay well he's doing what he can do so these examples go on and on and on and um man that warms my cockles I got to tell you um that people are are impacting intentionally their sphere of influence well let me ask it this way um it's it's not easy to write a book um it's even harder to write a good one um you took the time to do this you and it wasn't just any topic you picked a topic that you knew would be somewhat treacherous and not something anyone would recommend to you as uh you know the way to build your business your your primary career um a year later are you glad you did it depends on the day if I was honest with you um I would say in Balance most days I am um but but it's for reasons that are deeper inside than our business and by the way I don't think it's hurt to my knowledge it's not hurt our business at all so that's good news um but you know to have my father say it's the most important thing you've ever done um man that's probably good enough uh I I will tell you though I've learned some things along the way about my white friends um and and I I'll share three with you please yeah my my friends have an interest uh in our challenge with race that this has confirmed that with me they have an interest in in our challenges around race they've shown it through showing up they've shown it through putting me in front of their business groups the the folks who have taken a chance to put me in front of their associations and their you know um uh internal organization and um uh Community groups is just amazing to me so they have an interest the second thing I've learned though is that their interest is unrooted and therefore it's tenuous so what I mean by that is this is for many of them the first and only book they've ever read on this topic and they walk away thinking man okay Mel Mel's probably right got something there I understand what he's saying then they go back into their silos or they go back to their talk radio or their news sources or their social media feeds and they start getting hit with challenges to what they just discovered and since it's unrooted um it's easy for them to start believing and no maybe that maybe that isn't so true maybe what Mel said isn't right maybe you know maybe it's about something else so what that means to me is is I've got to figure out a way to give a more steady diet of keep writing more books yeah well I don't know about that my wife is like I don't know about that but the last thing is and this might be the scariest one is uh my friends want this to be fixed and it sounds great when you say it but the challenge is is they want more of it to be fixed by single solutions by microwave by by you know by Thursday at 2 o'clock an easy answer yeah and and and I think you know that this is multi-generational this is took us a long time to get here well really did and it's got so many facets to it um so they'll tell me like the answer here is education I'm like yep I think education is a part of it but if I educate kids and send them back to the same dysfunctional neighborhoods that they came from with you know six consecutive generations of poverty I got a feeling that's not going to work out Council will let me show you some examples that say education is great but it's not enough so so we've just got to um realize that it's longer term we've got to lean in in a way that is um sustainable and because it's not going to go away and I and so I don't haven't figured out what to do about what I've learned yet to be honest but those are the three big things that I've learned you know it's interesting you mentioned education and your book kind of coincided with this uh movement toward what's known as critical race Theory and we don't have to get into uh detail on that but it but basically you know it's um a thought that we need to be very careful about the way we talk about race I'm wondering I mean I obviously goes a lot beyond that but I'm encapsuled quickly I'm wondering if that uh had any impact on your book and your the conversations that you had did that impede uh your efforts to have these conversations in any way yeah I would call it uh headwinds yeah and I actually wrote a an oped about uh about critical race Theory and and and tried to place it where I think it belongs in in in this whole thing um because um there's always going to be those things and The Branding of certain things will but but again that's part of the context we're living in I knew that when we started and and um and I I've just recommitted myself to um to at least spending as much time as I spent the last year this coming year on this topic really you're GNA keep doing it I'm gonna keep doing it because um my friends have um have leaned in to support it and uh which tells me that they got my back on this and I'm referring to all my friends including uh my wife friends and uh if they're willing to continue to put me in front of the right groups um we're going to do it now we're not going to do a big promotional push or anything but um if people are saying hey this chamber of commerce or this um you know civic association or um come and speak to them I'm going get on airplane I'm going to do it because I want to infect the nation with a new way and a better way and a more productive way to talk about race and uh right now it's it's my calling and um when when the call stops I'll stop answering but right now the calls that's that's where I'm called to be well good for you uh I appreciate you continuing to fight the good fight Mel Gravely is CEO of triversity construction in Cincinnati and the author of Dear White friend which I highly recommend Mel thanks for taking the time it is my pleasure I can't wait to be back again and you will thank you Mel thanks everybody for listening have a great week e