In these most unusual of times, it was the most unusual assemblage of Kansas City-area business leaders in more than 20 years of Ingram’s Industry Outlook assemblies. Rather than with a large, live gathering in one location, this year’s executive field weighed in for the 2021 Ingram’s 250 General Assembly via Zoom meeting, via emailed responses and through live interviews. Their observations say much about where business in general is finding ways to succeed after more than 18 months of a global health crisis: Some companies, generally those deemed “essential”—as if any business weren’t—enjoy up to 100 percent on-site participation from their work force. Others are still struggling to bring workers back into the office from remote locations. Still others have embraced something of a new workplace/workspace hybrid that will be the model going forward, blending on-site and remote work. Many will use flex scheduling: Layered over all of that is the ongoing debate about how to provide incentives for staff to become vaccinated against the ongoing COVID curse, how to remake physical office space, how to deal with global disruptions in supply chains, how to safeguard carefully crafted workplace cultures, how to onboard new talent and other issues that, like the virus itself, are novel developments in the leadership tenures of most. In all, nearly 30 executives contributed to the conversation, from a diverse universe of business sectors—including health care, banking, construction, engineering, accounting, consulting, law, manufacturing, insurance, commercial real estate. If their deliberations proved anything, it’s that the Kansas City business community is blessed with leadership that isn’t afraid to take on a challenge, introduce innovative solutions, and push forward with organizational growth. There’s a lesson in there for all of us.
A New World
There is no question that American companies have changed the way they do business. The pre-pandemic model is history.
“We’ve believe the future of work going to be changed forever,” said Julie Vander Weele, managing partner of the Spencer Fane law firm. “The silver lining at this point is that the pandemic has showed us we can do more work remotely.” Lawyers have probably always done more work remotely, she said, and the good news is that companies have figured out how to extend that model to the staff and support services that have traditionally been in the office every week.
The downside? “We do know that it’s very important that we see each other on some kind of regular basis,” she said. As the firm attempts to discern what the return to the workplace will look like, “from a mentoring perspective, we’ve
had some suffering who joined the organization in the last 18 months without the benefit of that culture.”
The effects of that loss can’t be overstated, executives say.
“My main concern is for the younger people coming in who have never worked in an office. They never get the culture,” said Rosie Privitera Biondo, president of Mark One Electric. “We’ve had multiple new hires just in the last several weeks, but how would they survive in the digital world when they never got to sit next to anybody and don’t know anybody it the office?”
To combat the loss of that camaraderie, she said, the electric contractor had instituted events like regular cocktail parties in the office, drawing people together. It took a while, but after eight months, such efforts are starting to pay off, she said.
Rick Weller, CFO for Euronet World-wide, said the global financial-payments enabler was seeing a spike in remote-work interest. “This phenomena cuts both ways,” Weller said. “It does give you access to a wider population of resources, given geographics would be no restriction, but it also presents new work-place management issues.”
Stephen Penn, office managing part-ner for KPMG, said he, too, expects things to differ in the years ahead, and not just for the global accounting/consultancy firm. “Work will be a much more hybrid model, and even when in the office, it will be different. Rather than sitting at one spot all day, it will be more collaborative, and we’ll use space differently. We’re still trying to get our arms around what that means from an office footprint perspective, but it’s fair to say we think that footprint will shrink as we move through this; that’s pretty obvious to us.”
He, too, noted a growing desire among staff members, especially new hires, to get together. “They like working from their house, but also as part of a team,” Penn said. More seasoned professionals have long been used to working out of cars and conference rooms for a century, he said, “but it’s going to be a little different and more hybrid than it was before.”
Roy Jensen of the University of Kansas Cancer Center put his finger on an issue that will have huge implications for building design and construction for years to come. “We would allocate our space needs differently, such as allowing for more space between work areas but creating less workspaces with employees desk/office sharing,” he said. “Two employees can share one workspace with a hybrid work schedule.”
For some employers, the design of their floor spaces pre-pandemic separated winners from losers. One was Tension Corp., maker of envelopes and related business documentation. “Our facilities run 24/7 around the country,” said, Bill Berkley, “with high ceilings, so there’s a lot of air movement.” Sufficient floor space made it easy to put in place new protocols for distancing, and elements like sanitizing and restricting personnel—staff and suppliers—helped keep the viral spread in check. A resilient staff helps, too: “I was impressed by how quickly people adapted to the remote requirements and how quickly they understood what needed to be done,” Berkley said.
Steve Edwards, chairman and CEO at Black & Veatch, said the massive office footprint of a global engineering firm was changing.
“We are working to develop a reimagined workplace that facilitates this new way of working,” he said. “We plan to use office space more efficiently—taking a more collaborative ‘we’ approach to space rather than a ‘me’ approach with individual office spaces—and optimize our real estate. We plan to create a workplace that enables activity-based working, which provides many different types of work settings for people to feel and be most productive.”
Those include huddle rooms, lounges, large focus rooms, teaming tables, training rooms, and break/plaza areas, Edwards said. “We will also have spaces available to support focus activities. We have started to pilot in a few offices and will continue to work on reimaging our spaces as leases expire.”
At Global Prairie, the strategic communications firm, Anne St. Peter said open floor-plan designs at all of the firm’s nine offices “provide us with extraordinary flexibility to adapt and adjust based upon current public health recommendations.” In an assessment that should cheer commercial realty professionals, she said, “we have no plans to reduce our overall square-footage of office space.”
The flip side of that came from Russ Johnson, president and CEO at Lawrence-based LMH Health. “In the long-term, we will be reducing overhead space for non-clinical functions that have demonstrated the ability to work remotely,” Johnson said. “Ultimately this will mean less capital expended for facility development or lease or rental expenses.”
Work, though, is not a binary choice of home or office. As Jason Hooper, president and CEO at KVC Health Systems, noted: “KVC already has modern office design settings like open floor plans, given the nature of our team’s child-welfare and mental-health work.” But his team members, he said, “spend a big part of their working hours in families’ homes, schools, and other community settings, so not every person uses a dedicated office.” While he doesn’t anticipate near-term changes in floorspace, the pandemic has certainly given us new imagination and creativity for how teams can best work together,” Hooper said.
BOK Financial was in the challenging position of relocating its regional headquarters during the pandemic, said market president Kevin Kramer, and didn’t change a great deal beyond rededicating some conference suites for video interactions. “But we found exactly what Rosie said: Early on, everybody adapted well from home,” yet there were challenges with retaining the culture and onboarding new hires. Amenities in the new space, such as a specialty coffee shop, have helped bring younger people together.
Seeing things from the other side as a commercial realty professional, Ken Block of Block Real Estate Services said some tenants are using the changing scene to seek out higher-quality office space. “But for the most part, these tenants are continuing to keep the open office feel for clerical positions, and medium-to-low density cubicle arrangements,” he said. “Overall, the office market has changed and will continue to do so, whether that change proliferates into an office market that everyone is happy with (including developers), is still unclear.”
It’s clear, though, that many companies, while hybridizing positions where they can, are still assessing longer-term needs during the pandemic and its aftermath. The pandemic, Block said, “has created chaos throughout the office market since it began, although from an optimistic point of view, a new sense of company analytics and self-awareness was born.”
Owen Buckley of LANE4 Property Group, specializing in retail space, said his own firm’s needs would require more flex space “but we are still planning private offices dedicated to one person.”
That, for some, will be a key to ensuring productivity. “There isn’t one person I’ve talked to in business that does not say the same thing, and if I’ve heard it once, I’ve heard it 100 times: The same amount of progress takes more time” when working remotely, said Pivot International CEO Mark Dohnalek: “Difficult projects take more time to be negotiated. That’s what’s been lost.”
To Mandate or Not?
The week of the assembly produced some notable headlines on the vaccination front, as the University of Kansas Health System announced it would require employees to be vaccinated against COVID-19, something Saint Luke’s Health System and Truman Medical Center had already done. Quickly, North Kansas City Hospital and LMH Health followed suit.
The issue was top of mind for CEO Stan Holm of Olathe Health, where a staff vaccination rate of more than 80 percent provided some assurances, for the moment, that a staff-wide mandate wasn’t yet necessary.
At meetings with other hospitals’ executives, Holm said, he asks “what are se solving for?” with various mandates. Like other executives in health care, he’s concerned about whether nurses might find new career paths if they themselves are unwilling to be vaccinated before more is known about long-term health effects. That presents a particular challenge, Holm said, at a time when non-COVID cases are increasing both in number and acuity, and the demand for nursing has rarely been higher—with existing staff already worn thin by 18 months of a battle-stations mentality. “Our staffed beds are at a tipping point; we have nurses leaving the industry,” he said. “There is some COVID fatigue, but some are contracting out to make a lot more money. A lot of us are spending a lot more than ever before” on salaries and retention efforts.
Some employers say that, given the talent crunch hitting American companies, they can’t risk losing 10-20 percent of their staffs that are vaccine-hesitant.
For Rich Smith at Henderson Eng-ineers, the challenge wasn’t dissimilar to that noted by Jason Hooper earlier at KVC. “One of the challenges we’re having, is what to do about vaccine requirements at other companies where we have people out in client offices and projects,” he said. “When they require mandates as far as vaccination, that falls back on us.”
Henderson has not implemented its own mandate, he said, and so far has been able to juggle that challenge by sending to those job sites employees who have already been vaccinated. “It has created a bit of a bottleneck for us,” he conceded.
At Humphrey Farrington & McClain, partner Ken McClain said, “we have not discussed this to any great degree, and would probably only be inclined to do so after full FDA approval of all the vaccines.”
Ed Eilert said his colleagues on the Johnson County Commission “had recently implemented a mitigation plan that includes testing of unvaccinated staff and allowing employees to opt out of testing when fully vaccinated. No other incentives have been provided.” No other carrots—or sticks—are anticipated in the near term, he said, but “we do have a wellness plan and employees could earn points toward their annual requirement by getting vaccinated.”
To its staples of KFC and Taco Bell fare at KBP Brands, CEO Mike Kulp has added a metaphorical serving of carrots: “The company continues to offer a premium payment equivalent to four hours of PTO for all 15,000+ employees who elect to get a COVID-19 vaccine,” he said. But in light of the increase of COVID-19 Delta variant cases, “KBP has introduced even more compelling offers, including $100 in addition to the premium payment and entering vaccinated employees into a raffle to win $500.”
Dohnalek said no vaccine mandate was forthcoming at Pivot International, agreeing that the current job market “is too competitive to put undue burdens on retention.”
Euronet Worldwide is actively encouraging employees to get vaccinated, said Rick Weller, and the leadership points out the benefits, keeping a data-base of vaccination status and setting forth a protocol regarding exposure to the virus. “In that many of our employees travel (or usually do absent the COVID travel restrictions) internationally, there is a high likelihood they will be required to show proof of vaccination to the airline or destination country or be required to follow time-consuming quarantine protocols,” he said. As such, Euronet anticipates a higher rate of staff vaccinations than the general population, so “at this point, we have not required proof of vaccination for continued employment.”
Still, the issue poses a decision for executives: Which approach is best—the carrot, or the stick?
“I’ve always taken the view that a big enough carrot is a stick,” said Rob Broomfield, market president for UnitedHealthcare.
Mark Jorgenson, the longtime U.S. Bank executive who continues to hold multiple corporate board seats in retirement, said that what he’s seeing is “not dissimilar from the NFL; many of the organizations are still not mandating the vaccine, but are making things more difficult for those that are not vaccinated.” Among those are requirements for mask wearing at all times, limiting in person meetings, and possible insurance surcharges. Those who are vaccinated, he believes, “will see very little of these constraining requirements,” and he expects that vaccine hesitancy will dissipate somewhat when the FDA gives full formal approval to vaccines in use.
Hiring and Talent
At Country Club Bank, said Chairman and CEO Paul Thompson, the early days of the pandemic proved fortuitous from a staffing perspective. “The opportunity of hiring was good at first, as talent was available at the start of the pandemic, and we took advantage of that opportunity. Now, the labor market is very tight and positions are more difficult to fill.”
Jason Hooper noted that health care in particular was being slammed with a tight labor market. “There have long been work-force shortages in our field of health care, and there is a national social worker shortage as well. The pandemic has exacerbated those challenges,” he said.
The company’s focus on care for children and families was a differentiator, he said, “especially at a time when people feel isolated and more stressed, the connection we offer to other caring people and to a meaningful mission are important.”
Like Stan Holm at Olathe, LMH’s Russ Johnson said that “we have seen significant impact to compensation, schedules, work flexibility, and other pay programs for evenings, weekends, and shift differentials. We have had to make pay adjustments midyear and a half a dozen pay grades.”
And hiring itself has become more of a challenge, said Mike Bukaty, president and CEO at Bukaty Companies. It’s so tight out there, he said, that “we have had several interviews where the candidate did not show up.”
“With an elevated “quit rate” existing in our country, there are many people on the move,” said Mark Jorgenson. “Those that work at identifying top performers have a good chance of upgrading talent, but it does take a lot of work to make that happen.”
Inflation and Supply Chain
The pandemic wrecked supply chains globally, triggering the supply-and-demand dynamic that has helped fuel an inflationary cycle like none seen in decades. It’s impact reaches across business sectors.
“Inflation has been a factor in several areas of our business, particularly in commodities and shipping costs, which increased from $3,000 to $5,000 per container to more than $20,000 per container from Asia in the past year,” said Steve Edwards. “Lumber also saw significant price increases earlier this year that have since come back toward historic norms.”
Black & Veatch is absorbing these costs where it can, he said, “but, where it would have a material impact on our profitability and the viability of a project, we are working with clients to ensure work can be undertaken in a cost-effective and sustainable manner.”
The challenges of inflation and supply-chain squeezes aren’t limited to individual consumers and for-profit companies, as noted by William Johnson, president and CEO at the Kansas City Board of Public Utilities, serving Wyandotte County.
“We are experiencing sometimes double-digit price increases on many of our commonly used materials,” Johnson said. “There are also longer lead times for some items and sometimes an increase in overall delivery costs.” For the time being, the BPU is absorbing price increases, he said, “but a continuation of higher prices will at some point affect our maintenance and capital improvement budgets.” Supply-chain constraints as well, he said, “have already affected some of our engineering design decisions and project schedules.”
In the residential realty world, said Dennis Curtin of RE/MAX Midstates, the inflationary pressures “has put a huge burden on our associates. They can show a customer dozens of homes and not make a sale due to the competitive bidding nature we find ourselves in at the present time.” And it’s more than just the disappointment of a lost sale involved: “This has caused burnout in many agents,” Curtin said.
“The biggest challenge we have is lack of inventory to sell,” he said, as shortages of labor and materials in new construction “has extended the delivery of new home inventory by at least six to eight months longer than what we were accustomed to.”
Bucky Brooks of commercial realty firm Copaken Brooks, said that in the current climate, “projects are taking longer, contractors’ bids are taking longer, and construction prices, for both labor and materials, are higher.”
The Damage Done, and the Outlook
Save for those in commercial real estate, most who joined the conversation, either live or by email, said 2020 was a solid year—in some cases, a record year.
Curtin, for example, enjoyed a record 2020, but expects to eclipse that in 2021. “The resale market is very robust,” he noted, “and I do not see that shortage of inventory easing for the foreseeable future,” which means sales prices are likely to stay high.
After initially taking a financial hit with elective surgeries and procedures put on hold during the early part of 2020, most of the region’s hospitals saw a recovery that, in some cases, led to record growth. But the pandemic will also leave some long-term health challenges that will be add to the costs of care.
Stan Holm said Olathe Health was seeing complications from delayed care, particularly with patients needing cardiology and oncology services. “Those two service lines are seeing higher cases than in the past,” he said. “It really is a bump up not seen at this level before, and physicians are saying the acuity of those patients is higher.”
Sandra Lawrence, the longtime Children’s Mercy executive who still holds multiple board seats, noted that one company she serves had seen the impact of that with its therapies.
“One of the things I find disturbing,” she said, “is people seem to be changing the way they view getting the therapy they absolutely have to have. We saw a huge slowdown in the number of people who went in to get regular treatment, early, then it ratcheted back up, but now we find people come to be delaying again, postponing care more than in past. It’s setting a bad precedent that says it may be OK to skip or delay therapy a bit and catch up later. We’re really establishing some bad habits.”
On a corporate level, though, some companies have never been healthier.
Last year, said Anne St. Peter, “was our strongest year financially since our launch in 2008. We are on track to grow year-over-year again and forecast that 2021 will be another record-setting year for us.”
Paul Thompson said 2020 was also a step up from 2019 at Country Club Bank, “but it came with an incredible amount of effort to achieve those results.”
Debbie Wilkerson, president and CEO for the Greater Kansas City Community Foundation, is keeping a wary eye on what’s looming in the philanthropic sector as the final quarter of the year approaches.
“The fourth quarter is the busiest time” in her space, as people reassess their philanthropic position. She’s led a staffing change to maximize hours spent in the office, hoping that will meet the need during the giving push. “I loved Jeff Jones plan at H&R Block, with Tuesdays through Thursdays in the office, and on Mondays and Fridays, working from anywhere,” she said. “We were going to start that in September (prior to the Delta variant case-count surge), but are now pushing to October. “We’re trying to build flexibility, like all of you are,” she said.
Beyond bottom-line considerations, said Roy Jensen, 2021 promises to be a pivotal year in talent acquisition. “We are fortunate in that we are able to attract and hire experienced and qualified candidates,” he said. “We did not see a drop in talent availability (during the pandemic), as many of our jobs are specialized. For individuals who are seeking to work in cancer research, KU Cancer Center is a highly sought-after regional employer. In fact, 2021 will be our biggest hiring year to date.”
The winners and losers of the pandemic have been well-documented, said Mark Jorgenson, and “2020 has clearly been a better year for many on the upper end of the income scale, but not so much on the lower end for the many reasons already articulated in the press,” including record stock-market prices benefitting the wealthy, and white-collar jobs less affected by the pandemic vs. service industry jobs.
On a global scale, said Steve Edwards, “in some ways, the pandemic has highlighted how essential reliable power, water and communications are. Coupled with many global ‘megatrends’ already in motion such as sustainability, decarbonization and electrification, we see great opportunity for Black & Veatch and the markets we serve.”