The Leadership Gap in Construction: What Companies Can’t Afford to Ignore
Construction companies spent the last several years chasing growth, and most of them caught it. Revenues and headcount are up but leadership capacity hasn't grown at the same rate, and now many of those organizations are running at a scale and complexity that their leaders haven't caught up to yet.
Matt Kennedy, partner at FMI Corp., sees this as a math problem, not a culture or pipeline issue. “Businesses are growing faster than the people leading them, and now the numbers don't add up. That's making that gap wider and wider as time goes on."
Most senior leaders already sense this, yet few feel they can pause long enough to address it. They know too much rides on too few people and not everyone feels prepared to step into the next role. The problem is, increasing leadership capacity requires time and focus, and both feel scarce when projects stack up and margins stay tight.
Over time, that shortfall affects project performance, margin strength and how well firms prepare for the next phase of growth.
Where the Risk Shows Up
Leadership gaps don’t announce themselves, nor do they give companies much time to react. Instead, they surface gradually: decisions start taking too long, projects require more senior attention than usual and executives get pulled back into work they already delegated.
At a lower level of complexity, a poor decision or a misallocated resource stung but didn’t derail performance. At the scale many construction firms are operating now, those same mistakes can erode margin, performance and client confidence.
“Project speed is increasing, and what’s required of executives and managers today is different from what those roles demanded even a few years ago,” says Tracey Smith, partner at FMI Corp. “If leaders aren’t ready for that level of responsibility, performance suffers. Over time, senior leaders can’t lead strategically or manage the broader organizational risk that comes with growth because they’re pulled into day-to-day demands.”
Kennedy put the issue to the test in a recent conversation with a senior leader reviewing her bench. He asked a direct question: “Is this the team you would hire for the organization you have today?” The answer was no. The people were capable, but the organization had outgrown its leadership development strategies, and the risks were multiplying: poor decisions, resources landing on the wrong projects and senior leaders backfilling gaps that should have been filled two levels down.
This scenario is playing out across the entire E&C landscape, where faster project cycles and growing complexity are forcing organizations to rethink their leadership development strategies. That pressure extends beyond the executive tier. Department leaders who struggle to manage and develop their teams create operational drag, for example, and if managers can’t delegate effectively or build capability beneath them, senior leaders absorb the overflow.
The exposure can be even more immediate out in the field. As experienced project managers retire, fewer leaders are stepping in with both the technical judgment and the people leadership required to run complex projects.
“Seasoned superintendents are retiring, and not enough people are coming behind them with both the experience and the people skills to lead,” Smith observes. “When that happens, it doesn’t just affect development; it negatively impacts operational performance.” By the time those performance signals become obvious, the gap has often been widening for years. At that point, the execution risk is embedded in the business and far more difficult to unwind.
The Succession Blind Spot
Construction firms naturally respond to pressure by solving the problem in front of them. They plug gaps, move people around and step in where they have to in order to keep projects on track. “E&C defaults to minimizing the day-to-day operational strain,” Kennedy says. “It’ll do anything it can to solve the immediate challenge, even at the expense of the longer-term success of the organization, the team or the project.”
That instinct protects today’s job, but it also impedes good succession planning, which is one of the most underdeveloped practices across the construction industry. When senior leaders fill operating gaps themselves, for example, they delay preparing the next person to carry that load. Over time, firms concentrate responsibility in a small group of experienced leaders who carry way more of the load than they probably should.
Even companies that recognize the succession risk don’t always build depth beneath key roles. “Companies know that they really need to put some effort into their succession planning, but they don’t have a bench,” says Smith, who sees this pattern play out in different ways across the E&C landscape. In some firms, senior leaders remain in place longer than planned because no ready successor exists. In others, an unexpected departure exposes the weakness.
“Worst case scenario, you have a senior executive that has a medical problem and can’t work anymore and no one to fill that role,” Smith says. “We’ve seen that happen more than once.”
Five Ways to Move the Needle
Firms that build real leadership depth treat development as part of how they run the business. They define what strong leadership looks like at each level, assess where they stand and commit time and resources to strengthening the bench before a transition forces the issue.
After decades of working with E&C firms, Kennedy and Smith have seen what actually moves the needle. Here are five things they recommend.
- Take a hard look at your bench. Evaluate performance across leadership levels and agree on what effective leadership looks like at the executive tier, at the department level and in the field. Without shared standards, development efforts scatter and high potential becomes subjective.
- Choose a few priorities and stick to them. Identify one or two leadership capabilities the business needs most and concentrate effort there. Reinforce them consistently and measure progress before expanding the focus.
- Build succession into your operating rhythm. Identify successors early and move them through stretch roles before a vacancy tests readiness.
- Redefine the role when you promote someone. Leaders need coaching and reinforcement as they shift from technical execution to broader responsibility.
- Make feedback part of the job. Emerging leaders in the construction industry want to know how they’re performing and what it takes to advance. Clear expectations and regular feedback strengthen performance and improve retention.
These actions don’t require a dramatic overhaul, but they do take focus and consistency over time. “It takes intestinal fortitude and follow through from the leader, and it doesn’t happen immediately,” says Kennedy, who points to one company where the CEO spent years investing in training and development while others questioned the effort. When performance shifted in a noticeable way, everyone wondered how it happened. “The CEO said, ‘I did it, and this is exactly why we’ve been investing in leadership development for years now,’” he recalls.
“Anytime you start doing something new, performance may decrease a bit,” Smith says. “But give it enough time and the trajectory increases significantly.” As leaders step into the right roles and receive the right support, the people around them gain a clearer understanding of what they own and how they add value. “When you do that, a compounding effect will follow.”
As the E&C industry continues to expand, project complexity increases and labor challenges persist, the pressure on leadership capacity won’t ease. The most practical place to start is a bench reality check: convene your executive team for a focused working session to define what “effective leadership” looks like at the executive, department, and field levels—and then candidly assess your current leaders against those standards. That single step will show you where execution risk is already embedded, where development needs to concentrate, and what roles require action before you lose projects, clients, or people to firms that addressed the gap sooner.
Contact us to learn how FMI helps construction companies build leadership capacity.
