Your Next-Generation Leaders: Are They Ready?

Many construction leaders assume that leader development and succession issues have blown over since the recession put a swift end to the boom years’ war for talent.

However, these issues have not gone away; on the contrary, they have become even more acute as a result of the Great Recession thanks to these four key developments:

• The demographics bubble of retiring baby boomers followed by a much smaller Generation X.
• The construction industry’s inability to present itself as a desirable industry for future generations.
• The impact of long-term unemployment, which has driven many young workers out of the construction industry for good.
• Owner and/or company capital bases, which have been reduced by the recession.

These factors, combined with a rebounding economy and new opportunities for growth and expansion, put ownership transfer and management succession (OTMS) high on the list of critical issues shaping today’s construction industry.

The issues of OTMS in the construction industry have been talked about for decades. Though company leaders realize the importance of planning and preparing for this critical phase in a firm’s progression, the topic often gets deferred until it’s too late.

Successfully transferring the ownership and management of a construction firm requires a dedicated effort and can take more than a decade to accomplish. Procrastinating succession plan development – and the accompanying stock transfer implementation – limits an owner’s options, may delay the timing of his or her exit, and puts the business at risk.

Based on FMI’s experience, candidates for future ownership and leadership positions must be identified early in the business succession process and given time to grow into their new roles. This may feel uncomfortable to current owners, who fear losing their positions or authority in the business and community. However, it is a vital step toward achieving the larger goal of ensuring business continuity long after current leaders retire. Business consultant and author Peter Drucker once said, “The final test of greatness in a CEO is how well he chooses a successor and whether he can step aside and let his successor run the company.” No succession plan will work if the business lacks the people and leaders to make it happen.

Forward-looking contractors are already reassessing their human resources strategies and closely examining the relevancy of their succession and leadership development plans. The need for solid, deliberate leadership development plans – and the fact that many companies overlook this requirement – will continue to cause a surge of challenges and opportunities for construction firms, including:

• Identifying, selecting and developing a new generation of leaders (how to do it faster, more effectively, and without making the mistake of selecting the wrong people).
• Identifying, selecting and developing a new generation of leaders (how to do it faster, more effectively, and without making the mistake of selecting the wrong people).
• Understanding generational differences and building a “millennial-friendly” organization.
• Managing the extended timing and corresponding risk of internal ownership transfer, which takes up to 10 years to transition.
• Capturing and embedding the cumulative knowledge of outgoing employees.
• Developing intentional, purposeful succession plans.
• Growing high-potential employees’ abilities to lead versus manage and think strategically versus operationally.
• Preserving organizational culture and legacy for future generations.

Preparing future leaders is a process, not an event, and it starts at the top. Company owners must champion policies, practices and attitude around leadership development and clearly align employees’ capabilities and career aspirations with the company’s overall business strategies.

For successful contractors, transitioning ownership and leadership to the next generation is another true test of greatness – one that will establish their legacy, provide opportunity for others and allow them to realize the value of their life’s work.