Succession planning is challenging.
According to a 2017 FMI survey of construction companies, 77% think their successors will come from internal candidates, and 43% of construction company owners intend to sell to their employees. If this is your plan, how can you identify the people that will take over your leadership role and buy the company from you?
Don’t settle for second best.
Recently I interviewed Eric Jones, President of Foushee Construction, for Construction Genius podcast. He is a second-generation owner of Foushee and is developing the next generation of owners. Eric shared a simple question with me that he is using to identify his successors:
“Are they the best in their peer group?”
If you are considering a project manager (PM) or project executive (PX) for senior leadership and future ownership, this question gives you a jumping-off point to evaluate internal candidates in three ways:
- Project Performance
- Client Relationships
- Entrepreneurial Thinking
Let’s explore each of these.
You are in business to make money.
Budget, schedule, safety, quality, change order management, materials, and subcontractor management drive a project’s profitability. Those are achieved by people who have a technical understanding of the work, the discipline to execute proven processes, and the ability to coordinate communication between the field and office and with clients and project partners.
Project profitably is why you are in business, and anyone, from the build side of your business, that you are considering for ownership must consistently make money on what they build.
Ideally, they should not be specialists. If you do business with private and public clients, and perform ground up and tenant improvement projects, they should have mastered the nuances of each.
Future owners and leaders are not just builders. They understand the importance of taking care of your clients.
Construction is a relationship game.
The goal of your business is to build long-term relationships with your target markets and get repeat business. A future owner of your company has to be able to develop strong relationships with clients. Your customers should like and respect them. They are considered trusted advisors, and the client asks for them to build their work. If you are considering a PM or PX for ownership and they don’t have a “book of business” where clients ask for them to build their projects, that should be a red flag, and they should not be considered the best in their peer group.
Companies that adapt and change thrive across generations.
The primary activity of entrepreneurship is innovation. Where you are now is not where you will be in 5-10 years. A construction company innovates by improving processes, adopting new technologies, hiring people, expanding geographically, taking on new project types, working with new customers.
A future owner of your company must have an entrepreneurial mindset.
Take your time identifying successors. People can be eager for change, but if they don’t have the necessary “time in the seat,” they can miss innovation opportunities because of a lack of understanding and experience.
Top-notch PMs and PXs are consistently proposing new ways to improve your company internally and grow externally.
Succession planning is complex; work hard to simplify it.
One of the ways to do that is to think about your internal candidates and ask: “Are they the best in their peer group?” If they make money on their projects, build lasting client relationships, and think entrepreneurially, you can tag them as potential future owners.
What would it be worth to set your construction company and sell it (internally or externally) for top dollar?
Click this link to take FREE short Succession Planning Assessment. In less than 10 minutes you’ll have a clear idea of where you need to focus and prepare your company for the future: https://www.constructiongenius.com/construction-succession/