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But They’ll Never Retire: Overcoming Management Succession Procrastination

When construction executives speak of making an effective leadership and ownership transition, they often use the term passing the baton, conjuring an image of a tightly coordinated, intensely practiced transition happening smoothly and effortlessly at high speed. However, if most actual transitions looked like a relay race, the baton would spend more time on the track than in the hands of the participants. These fumbles are inevitable: At its essence, the transfer of ownership and leadership in a closely held construction business is deeply personal and emotional.

While many contemporary construction leaders are incredibly entrepreneurial, independent, and passionate about creating great organizations, only a few manage to build enduring greatness. Consider some of the factors involved in ownership transfer: money, legacy, family, facing mortality, and the potential loss of status and sense of meaning.

Owners and managers alike looking to transition their businesses face a perfect storm of factors challenging their efforts, including the illiquid nature of closely held ownership and the shortage of skilled labor. Despite these headwinds, leaders with vision and willingness to do the exceptionally challenging work of building and growing a great company will reap the rewards of a lasting legacy for the next generation.

At the Emotional Core

In an environment where owners and leaders often consider their companies as more of a family than a corporation, it is no wonder that executives defer the difficult and often painful decision of transitioning to life’s next phase. While most ownership and management transitions appear to be tactical on the surface, they are actually very personal and emotional at the core.

Research shows that the avoidance of pain is one of the most powerful drivers. Therefore, creating an atmosphere of safety and trust is essential for an owner or leader to overcome the fear of letting go of his or her business.

Contractors live in a perpetually urgent environment; liquidated damages are a daily risk with some carrying a cost of thousands of dollars per hour. Time is money. Given this world view, what can wait until tomorrow will wait until then; and, sometimes, activities of potentially profound significance – including the management succession process – fall into that category.

In his booklet Tyranny of the Urgent!, Charles Hummel explained that, “Our dilemma goes deeper than shortage of time; it is basically a problem of priorities. We confess, ‘We have left undone those things that ought to have done; and we have done those things which we ought not to have done.’” In other words, the sheer pace of life continually distorts our judgment.

If we avoid pain to our own detriment and experience heightened avoidance due to the distractions of a busy life, then what is the cost of this procrastination? Often the result is the sale of the business or the passing of the baton to a next-generation leader who lacks the skills and seasoning to continue profitable operations. In both instances, the result is a disruption of continuity – a deferred set of decisions puts jobs at risk and significantly affects many people connected to the business.

There is a highly plausible argument for the premise that the greatest risk to the capital and earnings of a business is the transition of its ownership and management. Yet, rarely is the process equated with the word “risk.” Even external financial stakeholders in the business – typically banks and bonding companies – understate and frequently misunderstand the perils of this transition.

Leaving Too Soon

One common mistake is an owner or management’s exit from the business too early or too suddenly. This is usually driven by an altruistic desire to let the next generation take over or by simply “having enough” of the long hours, risk, and stress of running a construction business. Some owners also believe that they can retain significant equity in the company and participate in the profit while absent from day to day business. However, this is rarely effective and often leads to disgruntled employees who are frustrated by running the business to fund an absent owner.

Most successful transitions are gradual and feature a phased and intentional transfer of responsibility, relationships, and equity. While this gradual transition conjures an image of a smooth and easy path, the reality is that there are almost as many starts as stops as the exiting leaders calibrate when, where, and how to transition key responsibilities.

For example, one owner reviewed all estimates, just as he had done for almost 30 years. When he abruptly decided to stop reviewing them as part of his transition, the next year featured several unpleasant project surprises as his estimating team – trained to rely on his expertise for this vital task – eventually found its footing.

Staying Too Long

An even more common mistake is staying too long, typically driven by either a failure to develop talent or an owner’s unwillingness to let go. Staying too long often results from a leader or leadership team focusing most of their time running and/or growing the business, with too little time spent developing a team of leaders to succeed them.

For example, when faced with very direct advice on the urgency of transitioning the business to his 55-year old son, an 82-year old owner swore, “The kid just isn’t ready!”

Fearing the Unknown

So, imagine the conundrum of the construction executive who grasps the consequences of inaction, overcomes the fear of potential pain of stepping out of the business, understands the enterprise-level risk, and yet still suffers from paralysis and inaction. Could there be an even deeper, more powerful barrier to overcome?

Yes – the fear of the unknown: “This is all I’ve ever done, I am quite good at it, and I don’t know what else I could do that would even remotely approach the mastery I’ve achieved here.” Rarely is a fear this personal and this profound ever voiced, yet it frames countless comments, objections, and concerns.

Leaders with the added burden of the business bearing his or her name must also separate their personal identity from the corporate entity. Construction executives often liken the process of separating from the business to amputating an arm or leg. While graphic, this metaphor captures the depth of sacrifice demanded for many transitioning leaders.

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About the Authors

Michael Mangum

Michael Mangum is a Principal & Senior Consultant with FMI’s Center for Strategic Leadership in Raleigh, NC. Michael has over 40 years of experience in the construction industry and helps drive organizational change through strategic thought and personal transformation. Michael has served in various construction leadership roles including President and CEO. He has additional experience in commerci

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Jake Appelman

JAKE APPELMAN is a Principal & Senior Consultant at FMI’s Center for Strategic Leadership in its Denver, CO office. He partners with architecture, engineering, and construction organizations to develop exceptional leadership.

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