Construction top executives come up through the ranks of the construction trades or through formal education which is usually in construction management or engineering degree. This genesis bends the construction professional’s profile toward the hands-on builder who, it must be said, has erected the world's entire built infrastructure. However, successful contractors often find themselves at the helm of big businesses that employ scores of trades people and handle millions of dollars every year. But rarely do they have any formal business, finance, or accounting training or education. For this reason, the construction industry has placed little emphasis on formal business education.

The Fortune 500

Although the construction industry is the oldest and largest industry in the world, its top management profile differs dramatically from most other modern industrial companies. Whereas most construction concerns are privately owned and run by a founder or the founder's hand-picked successors, most Fortune 500 companies have "professional" management at the helm.

• Approximately 1/3 of Fortune 500 companies have CEOs who hold an MBA.
• 52% of North American CEOs have obtained a master’s degree.
• 47% of North American CEOs have a bachelor’s degree in business administration.
• Brad Banducci, CEO of Woolworths Group has a Bachelor of Law, Bachelor of Commerce, and MBA.
• Thasunda Duckett, CEO of TIAA Investment a Bachelor of Finance and MBA.
• Tim Cook, CEO of Apple, a Bachelor of Science and MBA.
• Pichai Sundararajan, CEO of Alphabet Inc. (Google) a Bachelor of Metallurgical Engineering, Master of Science, and MBA.

Construction Leadership and Entrepreneur Myths

• Construction is a major contributor to the U.S. economy with more than a million construction establishments in the U. S. The industry employs 8.0 million people and creates nearly $2.1 trillion worth of structures each year. Construction is one of the largest customers for manufacturing, mining and a variety of other services.
• Yet, unlike typical Fortune 500 companies, most of construction's top executives do not possess advanced degrees in business management. Construction and engineering degrees offer limited if any advanced courses in the science of business.
• The management of a construction enterprise is typically seen to require technical and engineering knowledge. There seems to be little or no interest or need for the science of business.
• Vocational education has historically been an avenue for students graduating high school and moving directly into a trade. This excellent hands-on education obviously includes no basic business or accounting courses and the graduates are not assumed to be college bound.
• The entrepreneur myth states that company founders rarely have or need a formal business education. They can always employ professional management types to handle the sticky legal and accounting details.

When you look at construction's profile through the lens of the factors listed above, it is easy to see why formal education in the science of business management is not deemed necessary for construction's top management. The current belief is that hands-on common sense coupled with some early experience with the tools, or a construction or engineering degree will suffice to prepare construction top management for leadership roles in these complex industrial enterprises.

Art to Science

This year we have been discussing the impact of erroneous beliefs held by too many construction professionals on the risks inherent in our industry. The myth that the almighty intuitive entrepreneur unshackled from a stogy formal business education can run a large, complex business organization with just common sense and a large appetite for risk is the first step into the black hole of business failure.

Business management is an art. But big complex business management is a science. Contractors that start out with technical or engineering degrees or start out working with the tools that also have talent and energy can succeed in growing a one-man shop into a large industrial business. However, success can blind us to the risks that come with size and complexity, preventing us from recognizing that our company has transitioned from the entrepreneurial stage to the professional management stage.

We are here this year to highlight the risks inherent in that transition and offer suggestions on managing the risks that come along with complex business organizations.

Our first suggestion is – Know when to start applying science.

Next week our second suggestion will be - Recognize Risk.