CCA Conference Blog: Do it Right - Succession Planning

Succession planning can be a difficult process, especially with the demographic shift looming over the construction industry. A panel of succession planning and construction experts tackled the topic at the "Do it Right – Succession Planning" panel held on March 15 at the Canadian Construction Association conference in Savannah, Georgia.

The panel consisted of Tom Deans, author of “Every Family’s Business”, William B. Flaig, the president and CEO of Graham Group Ltd., and Paul Charette, the Chair of the Board of Bird Construction and past CCA chair of the board (2008.)

Deans started the panel by explaining that only one out of three family owned businesses actually pass down between generations. He added that most family businesses list right on the sign how long they’ve been in business, and that is precisely the wrong approach.

Deans said in the case of his own family, each generation sold the original business and started a new one, and that approach makes more sense as a “dynasty” than staying with a business no matter what other conditions exist. Bigness is no guarantee of permanence, Deans said. Lehman Bros was huge and still went bankrupt, as did Texaco.

Deans said that most business owners leave their succession planning until the last minute, and in most cases after a death the business goes to the spouse.

Deans pointed to how people are living longer, but will you have the energy at 90 to deal with the massive changes coming to the business world? He surmises in most cases people will not be able to do so, and so the company runs out of steam and sometimes disintegrates.

Deans said that your business is not your legacy. It either makes money or loses money, and your business is in effect alive. Therefore to act realistically you have to recognize that your business will have a final day and act accordingly.

Careers and ownership are two different things, Deans said. But people tend to mix up the two, and so exits in family businesses can be very emotional.

The upside for some construction companies is that because of demographics and poor succession planning there will be many family businesses up for sale, and those who want to make acquisitions will be able to do so very cheaply.

Owning the company and in effect running it while elderly children operate the business day to day is infantilizing, Deans said, and furthermore is not an effective way to do business.

Flaig gave his insights on the succession planning at Graham Group. He said succession planning is a day-to-day effort at the company. The after-product of the planning should lead on the continued success of the business, rather than on the exiting entity.

Succession planning must be an embedded business policy, Flaig said, and part of the company strategy. Effective succession planning involves structure, procedure and discipline.

Developing leadership talent is a long term effort. Succession planning should also be an open and transparent effort.

It’s important to target individuals who are ambitious and talented. Top talent should also be shared across the company rather than hoarded by one department.

Follow appropriate due diligence, and make sure all candidates recognize and are committed to the responsibilities that come with the new job.

Paul Charette of Bird Construction said the last thing he wants to do is sell the business, because he doesn’t want to adversely affect employees. When you sell the company, you owe it to those employees that they can continue with their careers.

Charette also said family members aren’t necessarily the best people to run a company, despite the emotional attachments many owners have.

Charette said Bird Construction was founded in the 1920s, and was passed down in the 1960s. But by 1988 the company had fallen on hard times, and eventually Charette, who was brought in, was made president. He said he was not prepared for that shift and furthermore was now responsible for 120 employees, and he made that his top priority.

Now Bird is a billion dollar company, but it’s still all about employees, Charette said.