Succession planning is a difficult, but necessary, subject for a contractor
- Larry May
All too frequently, construction owners delay their succession planning. It’s an uncomfortable topic, to be sure, because it forces them to admit a hard truth, relinquish control and trust another person with one of their most valuable assets. It’s an all-too-easy topic to postpone, especially given the hectic day-to-day environment of a typical construction office. Nevertheless, it’s a critical discussion necessary to the future of the business.
Strong management succession will increase and protect the business’ value, as well as provide a host of other tangible and intangible benefits. Succession planning should be a formal, intentional process, beginning with the identification of key decision-makers and succession planning goals and objectives. The owner should determine who will be involved in the process, select necessary advisers from outside the company, develop a transition timeline and identify long-term goals. Next, they should create a list of possible successors, as well as identify the technical and soft skills needed for the positions, and perform a psychological assessment. Ideally, the successor should even play a role in creating the plan, then be continuously groomed for the eventual transition.
Most importantly, they should have access to the owner’s intangible assets, e.g. knowledge, skills and relationships. Some of the more successful succession plans will gradually reduce the company’s reliance on the owner by transferring knowledge to the successor. In doing so, it ensures that a competent and valuable leader is available at all times during the transition. Flexibility should be an important part of the plan, as it will likely evolve over time. Other topics of discussion might include future financial security, financial stability for dependents, maintaining family ownership, treating children equitably etc. Different owners may have different exit goals or timelines, but communicating the objectives with key members of the organization is particularly crucial – a misstep in communication could cause costly disruptions such as power struggles among key employees or family members and stress for external players, including suppliers, customers, lenders and advisors.
Despite the various parts, pieces and complexities, succession planning shouldn’t be pushed to the back burner. An effective plan can be competently developed from the ground up by a following a precise, established process. For more information regarding succession planning and your unique situation, contact your local CRI professional.
Subscribe to our e-communications to receive the latest accounting and advisory news and updates impacting you and your business.