Following a 2017 survey compiled by the USG Corp and the U.S. Chamber of Commerce, the Commercial Construction Index revealed that the United States is on the precipice of what could be one of the largest labor shortages in decades. While high revenue forecasts and spiking project demands have succored steady optimism for today’s contractors — the availability, training, and cost of hiring skilled workers remain major concerns.
A large majority of construction businesses are owned by baby boomers over the age of 60, from which nearly half plan on transferring or selling their business within the next 10-12 years. To ensure the continuity and success of their business post-retirement, and mitigate the risks sparked by unexpected events and “The Perfect Labor Storm”, today’s construction business owners have embarked on a new project: succession planning.
A succession plan is basically an exit strategy that is designed to help ensure the orderly transfer of a business or vacant role from the current owner/ founders to the next generation. A small business is often the largest asset belonging to its owner, but many owners procrastinate or underestimate the importance of succession planning — if they bother to do it at all.
However, simply “making” business succession plans doesn’t eliminate the potential for something to go wrong. In fact, sometimes even the most detailed plans that owners or families in business spend months or years preparing can fall apart. What makes these plans fail? Here are seven reasons why your succession plan might fall apart.
Failure Due to Lack of a Plan
Some construction companies fail to even put together a succession plan. Why don’t they create one of these documents? Many times it is oversimplified by a family, and they believe by knowing the family member who will be taking over is enough. This can be a catastrophic mistake, both in the potential failure and collapse of the company due to not having the proper experience and skill sets to “steer the ship”, and the irreparable damage is can cause to future family relations. However, there are a few reasons why most of these companies say they don’t have one of these documents.
They Don’t Have a Suitable Successor
Some companies put off writing a succession plan because the CEO and other executives don’t see a suitable successor. In many construction businesses, the owner’s son or other relation takes over. What if no one in the family wants to run the company? What if the successor options within the owner’s family aren’t ready for the responsibility that comes with being in charge?
Even if that’s not a problem, sometimes it’s still hard to find someone within the company who will want to step up into the CEO spot when you step down. Your upper leadership may have no desire to be fully in charge or may not be ready for this responsibility. Without an obvious successor, therefore, it may seem to be pointless to create a successor plan.
You’re Not Certain You Want to Leave
Creating a succession plan may feel like the final step in leaving your company, and you may not be ready for that. You may have no plans to retire, but if you create a formal succession plan, you may feel like now you have to leave. You don’t. Succession plans aren’t tools designed to get you out of your company. They’re nothing negative towards you. Instead, these documents are there to make certain your legacy remains intact. They guarantee that your company will be able to continue.
A succession plan also serves as a type of insurance policy for your company. What would happen if you were seriously injured or even died tomorrow? Who would step in and make certain the company remains on track? Having a succession plan would help your senior managers know how to move forward in such an event.
The Economy Is in a Recession
Some company owners use the excuse that the economy is going through a recession to avoid creating a succession plan. They believe that their experience and knowledge is required to keep the business afloat—they can’t retire when the economy is in such a state. Some may have planned on retiring, but they might still use the recession as an excuse for remaining in charge longer than they had planned.
Failure Due to a Poor Plan
Even with a plan, it’s possible things won’t go as you’d like. Here are four key issues that can lead to a failed succession plan.
Your Successor Leaves
You may have put together a succession plan based on a few key people in the company moving up when you or one of your senior managers leave. But what if those chosen successors get a better offer elsewhere? If your plan isn’t flexible and can’t be adjusted for the loss of a successor, you’re going to have to start over.
Your Successor Isn’t Doing a Good Job
A succession plan needs to be able to be easily changed if a chosen successor isn’t performing as you had expected. There’s nothing wrong or shameful about deciding someone isn’t cut out to be a successor, especially since you should have given that person clear guidelines regarding following an advancement path through the company.
If this individual knows that you expect certain things and then doesn’t meet those expectations, you don’t have to hand over the business to that person. You don’t want to put your company in the hands of someone who isn’t ready to meet the challenge.
Your Succession Plan is Too Complicated
Your succession plan needs to be fairly simple and straightforward. Anything that’s too complicated and involves your successors jumping through too many hoops may actually cause those individuals to decide that it’s not worth the effort. They may leave before you can!
You Leave the Planning to HR
Succession planning isn’t something your HR department or sole HR expert should handle. It’s a major plan that will affect your entire company. You and your senior leadership need to carefully consider every available candidate and create a plan that works for all of you.
Cement Your Legacy
Your succession plan is your way of cementing your legacy and making certain that your company is in good hands after you leave. That’s why there’s no reason to put off creating one of these plans now. If you’re not certain how you should go about achieving this goal, there’s help. You can contact Small Business Growth Partners today in order to consult with the experts.