This article by Pamela Scott was published in Construction Executive on May 28, 2020.
How prepared is your construction business to close its leadership gap? Baby boomers are retiring at a rapid rate. The next generation of leaders is often not ready to take their place. The gap is especially wide in industries impacted by the 2007-2009 recession, such as construction, engineering and manufacturing. A generation of workers who would now be ready to step up and lead the business moved to other fields. Construction firms will likely face another gap in the future if the COVID-19 economic downturn persists.
In Deloitte’s Global Human Capital Trends survey, 80% of respondents rated leadership a high priority for their organizations, but only 41% said they think their organizations are ready or very ready to meet their leadership requirements. The good news is leadership gaps can be closed. Below are signs that your construction business has a leadership gap or will have one in the next two to five years. You will also find a three-step strategy to close gaps.
How well would the business function if the top-level executives unexpectedly left? Are there key players equipped to take over the business? Do those employees know they are next in line? A clear career path and open communication with employees are vital.
If a company has a bright group of next generation leaders, it is easy to get lulled into a false sense of security. Just because employees have excelled as mid-level managers, it does not mean they can run a business. There is a big gap between managing departments and leading a company.
How often are next generation leaders included in conversations, meetings and decisions about how to run the business? How much do next generation leaders know about operations, business development, recruiting, retention and strategy? If the next generation is rarely invited behind the curtain, it will be foreign territory to them when they get there.
What is the company’s turnover rate? Low employee retention can indicate a leadership gap. Without a clear path forward, top performers look for career growth elsewhere, and that’s probably with competitors. Sixty-seven percent of millennials cite a lack of leadership development as a reason for leaving.
Some soon-to-be retirees often create an exit strategy five years before they plan to retire. However, a study of 200 privately held businesses by Wilmington Trust found that nearly 47% of business owners older than 65 do not have an exit strategy.
Exit strategies are not the same as succession plans, though. Exit strategies focus on the financial and legal aspects of a leader leaving a business. Succession plans are strategies for developing the next generation of talent. A lack of exit strategies and succession plans creates leadership gaps.
If your business has a leadership gap, do not panic. Implement a continuous leadership development program using the steps below.
1. Succession Planing
Write down a succession plan that maps the executive team’s areas of responsibility and expertise. Evaluate the skills and expertise of the next generation and fill gaps in development with targeted training and coaching.
2. Leadership Development Planning
Build a leadership development plan. The program should span multiple generations in the workforce. Focus on training and mentoring in the areas of operations, business development, recruiting, retention and strategy.
3. Create Tools for Knowledge Transfer
Establish procedures for knowledge transfer. This will prevent the exiting C-suite from taking critical knowledge with them. This includes documenting procedures and creating a knowledge repository.
Staff development is critical to running a successful business. How well a contractor prepares the next generation impacts the next decade or more of bottom line results for the business.
This article by Pamela Scott was published in Construction Executive on May 28, 2020.