Successor Planning for Continuity and Survival in the US Construction Industry

According to Charles Schrader, a State appointed business advisor for the last 25 years, “Studies show that over 95 percent of all construction companies are family-owned or closely held businesses.” And of those business “only three in 10 family businesses survive from the first to the second generation, and only one in 10 of those survive to the third generation” (Chang, 2008). There is a major issue in the current construction world when one owner passes on his company to another owner, and as more owners begin to retire their business are beginning to slowly decline until failure. Furthermore, as the generation of baby boomers reaches retirement this problem will only be getting worse (Holmes, 2016). Many executives of construction companies are also the founders, and they typically lead their companies for 30 to 40 years. They posses a wealth of knowledge on leadership, and market conditions and they are often the key most important member within the structure of the company.(Yankov, Kleiner, 2001). However, they do not know how to successfully pass this knowledge on to the next generation (Schleiffer, Sullivan, Murdough, 2014). There is a need for a new method of organizing the way construction companies are set up, and our research is leading us to believe that successor planning is the solution to this problem. Successor planning is planning your company in such a way that it can continue to survive once you have stepped out of it (Davila, 2015). It is not a singular event but rather an ongoing system of procedures to develop future replacements (Kim, 2010). This type of planning usually looks like strategically mentoring and teaching company leaders and key players in your company to run and operate as the founder intended. This is a major problem but still few business owners actually enact successor plan to keep the enterprise thriving after they've left whether voluntarily or involuntarily (Targgart, Chapman, 2014).