How Multi-Generational Construction Companies Will Survive

From guest blogger and friend of the firm, Kris Anderson

As the great politician & businessman Benjamin Franklin stated, “By failing to prepare you are preparing to fail.”  A common theme relevant to all public or private companies – then and now.  I recently retired from a multi-generational construction company that will celebrate its 150th year in 2014.  It survived through four generations of family control, and then proceeded into a 20 yr. transition to 100% employee ownership.  During that 20 yr. period the company grew over 300% and solidified itself as one of the country’s largest & most respected privately owned construction firms.  This is but one success story, by a company that did the proper planning during turbulent economic cycles.  In an industry known for multi-generational ownership and a checkered history of good  & bad generational transitions.

According to the Family Business Institute, 88% of family business owners believe the same family or families will control their business in five years, but the real metrics undermine this belief.  Only about 30% of family businesses survive into the 2nd generation, 12% into the 3rd generation, and only about 3% operate into the 4th or beyond.  The most common areas of contention or omission in family business succession planning are:  1) Technical mistakes, 2.) Planning in a vacuum, 3.) Leaving the business to the surviving spouse, and 4.) The challenge of treating children equitably.

The most important quality the multi-generational business must pass on from one generation to the next is “leadership”.  Without effective leadership no organization survives, especially in today’s fast paced technically driven markets that change quickly, and have too many distractions for family owners.  The great recession we are slowly emerging from has resulted in many firms deferring ownership planning.  Over half of U.S. construction firms will change hands in the next 10yrs, according to the industry management consultant FMI.

The keys to multi-generational survival are rather basic:  1)  Current leadership must be honest & objective in assessing its options, 2.) No two companies are the same, 3.) Nobody is indispensable, including family members, 4.) Develop & manipulate the plan with technical experts that will help minimize mistakes.

Kris Anderson is a retired construction executive & principal of Anderson Associates II, a construction consulting firm that includes other retired construction executives from around the nation.  He spent 33 yrs. with McCarthy Holdings Inc. based in St. Louis; with 10 national offices, 100 % employee ownership & 2012 revenues of $3 billion.  He has a broad background in strategic planning, business development and operations.  He has had a long association with Anders construction & tax specialty groups.