When we started The Family Business Institute over 30 years ago, family ownership and management of construction companies was the overwhelming norm. Today, doing some quick surveying of our members, only about 50% are family-owned and operated. But that's still a tremendously high percentage when compared to other industries.
Family businesses are different. Leon Danco wrote in the 1970s that family businesses are "the perfect mix of entitlement and opportunity." We've all seen family construction firms that subscribe to the entitlement aspect, and some family members in those companies coasted along because they had the right last name. They enjoyed higher salaries, more vacations, better offices, and more opportunities. They viewed the family business as a place to exist on cruise control and enjoy the country club lifestyle without having to work too hard. That attitude is extremely unlikely to lead to a successful career or to be tolerated today. Most 21st-century construction companies are meritocracies. Success in construction is based on value and achievement now, and that's a good thing. The industry is much more professional than it was a few decades ago.
Why is being a family member in a family-owned construction firm harder? The reason is that family members are always under the microscope. They are continually evaluated by mom and dad, aunts and uncles, other senior leaders, field workers, and even trade partners and professionals. Employees wonder, "Is this young man going to take my job?" Field workers and trade partners think, "She doesn't know anything about the hard work of getting projects done." There is intense pressure on family members who aspire to leadership not the least of which is to hold up the legacy of the family business.
There are three steps for a family member to succeed in a well-run construction business: The basics, earning respect over time, and, finally, ascending into senior leadership.
- The basics. Whether formally or via relevant work experience, young people need to learn the business from the ground up. They should demonstrate a hunger for internal and external training. We recommend that they work outside the family company for at least three years. Ideally, they will work for another contractor that's larger and more sophisticated than their own family business. Get out there, learn, and make the inevitable mistakes on somebody else's nickel. Earn promotions, accolades, and on-the-job education. Doing these things means that when the family member returns to the legacy business, he or she is genuinely ready to contribute. Upon return to the family company, family members should start in the field even if only for a short period. This will allow them to appreciate how projects come together, and they can best learn that from working side-by-side with people in the field, experiencing their ups and downs, the ebb and flow of their days, and the kind of hard work required to bring jobs to fruition. That appreciation for the grueling work in the field contributes to empathy later on.
- Earning respect. Respect can neither be demanded nor bestowed; it absolutely must be earned. What’s the pathway to earning respect in construction? It's leading people to success across projects. Operations are the normal pathway for young people to learn the construction business, but they could also earn their spurs via success in business development, estimating, or any number of different ways. The main thing is a young person needs to be able to execute his or her job and build teams, collaboration, schedules, and budgets. They must engineer project success because if they can't run a project, how can they run a business? It's important to earn respect internally, of course, but if young people aspire to senior leadership, they also must earn the respect of peers, trade partners, customers, bankers, bonding companies, and other professionals. Earning respect never stops; in fact, it takes a lifetime. The paradox of respect is that you can lose it in an instant. It only takes one colossal slip-up or one major transgression. There's no real-time prescription for earning respect. Some will dash through the process with aplomb while others will take longer. If a family member doesn't earn respect, both internal and external, over time, don't even bother considering that person for senior leadership. Nothing collapses morale more than rewarding family members who have not genuinely earned their places. That will cost you good people, and that's a huge risk in today's construction marketplace.
- Senior leadership. Senior leaders must develop and hone great listening skills. In fact, they should listen much more than they talk. They must demonstrate sound decision-making. They've got to be mature, reliable, and consistent in their business and interpersonal habits. They must be masters at building and sustaining professional relationships. And finally, leaders must demonstrate true care and concern for employees and their families. If people come first in today's construction world, (and they do!), the most important decisions they make as senior leaders are people decisions.
While the landscape is not as dominated by family-owned construction firms as it once was, they are still a huge part of the industry, and, due to their complex natures, family businesses require a more delicate touch when it comes to the three stages of successful intergenerational transition.