Over the next decade, an estimated 10,000 Baby Boomers a day will retire, and with them many executives from SMACNA member contractors will as well. How well prepared are sheet metal and HVAC contractors to manage the transition of their top people over the next decade? How should Baby Boomer companies prepare the next generation of leaders to step up and assume a leadership role?
SMACNA’s new report on Management Succession, part of SMACNA’s Contractor Operations Manual, illustrates the ways members can turn this potential crisis situation into an opportunity while gaining a competitive advantage. The report highlights the benefits of internal management succession, best practices, and outlines a process for effective management succession. The Contractor Operations Manual covers the non-financial areas of operating a contracting business.
“When executives retire without a succession plan, the likelihood of the company surviving decreases significantly,” noted Thomas J. Soles Jr., SMACNA’s executive director of member services and market sectors, who spearheaded the project.
“If you don’t have some continuity with similar outlooks on the culture, the organization as a whole, and on the kind of customers they work with, then significant disruptions and confusion can take over and cause the business to collapse. You see a lot of business failures as a result of poor planning on succession.”
According to the manual, succession planning includes many benefits such as: increasing the odds of success in key positions reducing the costs of external recruiting and hiring, quicker transfers of institutional knowledge retention of high-performers increased productivity due to talent development from within.
“The manual shows you how to put some policies and processes in place to identify key people and future leaders in your company for possible leadership roles,” agreed Thomas E. Martin, president of T. H. Martin Inc. and chair of the Contractor Operations Manual Task Force. “The manual offers a way to prepare yourself better for management succession.”
“This is a process piece that tells you how to organize your thoughts about management succession, incorporating policies that work for your company,” Martin said. “It’s an exercise in the process of identifying people from the field to bring into the office to become managers and officers and also to identify future estimators, sales staff, and project managers to become company leaders.”
According to the report, only 10 percent of companies have an effective management succession plan in place to prepare for the departure of seasoned executive leaders and transitioning younger leaders into senior executive roles.
“We as contractors aren’t as prepared as we want to think we are,” Martin reflected. “Especially on the whole turnover of people retiring from the workforce, and of Millennials coming in. Millennials see things differently. They are social media and Internet savvy. We have to change our ways to make sure they are comfortable working for us. They are goal-driven, professionally and personally.”
“If your leaders are retiring and you are not ready to replace them, there is a lot of training involved and there could be gaps in your business,” Martin said. “If you bring in a new person, the training takes up to three months. If you’re not prepared you can lose customers, not be able to bid projects, and then customers’ concerns grow. It’s a real concern if you get caught in a situation where somebody exits and you don’t have a plan in place. We could be missing out on customers and future projects because we lack succession planning.”
“If you do the succession planning in-house, you are putting a positive plan together based on your culture,” Martin continued. “Every business is different. Some businesses bid to mechanical contractors, some bid to general contractors. You can build and define the company culture and your business mantra when you set your succession policies in-house.”
Coaching and mentoring also helps in-house recruits move upward. “When working on defining roles, make sure they know what they are going to be doing and mentor them accordingly.” Martin said.
“For your senior managers, you are looking at Gen-Xers and Millennials as your potential candidates for leadership positions,” Soles agreed. “How do you evaluate them? The manual gets down to the nitty-gritty details in the process and gives company leaders a detailed plan.”
Members can download a free copy of the new Management Succession manual