The vast majority of asset-based construction businesses are private and family-owned. Owners, in turn, often have to navigate the question of family succession across generations – an entirely different beast from running the business. With family involvement to consider, they wade through issues like nepotism, employee upset, stakeholder interests and much more.
The continued success of the organization depends on a well-crafted transition. To guide asset-based construction businesses through this massive undertaking, we sat down with Ronald Richardson, a 6th-generation-professional from one of Canada's oldest and most successful companies, JRSL. Richardson has been a part of the company’s succession and governance processes for over 20 years, earning him a deep familiarity with the challenges of generational transitions. This article will capture the insights Richardson offered to asset-based construction business owners, focusing on the questions they should consider, and the role of software in implementing a seamless transition.
1.) How do you ensure the continuity of your knowledge?
The test of any leader is how well their business runs when they step out of the office. Ideally, your business should already run like a well-oiled machine when you’re not there to steer it, implying that the bulk of your know-how has already been handed off. But, the stakes are different when you’ve truly moved on from the company. At that point, you need to effectively “empty out” your expertise, making it accessible to the team forever after. So how do you ensure that your values and knowledge are preserved?
The obvious answer is that you have to pass down your operational practices and decision-making logic to your successors. According to Richardson, this manifests as deeply intentional delegation and training, developing agency within the team, and of course, thorough systems and documentation. You need to be certain that others know how you would approach a procedure or problem. Exactly how you go about it will differ from business to business, meaning we can’t be overly prescriptive.
However, the most important piece of advice in this regard is that the process should begin long before the founder's departure. The longer you’re collecting and codifying your institutional knowledge, the richer it will be when you leave.
2.) What role, if any, should the outgoing leader play in the business after the transition?
A patriarch or matriarch “hanging around in the hallways” can harm a successful transition, making it unclear who people should go to for decisions or input. Richardson champions the idea of having as clean a cutoff as possible, with founders striving to minimize post-transition interference. It can undermine the authority of the successor and promote reliance on the founder’s presence, which is no longer stable. Instead, the outgoing leader should serve as a repository of corporate memory, institutional knowledge, and nuanced info about customer relationships – to be used judiciously.
According to Richardson, the best thing founders can do the minute they leave is to forward questions to new leaders, limiting their involvement instead of leaping in to save the day. It is often best that they step into a board governance role - one that is narrowly scoped and clearly communicated. Non-executive board roles such as Vice Chair, Chair, or simply Director serve this purpose (and in the case of an honorary title, even “Chairperson Emeritus” has been used). It is critical for founders to remember, though, that it is the role of the board as a whole to direct the company, not individual directors, and to be careful not to inadvertently interfere with the new leadership’s authority.
The leader’s role is best distilled to the following actions:
Raise the topic of succession to the team - begin to hold meetings addressing it
Determine how long you plan to stay
Share your full assessment of all direct reports and successor candidates
Develop the potential candidates
Provide input on skills needed
Communicate only the messages that need to be communicated to the broader team
Get out of the way
3.) What is an ideal timeline for implementing a succession plan?
“Succession always seems to happen too late,” Richardson says, “which is why it’s important to have some form of Talent Succession Plan and regularly revisit it.” Boards are often caught flat footed because they’re forced to have this conversation if and when the founder’s exit comes up abruptly. It’s a difficult conversation that’s dealt with reactively, rather than thoughtfully and with clear intention.
While there is no magic number, the best timeline for succession planning is simply sooner rather than later, with a few years being ideal. This allows for thorough preparation and adjustment of the plan as circumstances change. It also affords the founder enough time to create a depth chart, consider each senior position (including his or her own), and write down each understudy – with a note on their readiness to undertake the role, be it today, in an emergency, in anywhere from 1-5 years.
4.) How do you prepare successors for leadership?
When the founder has a direct successor in mind, it may be best to have that candidate wear many different hats, getting experience across different operational areas of the business. This can range from getting in front of customers to getting out in the field and “shoveling grain,” so to speak. Having boots-on-the-ground will be some of the most important and foundational experience the successor will have. The founder, for their part, can almost reverse engineer the experiences most helpful to their role as leader, determining which ones the candidate would need to fulfill those requirements. This will be a long process, speaking to the need for proactivity. In the asset-based construction world, countless businesses were founded around a truck or one or two pieces of equipment, and have organically grown into multistate operating businesses. This was usually done on the back of the visionary or gritty founder. It bears asking yourself who within your candidate pool shares that “builder” and value-creation persona, and if your company still demands leadership in that vein.
You also want to get the buy-in or shareholders and stakeholders for your potential successor. Hearing their feedback ahead of time will help you get ahead of any reservations they have as your departure date nears.
5.) Should the founder secure third-party help?
Unequivocally, yes. If you can secure third party advisors experienced in generational transitions, then do so. However, this can also include internal stakeholders, board members, or third-party advisors friendly to the company, who have just as valuable input on the process. They can provide objectivity, making it so that the decision isn’t exclusively made by the outgoing leader, but by a group of people who are tending to the future of the company.
The role of advisors and internal stakeholders can be distilled to the following:
Own the process of succession
Drive the work plan
Get to know the candidates
Define skills needed in the next leader
Make the selection decision
Support transition in and out
Engage the new leader and respect his/her leadership space
6.) How will you keep shareholders engaged & comfortable during the transition?
Richardson asserts that the satisfaction of shareholders will have a pronounced effect on how the business fares after the founder’s exit. Their comfort levels should be actively catered to. Between operating and non-operating shareholders, their priorities, visibility, and demands differ. Salaries vs. dividends and growth vs. liquidity are just two of the spectrums for alignment. A lot of family businesses fracture due to misaligned shareholder interest, which succession can exacerbate.
Healthy communication and access to information is usually the antidote for this. That may mean offering non-operational roles, such as advisory or governance roles, to shareholders, enabling them to be more informed. Prioritizing shareholder engagement is key, as is balancing their needs with those of management and the business during this time.
7.) How do you deal with nepotism & family dynamics?
Family businesses can be breeding grounds for nepotism. The roles that family members secure may be merited, but often may not be either. This can undercut employee morale if they feel the family member hasn't earned their place. Richardson asserts that, “family members in the business must work twice as hard for half the credit.” Fairness is another factor: there is the potential for resentment between family members and emotions to bleed into the business, complicating everyday operation or the particulars of succession if not careful.
Best practice is to invest in family harmony – throughout the succession process, but in general, too. Open discussions about roles and expectations can help mitigate feelings of resentment or entitlement among family members.
If there are multiple familial candidates competing for a role, consult with your stakeholders on where to place all worthy candidates so that no talent is wasted and everyone is in the right seat. Furthermore, you shouldn’t make familial promotional decisions in a vacuum. Have a defensible, broader process and earn employee buy-in for decisions by including them in meaningful ways.
8.) What strategies can be employed to retain key employees during and after the transition?
Employee retention is always a challenge during transitions, especially if the new leader doesn't have the same credibility or command the same respect. The solution for this overlaps with an earlier question – that is, it hinges on getting your successor in the door early and exposing them to every level of operation. This not only acquaints them with the work, it acquaints them with the team. Credibility often begins with the willingness to get one’s hands dirty, and where employee perception is concerned, this is a good place to start. It also pays to explicitly involve key employees in the transition process and the details of how it should take place.
9.) How are crucial customer and vendor relationships kept healthy during succession?
Richardson believes that a warming up period will help you tend to the comfort of customers and vendors. Communicate early and often. To achieve this, it’s essential to clearly define and communicate roles, accountability, and to stick to them. Ahead of a transition, be proactive with handover and transition activities. At the time of transition, update titles immediately in email signatures, organizational charts, and other official documents to reflect the new leadership structure. Formally communicating them is critical, like "John Smith, Vice Chair, Board of Directors" (as the outgoing CEO) and "Jane Doe, CEO” (as the incoming CEO).
Organizations can introduce the new leader in meetings or communications to familiarize customers and vendors before the transition. Additionally, hosting a formal handoff meeting can help ease customers and vendors as you officially transfer responsibilities. Emphasizing the continuity of company values and vision, while highlighting the strengths and qualifications of the incoming leader is also useful. The outgoing founder should reinforce that the new leader has full decision-making authority, and encourage customers and vendors to direct inquiries and concerns to them, when appropriate.
The Role of Software in Succession
Software plays a crucial and often unappreciated role in succession. Preserving institutional knowledge is one of the most significant challenges during succession. An integrated enterprise resource planning (ERP) system, like Tough Commerce, supports that by systematizing operational procedures. This digital warehouse helps cement operational best practices, reducing the organization’s and new leader’s reliance on undocumented practices. Business practices are structured and formalized. The result is greater efficiencies, understanding and operational rigor, from which the business that can scale more profitably.
In cases where the software was not already in use prior to the handoff, it facilitates innovation. Incoming managers, especially those younger, may be keen to introduce more efficient, technologically robust solutions – injecting new blood into the business. This can lead to significant improvements in efficiency, revenue, and profitability, setting the stage for a more successful handover.
Ultimately, the right software preserves the legacy of the business while enabling new leadership to innovate and improve operations. It provides a foundation for continuity while allowing for growth and adaptation, making it an invaluable tool in navigating the challenges of generational transitions in business.
That said, it’s incredibly important to vet the software you use. Ideally, the right software will be in use long before the transition. Competing software solutions, like RapidWorks, are notoriously unstructured and poorly validated, rendering it potentially messy and requiring active administration to be impactful to someone using it. You want a system that actually understands your business and protects the integrity of your data in how it was designed, versus the ‘spreadsheet on steroids' approach of legacy systems. With the right integrated ERP, you should see gains in efficiency, revenue, and the bottom line.
Succession planning in family-owned businesses is extremely high stakes. The removal of certain bricks, like a retiring leader’s wisdom or even an outdated business practice—threatens to topple the tower. On the other side of the coin, these changes may be exactly what the business needed to strengthen its structural integrity. As the next generation steps up, armed with fresh ideas and an appetite for innovation, technology can become the mortar that cements the business’ legacy. Ultimately, the most successful family business transitions don't just pass the torch; they actively stoke it.
Comments