As baby boomers continue to retire in large numbers, many are leaving leadership of their companies to the next generation. More than 50% of engineering and construction firms are expected to change ownership in the next 10 to 12 years, according to a recent study by industry consultant FMI. However, with rampant talent shortages across the industry, firms must both acquire and develop talent while transferring ownership to a new generation, the study says.
FMI’s study focused on questions of ownership transfer and management succession (OTMS) to assess how companies find and develop next-generation leaders. The findings reveal several emerging trends:
- Fewer firms have family members active in their businesses today than in 2013 (45% in 2017 versus 73% in 2013, according to the FMI survey). Even fewer say the next generation will own and run the business in the future (32% in 2017 versus 52% in 2013).
- In 2013, 17% of respondents planned on a third-party sale. In 2017 that number has declined to 8%. Conversely, employee stock ownership plans (ESOPs), have gained in favor among respondents, increasing from 4% to 12% from 2013 to 2017, respectively.
- Firms with a clear strategy for the future are more likely to have a formal ownership transfer-and-succession management plan in place.
- Successions in the engineering and construction (E&C) industry require embracing nontraditional development plans and cultural shifts.
- Less than half (44%) of survey participants indicated that current leaders are held accountable for their own succession.
The survey also revealed that many next-generation leaders (47% of identified successors) are unprepared to lead the business for another three to five years. Worse still, options are dwindling for baby boomers who have delayed their transition planning. That’s due to the amount of time needed for effective ownership and leadership transition.