Building a Culture of Merit in a Family Business
Some family businesses have been accused of favoring family over meritorious non-family employees. That was probably true a decade or two ago, but the construction industry has evolved substantially to focusing much more on merit than other characteristics today. That being said, doesn’t it make sense to build a culture of merit and accountability in your company whether family-owned or not? If that’s the case, how do you do it?
Please tune in this week as Wayne covers a story from the Chief Executive Daily Briefing and offers three tips on building a culture of merit. He also discusses his perspective on generational alignment and evolving attitudes on the subject of profit drawing on an article he wrote in 2009 (seems like a long time ago, doesn’t it?). What’s your thinking? Please share your opinions with us at [email protected].
Building a culture of meritocracy starts with investing in the leaders who've earned their seat at the table. The Contractor Business Boot Camp, our unique leadership development program, is designed to equip your high-potential rising leaders, family member or not, with the skills, strategies and accountability mindset needed to drive your construction business forward. The final cohort of 2026 begins in November, and spots are limited, so don't miss this last opportunity of the year to put your best people in the room. Contact Charlotte today at [email protected] to find out more.
(DESCRIPTION)
Logo, Performance Construction Advisors
Logo drops into the middle of a blue screen.
Host Wayne Rivers appears in front of a white screen and talks to the camera.
On screen text, Wayne Rivers, Performance Construction Advisors
(SPEECH)
WAYNE RIVERS: Hi everyone. This is Wayne Rivers at Performance Construction Advisors, where We Build Better Contractors.
This week, I want to talk about building a culture of merit in a family business. This comes from an article from the Chief Executive Daily Briefing in January of 26 written... Oh, it's an interview actually with the Deloitte's Laura Pearson. And she talks about three different aspects of creating a culture of merit in a family company. Now, what about this is important to you? Even today, after all these years, about 50%, a little more than 50% of our members are still family businesses. Family business is the number one form of business in the whole world. Always has, always will be, I think. And so construction companies today are all about merit, not like when I started 37 years ago. Well, there was nepotism, let's face it. But today it's all about merit in construction companies and it really is an industry changer.
The idea that I have a business, therefore it will go to my children, irrespective of their strengths or weaknesses or anything else is really not the best format if you think about it. Still the most common format around the world, but maybe less so here because our culture is one that advocates for merit over family ties. Now, what about this important to you? You've got to consider it. Whether you're a family business or not, you've got to think about how you advance people in your organization.
So number one, how do family members or not family members for that matter advance? How do they enter the company and how do they make career advancements? What's their external work experience? What are their qualifications? What are their experiences? What's their internal career path going to look like in your organization? Where are they the weakest? Where do they need outside training?
I can tell you generally as people rise through to construction companies, they're the weakest in finance. Even if they come up in the finance department, they're usually historians looking backward versus finance people looking forward. And people that come up through estimating or business development or project management or whatever, they tend to be the weakest. They may understand a project budget, but they don't understand an enterprise budget necessarily. They don't know how to read a P&L or a balance sheet, or how things move from the P&L to the balance sheet. In our Boot Camp, obviously we focus on an entire day on construction business finance. And John Woodcock built out this incredible interactive model that really opens the eyes of the Boot Camp attendees. Contact Charlotte for more information about Boot Camps that are coming up.
All right the second thing, managing generational differences. I would say this was the big one when we were the Family Business Institute and back in the day we were working with all kinds of different businesses, not just construction companies. But this was the big one, managing generational differences because this generation came up dirt poor and they worked through, they had incredible courage and strength and perseverance. But now the business is at a different level. It doesn't take 120 hour work weeks anymore. It takes a different kind of viewpoint to run a company. Back in the day, maybe you were managing projects, but today to be successful in this new construction company of yours, you got to manage people. And that's an entirely different thing for managing projects.
So over the course of the generations, perspectives develop differently and you've got to find a way to consolidate that around what? Mission, vision, and values. They have to be the constants that all generations must believe in. If they need to evolve as the companies evolve, that's fine. They don't have to be permanent. You wouldn't change them very often, that's for sure. But mission, vision, and values have to be completely shared up and down the generations in the company. There's got to be psychological safety. How many times have we talked about that? And then you also want feedback. It's great to have feedback from what Léon Danco wrote about in the '70s, risk taking peers. He was talking about boards. When we say risk taking peers, we're talking about a peer group of people who are in your industry doing the things you do. It's absolutely invaluable.
The third thing, balancing purpose and profit. So she talked about having a positive impact in your community beyond financial returns. And that's fine. The term, giving back, as you know from previous blogs, we don't necessarily believe in because when you say giving back, it sounds like you took something. Give it back? Wait, I generated stuff. I didn't take anything. In my peer group, we talk about doing good. We don't talk about giving back, we talk about doing good. And that made me think about this orientation. I remember talking to contractors over the years and they said, "Well, we're not all about profit here." Well, nobody's all about profit. You don't wake up in the morning thinking, "Boy, I need more profit." You wake up in the morning and think, "I want to deliver a service here. I want to build a project. I want to do something. I want to build that medical office building for these people so they can do their thing and they can do it happier and more fun than they do it now." But you got to have profit. You got to have profit.
It made me think, golly, didn't we do a blog on profit? And we did in 2009. So I wrote this in 2009. And you think about the media and the things that you read about business in the media. And when those news readers come on and they say XYZ corporation made a billion dollars of profit, they say it almost with disdain. The idea that profit is somehow immoral or something. So I started thinking about that and I said, "It's not uncommon for family business owners to begin to doubt the morality of high profits. We would like to put that ambivalence to rest." You see where this is going? "It's simply good stewardship to maximize profit and efficiency in any business. It may not be the stated purpose of your company, it shouldn't be, to make a profit. However, in the absence of profit, there won't be a company in the long run." How do I know this? Well, because 37 years.
So I remember doing some basic benchmarking for a company. They were in a relatively small town. Town was in a bit of decline and it was the first year they'd ever made a million dollars of profit. And we kind of did benchmarking and we said, "Golly, with your inputs, it probably should have been more like $2 million of profit." And they laughed at us. "Dennis and Wayne, that's funny. We never thought we'd make a million dollars of profit, much less $2 million." They're not here anymore. Because, this was written in 2009, hard times hit construction. It lagged the regular economy in commercial construction as you recall. So it was about 2010 before it really slammed the door on commercial construction. Having that extra million dollars on the balance sheet may have been the difference between death and survival for that company. It ain't all about profit, folks. I'm not trying to say it is. I'm just saying that it is good stewardship in your organization to run it as efficiently and effectively as possible. And one of the measures of how you're doing efficiency-wise is guess what? Profit. Okay?
So the general theme of the Chief Executive Daily Briefing was meritocracy is greater than nepotism. Well, of course it is. And to the degree that you can have a meritocracy in your family business, you're going to perform better and people are going to be happier. Ironically, people will be happier in the family, whether they work in the company or not, if you run your company as a meritocracy. What do you think? I might get some pushback on this one. Email me [email protected].
This is Wayne Rivers at PCA, where We Build Better Contractors.
(DESCRIPTION)
On screen text, Wayne Rivers, Performance Construction Advisors Performance Construction Advisors logo drops into the middle of a blue screen.
