Where Traditional Succession Planning Falls Short
Jeff Rosenthal wrote an intriguing article in the Harvard Business Review outlining some of the troubles large companies are experiencing in their succession planning endeavors given that as many as 25% of CEOs transitioned out of their roles just in 2024. While middle market contractors don’t overlay perfectly with public corporations, some of their travails also manifest in middle market companies.
Please tune in this week as Wayne discusses Rosenthal’s three points about traditional succession shortcomings, adds another of his own, and provides five tips for getting your planning right in spite of the challenges. What’s your reaction? Have you lived through some of these continuation challenges? What advice would you provide for other contractors? Email us at [email protected]
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WAYNE RIVERS: Hi everyone. This is Wayne Rivers at Performance Construction Advisors, where We Build Better Contractors. This week I want to talk about where traditional succession planning falls short.
This is from an article from the Harvard Business Review, July of 2025, written by Jeff Rosenthal. And let me just start off with his words, not mine. "It happens every day. As one board member at a Fortune 10 company told us, 'In my 10 years on the board, the only time we ever talked about CEO succession was when there was an actual CEO transition happening right then.' Sure, it's an SEC regulation for public company boards to actively discuss CEO succession, but there are lots of SEC regulations." So that's the way he winds it up.
What about this is important to you? Well, in our peer group meetings, people talk about succession all the time. And remember, it's not just succession at the very top. If you've got a super talented estimator or a super talented equipment manager, then those people need to be looked after too. But most of us focus primarily on CEO, or COO, or CFO succession, the senior leaders and the people that really, really make things go.
I will say that it seems to me that people are getting more proactive about succession. We recently had an engagement where the company principals are in their mid-forties, and so maybe they're a decade ahead, but they're starting to think, how do we get people integrated in ownership the way we are in our mid-forties? How do we give them that same opportunity? So, succession planning may be getting a little more proactive.
Okay. Where does, according to this article, where does traditional succession planning fall short? They said that according to Challenger, Gray & Christmas, in 2024, 2,221 CEOs departed their roles. And that was the most since they had been keeping up with that number, since 2002. So that's a lot of changes. If you think about public companies, public or semipublic companies, there's only about somewhere between 5,000 and 8,000 in the entire country. So that means that somewhere around maybe 25% or more of CEOs turned over in the year 2024. And they said that that trend seems to be accelerating.
Okay, what are the issues for them? Number one, "all talk and no action." Rosenthal said that companies collect and conduct talent reviews, talk about capabilities, but they spend little time actually developing, preparing, and grooming future leaders. Why? Well, these rising leaders are working. They're working 60 or 80 hours a week. It crowds out the time that they may need to learn, to be mentored, to learn the things they really need to know which reminds me of Boot Camp. The Boot Camp schedule for 2026 is on our website. So, take a look, get in touch with Charlotte, and she'll get you the information you need to groom your next generation of leaders in a proper way.
Number two, it's rarely urgent. So, succession planning can always be put off until another day. As long as there's no imminent health crisis, why would you jump into it? As one leader told us, "I'll be comfortable talking about successors for my role on the day I decide that it's time for me to move on." So, it's usually not urgent when you're thinking about CEO succession.
And then the third thing. It's not an event, it's a process. And that's I think the... People think, oh, okay, I'm going to be transitioning out on December 31st, pick a date. And they see it as an event, but it's really not. It's a procession of events that take place over time.
And then the fourth thing, especially in middle market companies, and this article is written about the biggest of the big, but in middle market companies like our contractors, all of the intellectual input, all of the professional advisor input focuses on the ownership aspect of succession, not the other two, which we'll talk about in a second.
Okay, if these are issues with succession planning as done in a traditional way, how do you improve that? Number one, give yourself time. Dennis and I always said that seven to 10 years is the appropriate amount of time for a proper succession. "Oh my, I don't have seven to 10 years. I have maybe three years." Okay, go with what you've got, but give yourself as much time as you possibly can. Should everybody start succession planning in their mid-forties as the folks that I referred to earlier? Maybe not, but give yourself as much time as you can.
The second thing is future proof your company. Succession planning is, oh, we're going to transition, and these people will be gone, and these people will take their place. And that's transactional. Think about future proofing your company. Think about where you want your company to be five years or 10 years from now. And don't think about who. That's a problem When people talk about forming boards or they talk about successors, they start with who. Who can do this? Who has the capabilities? Start with what. Where do I want my company to be? What do I want my company to look like? What do we need to be really good at to succeed five or 10 years from now? What capabilities do we need to develop? Start with what, and then who will follow naturally.
The third thing, drive the process, not just top down, but also from the middle up. Too many times people sit back and wait for the very senior-most leaders to initiate succession planning. If I was a rising leader in a construction company, being aggressive and ambitious as I am, I wouldn't be waiting. I would be making noise. Don't be a pest but make some noise. Let people know that you too are thinking about the future. You too are thinking about the company. You too are thinking about your career and how to time things. I think that middle group of managers, those rising leaders, defer way too much to the senior leaders. Do you need to defer to your senior leaders? Of course you do, but they respect strength. And if you're pushing for succession in a tactful and intelligent way, they're going to respect that. I really believe that to be true. So, drive the process, not just top down, but middle up.
The fourth thing. Don't just think about ownership succession planning. Now, why do people do that? Well, because the advisors to most construction companies work for the senior leaders. They work for the CEO, or the CFO, or the COO, and that's who they think about, they need to take care of. That's their client. I mean, that's their professional mandate. But there are other things to be thinking about. Management succession. Who's going to do all the dirty little jobs day to day that people have to do to make the company go? Who's going to fulfill the CEO role, COO role, the CFO role? Who's going to do all the million things that you have to do to make a construction company successful over time? So, there's management succession.
And the third piece of it is leadership succession. Some managers are great managers. They're not leaders. They're not either natural leaders or manufactured leaders. So, you've got to think about those three things. Leadership succession, management succession, and finally, the last thing, the last piece of the puzzle is ownership succession. So, I think traditional succession planning has it backwards.
The fifth thing, communicate. Communicate internally. Your people, down to your newest laborer, they want to know. Is the company going to be taken care of five years from now, 10 years? Because I'm going to be here for a while. So, are you guys at the top doing the things you need to do to make sure this company is well taken care of? Communicate your succession planning process. You don't have to get down into the nitty-gritty. Let people know that things are going on. Communicate internally to your people. Communicate it to your trade partners. Communicate it to your suppliers and vendors. And of course, communicate it to your bank and bonding company. They have a little say so in this too. So communicate it as much as you can as frequently as you can.
I heard speaker at AGC convention two years ago say that the average age of senior construction leaders now is 61 years old. And 90%, 90% say that they're going to be in a different role in five years. That was two years ago. So, we could be looking at a wave of succession going on here in the next five years. So, think about your own succession process. Are you making the mistakes that the Harvard business writer says? And what can you do to improve the process?
Email me, please, [email protected]. Let me know what you're thinking.
This is Wayne Rivers at Performance Construction Advisors, where We Build Better Contractors.
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