The Evolving Landscape of Succession Planning: Insights and Reflections

In the ever-changing world of business, the art of succession planning remains a critical, yet complex, endeavor. Wayne Rivers, from the Family Business Institute, recently shared his candid thoughts on the current state of succession planning, drawing from his extensive 34-year experience in the field. His reflections, sparked by a series of events including a conversation with a Wall Street Journal reporter, attendance at an industry conference, and the reading of a book on contractor exit planning, raise important questions about the effectiveness of current practices in 2023.

The Urgency of Succession Planning

Succession planning is not just a topic of casual conversation; it's a pressing concern. Rivers highlights a startling statistic: the average age of a contractor today is 61, with an astonishing 90% of senior leaders in construction firms planning to exit within the next five years. This looming shift could have seismic implications for the industry, signaling a need for immediate and thoughtful planning to ensure continuity and stability.

A Question of Focus

One of the points Rivers contemplates is the notion of focus within the industry. He challenges the idea that a consultancy can truly specialize by spreading its expertise across 18 different industries. Construction, with its unique accounting practices, job sites, and changing trade partners, demands a dedicated focus. Rivers suggests that the intricacies of this single industry are more than enough to warrant specialized attention, rather than diluting expertise across a broad spectrum.

The Role of HR in Succession Planning

The integration of HR leaders into the succession planning process is another area Rivers scrutinizes. He observes that, particularly in small to mid-sized contracting firms, HR leaders often do not hold strategic, C-level positions that would make their involvement in succession planning impactful. While larger firms might have this capacity, it remains a rarity. Rivers' perspective challenges the conventional wisdom, prompting a reevaluation of who should be at the table when planning for the future.

Rethinking the Composition of Outside Boards

The concept of an "outside board" is also put under the microscope. Rivers expresses skepticism about boards composed of professionals already in service to the company, such as CPAs, attorneys, insurance agents, bankers, and CFOs. He argues that true outside boards, much like peer groups, should consist of individuals who can offer fresh perspectives and unbiased advice, rather than those who are already entrenched in the company's operations.

Conclusion: A Call for Innovation in Succession Planning

Wayne Rivers' reflections serve as a call to action for those involved in succession planning. As the industry braces for a significant generational turnover, it's clear that innovative approaches and a reimagining of traditional practices are necessary. The insights shared by Rivers invite industry leaders to think critically about the structures and strategies they have in place and to seek out new, more effective ways to prepare for the future.