By Martin E. Prendergast
Gray, Gray & Gray, LLP
If you are the principal in an architectural firm, engineering firm or construction company your days are probably filled with managing projects, putting together proposals for new work, reviewing plans, and tending to the hundreds of details that cross your desk. But in the midst of the chaos you need to carve out time to listen to that nagging voice in your head that reminds you that someday all this will end, and you will finally get to retire and start enjoying your post-work life. You certainly have earned it! However, unless you intend to sell the entire practice, or simply lock the door and walk away, you’ll need to make plans for the continuity of leadership of your firm.
In a public company the board of directors has a responsibility for developing and implementing a succession plan. But in a privately held firm, as is the case with many A/E/C companies, it is up to the principals to prepare for a future in which they are no longer running the business. Will your firm be able to continue without you? Who will fill your shoes? To put it in sports terms, how deep is your bench?
A basketball, football, baseball, hockey or soccer team manager must single out and nurture young players to eventually take their place in the starting lineup. Or they may choose to trade for an established player who can step in immediately. Either way, a firm’s principals must identify and groom their replacements. Putting the next generation of leaders in place is one of the most important tasks you face. Assessing bench strength is not an exact science, but generally every principal should have two to three reliable, competent and committed candidates in mind if the intention is to promote from within when the time comes.
Internal or External?
There is some disagreement over whether it’s best to source candidates for leadership positions internally or externally. Each approach has its benefits and problems.
Bringing in an experienced person from outside can bring new perspectives and fresh ideas to the firm. But it can be costly, and there is no guarantee that a manager brought in from the outside will successfully mesh with the established culture of the firm. In addition, as reported in Forbes1 magazine, a study conducted by a Wharton School professor found that it cost 18 percent more to hire outside employees, they consistently underperformed their peers who were promoted from within and were 61 percent more likely to lose their jobs than internal hires.
Developing leaders internally takes more time and effort, and success is not guaranteed. While an internal candidate has institutional knowledge and established relationships within the firm and with clients, not everyone has the skills and aptitude to lead. Yet, a well-executed internal promotion plan can be substantially cheaper and overall provide a better fit for the organization than bringing in reinforcements from the outside.
Which is why it is crucial to identify employees with leadership potential early in their careers. A formal training program should be established to help filter out those whose ambition exceeds their abilities, while helping suitable candidates to develop the “soft skills” required to manage and grow a professional firm. Making such a career training program public can help to bring the best talent to the surface and may also serve as an effective recruitment tool.
Whether you choose to add depth to your team with an external acquisition or develop future stars internally, you cannot wait until the fourth quarter of the game to begin the process. As a leader it is your duty to yourself and your organization to take the steps necessary to ensure continuity by creating a deep and strong bench.
Martin Prendergast is a Manager in the Architecture, Engineering & Design Practice Group at Gray, Gray & Gray Certified Public Accountants and Advisors in Canton, Mass. He can be contacted at (781) 407-0300 or at mprendergast@gggcpas.com