What happens when the boss retires? Panic? Backstabbing? A lack of direction? Better to plan for the succession, so there is a smooth handover …
All entrepreneurs hope their business will outlive them – but handing over the reins to the next generation is not always easy. Experts say the construction industry's failure to plan ahead is jeopardising the future of many practice-based firms and those run by their founders.

"Not enough construction firms are taking the issue seriously – all companies need a succession plan to provide for their future," says Chris Chetam, senior manager at recruitment consultant Hays International. Chetam adds that practice-based firms are still too traditional when it comes to planning for the future; a founder may look to his or her partners for a successor only to find that they, too, are ready to depart.

And what precisely is a succession plan?

Grant Thornton, an accountant who specialises in offering advice to small or family-run businesses, says it should be a formal, written plan that sets out a timetable for succession at least 15 years before the boss plans to hand over the business.

The concept of succession planning is gaining momentum in British industry, and banks are responding by setting up services to help firms prepare for the future. A report published last year found that more than 70% of businesses listed in the FTSE500 have a formal succession policy. However, firms in the construction industry are proving slow on the uptake.

The departure of the boss raises a multitude of issues over the ownership and identity of a firm. Even after you have identified a successor, retaining him or her in a competitive jobs market can be hard – then there is the question of how other employees will be affected. Business leaders are increasingly realising that you cannot groom your successor overnight.

"Appointing heads for businesses that have grown out of practices like surveyors and consulting engineers can be especially difficult," says Chetam. "Typically the companies are set up by a person in their 30s, who works with pretty much the same team until he is in his 60s. The whole team ages and then the founder realises there is nobody in the firm to hand on to."

Chetam believes that firms then make the mistake of looking for a replacement for the founder. "You can't replace the person who set up the business. The best you can do is try to find somebody you trust who will not upset the staff. The problem is that smaller firms aren't used to recruiting at senior levels."

The cyclical construction market can also cause problems for succession. "The nature of the industry makes it difficult to plan for the future," says Chetham. "Firms are working flat out in the good times, without too much thought about the future. Then during the quiet times, good people with management skills are lost."

Even after you have identified a successor, retaining him or her in a competitive jobs market can be hard – then there is the question of how other employees will be affected

Scott Lilley, technical consultant at Cra-Cro Construction Personnel, agrees that the issue of retention is crucial to any succession plan. "The person or persons earmarked for succession could, at any time, start looking for another position or change their mind about the job," he says. Lilley adds that companies must consider what incentives are needed to retain such key staff. Not enough small and medium-sized construction firms, he warns, are attuned to the long-term career aims of its core members.

And succession planning is not necessarily made easier when the outgoing boss works with his or her children. Colin Harding is founder and chairman of Bournemouth-based contractor George & Harding. He works with his two sons Magnus and Rufus, but rather than simply handing the business over to them, Harding has chosen to follow a carefully prepared plan that should reveal who in his firm would make the best chair (No preferential treatment, right).

Psychological barriers can also hinder firms from putting together a coherent succession plan. Graham Jackson is a consultant at Potensis, a firm that specialises in headhunting for top positions in the construction industry. He says: "For the founder of a business that has been going for 30 years, it is difficult to accept that somebody else is going to have to take over your firm. But it's best to tackle the issue head on as soon as you can so that you get the successor you want."

However, Alan Baxter, founder of consulting engineer Alan Baxter & Associates, disputes the need for a formal plan. "We have thought carefully about the future of our firm, but we haven't got a formal succession plan," says Baxter. "It is dangerous to be too formal or rigid – there should certainly be no set retirement age." Baxter says many creative building professionals do not reach their potential until past the standard retirement age and therefore any succession plan needs to be flexible.

Most recruitment consultants disagree: they say the best policy is to nurture three or four potential successors in-house, depending on the size of the firm. For Jackson, this means creating senior roles that will encourage the development of the management skills required by a leader. "Practices like architects can spend up to five years developing a rapport with their clients. The clients are attracted to the designers they know so it is essential that access to key clients is given to senior staff – not just the lead partner."

Richard Milson, a consultant at Potensis, strongly believes that limited companies can cope better with succession. He says: "Limited companies are more likely to have a year-on-year growth strategy, which increases the chance of promotion within the business."

Bernard Hunt, of HTA Architects, agrees that becoming a limited company is better for the long-term health of an enterprise. Two years ago, John Thompson, co-founder of the group, left the firm. As a result, the architect decided to change its name from Hunt Thompson Associates to HTA and become a limited company. Hunt says: "In a limited company the owners and managers are separate. As a means to succession planning, a limited company is better than a partnership because of the different culture. A company encourages people to work in a team."

George & Harding: No preferential treatment for sons

1 Rufus Harding, Colin’s son
2 Magnus Harding, Colin’s son
3 Ronald Harding, Colin’s father
4 Colin Harding
5 Julius Harding, Magnus’ son Colin Harding has selected five employees to groom as possible successors as chairman of George & Harding – two of them are his sons. Harding is in the second year of a five-year handover plan. He insists that sons Rufus and Magnus will not get preferential treatment. “The idea is that over the next few years, the right people will emerge to do the right job.” Each candidate spends about nine months working as Harding’s personal assistant so he (they are all men) can learn how a business is run. Meanwhile, Harding intends to phase out his day-to-day involvement with the company until 2005. At that point, he will become a non-executive chairman and the identity of the new leader should be clear; the other four employees will continue in senior roles. “There’s a healthy competition between the five,” says Harding. As for the risk of the other four leaving if they fail to make it as chair, he adds: “Business is about taking risks.”