Why the Great Wealth Transfer will Cause Projects to Fail

By 2040, over $500B of private construction business assets will be passed to the next generation, while total U,S, construction volume will exceed $20T. To avoid putting huge sums of money at risk, project leaders must ensure the stability of their contractors’ leadership, because research shows that ineffective leadership transitions are a top cause of contractor bankruptcy. 

Why? For many construction companies, the influence of key leaders extends far beyond their job titles. Typically, 1 to 3 individuals form the backbone of an organization, overseeing critical areas such as estimating, operations, or administration. Their expertise, built over years of experience, serves as a safeguard against costly mistakes. Their relationships within the industry bring in business, and their reputation helps maintain trust with clients and partners.

Moreover, these leaders often shape the company’s culture and values. Their departure can create ripple effects, including unexpected turnover among other employees. When replacements step in, they may lack the nuanced understanding of the local market, company operations, or even the unspoken dynamics that keep a team functioning smoothly. 

The solution? Proactive planning. Begin by identifying your essential personnel—those whose absence would severely disrupt operations. Once identified, invest in creating detailed succession plans well in advance of any anticipated transitions. This ensures that new leaders have ample time for training, shadowing, and gaining the hands-on experience necessary to step into their roles effectively. In the meantime, make sure to document key processes, client relationships, and risk management strategies for a smoother handoff.

Leadership changes are inevitable, but with careful planning and the right tools, construction companies can mitigate the risks and ensure that stability is preserved during times of transition.