Founder’s Transition: The Time Is Now

Companies start with people, function through people, thrive through their culture, and survive through their adaptation to the zeitgeist — the defining spirit or mood of a particular period of history as shown by the ideas and beliefs of the time. The pain of separation and the anxiety experienced during the loss of a leader is very much like the five stages of grief; however,  the organization and its departing founder can plan to avoid that pain and anxiety.

The Evolution of an Organization

While some organizations grow through acquisitions and going public, construction companies most often grow organically and are led by the initial founders.

These founders are the organization’s holding pin, and if they are removed prematurely, it can cause unwanted consequences due to operational disruptions. However, if the founders insist on staying in their roles longer than what benefits the company, then their operation philosophy and dissolution of the company can happen through disengagement of the markets and customers due to the organization’s lack of adaptability.

External market influences that can impact an organization’s evolution include:

  • Technology changes
  • Market shifts
  • Product or service production changes
  • Labor and social law changes
  • Ecosystem shifts or changes
  • Global unrest, pandemics, natural disasters, or conflicts causing economic change

Most of these external influence shifts do not happen suddenly and are not as visible at their onset. Production process changes, for instance, can take years to infiltrate the markets and influence the company’s operation. For example, in the automotive industry, it took over 30 years for the Toyota Production System (TPS) to be recognized, and it took another 20 years for it to become the dominant production process.

Stages of Company Growth

At the beginning of a construction company’s startup, the processes, decisions, job bidding, daily progress, and technologies (Exhibit 1) are often decided at a kitchen table or around the coffee pot every morning.  

The CEO or president is the leader and owner of the company’s processes. As the company grows, these processes become more hidden and need to be redesigned, which includes technology adaptation. Process designs and changes must consider the six elements of market influence mentioned previously.

As the company grows, its changing process needs are often not recognized beyond what the owner can keep in their head. Like any soft change in an organization, making process changes must be approached methodically and systematically with categorization and review of impact and risk of change. It is important to approach changes in the business systematically or risk adding a checklist, which may solve the current issues and be very localized in its outcome. It may prevent past mistakes from reoccurring but may not forecast future issues.

Exhibit 2 shows an organization’s evolution of what happens throughout four levels of business growth and change. The goal is to transfer information from the base to the top to be digitalized and ingrained in the company fabric as artificial intelligence (AI).

Level 1: People

The business is run by the information stored in people’s heads — their methods, thoughts, and judgments. The culture was likely created by the founder and other owners and leaders.

Level 2: Process

Practice becomes habit. There is company tacit knowledge that the team knows and understands through time and access to the founder and leadership team. This is simply “the way things are done.”

It may be difficult to find these processes written down explicitly, and it’s likely that only the team that’s in-the-know can figure out what do to. This is difficult to scale; these processes are likely not optimized as the company grows, yet they are ingrained and repeated.

Level 3: Procedure

Tacit information is translated to explicit information. Templates, forms, and checklists are made for others to follow, which helps with scaling. The quality of the process improves thanks to written instructions. The company infrastructure as well as the founder’s intent/thoughts start to become ingrained and documented.

Level 4: AI

This is where the founder’s methods are captured, as the organization will have created its own AI. This intelligence can be created or compared to existing IT solutions that match those procedures. The IT solution’s role is to automate and embed the AI, which is still rooted in the founder, into the company-wide information flow (e.g., timesheet tracking, accounting/enterprise resource planning, expense reporting).

Remembering that AI is intended to embed processes and procedures that are created by the people and company will help prevent purchasing a “tool” that may not match the company’s intent. AI maximizes the benefits of the company’s tacit knowledge.  

To get to the AI level of any organization, the other three steps must be understood and built upon. It’s virtually impossible to replicate or duplicate the founder’s way of operation, vision, and drive, but one good way of creating a continuation of the founder’s vision and modus operandi is transferring them into AI via management with data, interpretation, and analysis.

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