By J. Tim Griffin, MBA, PE, LEED AP, Consultant, PSMJ Resources
While current baby boomers are looking to retire, few Gen Xers are ready to take over the reins. Because there’s not a lot of them, trying to transfer your firm to Gen Xers is going to be difficult. And if you are planning ten years down the road, you are thinking the following generation, i.e. millennials. In fact, front-edge millennials are now just coming into the heart of their careers where they can really push a business forward. And so the question arises, how do millennials view A/E firm ownership? What are their reactions when approached with such an offer?
There are no simple answers to these questions as millennials come to the workplace with completely different expectations than today’s retiring baby boomers. This is a big concern of the principals I work with across North America. There are a lot of baby boomers who started and own A/E firms and need to transition out. Yet, they are having difficulties finding millennials that want to step up and take over.
Millennials value work-life balance
One of the biggest challenges has to do with the value millennials consign to work-life balance. As a result, they often show a resistance to the owner/partnership track, which has been a core part of our business forever. It took time to figure out why, but this dilemma can be attributed to nothing less than the overprotective and goal-oriented parenting received by this younger generation.
If you think about it, when they were babies, their parents were trying to get them into a great kindergarten, so they could get off to a good start. In elementary school, they were told, “If you work really hard, you’ll get into all the advanced programs in high school. And if you take all these advanced courses in high school, and do all these extracurricular activities, then you’ll get into a great college.”
And when they get into a great college, they are told if they work hard, get great grades, and do lots of extracurricular activities, then they will get a great job. And finally, they come into our firms, and are told, “If you work hard and sacrifice for twenty years, you can be a partner just like me, and you’ll be set.” Their response is “I think I heard this story before, and I don’t buy it anymore.”
The other problem is that boomers do a terrible job selling firm ownership. Millennials look at the boomers with dark circles under their eyes, stress lines everywhere, and families falling apart because they are not spending enough time at home. And so the millennials say, “I don’t know if I really want that life.”
Millennials are risk averse
Furthermore, any idea of loyalty to an employer was broken in their parent’s generation, where there were massive layoffs in the Great Recession. So millennials don’t buy the idea that “if I put my head down and work hard for an employer, they will take care of me for the rest of my life.” They think it’s a lie.
There are a lot of forces working against millennial’s interest in firm ownership. In addition to distrust in the process and an aversion to sacrifice, there is also the financial element. A core of millennials graduated from college during the Great Recession, so they are risk averse when it comes to investment.
For one, millennials are disproportionately not in the stock market. Also, their debt load is very high due to student loans. So when you ask them to take ownership of a business, and buy in, they just don’t have the financial wherewithal. If it’s going to happen, firm leaders need to come up with a smart plan to transfer ownership over time.
Another financial challenge in trying to bring early-stage millennials into firm ownership is the fact that many have kids and need to save for their college education. They don’t have a lot of free cash. If firms can help them get financing, and it will not impact their day-to-day budget, it is very attractive.
Smart firms that have an ownership transition plan usually include some financial help with the buy in. It’s not discounts on the value; it is loans from the firm’s bank, and a plan that will show that their investment is going to earn more than enough to pay off that loan.
If you bill it over time, it is very easy to do. A well-run architecture firm is a profitable investment. But you have to communicate that to your millennials, so they understand it from an investment standpoint and know what it means for them financially, so they don’t just think you are asking them to get a loan so you can retire.
Millennials need leadership training
While financial help can make it easier for millennials to move toward ownership, successful transition cannot happen if firms do not engage in training their future leaders. That means identifying stars early in their careers by putting them in situations where they have the opportunity to thrive. Here are some guidelines to help you maximize the generational forces in your firm as you start to move toward ownership transition:
- Call upon boomers to resume their youthful role as change leaders. Now is the time to abandon hierarchical norms, sink-or-swim management, and one-size-fits-all career paths.
- Prepare Gen Xers for supervisory responsibility and leadership roles. Gen Xers are now entering their prime working years in short supply and full of attitude. Xers want status, authority, and rewards, but often resist traditional management roles. Create new paths to leadership, redesign leadership roles, and develop the new generation of leaders for those roles.
- Accelerate the professional development of millennial employees. Recruit new employees at younger ages, get them up to speed faster, and trust them with important roles involving critical tasks and responsibilities. There’s no choice; there won’t be enough older experienced workers to get all the work done. Teach managers to coach these seemingly high-maintenance younger workers through every step.
Also, millennials are an impatient generation when it comes to advancement. They feel that after a few years out of school they should be the CEO of the company. So there needs be a lot of interim steps in their career advancement. It’s too long to say, “You will get there in five years.”
Emerging leaders not only need to understand technical skills, but also how the business works and the leadership skills they are going to need to be successful. It is essential to have a leadership development program that is formalized within your organization. By doing so, firms encourage their best stars to stay by investing in them. They also attract potential stars who want that type of training. Since very few firms are doing this, it is a powerful recruiting and retention tool.
Millennials want to see a career path
And finally, firms need to develop a realistic and well-thought out ownership transition plan. It takes ten years to do an ownership transition right—with people selling out and people buying in—and everyone happy with how it works out. So it is very important that the generation that wants to sell out have realistic expectations on the age that they will exit.
I have spoken to firm owners all over North America, and the consistent theme is “I am going to retire in five years.” And five years from now, they are still going to retire in five years. That drives millennials nuts.
If you want to do an ownership transition, the right time to do it is around social security retirement age. That’s the time to step back and let others people step up. It is those folks in their 30’s and 40’s who are going to have the passion to really move your firm forward into the future.
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J. Tim Griffin, P.E., MBA, LEED AP has published numerous management articles and trained hundreds of design firm principals across North America in the best business practices. In addition to his work as a PSMJ consultant working with A/E firm leaders to develop the full potential of their teams, Tim is a Partner and Branch Manager with RMF Engineering, Inc., an engineering consulting firm that works internationally. He is the author of the top-selling book, Winning with Millennials, which addresses the challenges of integrating new and young talent into today’s architecture/engineering firm.
(Return to the cover of the 2016 PM Digest: Ownership Transition)