Generational differences can be a powerful source of innovation and adaptability.
The ability for leaders to understand and guide those they lead is essential. And, with baby boomers, Gen X, millennials, and now Gen Z in the workforce, there is an opportunity for firms to capitalize on generational differences in perspective and values. Diversity of age in a leadership team is a powerful strategy for AEC firms and AEC firms would be well-served to see age as a number, not a credential.
When principals and firm leaders have younger voices to stimulate innovation and challenge the status quo coupled with more experienced colleagues with deep expertise and the steadiness needed to prevent self-destruction, the results can be powerful. Why, then, is it that Zweig Group’s 2020 Principals, Partners, & Owners Survey Report found that only 2 percent of AEC firm principals are 39 years of age or younger?
A principal with a couple of decades ahead of them to live with the consequences of their decisions is going to see things very differently than someone whose retirement – and liquidation event – is a year or two away. Risk tolerance changes over time, and healthy discussions about the tension between short-term profitability and longer-term investments is one to encourage.
In one firm we work with, I sat in on a spirited discussion between two principals – a boomer and a millennial – in which the boomer expressed frustration that the incoming principals lack commitment to the company by not “just going down to the bank and getting a loan” to pay for their ownership interest (in full). The discussion that followed didn’t just lead to a better understanding of the student loan burden that the incoming principal generation had taken on, but also a significant softening in age-related frustration about younger staff in general. After the discussion, we modeled out the ownership transition financing options – both incoming and outgoing – to find solutions that kept the entire ownership pool enthusiastic to invest in the company they were all so important in building.
A surprising contrast in our data set this year is that 82 percent of AEC firm principals are older than 50 and the median age at which principals plan to retire is 65. Yet with this massive concentration of ownership held close to a planned retirement date, our study also found that 75 percent of firms do not have an age requirement for principals to begin to sell down their ownership. The consequences of hoarding shares and selling all ownership at once upon retirement are risky financially. Perhaps worse, though, is that this can cause serious rifts between exiting shareholders and the incoming ownership group, which, when unmitigated deprives both groups of much-needed mentorship and perspective.
One of the most effective ways to maximize team output is to boost cognitive diversity, bringing in different backgrounds and perspectives. An age-balanced leadership team doesn’t happen without intention. According to PwC, only 8 percent of organizations include age as part of their diversity and inclusion strategy. While generational differences can sometimes be a source of conflict in the workplace, when managed effectively, they can be a powerful source of innovation and adaptability.
Jamie Claire Kiser is managing principal and director of advisory services at Zweig Group. Contact her at email@example.com.Click here to read the full issue.