Is your business model standing in the way of innovation?

2020 was an unprecedented period of change for the construction industry. The World Green Building Council is calling for buildings and infrastructure around the world to achieve net-zero emissions by 2050. Population growth and public health concerns are also expected to bear impact on the construction industry. Innovation at pace is vital, but is its business model standing in the way?

Thanks to a paternalistic approach, in which business leaders treat their employees like an extended family (in many cases employees are family, with many following in their parents or grandparents footsteps), the construction industry in North America has benefitted from an extremely loyal workforce where a minimum of 15 years’ experience is not uncommon. But in a decade of exponential change and disruption, is loyalty enough?

Academics have described paternalistic leadership as “a dominant authoritative personality who acts as a matriarch or patriarch and treats partners and employees like they are members of large extended families. In turn, the leaders expect trust, obedience and loyalty from the employees.”.

The benefits of a paternalistic model can be plentiful. A focus on employee welfare means decisions tend to favour the happiness of its workers, with redundancies and job losses avoided. All of this has a huge impact on employee satisfaction. Employees feel valued, resulting in a motivated and loyal workforce.

But the benefits need to be considered against the negatives. A loyal workforce means low turnover, and this can present problems. If no one moves on, the opportunity for employees to grow and develop is limited. If the next rung on the career ladder is filled by someone who intends to stay with the company for the best part of a lifetime, promising junior members or middle management could find themselves waiting 15 years before the opportunity for a promotion occurs. They can start to feel stifled and held back, unable to progress despite their hard work, loyalty, and aptitude for the job. Paternalism can also easily slip into authoritarianism, which can further stifle talent and dampen innovation.

I recently discussed this topic with President & CEO from Gilbane Building Company, Mike McKelvy. Mike noted, “Sometimes we need to acknowledge that the C-Suite doesn’t always know best”. The key, he argues is creating opportunities for employees to share their thoughts and ideas “without fear of being criticised of chastised for coming up with a different view”.

This was echoed by Head of Shared Services and Vice President of HR and Communications at China Construction America, Tom Crane. The answer, he suggests, is “finding a balance from the best of both worlds” that cares for employees, while “making space for entrepreneurial spirit, creativity, diversity of thought, and innovation.”

A beacon of best practice in balancing a paternalist model with innovation, Mike highlighted how Gilbane fosters innovation by bringing together a cross-pollinated team of employees to address problems and find creative solutions. By bringing together leaders with high potential from different parts of the business and asking them to find and solve a problem within the company, Gilbane has made space for innovation and creativity. Far more than a tick-box exercise, the group are then given the autonomy to make their proposed solution a reality. The programme has also proven to bring a great level of employee satisfaction and pride when they can see the real tangible impact they can have within the business. This transforms old systems of paternalistic dependence to adaptive, rewarding modes of independence.

Mike McKelvy’s work at Gilbane is a living example of how a different style of leadership can bring about much-needed innovation. One that encourages its employees to feel empowered to make decisions and step up with creative solutions. Tom Crane argues that this is about “letting your guard down, showing emotional intelligence, and even vulnerability” to foster collaboration, entrepreneurial spirit, and interdependence.

Extreme loyalty also means limited opportunities for new talent to enter the business. Where there are vacancies, some businesses could be accused of falling foul of nepotism. This does nothing to help an industry which is struggling to attract diverse talent to bring diversity of thought and perspective that will help it to innovate and solve challenges.

Leaders need to think about how they can bring in fresh talent with new ideas and diverse thinking, whilst also creating space for their loyal employees to flourish and not feel stifled. The creation of new roles and new divisions, or reskilling and retraining, are worth the time and investment to bring about rapid innovation needed in the exponential decade. Put simply, if the construction industry does not change its approach, it may struggle to attract talent and fulfil its role in the future of our society.

Tom Crane concludes “The construction industry employs some of the best people in the world. But we need to help them to see the bigger picture, that what they do every day is contributing to the betterment of society. We need to think seriously about how we can apply what we have done for hundreds of years to better society through the built environment.”

Real Estate Team