Succession plans that overtly pit top executives against one another in a “horse race” for the CEO title often go awry. Not so at Southland Industries, where Ted Lynch recently bested two rivals for the role of CEO-in-waiting at the privately owned $435 million construction and engineering company. Lasting five years, the race was more of a marathon than a sprint to the finish. And the leadership handoff will continue at a leisurely pace—Lynch will now work closely with outgoing CEO Andrew Fimiano for the next two years before officially ascending to the CEO seat.
Stretching the CEO transition over seven years might sound overcautious, but it played out well for the Irvine, California-based firm—and for its leadership candidates, says Lynch. “The people who were in the running for the position are all staying with the company,” he points out. “At the end of the day, everyone felt it was a fair process.”
The CEO candidates faced a series of assignments, including essays about competitive strategy and their vision for the future, as well as semi-annual evaluations by the employee-owned company’s board of directors, all of whom own significant stakes in the company. Lynch was their unanimous choice for president and successor to Fimiano, who will take the reigns within two years. But Lynch, who was tapped as a candidate in part for his role in turning around Southland’s floundering Mid-Atlantic division in 1998—is unfazed by the seven-year stretch. “Really, it’s a great luxury,” he says. “It allows me to grow into the position and slowly take on his responsibilities.”
With design-build-maintain there’s single source accountability. It’s better, faster, smarter.
Among those is the task of completing the company’s mission—under way since 2003—of phasing out its traditional construction business to become a 100 percent design-build-maintain contractor. In traditional contracting work, a client hires an architect engineer to create a design and subsequently contracts with a construction company. In design-build projects, a single source has full accountability for both design and construction, as well as, in some cases, the ongoing maintenance of that facility. Being able to incorporate construction knowledge early in the design process helps ensure projects stay on budget, says Lynch. “Anyone who has been through a construction project knows that after the bidding process there are usually safety factors to address or things missing and you price out changes… and the contractor blames the architect, the architect blames the contractor. With design-build-maintain there’s single source accountability. It’s better, faster, smarter.”
It’s also a more specialized, and therefore more recession-proof, field than traditional construction, which has been hit hard in the economic downturn. Southland Industries has largely escaped the aftershock effect plaguing some of its competitors. “We’re coming off of our best year ever,” says Lynch, who notes that the company has four regional divisions in Northern California, Southern California, the Southwest and the Mid-Atlantic. “In the Southwest, Las Vegas is in a bad situation, but the other areas are all growing so we’ve been able to keep a presence there while relocating people to our busier offices.”
Looking ahead, Lynch envisions moving the company back into energy services—a business it abdicated in 1999 with the sale of the division to Reliant Energy. “With our expertise of engineering and construction and operations and maintenance, we can have a real impact on energy use,” he says. “We can take your existing building and, by putting in more efficient lighting and chillers, reduce energy costs significantly enough to fund those capital improvements. Over the next three to five years energy service is going to be the biggest growth area for our business.”