MiMfg Magazine December 2019 | Page 13

December 2019 R unning a business isn’t easy and running a business across multiple generations can sometimes feel impossible. The vast majority — approximately two-thirds to three-fourths — of second-generation businesses fail. By the third generation, the failure rate exceeds 90 percent. From the moment you start a business, you are fighting to keep it going and changes to leadership only heighten that tension. One wrong leader or one poorly timed transition and everything you’ve achieved can disappear. The further away a business gets from the leaders who had the initial vision and passion to build it, the harder it becomes to main- tain that success. A succession plan can be the most important part of your legacy as a manufacturer. By providing the business with a blueprint to survive, you increase the odds of being there for generation two, three, four and so on. But what makes a successful succession plan? MMA members Koeze Company, Lomar Machine & Tool Co. and Stormy Kromer have all fought to develop their own transition strategy while associate members like EDSI Consulting, Kerr Russell and Weber PLC, and Maner Costerisan use their knowledge and experience to help countless manufacturers create viable succession plans. Consider how their advice can support your brand’s future and connect with MMA’s associate members for help in developing your own succession plan. Preparing for Unexpected Transitions “Just like good strategic planning, succession planning provides a sense of direction and stability for the future,” explained Gina Jacquart-Thorsen, president of Stormy Kromer, a division of Jacquart Fabric Products. “By having a succession plan in place for key positions — from ownership to executive leadership to production management — you give your company a stable foundation by which to succeed now and in the future, without the distraction of worry and stress about who will be filling these roles.” While some companies benefit by knowing its second or, in the case of Stormy Kromer, its third- generation is being prepared to take over ownership and leadership, many companies don’t. Issues like a sudden death or a family-owned business with either no future generations or a lack of interest from future generations can turn clear succession into a haze of uncertainty. “Succession planning is important and should be managed continuously. There is a short-term aspect — what if somebody dies or departs suddenly for some reason — and a long term aspect — when are people planning to retire, hoping to move to part-time, etc,” said Jeff Koeze, CEO of Koeze Company. “For us, MiMfg Magazine the most helpful thing has been to do a ‘hit by a bus’ exercise. We ask ‘what would happen if this person got hit by a bus today?’ This generates a document that captures all the key functions of a job in sufficient detail that somebody could in theory pick up the job and take over.” A proper succession plan should be written and communicated throughout the management team so they can include necessary actions in their planning. It needs to be flexible enough to incorporate changes, yet concrete enough to properly guide its execution through the most difficult tasks. — Dennis Theis • Maner Costerisan Once you’ve considered what is required to maintain functionality in the event of unexpected transitions, you can start preparing for both worst- case scenarios and anticipated transitions. The “Must-Haves” of Your Succession Plan Of course, nobody wants to activate a succession plan due to unforeseeable issues like death or illness. In most cases, transitions will be expected — a retirement or a career transition either with an individual moving to a new role within the company or taking a new job outside the company. “A good succession plan identifies and develops new leaders or staff members who are willing to fill the position and comply with the process once other leaders, or personnel, leave or retire,” said Ron Geisman, president of Lomar Machine & Tool Co. “Identifying candidates and developing internal people with the potential to fill those leadership roles is key to Lomar’s succession plan.” According to the team at EDSI Consulting, to achieve maximum effectiveness (and minimum disruption) you should: • Appoint a “champion” who owns the process of reviewing, updating and implementing the plans • Identify all critical positions within an organization and estimate when the position may be vacated • Create success profiles for each critical position • Identify one or two potential successors for all critical positions — this can be done by developing a current organizational chart and an anticipated organizational chart set three to five years into the future 13