For middle-market manufacturers, especially family -owned businesses, the potential for growth often hinges on the activities and decisions of one individual – the owner. When the owner leaves the company or retires, these companies often face a leadership crisis. Baby boomer demographics make this a national issue. According to one recent survey, 59 percent of U.S. manufacturing firms anticipate a possible change in leadership within the next five years.
Savvy manufacturers maintain detailed succession plans that identify critical leadership roles and the candidates likely to fill them. These companies invest considerable time, effort and money into developing candidates for new roles, rotating them among a variety of leadership positions in multiple departments and, when possible, in multiple locations around the globe.
It’s important to remember, too, that critical, non-executive positions also require replacement planning. Candidate development for these positions (e.g., director of procurement, head of R&D, plant manager) usually includes mentoring and shadowing of current staff, along with a range of experiences and training necessary for those roles.
Lastly, owners planning their exits must develop detailed legal and financial plans, even if family members are involved in the succession. Smart owners will work with experienced professionals who can help them value their companies and review liquidity options (sale of the company, employee ownership, etc.) so that talent, operations and profits grow even after their departures.
Manufacturing Minute is provided by GBQ’s Manufacturing Team for our clients and other interested persons upon request. Since technical information is presented in generalized fashion, no final conclusion on these topics should be made without further review.
This article originally appeared in BDO USA, LLP’s “Manufacturing Output” newsletter (Spring 2013). Copyright‚© 2013 BDO USA, LLP. All rights reserved. GBQ is a member of the BDO Seidman Alliance, a nationwide association of independently owned accounting and consulting firms.