by Susan Hileman, NWIRC Strategic Business Advisor

Did you know there are approximately 2,100 manufacturers in Northwest PA? Similar to national averages, the vast majority of those (64%) are companies with less than 20 employees. The average age of an owner in the U.S. is 50 years old and average age of manufacturing employee in Northwest PA is 56 years old. Baby Boomers are retiring at a rapid pace, yet statistically only 30% of all family-owned businesses survive into the second generation and only 12% will survive into the third generation. So… what do you think is going to happen over the next 10 years?

Added to this, the Family Business Institute notes “88% of current family business owners believe the same family or families will control their business in five years, but succession statistics undermine this belief. Research indicates that failures can essentially be traced to one factor: “an unfortunate lack of family business succession planning.”

So why here—why now? Because we want our regional manufacturers to continue to be successful, continue to employ workers, and continue to grow their customer base and be profitable. Succession Planning is more than just ownership and control. It’s also more than ‘just’ transitioning your business to the next generation. It’s a holistic approach for developing a plan to minimize the risk of failure or falter of the business and a way to position the company for its greatest success.

We often hear (and believe), “people are your greatest asset”. Succession planning includes developing a plan to communicate the changes within the business and gain the trust of your existing employees to retain and grow talent. This is especially true when it comes to identifying and developing your mid-level [team leads, supervisors, managers] bench-strength. The “domino effect” of transitioning key positions within a business means you not only need to insure the right person (or people) are chosen to assume leadership, but also insure those who fill the gaps have the tools and knowledge they need to succeed.

Succession Planning can also help to:

  • Look for gaps around responsibility and accountability
  • Determine what knowledge, skills and abilities are needed to perform each role
  • Consider potential challenges, industry movement and pitfall scenarios
  • Develop a clear understanding of who does what and who reports to whom
  • Ensure the company is prepared to address rapidly changing technology as well as the changing workforce
  • Compare best practices in organizational development to other manufacturers
  • Begin planning your legacy and spending time in the next chapter of life

You are the experts about your business. NWIRC helps guide the process so strengths remain strong and challenges are addressed. So again, “why here—why now”? Because we want to help minimize the risk of faltering, keep our regional economy strong in manufacturing, and help your company be one of the 30% who succeed… regardless of whether that’s transitioning to a family member or an outside buyer.

 

Susan Hileman is a Strategic Business Advisor at NWIRC. She is a Galliard trained Family Business Advisor, an Innovation Engineering Green Belt, and has degrees in Business Management and Speech Communications from Clarion University.