Sound planning and preparation are key to a successful transfer of ownership and continuity for building product manufacturers.
A quick look around the building product manufacturing (BPM) industry reveals very few firms that are truly ready to formally transition ownership to the next generation of leaders. Whether they don’t have a succession plan in place, have never developed a business continuity plan, or simply aren’t thinking too far into the future (or a combination of all three), these companies’ leaders are focused on putting out daily fires and paying little attention to what will happen to their firms in the future.
The good news is that even for a company that’s a couple of years away from an ownership transition, there’s still time to create and implement a succession plan that’s rooted in a strong continuity mindset. Focused on identifying and developing the people you have already hired, trained and invested in—or bringing in “new blood” to fill open management/leadership roles—succession planning ensures not only that the right people are installed at the top, but also that the rest of the team is properly prepared for the inevitable, transition-related changes.
As BPM firms grow, their leadership needs change. In some cases, current leaders look at the business as being more complex and challenging than when they took the reins. And they wonder whether the next generation will be able to step into ever-bigger shoes successfully.
This article sheds light on the importance of developing and utilizing a continuity mindset in today’s business environment, where succession is often approached hastily or completely overlooked.
You Can’t Avoid It Any Longer
Transition planning is important for companies of all sizes but developing a continuity mindset is especially important for smaller or family-owned BPMs that may not have formal transition plans in place (or that may not even be thinking about how to create or implement such a plan). Making up the bulk of the building product industry, these companies are particularly vulnerable to abrupt shifts or changes (e.g., the illness or death of a key principal)—so much so that a percentage of them will go out of business when this type of disruption occurs.
Perhaps not surprisingly, given the weight of the process, leaders avoid this necessary introspection in favor of the more tangible decisions needed to transfer a business to the next generation. For example, leaders often dive into identifying and executing on equity transfer techniques, buy/sell agreements and organizational structure changes while neglecting a critical part of succession needed to guide the organization to lasting success beyond transactions: a continuity mindset.
Having worked directly with numerous BPMs, we’ve learned that many of them are just too focused on “building the seats” or hiring to fill the open positions—without giving thought to exactly who they’re putting in those positions (and those individuals’ leadership potential). For example, one large carpet manufacturer decided to go out and hire hundreds of new employees without thinking about the skill sets it was seeking, the type of individuals it wanted on the team, and the value those people would add to the current team.
The approach made sense to the carpet manufacturer that, like many other BPMs, knew it needed to replace its current leadership but didn’t quite know how to achieve that goal. Some of this uncertainty can be traced to the fact that the building material industry looks very different today than it did just three years ago. Rapid advances in technology, for example, have changed the criteria for any firm that’s looking around for new managers and/or leaders.
5 Ways to Feed the Continuity Mindset
Today’s companies must hire individuals who understand different distribution models and who have experience in alternative project delivery methods, for example. In this situation, building products manufacturers come into the picture much earlier on the construction project than they once did, and that alone requires a different skill set. Put simply, it’s no longer about just calling on architects; it’s also about calling on end users and going direct to the consumer of your product.
Add the tight labor market to the mix (at press time the national unemployment rate was just 3.9%), and the proposition doesn’t get any easier. Using a continuity mindset, however, BPM companies can overcome these challenges and ensure their longevity in an ultracompetitive industry. Here are five ways to do it:
- Think beyond gut or instinct. Like most talent-related decisions in the BPM industry, succession decisions are often based on instinct and tend to be highly emotional, especially when leaders hope to pass the business along to a family member or trusted partner. These emotional factors can cloud the use of facts and data to pick the right successor to lead the business into the future. As a result, companies will often promote people before they are ready, pick the wrong successor, or lose talent due to perceptions of a poorly handled succession management process. All these hurdles can be avoided by using a well-thought-out, fact-based approach to succession, and one that incorporates the continuity mindset into the equation.
- Don’t just go to your star performers. In most situations, a bench of star performers or high potentials will fall short on the succession plan. That’s because, while these candidates may represent top talent, they may not be aligned with the skills and competencies needed to lead the company to success in the future. Furthermore, winning the battle for talent means having the right people in the right place and at the right time in the first place, not simply having lots of great talent. To overcome this perception, BPM organizations must fine-tune their talent strategy for key positions and prioritize succession management efforts by building the bench for those specific roles, since they will serve as important business differentiators.
- Establish the groundwork to prepare the organization for effective succession. Incorporate both data- and fact-based decisions that serve the company’s long-term interests, even when those decisions are immediately unpopular or misunderstood. This goes as far as setting the leader transition in motion and seeing it through to the successful integration of individuals in their new roles, including the preservation of values and culture. These steps must be carefully orchestrated and then revisited whenever the strategy changes. Ultimately, individuals who possess continuity mindsets see leadership and ownership of a firm as a privilege and an ongoing responsibility to steward the organization for future generations.
- Drill down to the individual positions. This allows BPMs to focus on identifying every role that has a major impact on the company’s strategy, rather than just looking at those roles facing imminent need for replacement. For this step, taking a continuity mindset means looking at the positions, not the people. When thinking about a business’s strategic positions, the primary focus should be on the roles that directly impact strategy and not necessarily on the company’s current star players. This process may require a shift of focus—from A players to A positions—to identify roles that are critical for organizational success and that need a succession plan. This means identifying the roles that are key to driving and executing the strategy, and then identifying the individuals who are good fits for those positions. Of course, your A players might be the best candidates for these A positions, but the role identification should come first. (It is possible that given a shift in the competitive environment or changes in technology, looking outside the organization might provide a candidate who better supports a role of the future.)
- Remember that you’re not just picking a leader; you’re shaping your company’s future. Succession is often viewed as simply picking a successor for the top leader (the CEO or president); the focus is usually superficial and emphasizes mostly replacement. However, good succession goes beyond putting a new leader in place. It also includes the conservation of a company’s culture and values, the identification and development of future leaders for all key roles, and a smooth ownership transition. This type of transition is key to a company’s success and requires a well-thought-out process to ensure that all the pieces are in sync. The effective organization makes succession decisions based on facts and data, focuses its attention on strategically important positions, and takes a holistic and proactive approach when looking at the organization’s succession requirements.
Ready, Set, Go!
Embracing a continuity mindset and engaging in a systematic succession management approach help BPMs minimize the likelihood of the wrong individual being put in place at the wrong time. When positions that drive strategy are identified early on, and when the competencies for success in those roles are clearly defined, the organization will be well-positioned to develop and select the best-suited individuals for the job.
Effective leaders with a continuity mindset understand that for the organization to succeed, they must make hard choices that may be unpopular in the short term. Succession management and ownership transfer for a long-term win requires courage, humility and a long-term focus. The good news is that having the best talent in the most strategic positions—and the bench strength to fill those key roles when the time comes—drives winning organizations.
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