12 minute read
SUCCESSFUL SUCCESSION
Passing the torch is one of the most important decisions a business or Local will make. Do it right, do it with trust.
By / Jessica Kirby
Passing the torch, passing the baton, taking up the cause, rising through the ranks, stepping up, or stepping down. Whatever way an organization looks at succession, it is as much a part of sustaining and advancing a business or Local as payroll and materials, and it has to be done right.
In a business scenario, there are many options for business owners to exit a venture—transfer to a family member, sale to an outside business or employee group, or simply shutting down and walking away. Many business owners opt for ESOPs (employee stock ownership plans) under which employees become owners. There are both advantages and disadvantages to that model.
Within the sheet metal industry, where labor-management partnerships are the glue that holds sector-wide successes together, it is important to bring succession planning into every aspect of the industry—business transfer, Local leadership, and special project committees. Although quick turnovers are possible under duress, the more thought and time dedicated to transitions, the more stability and trust afforded the industry as a whole.
In June 2021, Jim Paquette, business manager and financial secretary at Local 280 in British Columbia, decided he would
Jim and Sonya Pacquette not seek reelection for a ninth term. Part of that decision was planning far enough in advance to give the Local time to select a replacement and prepare him or her for a smooth transition.
“I promised my wife Sonya after the eighth election that it would be my last,” Paquette says. “So, from that point I knew we needed to start thinking about who would hold this position next. Unions—by their very nature democratic organizations— work on an election schedule, so at a minimum planning should
begin at least a few years in advance if the hope is to transition smoothly.”
Paquette says that when planning for succession, a Local should select someone who is capable of doing the job, willing to take on the added responsibility, and supported by the existing representatives. “Local officers and staff needs or wants should also be considered,” he says.
At the end of July, Richard Mangelsdorf took over Paquette’s position. His decision to accept the role had to successfully make it through his “what’s best for the membership” filter, as do all of his decisions, he says.
“It made sense to me that the person who was likely best suited for the position would be the one with the most experience as a full-time officer, as opposed to someone coming directly from the job site or shop floor,” Mangelsdorf says. “Since I had the most experience, it was a natural fit. I also wanted to make sure that I was taking on this role for the right reasons—to help benefit the membership and the industry as a whole, and to keep my ego out of it. For a position such as this, decisions that are made on a daily basis need to be altruistic and not selfserving.”
The transition has been smooth, namely because Mangelsdorf and Paquette have been having conversations for years about the importance of creating positive situations and developing collaborative attitudes that are important in successful decision making, Mangelsodrf says.
“These more in-depth discussions will help me handle situations Jim may not have encountered or wouldn’t have been able to show me directly,” he adds. “I feel that I have been given every opportunity to succeed in this position.”
The risk of failing to plan is pretty obvious, Paquette says, as it places the Local in a position ripe for turmoil. “Office staff confidence in the new officers may suffer, which ultimately affects the membership and has the potential to negatively affect the industry as a whole,” Paquette says.
Mangelsdorf agrees that establishing confidence in the membership is key throughout transitions. One way to preserve this is to identify potential leaders early and encourage them to get involved in union activities.
“I use the word ʻpeople’ specifically because in a democratic system, you cannot just have one person that you put all your succession planning hopes in,” Mangelsdorf says. “The membership gets to vote on who they want to be your successor. If you can identify people early and get them to be involved, it creates options, and the added participation is better for the membership as a whole. Along the way, people may naturally surface that are good fits for certain positions, so it’s also important to be flexible, as well.”
Above all, Paquette says the worst thing to do is keep plans and ideas secret. “Others need to know about what is involved and what needs to be done,” he says. “Only then can the Local hope to be sure that the planned successor knows what they are getting into. With the successor fully aware, others can have confidence that person is up to the task.”
On the business side, family-owned businesses passed down through the generations can be the smoothest transitions if the relationships are well established between successors and those transitioning out and between labor and management.
Nathan Dills, owner of ACP Sheet Metal Company in Oklahoma and past-president of SMACNA National knows all about succession planning. His is a family-owned business started by Dills’ father in 1977. In 1992, he split the company into two, and Nathan worked for both all through school and through college.
“I started law school in the fall of 1992 and didn’t work for the companies again until 2005,” he says. “In 2008, I purchased one of the companies from my father, and he kept the smaller company. I ran both until he passed away in 2016.”
Dills has two siblings, one of whom worked for the family business from 1999 to 2004, but when his father was ready to start transitioning away from the business, it was Nathan who— with his wife’s support—decided to take on the succession. Dills and his father had reached an agreement on transferring ownership of the small company to Dills, and Dills became sole owner of both.
Navigating the financial and strategic requirements of the changeover required attention to a firm vision of all the business’s facets.
“My father and I each hired our own accountants and lawyers,” Dills says. “Tax implications, such as gift taxes, capital gains taxes, and estate taxes were the biggest concerns for us. I think you have to determine if the business is profitable and what the short- and long-term market looks like in the industry.”
This also means studying the company’s customer base and whether there are growth opportunities.
© Can Stock Photo / focalpoint
“For a family business, I think the driving forces were to get my dad money for his investment and hard work without strapping the business for cash,” Dills says. “Finding that balance was key.”
In the event a successor doesn’t know the market or industry, the challenge is getting out from behind that eight ball. For those who do know the industry, it is essential to stay involved and current in order to minimize surprises as the company changes hands.
“Luckily for me, I had worked in the business for 12 years before law school, and then I came back into working in it for several years before taking over,” Dills says. “Even during my time away, I was involved in the business as a board member.”
Someone wanting to transition out to a successor must understand that the business is no longer theirs and be willing to step back, and that takes requires trust. “They may be kept on as a consultant, to preserve legacy knowledge, but a key part of a sooth transition is understanding that the decisions are now being made by someone else, Dills says.
“Also, family businesses are unique,” he adds. “Owners may want to transition to someone who isn’t family or married into the family, but still try to keep some control with the ʻblood’ family which is a huge concern.”
No matter the challenges, solutions are within reach with commitment to one key principle: open and honest communication. “Have an open mind, communicate, and be abundantly clear about the true value of a business and how different people might view that value differently,” Dills says.
Managing labor during a transition is essential, he adds, and it can be tough. “Obviously a succession means different management and leadership styles,” Dills says. “Open and honest communication are so important. People need to know where new leadership wants to go and they need to feel they are included in the way to get there.”
In a collaborative setting, representing various and sometime competing interests, carefully selecting members and members’ successors requires important attention. This is also a setting where having a formal plan or process in place can be beneficial.
Ben Watson is a new member of the SMACNA-SMART Best Practices Market Expansion Task Force. In 2021, he took over from his uncle, Mark Watson, who had served on the task force for several years. The decision to step into his uncle’s role was a deliberate part of a larger succession plan in which Ben is set to take over the Cedar Rapids, Iowa, division of Climate Engineers, his family business.
“My uncle asked if I was interested and recommended the Task Force as something I should be a part of as I transition into taking over more leadership roles at the business,” Ben Watson says.
Mark Watson retired more quickly than expected, which meant Ben had to jump right into the role without the benefit of shadowing his uncle or attending face-to-face meetings.
“The group is very good about introductions and getting new people involved,” Ben Watson says. “Obviously after COVID, having those face-to-face meetings and interactions, and having the chance to build those relationships will be good.”
Ben says a succession plan for committees would help
new members fully understand the nature and mission of a committee or task force, give them a chance to ask questions and gather background information going in, and as a result, fully grasp how they can best fill the role they are entering.
“One way to do that would be in a mentoring or shadowing format where the new member and the person transitioning out can attend a meeting or two together so the exiting members explain who has what role and provide background on other people’s information and perspectives,” Ben Watson says. “You start to pick up on it eventually, but initially it isn’t always clear how members of a group are related in the industry.”
Watson is currently a project manager and in charge of financials at Climate Engineers. Ben’s father and his two brothers own the company together, and as Ben’s father transitions out of his position over the next three years, Ben is slowly taking on new responsibilities.
This is the long end of an ideal timeframe for transitioning, Watson says, because it provides adequate time for the successor to adjust and to hep the workforce feel comfortable with the switch.
“Eighteen months to three years is ideal, depending on how much the successor plans to take on,” he says. “This is most critical our industry because we are working with union employees who can be laid off. Job security is their number one concern, and they want to be able to talk to the person in charge so they know they will have a place to work.”
A longer transition times means the workforce can witness new leadership’s approach to their roles and responsibilities and feel more comfortable and stable in the company.
“A new leader can bring new opinions or leadership styles to the company, but if a transition takes place over time, everyone becomes comfortable with the decision,” Watson says. “It eases anxiety about the direction the company will go and assures the workforce there is a clear path forward.” ▪
Jessica Kirby is a freelance editor and writer covering construction, architecture, mining, travel, and sustainable living for myriad publications across Canada and the United States. She can usually be found among piles of paper in her home office or exploring nature’s bounty in British Columbia’s incredible wilderness. Get your Local, Chapter, company, or training center recognized in a whole new way! Share your industry images with Partners in Progress to use in marketing and promotional materials. As an advocate for business and workforce development on behalf of SMACNA and SMART, we often need photos that are new and engaging. That’s where you come in. We need your help expanding our photo catalog. If you have images that you would like to appear in Partners in Progress communications, please read below about how to work with us on this request:
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