Take Us to Our Leader

By John R. Brandt

Manufacturing executives are nervous — and rightly so. Are we out of recession? Are we in danger of falling back in? How can we take advantage of growth opportunities while hedging our bets on investments, payrolls and production capacities?

In such a dynamic environment, it’s no wonder that fully 25% of manufacturing firms have a leadership succession already planned for their organization in the next five years, with another 29% at least considering a succession (according to the Next Generation Manufacturing Study). If these projections hold true, more than half of all manufacturers could have a new leader in place by 2015.

 Source: Next Generation Manufacturing Study

Large manufacturers (annual revenues of more than $100 million) are even more likely to change leadership: 36% of large firms report a succession is planned (compared to 24% of small manufacturers), and another 34% report a succession is possible (compared to 28% of small manufacturers). Industries with the highest percentage of successions (planned or possible) were: [i]

• Paper manufacturing: 67% of manufacturers have a leadership planned or possible.
• Non-metallic mineral product manufacturing: 62%.
• Transportation equipment: 61%.
• Chemical manufacturing: 60%.
• Furniture and related product manufacturing: 56%.

Changing leaders is always challenging, and even more so during precarious times when margins are slim and credit is tight — with any change, no matter how well-planned, potentially viewed as negative or destabilizing. Yet the business world has changed dramatically during the last two years, and management styles and visions appropriate to previous decades are unlikely to succeed today. Then, too, many CEOs and presidents carry with them the ghosts of cost-cuttings and layoffs; however necessary these moves were to survive the recession, their memory doesn’t inspire workforces to focus on growth and innovation.

It’s important to remember, however, that simply removing old guard leaders in hopes of a different, brighter future rarely (if ever) works. Succession works best when it’s part of a comprehensive plan to improve company performance and overall executive benchstrength, answering three key questions:

• What strategies have been put in place to make this an orderly, positive transition focused on overall company performance, and not just executive changes?
• How will the firm deal with negative fallout from changes (e.g., passed-over senior executives and their lieutenants exiting the company, etc.)?
• How will the company ensure that its workforce embraces a new leadership’s style and vision?

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The NGM Study was coordinated by the American Small Manufacturers Coalition, conducted by the Manufacturing Performance Institute (MPI), and supported by Manufacturing Extension Partnership centers and partnering organizations. If you would like to subscribe to MPI’s NGM newsletter and blog, click here.

© 2010 The MPI Group