In planning for a leadership transition in business, what’s at stake when the heir apparent is a family member—a son, daughter, nephew or niece? What’s at stake when the next in line is not next of kin?
The complexities of succession planning can be great, and every company’s situation is different. We spoke with three AWCI member contractors representing diverse companies to get some clarity. They’ve each gone through recent transitions or are going through them now.
Tim Wies: Get Buy-In from Others
Many wall and ceiling company owners and officers begin planning for transitions years in advance. While there’s no set rule, starting the process about five years ahead of the transition, plus or minus, seems to be common. But how does one go about it?
The first step involves an honest read of the situation, says Tim Wies, president of TJ Wies Contracting, Inc., in Missouri.
“The departing member needs to be fully cognizant and pay attention to his potential successor’s skills and abilities,” Wies says. “You can’t try to drive a round peg into a square hole,” he says about selecting the next in line.
To make an honest evaluation, Wies suggests having plenty of candid conversations early on.
“We’ve had conversations for eight years,” says Wies about him and his son Cameron. Cameron Wies is the company’s chief operating officer and poised to become company president.
Wies says his son received lots of training over the years. The younger Wies worked for TJ Wies Contracting in high school. After college, he worked for two years at the German construction company Baierl & Demmelhuber. When he got back to St. Louis, Cameron first worked in the field, then as an estimator and later as a project manager for the company, spending about two years at each level, his father says.
Then, when Cameron became the company’s chief operating officer about a year ago, the move sent a signal to others that “he was the heir apparent,” Wies says. The signal worked. Cameron’s rotation through various company positions had earned the all-important buy-in from the crews, estimators, project managers and company’s leadership team.
“He’s been a colleague with everybody,” says the elder Wies. “And truthfully, there were times when my leadership team came to me and said, ‘It’s time for Cam to make the next move.’ That’s what you want—your team to tell you he’s ready.”
In addition, about three years ago, the elder Wies looked outside the company for transition advice. He engaged the consulting firm, Family Business Institute in Raleigh, N.C., whose lead consultant asked tough questions. One area of questioning involved the consultant zeroing in on the differences in the Wies’s leadership styles.
“Cam and I are polar opposites,” Wies says. “I’m a gut instinct type person. I take a little bit of data, make a decision and live with it. Cam is data driven. He uses his head to make decisions. I use my heart.”
Naturally, differences in how leaders make business decisions is to be expected. The elder Wies admits, however, that initially he tried to get his son to think like he did, and that pressure interfered with the succession process.
“Cam is not going to be me. He’s not the second me,” says Wies. “He’s going to do things differently than I would, and that’s all right.”
Besides benefitting from a consultant, Tim and Cameron also drew valuable insights from members of their AWCI Business Forums, peers with whom they’ve shared experiences for years.
“Our peer group is, for lack of a better term, the Old Timers,” Wies says. “More and more of us are retiring, so we’ve had the opportunity to watch their transitions and benefit from them. I’ve pirated more ideas from our forum group than I could count.”
So, with the succession plan at TJ Wies on track, what does the elder Wies plan to do once the transition is completed?
“My goal is to be available as needed for advice,” Wies says. “But day to day, I’m going to be gone. I can be the Director of Fun and barbecue for lunch every now and then. But my goal is to let Cam have the reins and drive the bus. I’m extremely excited to see where he and his team take this company.”
Ty Crane: Don’t Let Emotion Drive Decisions
Ty Crane became president of F.L. Crane & Sons in Mississippi in September 2019, when the former president, Mike Heering, retired. Heering is the winner of AWCI’s 2017 Pinnacle Award and was AWCI’s 2006–2007 president. He had been with F.L. Crane for more than 46 years, so his shoes, as it were, would be tough to fill.
Crane himself knew this. He acknowledged in a May 2017 article in AWCI’s Construction Dimensions: “The thing I admire the most about Mike is his ability to speak on every level of the company. He came up through the field, so he can communicate with our guys out in the field. He can do every trade of work that we do at F.L. Crane, yet he can sit in meetings with the CEOs of companies much larger than ourselves and communicate on their level and make tough business decisions. That takes a true leader.”
To begin filling those shoes, F.L. Crane looked for future leaders from within the company, as is its custom.
“All at F.L. Crane would agree that the succeeding member would need to be organically grown in the company, so they have a clear understanding of the mission and culture within the company,” Crane says. “Other types of businesses might be able to get away with hiring highly talented outsiders, but we feel that the best opportunity for success lies with the leadership that is grown within our company.”
He says employees have a lot riding on those appointed to run the company.
“We have a large number of employees who entrust their livelihood with us,” Crane says. “They are much more willing to follow a leader they know and trust, rather than someone who has come from an outside entity.”
Succession Planning Framework
The United States Department of Commerce has a suggested framework for company executives to recruit, develop, retain and deploy workforces and build a pipeline of leadership talent. In addition to the ongoing job of ingraining an ongoing succession mindset throughout the company, the DOC framework involves four steps:
1. Establish a succession planning strategy.
2. Determine leadership and key position demand.
3. Evaluate talent.
4. Mobilize by filling competency gaps.
The DOC succession planning model is available for
download at https://www.commerce.gov/hr/files/doc-sp-framework.
Crane himself acquired experience and understanding of the business by working his way through the ranks of the company. He says it’s a mandatory career path for F.L. Crane executives.
“I worked summers in the field,” Crane says. “Then out of college, I came in as an estimator and also worked as a project manager.”
Crane’s transition to president involved three years of executive management training under Heering. Crane was appointed the company’s chief operating officer, during which he worked closely with Heering and other F.L. Crane executives.
“It gave me time to learn under Mike—to spend a lot of time working alongside him to see how he operated,” Crane says.
The three-year period also allowed Heering to divide up his reporting duties between Crane and executive vice president Kevin Payne. Ultimately, the plan worked, and Crane was appointed company president, though he admits that had he not proven himself capable, “the plan would have changed quickly.”
Crane’s advice for others undergoing succession planning is to be downright honest with yourself and with the candidates under consideration. That’s how he was treated.
“Promote wisely,” Crane recommends. “If someone is not the right fit for the role, don’t force it.”
The wrong choice—someone not ready or not able to take on leadership responsibilities—could mean a company division, or even the entire company, will step backward and miss out on growth.
“Don’t let emotion drive the decision,” Crane says. “Don’t promote someone and hope it works out when you know that person doesn’t meet the requirements of the role. Instead, go with what you know [to be true] deep down.”
It may be someone’s “turn” to take on a leadership role, but if they’re not right for the job then their promotion could put others’ well-being in jeopardy. Sure, management might fear losing a long-term, tenured employee being passed over. But younger, more talented individuals, Crane says, could leave just the same. The key is to make the proper, logical choice.
“Be honest about whether that person can really do the job,” Crane says. “Don’t be afraid to say, ‘Here’s why you get, or don’t get, my vote.’”
Mark Nabity: Ensure the Business Has Continuity
How is the succession plan going at Grayhawk, LLC, in Kentucky?
“We’re just past the halfway point on our five-year plan,” says Mark Nabity, president of Grayhawk, LLC in Kentucky. “We’re ahead of schedule with the note.”
A remaining to-do involves filling positions of a few long-time employees who will be retiring soon.
“I have to pass all the batons,” Nabity says. “I want to make sure we’ve got all the people in place to carry on the business.”
Nabity says the plan at Grayhawk is generally to promote from within, but not always. To run the company’s panel business, for example, Nabity and Bill Ford, his partner, have been searching outside the company for the right individual.
“We went after a fellow pretty hard, but we came in second place to a large industry friend,” Nabity says. “But, you know, that’s why you try to find the right guy.”
Grayhawk’s succession planning began two to three years before January 2020, when Nabity and Ford signed their agreement for the transfer of the company.
“I needed to find the right guy, and that ‘right guy’ [Ford] had been with us for six years,” Nabity says. “The right guy had to be operationally strong. He had to know the business from the inside out and not be in the weeds but be someone who could get above the weeds and manage others.”
Nabity says, however, he had to address another challenge of selling a construction company. “You’ve got to figure out a way to monetize the buyout,” he says.
Buyers of construction companies don’t show up with blank checks in their hands, Nabity says. If they did, he says “they’d be nuts,” because wall and ceiling construction is a cash intensive business.
Since Nabity has personal assets tied up in Grayhawk, he needed to find a buyer who could meet “a minimum price of entry.” His arrangement with Ford allows Ford as the buyer to earn an income and give him time to increase his stake in the company. The arrangement will keep Nabity in the picture for a time—“I’m going to hang around and be ‘the bank’ for a few years,” he says—but this also helped stabilize the deal.
Nabity explains: “Bill, who’s buying the company, needs time to earn some money and put it back into the business and build his capital account in the business before I can start taking out money beyond the purchase price. If I just pulled everything I had out and left, it would hamper his ability to move forward. He couldn’t finance his receivables or get good credit terms with suppliers, and you need all that because this is a very cash hungry industry.”
How do you set a purchase price for a wall and ceiling company?
“Typically, it’s based on EBITDA multiples,” Nabity says. EBITDA, which stands for earnings before interest, taxes, depreciation and amortization, is a measure of a company’s bottom-line profitability. “I did talk to outside companies about valuing the company and representing me in a sale. But at the end of the day, that’s not the direction I chose.”
Nabity says outside firms tend to inflate the values of companies for sale. They paint a pretty picture that may garner more bang for the buck for the owner. But that’s only true if they can find a buyer, which Nabity says is hard to do in specialty construction.
“For an outsider to just come in, stroke a check and say, ‘Things are going to be good,’ is not likely to happen,” Nabity says.
So, Nabity chose to sell Grayhawk the way he himself acquired it.
“I was given equity after I participated in managing the business and earning the business money,” he says. “But for a lot of years, I didn’t have any equity; I just worked my butt off. I feel this is the best way to transfer the company to the next generation.”
So, the note is signed and the transition plan at Grayhawk is working. But why is it time for Nabity to leave the company?
“I recently turned 66 and I’ll be 68 when the [buyout] day comes, and that’s enough,” Nabity says. “I’m ready to do some things I haven’t had the luxury or freedom to do.”
Mark L. Johnson writes for the walls and ceilings industry. He can be reached via linkedin.com/in/markjohnsoncommunications.
