Transition and succession, Part 1: Challenges and solutions

Editor's note: Custom molding businesses are often family owned and operated, and many of these companies are beginning to undergo the transition from founding generation to second generation. There are pitfalls to such a succession and ways to make the transition easier for all involved. This is the first in a periodic series of articles on making that transition a successful one.

The injection molding business is changing. The generation of men (and it's safe to be gender-specific in this particular case) who founded a majority of the molding companies in the 1950s and 1960s are finally retiring. Many have children in the business who've been with the family-owned company all their lives in one way or another. But what presents new opportunities for one generation presents challenges for the other.

As the younger generation steps into the role of president or ceo, the older generation is often reluctant to step aside, afraid that somehow the youngsters won't know what to do. There's a "here it is, but don't break it" attitude among owners, say these second-generation company executives. These new leaders often have very different backgrounds and experiences from their founder-parents. This experience adds a new perspective to the business and, given the chance, can lead to growth. However, to ensure the continuing success of the company, the older generation sometimes hangs on, which can lead to conflict. The key is to find the right balance.

Letting Go
Charles A. Sholtis is one of these second-generation molders and was recently promoted to ceo of Plastic Molding Technology Inc. (Seymour, CT). In addition to holding a B.S. in Business Administration from Villanova University and a Master's degree in Management from the Hartford Graduate Center of Rensselaer Polytechnic Institute, Sholtis also completed his NROTC in college and spent three years in the Navy.

His brother, Todd M. Sholtis, is PMT's vp of new business development and also has a diverse background. Educated at UMass Lowell and Penn State, Todd has been in plant maintenance, sales, and project management. He also spent two years running an affiliate mold design and export business in Slovakia.

Although it would appear that PMT is in good hands, the business is never far from its founder's heart and mind. Charles E. Sholtis, or Chuck Sr., has entered semiretirement but continues as PMT's chairman of the board. This allows him more time to travel to his other home in St. Petersburg, FL where, at age 66, he can enjoy some free time. Yet, being the self-described engineering type that he is, the elder Sholtis still receives faxes of prints and helps out with various projects.

"You have to do something," says Sholtis. "You can't play all the time."

Both father and son (Charles) acknowledge that they come from different places when it comes to business. Chuck Sr. went to night school shortly after founding PMT and got an associate's degree in engineering. He spent time on the plant floor, doing those hands-on tasks engineers love.

When, in 2000, it came time to think about succession planning and making the transition, Chuck Sr. began by putting an advisory board in place. The board consisted of people who were successful and knowledgeable in their own right, and had the skills necessary to guide the family business in the right direction. "We looked at it from a standpoint of bringing in people with varied backgrounds," notes the younger Sholtis. "We had a 'care-about' list of those areas where we felt the company could be strengthened from a management or competency standpoint."

The advisory board also helped with the family side of the business. "It's not easy when you have a family business," says Chuck Sr. "You have the business, but you're also the parent and that can present problems from time to time. An outsider helps neutralize this."

The younger Sholtis agrees. "Outside oversight becomes almost a necessity to address the differences in direction," he adds.

One of those differences included a decision to establish a molding facility in the Southwest U.S. "I felt the company needed to be there for the long haul strategically, in response to questions from our customers about our being closer to their manufacturing sites," explains CEO Sholtis. However, convincing his father this was the right thing to do required planning.

To aid his cause, he put together a business plan, including customer service benefits, for siting a plant in El Paso, TX. He outlined the bricks and mortar of the facility in a plan that included machinery and equipment required and the financial support needed. "Having that in hand I stood some chance of getting my views across to my father," says the younger Sholtis. "He was at a very different juncture in his life. I'd been here 15 years, he'd been here 30. It took a lot of convincing for him to take this risk—everything he built—for this new facility."

The elder Sholtis insisted that PMT have contracts in hand for enough work to support the new facility, which his son secured. With the approval of the advisory board, the company moved forward with the 12,000-sq-ft facility, which today has 12 presses and serves customers in the automotive and electronics markets with insert molding capabilities.

Words to the Wise
Sholtis Sr. says it's important to do advanced planning before making a big change. "If you don't do those things necessary to prepare for the next generation you'll find the transition is more difficult to implement. You can't wait until the day you leave and say 'here are the keys.' It starts years ahead."

Today, PMT has made the transition from an advisory board to a formal board of directors. "We've literally transitioned from a mom and pop organization—my mom worked the front office and my dad worked out back in the plant—to a company that operates like a professional corporation, looking at management objectives, strategic planning, finance issues, and shareholder value," says the younger Charles.

He credits the smooth transition to the advisory board and to the Family Business Center at the University of Connecticut, which helped the family make the right decisions for both the company and the family members.

"The advisory board gave us confidence in the succession process," says Charles A. Sholtis. "I'm trying to build [my dad's] confidence in the management of PMT and he's beginning to see it. We're doing well, things are going right, and when the board says we're doing right, he has a higher level of confidence that he can step back."