During the past decade, fast-changing technology and the ever-shifting business landscape have ratcheted up the challenges for owners of family plastics companies.
Many of the entrepreneurial plastics pioneers of the 1950s are confronting retirement age and a bewildering array of options, including handing over the company reins to their baby-boomer offspring, cashing in by selling the business, or devising some other creative exit strategy.
In some cases, the choices are clear, as at injection molder Hoffer Plastics Corp. of South Elgin, Ill., and at 75-year-old, New Berlin, Wis.-based mold maker Stanek Tool Corp., where sons and daughters have demonstrated not only the interest but the aptitude to step right into their fathers' management shoes.
Others have chosen different paths, such as Milwaukee-area toolmaker Carl Edquist, who also passed his firm, Carlson Tool & Manufacturing, on to a son — but only after employing a novel succession-training plan.
Brothers Mike and Larry E. Noggle built custom injection molder SPM Inc. on the solid foundation established by their father, Larry C. Noggle, before embarking on aggressive growth that led to selling the family business and some unexpected consequences.
There are lessons to be learned in all these stories, not only for today's retiring owners seeking to hand down or sell their operations, but for the new-generation managers navigating their family businesses into the new millennium.
``More and more mom-and-pop businesses are having trouble competing with better-funded competitors,'' according to Debbie Douglas, whose St. Louis-based private investment banking firm Douglas Group specializes in the sale and purchase of companies. ``Those who came into plastics 30-40 years ago are facing a much tougher road.''
Typically, Douglas noted, older companies were started by engineers who could run a modest manufacturing operation just fine. But now, she says, ``There is more pressure for secondary operations, sophisticated inventory controls, computerization, ISO quality standards.'' These issues heighten the need for strong business management and financial skills.
``Ten years ago, problems used to always be at the manufacturing / supervisory / line-personnel level. Now, they're at the executive management level,'' said Richard Jones, chairman and chief executive officer of Management 2000 Inc., a Burbank, Calif., consulting firm that specializes in family-business succession.
Such problems have not beset Hoffer Plastics.
Robert A. Hoffer Sr., who turned 80 years old this month and still works full time as company president, found the necessary management skills within his immediate family. His two brothers and his wife's cousin have worked in the business, and now his two sons are playing key roles as company vice presidents. Robert Jr.'s specialty is computer-assisted manufacturing and brother Bill's is operations with a sales and marketing focus.
The success of the elder Hoffer's strategy is evident. He started Hoffer Plastics 46 years ago in a 40-by-60-foot garage. Today his one-plant operation employs 700 and runs 118 injection molding presses. Sales slipped slightly last year, but still were $78 million.
``The cost of playing is obviously higher now,'' he said, referring to the need for sophisticated computerization and his firm's current efforts to install and document stringent QS 9000 quality systems.
Still, such challenges haven't deterred his family business. ``We've had no debt for 25 years, yet we've spent $16 million in capital investments in the last five years. We've had to earn our way. So it can be done.''
Stanek Tool is another plastics firm proving that effective family ownership still can spell success.
Czech immigrant engineer Edward Stanek Sr. and two colleagues founded the firm in 1924, when tool and die makers were earning 20 cents an hour. After Edward Sr. died in 1937, his three sons took over and worked in the company for a combined total of 131 years.
When the youngest son, Tom, retired in 1996, his daughter, Mary Stanek Wehrheim, who had joined the company in 1984, became president.
This one-plant, 85-employee maker of injection molds now generates annual sales of about $12 million. Wehrheim, who said it was always her decision to get involved in the family business, has had a front-row seat as management practices have evolved.
``Companies today do a better job of communicating all around,'' she explained. Employees ask more questions of management now, and expect answers.
``You need a written document'' spelling out every such detail, she stressed.
The most important advice she has for family business managers is that they must be very open about what all family members should expect, in terms of company stock, management duties, etc.
Carl Edquist was acting both as a father and a company president when he concluded in 1989 that it was time for him to step down from the mold-making company he founded in Cedarburg, Wis., in 1958. But he felt that his son Jerry lacked the managerial experience to run the firm. Jerry, an engineering graduate, was 31 and the only one of eight siblings interested in his father's business.
``I wasn't ready to run the company, and I knew that,'' Jerry said.
So Carl, already in his 70s, hired a consultant he knew from the National Tooling and Machining Association to thoroughly analyze every aspect of Carlson Tool & Manufacturing's business — from balance sheet to employees to end markets. The result: a 79-page report that recommended Carl hire an interim president while his son learned the business side.
Carlson Tool in 1990 hired Mike Schoeben to run the company for the next five years, while Jerry worked alongside him and participated in executive training courses. Everything went to plan, except that Jerry found himself ready to take over after just four years.
``I had ideas to implement, and it was a little like two brides at a wedding.''
So the company worked out a plan for Schoeben to leave a year early, and in 1994, Jerry Edquist became president of a firm that had about 85 employees and annual sales of $10.6 million.
Today the firm has two Cedarburg plants, employs 120, and has annual sales of about $17 million. Carl Edquist remains chairman, but otherwise lets his son run the business.
Increasingly these days, family businesses find themselves the targets of investors or acquisitive plastics companies seeking to fill gaps in their manufacturing portfolios.
Such was the case with the mold-making firm that began life in 1954 as Southern Plastic Mold Inc. Larry C. Noggle founded the company and sold it to his three sons, Ed, Mike and Larry E., in 1976.
The brothers built a multiplant custom injection molding business, and in 1992, eager to expand operations globally, entered SPM into a joint venture partnership with other investors called Bace Manufacturing Inc.
In February 1995, Mike, brother Larry and partner Charles Finkbiner were majority shareholders when they accepted an offer worth nearly $103 million for SPM from British-owned Dynacast Inc.
``We were not actively looking to sell our company,'' Mike Noggle said, but the Dynacast offer was difficult to refuse. The merged operations, named SPM Inc., had 11 plants and annual sales of some $185 million.
But the pursuit of growth can be fraught with risks. Twenty months after the February 1995 buyout, Dynacast eliminated the jobs of the Noggle brothers and Finkbiner.
Dynacast's parent, Coats Viyella plc, in turn agreed Feb. 17 to sell its Precision Engineering Division, which includes SPM, to a British venture-capital firm, furthering the complex saga of this once family concern.
Noggle said the primary challenge for a family business owner is whether to grow or stay small. ``Dad always was content for it to be a modest business,'' Noggle explained.
``It's the question of comfort vs. going for the brass ring. ... An owner has to know if [his or her firm is] a small company, or a big company that hasn't grown yet.
``There was not as much pressure to grow 10 years ago,'' he added. ``Then, you could sit and grow. Not anymore. Now you need to follow your customers globally. ... Today, keeping up with technology is a full-time job.''
And while many sources agree there always will be a place for small, well-run family businesses that excel in particular product or service niches, some see changes on the horizon.
Noggle, commenting on how more kids are likely to go their own way rather than follow in their parents' footsteps, predicted, ``I don't think you'll see as many family businesses, and I don't think they'll last for as many generations.''