Passing the torch to seven members of the next generation is not an easy task, but the Baughman family accomplished it with some professional help at Plastomer Corp.
Plastomer has been a pioneer in flexible polyurethane foam since 1954, when Walter Baughman II established a company that became the first North American slab stock manufacturer of the versatile material. Walter's brother George soon joined the new company as applications developed for many household products such as sponges, kitchen scrubbers and toys.
In 1958, Plastomer began producing PUR foam for automotive uses to replace felt, rubber and cloth gaskets in vehicle interiors. Plastomer soon broadened its sales for such components and as acoustic dampers in appliances and for packaging of electronics.
Applications evolved in complexity and Plastomer was forced to invent or revise machinery to split foam sheets, apply adhesive backings, apply film facings and then cut the foam structures to their final, specific shapes. Plastomer diversified into ethylene-propylene diene rubber, non-woven PET sheet and other materials processed by die cutting, with or without pressure-sensitive adhesive backings.
Walter and George Baughman gradually sold their shares in the company to the next generation of the family in the form of a long-term loan. At times it was hard for the new generation to make the payments but the founders were patient because family ownership gave them freedom to relax payment schedules. During tough times the payments were tailored so that suppliers and other creditors would be paid in time so that the company could weather the short-term difficulties and avoid drastic measures.
As the new generation gained ownership seven family members became executives and managers. Heading the company operations are Walter Baughman III as president and his brother David Baughman as executive vice president.
Family ownership gives the owners much power in the myriad financial dealings that companies face, explained David Baughman in a phone interview. Deep family ties can ensure company stability when borrowing money carries risk and when the firm enters troubled waters.
“For example, if the automobile industry weakens there are no outside investors to please as the company seeks solutions,” David Baughman said.
Company needs and strengths can be openly discussed among family members, he added. And siblings are available if necessary to share stringent customer demand. On the downside, a family member might feel free to express strong emotions to siblings.
“Any one of us can have a bad day,” mused David Baughman. But if the distressed person is a family member, siblings have insight in how to calm the waters.
Another disadvantage is that the founders might find it difficult to retire while the family is waiting in the wings to take ownership. The Baughmans got outside help to make this sometimes painful transition. A business consultant from the Wharton School of Business at the University of Pennsylvania advised the Baughmans on the first buyout of stock and succession within the company.
“This is a major issue, especially if succession involves moving ownership from the founders to the next generation,” said David Baughman.
“It takes a professional approach to run a business and we wanted outside help,” he added.
The younger generation of a family brings new ideas based on their unique experience to management meetings. As they grow into their roles in the company they contribute ideas and take on more responsibility and autonomy.
But not all family members want to be involved in the company. David Baughman indicated that can be an advantage because there is less temptation for family members to form cliques with separate agendas.
While family members can be a storehouse of expertise, company owners also need to rely on outside experts, David Baughman noted. Plastomer's family owners, for example, didn't have backgrounds as accountants, technical managers or lawyers.
“There is never enough talent to meet demand, so when we can access it outside we bring it in to augment the family's strengths,” he said. Family members also might need training by a third party if the company lacks a particular skill set.
Plastomer also engages in training non-family personnel who Plastomer hopes eventually will work for the firm. Plastomer established a minority-owned affiliate, Inteligente Technologies, in 2012 to train people with Hispanic heritage who are recommended by a staffing supply company partnering with Plastomer. The joint venture prepares workers for the workforce using Plastomer's manufacturing expertise and equipment.
David Baughman said the minority venture and the recent establishment of a Mexican operation should figure in Plastomers's growth.