Manufacturers optimistic, but succession planning lurks as a hidden challenge

Written on Aug 10, 2017

By Gary Hunt, senior content editor

OSCPA member Jason Tuma, CPA, said a recent report on the state of manufacturing in the U.S. largely reflects what he is seeing in Ohio, but one result surprised him: manufacturers’ lack of a succession plan.

The third-annual report from professional services firm Sikich LLP found that in spite of the oft-discussed retirement of the baby boom generation, two-thirds of respondents do not have a written plan for exiting the business.

Tuma“That's something that manufacturers don't think about a lot because they have other irons in the fire,” said Tuma, a partner at Sikich. “They're going to need to figure out what they're going to do with their company – whether that means passing it on to a family member or selling it. I think there's a lot of succession planning, a lot of M&A activity, on the horizon, and it's not something that's front-of-mind now.”

Based in the firm’s Akron office, Tuma specializes in manufacturing and distribution. He said many of the report’s findings reflect what he is seeing statewide. For example, 69% of respondents expect headcount to increase, but nearly 60% said a lack of qualified workers is a barrier to growth.

“First and foremost, workforce development continues to be top of mind for our clients,” Tuma said. “It's very rare to talk to them and ask what’s keeping them up at night and not have it be finding skilled people: finding people who want to work 40 hours a week, and just finding people who will consistently come to work.”

He said this has been a pressing problem over the past six or seven years in particular.

“The economy is looking good, or at least the respondents feel very confident with the economy right now,” he said. “So, it looks like they're all in a position to want to hire. But then there's this anxiety that they can't find the people to hire.”

The reasons center around both employee attitude and aptitude.

“Manufacturers deal with high-tech machinery, and hiring someone that has experience on a particular machine is very rare,” Tuma said. “So, they need to hire someone that is proficient and has a good work ethic, and then train them on that machine and get them to the point they can operate it and handle things when it breaks down.”

He said there are also fewer workers choosing trades as a profession, citing an increase in the number of students attending institutions of higher learning.

“That is great on one hand,” Tuma said. “But on the other hand, a lot of those kids 30 years ago probably would not have thought college was for them, and they would have pursued a trade and maybe entered the manufacturing arena.”

Some students might not even know there are other possibilities.

“I tell young people all the time if you can become a good welder and you have a good work ethic, you can do very well,” he said.

Nearly 80% of respondents said they are more optimistic about the U.S. economy compared to last year while 66 percent said the same about manufacturing. Tuma attributes that sentiment to the political environment; Republicans now rule in Washington, and “I don't think it's any secret that a lot of manufacturers tend to have Republican leanings.” He also said the positive mood cannot be tied to explosive growth in one particular industry, which bodes well for the future because a downturn in one area is less likely to cause an overall bust.

You can access the full Sikich manufacturing report here.

Related:

Don’t miss Sikich’s Dominic Irrcher at OSCPA’s fall accounting shows when he offers a LIVE DEMO: “How to Use Collaborative Programs to Improve Workflow Efficiency.”

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