Transition and Turnaround of Second-Generation Family Business

Situation

A custom fulfiller of promotion/loyalty pieces was struggling financially due to falling sales and costly start-up of new equipment.Two brother-owners shared ownership and control; one decided to leave for a new career before the situation worsened. High usage of temporary help was contributing to quality errors, high turnover and customer service problems.

Challenges

• Restructure the management team to provide for the exit of one brother.
• Streamline operations to improve throughput and profitability.
• Improve scheduling to reduce peaks/valleys and dependence on temps.
• Convert a group of sales/customer service personnel into a self-directed sales team to focus on new business development.
• Change the culture to weed out “bad apples” and reward profitable results.

Solution

Platinum Group facilitated the ownership transition and provided guidance for streamlining operations, as well as getting the right employees in place and preparing to move the company forward. This process started with mentoring the remaining brother and selecting a management team, followed by removing weak performers and recruiting skilled people to replace them. This new organizational structure was supported by results-based compensation. In addition to ongoing mentoring, all personnel were trained in Theory of Constraints to improve throughput and teamwork and provide a catalyst for needed cross training. A self-directed sales team was created and mentored to divide responsibilities between finding and maintaining customers, with a new commission structure to appropriately reward realized gross margin rather than top line sales. A new banking relationship was established to provide the funds needed to support growth, particularly in new equipment.

Results

In the following nine months, new business generated over 20% growth and earlier losses swung to record profits. All employees received bonuses in excess of $2,000 for their 15% share of the pre-tax profits as this profit-sharing culture has taken hold to drive performance.