Congratulations to our client C-MAC Industries who last week won the ESOP of the year award for SME Succession
C-Mac GM Steve Grylak was presented with the national award for best employee share plan for SME’s / Succession at the inaugural Employee Ownership Conference and awards dinner last Thursday 10th May at the Sofitel in Melbourne. Locally grown and owned engineering plant C-Mac in Girraween, in Western Sydney, NSW, has bucked the growing national SME trend to wind up on owner retirement (The Exit Generation Needs Help – SMH 19 Sept.2011) with the introduction of an employee owned share plan ( ESOP) offered to all its employees. The engagement of employees as owners has already seen an 18 % hike in productivity at the plant.
More than 80% of Australian small and medium business owners aged over 55 are trapped in their businesses – struggling to work out how to escape and at the same time extract their wealth from the companies they have worked so hard to create.
Recent surveys by a number of the Big Four banks and several accounting firms identified succession planning as the number one issue among business owners as they approach the end of their careers. But like so many management “buzz words” coined to capture complex trends in simple phrases, “succession planning” fails to address so many of the problems the owners of SME’s are grappling with. For example, those in the manufacturing sector find themselves looking for a viable exit from their businesses at a time when markets for their products and services are disappearing offshore. Unable to find buyers prepared to pay a fair price for the value they have created or family members willing to take over the reins, more and more face the terrible alternative of simply turning out the lights and walking away – 38% had a lack of awareness of the option of employee buyout as an option for succession, with a further 44% considering employee buyout as unlikely or very unlikely.
The Australian Employee Buyout Centre facilitated the ESOP implementation and funded all the advisors costs for C-Mac Industries. The funding was provided through a Federal Government Grant under the now completed Rudd government initiative, the Jobs That We Own program.
ESOP designer Craig West of Succession Plus states “this plan has been a great example of the combination of enthusiastic employees (who have now elected two employees to represent the new group of owners on the company board) and owners who can see the benefits of increased participation and who are prepared to create a win-win environment for all stakeholders. It is unusual to see such a high take up rate amongst employees and encouraging to see the improvements in performance even at this early stage.”
Steve Grlyak, manufacturing manager for C-Mac said that since the introduction of the employee share plan, “People are now saying “us” instead of “me” and asking, “what do you want us to do?”. Job security is a key motivator at C-Mac and we do not want to lose employees with skills. There are now charts in the lunch room so everyone can see how the business is doing. The change has been truly unbelievable from all staff. I have directions and targets from the elected board (The plan involved the members electing two employees to represent them on the C-Mac board) and I have all the support I need from all staff. Our meetings are open for discussion with great ideas from all staff to improve efficiency. As a manager with job security and a share in the business it’s a great pleasure to manage a team who want you to lead with ideas”.
Interestingly, it is not just the management team that are behind the plan, Ben Schnebly at tradesman at C-Mac say’s the family “ has provided more info and is now more open to allow people to make decisions and contribute ideas” and that the plan “allows employees to work harder to make more money to allow us to buy more shares.” Matt Connolly, technical officer for the sheet metal department, was elected by the employees as one of two representatives to sit on the board of directors has fully embraced the plan – “Being a board member has definitely given me a much different perspective on the way the business runs. I now have a lot more respect for the decision makers and have found that a lot of the day to day issues aren’t as clear cut as they seem. Being on the board has also given me some new found confidence in the business. Now I see all the measures and processes that are set up to make sure the business doesn’t fail. I’ve found it quite interesting so far and can only imagine it will get more exciting… “ In terms of the performance of his colleagues Matt says “I get a slightly more positive vibe in terms of the way the company is viewed by the employees. It has definitely made people think about their futures with the company and not just the next week or day. Most people understand it is a long term process and aren’t expecting to “get rich quick” or anything like that.” In terms of his own approach – “I will be constantly on the lookout to improve the business. I will also carry a sense of pride when representing the company during or even after work hours. It has also made me think long term in regards to my employment and also in regards to future opportunity with the C-Mac.”
The company’s founding family are still the principal shareholders but see the benefits of a gradual sale of shares to employees based on profit share as well as the increased involvement of key staff within the management team. Margaret McMaster (widow of company founder Cliff who passed away in 2008), supported the plan as she saw it would benefit “long term and faithful employees as much as the family.”
The plan – a Peak Performance Trust designed by Succession Plus specifically for small to medium privately held businesses who are looking to attract, retain and motivate key staff by involving them in both the equity and control aspects of succession planning – has been used successfully by a growing number of business owners throughout Australia looking for an innovative approach to succession planning.