A Guide to Succession Planning: Protect the Future of Your Lumber Business

By Lindsey DiGangi, Senior Vice President & Chief Operating Officer

In the lumber and building materials industry, a key risk to your organization is your succession plan. Too often it is common to hear owners nearing retirement without a clear plan for who will take over the business.

The lumber and building materials industry, much like insurance, is built on relationships. For many business owners in this sector, those relationships include more than customers, they involve family members working for the company. As a result, many lumber business owners plan to pass down their operations to family members or to close constituents of the organization. Still, the process requires thoughtful planning. Considerations must be made to business continuity, to preserve company culture and to ensure the next leader is someone who will not only manage the business successfully, but whose personality and leadership style will resonate with customers, employees, partners and other stakeholders.

Delaying the succession planning process can build unnecessary pressure on both the organization as well as on those who will assume the new leadership roles. Essentially, a solid succession plan should be a part of a company’s larger risk management strategy.

Get Out There

An effective succession plan should ensure future leaders are introduced to the marketplace well before a change in leadership is imminent. They should be presented with ample opportunities to network across the industry, working with trade associations, committees, leadership councils and more. These events and organizations invite emerging leaders to cultivate relationships with peers, customers, vendors and partners and understand their priorities before assuming an active leadership role.
Participation in associations and leadership programs can also help emerging leaders gain industry perspective, confidence and peer support. These experiences often create valuable long-term professional relationships that continue throughout a person’s career.

Leadership should not assume that existing relationships will automatically transfer when a new leader assumes the role. By presenting upcoming leaders with opportunities to build their own networks and establish trust within the industry, existing relationships will be more likely to continue on as the individual will already be a known quantity.

Not sure where to start? Here are a few associations who are fortifying the future of the industry through next generation development programs:

• LBM Advantage NextGen program
• Hardwood Manufacturers Association NextGen Leaders Council
• North American Young Lumber Employees (NYLE) by Northeastern Retail Lumber Association
• Lumbermens Merchandising Corporation (LMC) Executive Program at Wharton School of Business

This is not an exhaustive list for the industry. If you don’t see your association there, check with them to see what kind of education is available for new and upcoming leaders.

Another great opportunity to build a network is at peer roundtables. Many industry associations or even local community associations have roundtable opportunities. This is a great way to gain perspective and build a network.

If you’re interested in education outside of the industry, a great place to look is at the Center for Creative Leadership. This cross-industry training curriculum offers something for all levels of leadership, starting with high potential individual contributors. Speaking from personal experience in attending several of their courses, collaborating with others from different industries has given me some of the best perspectives on our own organization and on my leadership.

Developing Future Leaders

A culture that supports professional development is another essential component of a successful succession strategy. Many organizations unintentionally slow leadership development by shielding emerging leaders from difficult conversations, operational challenges or high-level decision-making. When current leaders handle every challenge independently, others lose valuable opportunities to learn, gain perspective and understand how the business operates at a broader level. Exposure and experience to different aspects of your lumber business’ operations are critical to leadership development.

Business owners in the lumber space should actively involve developing leaders in conversations, projects and decision-making opportunities that broaden their understanding of the company. Future leaders need opportunities to navigate challenges, solve problems and experience different areas of the business firsthand.
As our CEO John Smith often says, “we want to give our rising leaders the opportunity to drive into the ditch but not off the cliff”. Current leaders should set the guardrails and provide feedback, but give developing leaders the opportunity to navigate on their own.

Leadership Development Beyond Training

It is equally important to allow emerging leaders the room to develop their own leadership style. Thoughtful succession planning is not about creating an exact replica of the current leadership team for your lumber or building material business. It is about developing confident, capable leaders who can guide the organization forward while maintaining its values and culture to embrace the future.

At PLM, we have experienced firsthand how an effective succession plan can aid business continuity through our own succession planning. The most important part to recognize is that it takes time. A new successor will need to build relationships with customers, vendors and others long before they step into a leadership role. As your insurer, early succession planning allows PLM the opportunity to get to know your company’s incoming leadership better and align on goals and execution.

Ultimately, successful succession planning in the lumber industry must be a critical component of your business’ risk management strategy. At PLM, we work with you to help identify and assess your risks, to adopt an effective risk mitigation strategy and to ensure adequate insurance coverage that meets your business’ unique needs. A smooth transition in leadership is critical to protecting your business for years to come. Starting succession planning early with a focus on future leader networking, professional development and exposure to decision makers helps to ensure your business has a clear path for the future.

As always, I welcome any feedback or questions you have at ldigangi@plmins.com or 267-825-9034.