Volume 36, Issue 8, August 2001

Changing of the Guard
When Company Management Passes from Old Guard to New

I once had the opportunity to witness the changing of the guard at Buckingham Palace and it’s nothing compared to the way it works in the glass business. Over the past quarter century, I have watched company managements get old. As the owners get ready to leave for the golf course one final time the age-old question of succession again rears its ugly head. It is our version of the changing of the guard and it is a frequently painful experience. 

There are two kinds of change. First there is the corporate take-over or the buy-out. At first things look as if there will be only minor “adjustments” but “we are under new management.” This is an interesting experience but not nearly as interesting as the change that takes place when a small- to medium-sized glazing contractor attempts its version of the changeover from old management to new.
For a glazing contractor the easy way out is to just close the doors, wind down the backlog, collect the receivables and sell the assets. I guess the payables need to be handled too, but not if you move fast enough and set sail for the Bahamas. That’s it. Most of the money is usually in the contracts. The labor was hired out of the union hall and the bookkeeper was the owner’s spouse. The superintendent goes back to work with the tools and the estimator hangs up his own sign as the new glazing contractor in town. 

For some unexplained reason, retiring owners tend to think that there is some huge windfall attached in “good will” to the company’s name. They think what really is “blue sky” is worth a fortune. Should the estimator have the appetite to try to retain the name and buy the business, he may be offered the opportunity at a handsome price. The terms of the sale usually depend on who is doing the selling. An owner who just wants to retire is more likely to be fair than an heir who got the business because he was there to catch the goodies when the owner kicked the bucket. He is now ready to make a killing and is prepared to screw the poor estimator right in the old glazing pocket.

I had a great uncle who was a high-stakes gambling businessman. He made fortunes and lost fortunes and when he retired he sold out to his partner. I asked him why he did not just give his share of the company to his son, who was working in the business at the time. He laughed at me and said, “If I give him my half now, in a year my partner will have it all for nothing. This way at least my son will inherit something." This was not a glass deal but I have seen the same trick in the glass business.

Blessed are those who raise their children in the business and do it right. They train their children by grooming them in the company from the bottom up. They hold them to a higher set of standards than any employee, and when they are ready to retire they can feel good about walking out the door. They will be assured in knowing they are leaving their company in well-trained, capable hands. Unless of course the kid wants to be a brain surgeon or a rock musician - then to hell with it, just cash it out; take the money and run.

Dez Farnady serves as general manager of Royalite Manufacturing Inc., a skylight manufacturer in San Carlos, California. His column appears monthly.


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