The transition challenge
Blurb: When successful entrepreneurs like Mitch Garfinkle decide to retire, they typically do so by gradually transferring power to the next generation.

Mitch Garfinkle, president of Mitchel-Lincoln Packaging, runs one of Canada's most successful manufacturing firms. Last year, the company's 600 employees produced $170 million worth of corrugated cartons, moving supplies and accessories.

With all of his success, you'd think that Garfinkle, a 74 year old golf enthusiast, would have long ago created a clear succession path, by nominating a dauphin from among his three children, all of whom are active in the business. Think again.

"I can't decide who to pick," said Garfinkle, who in recent years has been gradually stepping back from day-to-day operations. "They all have their qualities. If I choose one, it may not be fair to the others."

Garfinkle's sons James, who is 46 and runs the company's Festival Packaging unit and David who is 44 and handles production, are the front runners for the CEO position. Both are seasoned executives who have been active in the business for decades. Daughter Joanne Garfinkle-Greenspoon, who is 41 and currently raising a young family of three kids, works part-time as a salesperson servicing house accounts.

Garfinkle's indecision is more apparent than real. Like many entrepreneurs who built their businesses from the ground up, and who have tackled countless competitors and weathered business cycles over an extended period of time, Garfinkle is plagued by conflicting realities.

The first is that despite his children's obvious talents, there is probably no one who can run his business better than he can. The second is that the more management experience the kids accumulate before Garfinkle retires permanently, the betterMitchel-Lincoln Packaging's chances will be of continuing its growth into the next generation.

The Garfinkles are not alone in facing the transition challenge. According to the CIBC, 500,000 small business owners will retire during the next five years. When they do, they are poised to transfer $1.2 trillion in business assets. The bank labels this as "one of the largest handovers of economic control in generations."

A quick meeting with Garfinkle's kids, sheds light oon Mitch Garfinkle's dilemma in naming a successor. Each comes across as bright, motivated, hard working and with a good knowledge of the packaging industry.

One reason for the good first impression is that despite their differing responsibilities, each also works in sales handling house accounts. Like most good salesmen, their first challenge is selling themselves. In fact, the Garfinkles' close contact with customers is one of the key reasons for the company's success.

"If you don't sell you don't know (anything)," said David Garfinkle, whose main responsibility is overseeing Mitchel-Lincoln's two plants, both of which are more than 200,000 square feet in size and contain production equipment worth tens of millions of dollars. Despite this daunting challenge he also oversees three salesmen and several accounts.

"You can talk about all the business theories, but they all go down the drain if your customer isn't happy," said Garfinkle. "And the best way to make sure customers are happy, is to stay in touch with them by being on the front line."

Mitchel-Lincoln's clients, --who are mostly manufacturers themselves,-- are a special breed. The boxes they package their products in are the last thing they think about. But if the boxes aren't there on time, it creates a bottleneck that can shut down their own production lines.

Over the years Mitchel-Lincoln has developed an "on-time, as ordered," philosophy, that permeates all levels of the organization. The company's warehouse is filled with skid loads of custom made cartons that were produced in advance, but which can only be shipped the day the customer needs them.

"It's a problem for us," said David Garfinkle, shaking his head at the endless rows of pallets. "That merchandise takes up lots of valuable space. And there's also a cost because we could use the cash that's tied up there elsewhere."

When Mitch Garfinkle founded Mitchel-Lincoln almost 40 years ago, he began as a jobber, buying and selling, paper and cardboard products and trying to make a living on the thin mark-ups that are the bane of a middleman's existence. His big break came several years later, when Toronto-based Atlantic Packaging, agreed to finance his foray into production, in exchange for a 50 percent stake in his business. The investment turned out to be a great move for both parties.

But although Garfinkle has run his own show since then, ironically, it may be the folks at Atlantic Packaging who decide who will eventually run the company he founded.Mitchel-Lincoln's board of directors, of which the Toronto based partner nominates half, will make the decision.

Ultimately, what will matter more to the Garfinkles than who holds the CEO title, is how well the kids get along. As in almost any family business, in which numerous members hold equity stakes, big decisions will need to involve significant amounts of consensus.

"It really doesn't matter who has the title," said David Garfinkle. "I know (my brother and I) can both can do the job. What matters is that we work together."

 

Fact Box:
Company Name: Mitchel-Lincoln Packaging Ltd.
Web-site: www.m-lgroup.com
Owner: Mitchel Garfinkle 50%, Atlantic Packaging 50%
Founded: 1965
Annual sales: $170 million
Products: Corrugated cartons
Employees: 600
Phone #: 514-832-5475

 

peter@peterdiekmeyer.com

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