July/August 2007
Bringing outside managers into a family scrap company can be tricky. Make the opportunities attractive to outsiders, seek out promising candidates, and provide extensive training, experts say, to get the best results.
By Ann C. Logue
It's a familiar story in the scrap industry: An immigrant arrives in the United States, starts peddling scrap to earn money, and eventually founds a scrapyard. His continued success leads to the company's growth, and his children and grandchildren eventually take on leadership of the business. But what happens when that company becomes an operation that employs more than 2,000 people in more than 40 locations in North America?
That's the situation at OmniSource (Fort Wayne, Ind.), which Irving Rifkin founded in 1943 as Superior Iron & Metal. The third generation of the Rifkin family is now involved in the leadership of the company, and some members of the fourth generation are working after school and during the summer to learn the business. But to continue to grow, the company must also recruit, retain, and promote people from outside the family.
Luckily, with the global increase in environmental awareness and the strength of the commodities markets, the scrap industry is looking more attractive than ever. That makes this a wonderful time to expand the talent pool through recruiting and management development. "We've been doing the same things for years, but now we're in vogue," says Ben Eisbart, OmniSource's executive vice president for administration—and not a member of the Rifkin family. In fact, three of the company's five executive vice presidents are not family members.
The Need for New Talent
Family scrap companies have long had a need to recruit and train outside managers. Not every generation produces people who are both interested in the business and capable of managing multiple yards in a high-tech, global market. Further, family-owned businesses that expect to keep up with the recycling industry's growth and to find investors or buyers for the company often need to attract outsiders to take over or augment the management ranks.
The challenges of attracting managers are well-known. Some relate to the scrap industry itself: It's got a low profile in the business world, and there is no single education path that gives a person the combination of metals, management, and money skills needed for success.
Other challenges are common to family companies in any industry, though. A manager considering joining such a company inevitably wonders if he or she will always have "outsider" status and if the family will welcome the addition. "Many professionals are reluctant to enter family businesses," says Harold Welsch, director of the entrepreneurship program at DePaul University (Chicago), because they are afraid that they will never have enough authority to be effective.
Mismanagement in the family ranks can be another turn-off to outside professionals. Welsch recommends that family businesses solve that problem by setting objective criteria for who among the family can join the management ranks—and with what training. A typical set of requirements, he says, is that relatives joining the company have a college degree, work for another company for at least two years, and then put in stints in different company departments, such as yard operations and purchasing. "After some seasoning, the reins are turned over," he says, and the company's employees can support the decision because the family members have walked a bit in their shoes.
Throughout the history of OmniSource, the next generation has spent summers and school breaks working in the yards, learning the business from the ground up, Eisbart says. That sets a tone from the top that family members have to earn their place in the company.
Another way family businesses can improve their recruiting, DePaul's Welsch says, is to have succession plans, estate plans, and strategic plans in place—steps businesses should take regardless of their staffing needs. "It [creates] an objective growth model," he says. "These outside folks can see where they fit and help the next generation." Otherwise, managers outside the family will fear stepping into a cesspool of sibling rivalry, intergenerational squabbling, and unprofessional promotion practices.
Star Search
Once a family scrap business has made itself attractive to outside managers, it must then find them, most likely via marketing. Businesses constantly market themselves in order to find new customers and suppliers and keep current ones; they can extend those efforts to market themselves to prospective managers. With the additional challenge of explaining the scrap business to those unfamiliar with it, recruitment marketing efforts often must be extensive. Whether it's finding people at the entry level or bringing in experienced hires, scrap companies have to emphasize the industry's opportunities.
As a public company, Metal Management (Chicago) doesn't have some of the challenges of bringing managers into a family company—but it doesn't have a supply of family members to fill the management ranks, either, so it is constantly recruiting for its more than 50 facilities in 17 states. "We go out to colleges and universities. We try to get seniors interested in what we see as a good industry and a good company," says Jim Gutchewsky, the company's national director of human resources.
Metal Management's college recruiting program is a yearlong process that introduces business and engineering students to the company and the industry. Company representatives visit a college campus with glossy brochures, to start, and they offer students tours of their facilities. The company also has a summer internship program that gives students more exposure to the company and the industry before they commit to a career. The process is intentionally a long one so that the company and the recruit both feel comfortable with the fit. "We have a good organization [but] we're in an industry that isn't well known to a lot of people, so we have to educate them," Gutchewsky says.
Part of Gutchewsky's job is training Metal Management's managers to recruit. Though they know what it takes to be successful in the industry, they often don't know how to explain it to a potential hire or evaluate someone in a short period of time. Metal Management's human resources staff works with these managers before they go on campus so they can do a better job. OmniSource also has an internship program it uses to promote the company and the industry. The internship often can fulfill the practicum requirements of college students in engineering, safety, and environmental studies, and "80 percent of them, once they graduate, have remained with us," Eisbart says.
"Most folks don't have a clear idea of what takes place in a scrapyard," he says. "They often think of it as a junkyard with barking dogs and rusting cars and a lot of chaos. Our recycling facilities are a great deal different. Our attention to housekeeping, the environment, and safety sets us apart from most in the industry. … We're proud of what we do and how we do it, and [we] encourage job candidates to visit the company's facilities in the beginning of the recruiting process."
OmniSource also recruits from outside the scrap industry, looking for good people in other or related industries—and it defines "related" broadly. For example, someone who has worked in agricultural commodities is likely to understand the trading and hedging aspects of the scrap business, even if that person has never worked with metals before.
Recruitment in Related Industries
Scrap recycling isn't the first industry dominated by family businesses needing to attract outsiders to sustain growth. Similar and related industries have created training and scholarship programs to get students interested in their work and to help younger employees build their skills.
- FEF, formerly the Foundry Educational Foundation (Schaumburg, Ill.), provides scholarships to students and financial support to professors studying fields related to metal casting. The foundation, funded by donations from companies in the industry, currently funds students at 25 different colleges and universities. It also works to attract students to the industry with an annual conference and support for a professor to mentor them. "The demand for students coming out of school and hitting the floor running is pretty strong," says Bill Sorensen, the foundation's executive director. "The industry knows it needs these dedicated graduates who have the technical skills to succeed, and metal casting is fortunate to have a foundation like FEF to provide that link to the college campus."
The foundation provides discretionary funds to professors for metal casting lab equipment, supplies, travel, and fellowships. It also brings industry volunteers to campus.
- The "Construct My Future" program (www.constructmyfuture.com) informs high school students and their parents about the wide range of careers available in the building trades. A consortium consisting of the Associated Equipment Distributors Foundation, the Associated General Contractors of America, and the Association of Equipment Manufacturers supports the program, which promotes a range of careers in the industry. The Web site includes scholarship listings, a directory of universities and technical schools offering construction education programs, and profiles of people working in the field, ranging from diesel equipment technicians to project managers.
- The National Demolition Association (Doylestown, Pa.) worked with Purdue University to create a demolition submajor in Purdue's undergraduate construction management program. Required courses for the submajor include general demolition operations and accounting, so that graduates can write estimates, manage safety and health considerations, and talk to the bankers who fund the businesses. In the late 1990s, when construction was booming and managers of companies in the demolition business were running flat-out, the industry realized it needed new employees who understood what demolition was all about, says Mike Taylor, NDA executive director. "We were in desperate need," Taylor says. "We weren't training anybody, and we were stealing employees from each other." At the same time, many association members started to confront succession planning. Another wake-up call for the organization's members was a survey of high school students about careers, Taylor says. Construction ranked 49th out of the 50 options on the list. The problem, Taylor says, is that students saw construction as a job you have in between gainful employment, not as a career into itself. "We've done a terrible job recruiting the middle-management cadre that we need," he says. At Purdue, NDA first established a student chapter of the association. Then association members created a syllabus that instructors could use, and NDA offered its safety manuals and training videos. It worked with faculty members to write a textbook, and it provided funding for a program director. (A $50,000 gift from Caterpillar helped establish the program and attract other donors.) Further, 160 association member companies agreed to interview participating students for summer jobs, co-op arrangements, and permanent employment. The first class graduated in May. "Anybody who comes out of this program, I can get a job in 30 seconds," Taylor says.
- The Carolina Recycling Association has created its own Carolina Recycling University, which offers a "qualified recycling professional" certificate. The program has two objectives: to ensure that people working in recycling businesses in those states follow best practices and to help them develop their industry contacts. Current program topics include materials handling and processing, composting, and recycling education. Many of the participating organizations are nonprofits and government agencies who are promoting recycling, so the training program gives them a chance to learn the entire spectrum of recycling industry operations and what's happening in the region. "If you're doing business in the Carolinas, you'll want to know people in the agencies," says CRA Executive Director Kerry Krumsiek. "That's the wonderful state-specific service we can provide." He's also noticed strong interest from private-sector companies, including metals processors, looking for professional training for their employees.
Bringing Them Into the Fold
OK, you've made your family business an attractive place for managers to work and you've identified and hired a few promising workers. Now what? Making these new hires feel like a member of the family might mean training them like you would train your own children.
Metal Management operates a two-year management training program for college recruits. It hires four to 10 recent graduates for the program each year, depending on the company's needs. Each does a short stint at a variety of different departments to learn all aspects of the business. "When the program does end, we think they've gotten an exposure to everything we do and what we are all about," Gutchewsky says. The program allows Metal Management to identify the employees' strengths and lets the employees see where they would most like to work, then the company tries to match those strengths and interests with a position. Most of the management trainees stay with the company after doing their rotations; a few program alumni are moving up to executive levels, Gutchewsky says. Though smaller companies might not have the resources to duplicate Metal Management's program, incorporating some rotating responsibilities into a new hire's job could encourage longevity.
Mentoring is another element of Metal Management's training program: Each participant holds a monthly meeting with an assigned corporate mentor. Beyond that, the company encourages all managers to offer informal mentoring to all employees. "We encourage our managers to make sure they have regular discussions on a daily basis with the people who report to them," Gutchewsky says.
Other companies have taken more idiosyncratic approaches to training managers in the company and family ethos. In February, the New York Times reported on the management training program at Louis Padnos Iron and Metal Co. (Holland, Mich.). The Padnos family wants to maintain its 102-year-old business, but there's enough of an age gap between the third and fourth generations that the company has to rely on nonfamily managers. To ensure that its six senior executives who are not family members maintain the family and company culture when they take charge, the company hired Michael DeWilde, a philosophy professor at Grand Valley State University, to give them a broad grounding in classic literature, communications skills, and business ethics, among other things. The goal, the article states, is to give these managers the ability to work as a team, as the Padnoses did, and to help them develop some of the global perspective that the family picked up in college and during travel abroad.
Casting a New Generation
With the scrap industry's tremendous growth opportunities, family companies are in a great position to make their case to outside managers. With an internal culture that welcomes professional managers, no matter what their bloodlines, a privately held scrap company can show how industry growth creates career growth.
But it's not easy. It requires a commitment to recruiting and training, as well as an understanding that the outsiders will never have the exact perspective of family members. That's not necessarily a bad thing, though, as many family businesses have been undone by squabbles based on childhood slights, parental favoritism, divorce, or death.
Outsiders might be able to bring in fresh perspectives and a professional approach that can help a company thrive for generations more. "The founders are usually such hard-driving entrepreneurs that they have a hard time letting go," Welsch says, but a looser hold on the reins might lead to greater growth.
Ann C. Logue is a writer based in Chicago.
Bringing outside managers into a family scrap company can be tricky. Make the opportunities attractive to outsiders, seek out promising candidates, and provide extensive training, experts say, to get the best results.