Academic journal article Entrepreneurship: Theory and Practice

Ed's Dilemma: Succession Planning at Niagara Paving (1)

Academic journal article Entrepreneurship: Theory and Practice

Ed's Dilemma: Succession Planning at Niagara Paving (1)

Article excerpt

Ed Merski, the founder of Niagara Paving, a successful asphalt company, must decide whether and on what terms to invite his youngest child Nancy to rejoin the family business. Nancy has worked in a number of jobs in and outside Niagara Paving and soon will graduate from a master of business administration program. Ed is concerned about how her entry will affect not only the operations of the business, but also relations among employees, including his son, Luke, who has worked for the company for the past 20 years.


In spring 2004, Edward (Ed) Merski stepped out of his office in Buffalo, New York, and surveyed the asphalt plant, fleet of trucks, and assorted equipment that were the mainstays of his paving business. He felt pride in Niagara Paving, the business he founded in 1977. Over the years, the business had employed many local people, including a number of Ed's siblings, in-laws, and children. His longest-serving employee was his son, Luke, who had worked alongside Ed at Niagara Paving for over 20 years. David Jones, his sales manager, had served the company for over 10 years, as had office manager Judy Holt. With these managers in place, Ed thought of retiring from the day-to-day operations of Niagara Paving on his 60th birthday in 2 years time. He was concerned, however, that the company still revolved too much around him, and thought that he needed to plan carefully for a successful transfer of management and ownership. Without continued strong leadership, the company's future would be at risk--and with it the bulk of Ed's wealth, his retirement income, and the livelihoods of his employees.

A recent discussion with his youngest child, Nancy, 27, had caused Ed to rethink his plans to have Luke take over the business. Nancy had worked at Niagara Paving for 2 years following her university undergraduate studies and at one of the company' s suppliers for another 2 years. After these experiences, she returned to school for a master of business administration (MBA). She would graduate in a couple of months. On her most recent visit home, Nancy had asked Ed if she could rejoin Niagara. She suggested that she could help the firm by bringing new ideas and managerial skills.

The question of whether to hire his daughter posed a dilemma for Ed. He was proud of Nancy's accomplishments, as she was the first family member to graduate from university. However, it was unclear to him which roles and responsibilities she could assume at a company that he believed had been successful because of his hands-on approach to management and his stable team of dedicated employees. He was also apprehensive of her past tendency to move from job to job and wondered about her commitment to Niagara. He thought that the business required one person to have the ultimate decision authority and wondered about the longer term issues of succession of leadership and ownership. Given Nancy's suggestion that she would eventually like to have a much larger equity stake in the company, these ambitions would be of concern to Luke and a number of nonfamily employees. He wondered if she would be sufficiently determined and capable of leading the business. This was an important consideration as Niagara would need to generate enough funds to compensate Nancy and Luke as managers, as well as repay Ed his invested capital in order to fund his retirement. Ed believed that if a succession plan were going to work, it had to be done with a realistic view of the conditions of the industry and the company.

Industry Overview

The paving industry was shaped by several factors, such as government expenditures on roads and private sector construction. Road building and construction in the Buffalo area had been bolstered in recent years by the increase in Canadian--U.S. trade. Buffalo was the gateway for a significant portion of that trade, as well as a preferred shopping destination for Canadians.

The past year had been a strong one for paving in the Buffalo area. …

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