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Executives To U.S. Manufacturing Companies: Stock Options Or Bust

BY JON ROBBINS

Given the choice of a fast-growth e-commerce company with no profits or a profitable manufacturing company in a rejuvenated industry, executives are choosing the former. With the promise of stock options and working in the fast lane, these executives are even turning their backs on the souped-up automotive industry. The American automobile sector is healthy, but it doesn't offer the upside of the Internet.

The result is that the automobile industry is facing another big threat to its future: executives are leaving the business of providing the vehicles for the highway for the virtual super highway. Simply put, top-level general manager positions are going unfilled as prime talent flocks to high tech and the Internet.

It's happening across the board in capital goods, agricultural and heavy duty equipment manufacturing -- the backbone of the American economy.

This is an alarm bell for the manufacturing industry. Manufacturing companies today are recruiting as hard for general managers as Internet companies searching for vice presidents of marketing and sales. And the candidates are just not there.

Not only is the manufacturing business having a hard time finding outside candidates when it wants them, but more serious is the lack of executive development within companies. Young managers aren't being groomed to take over for the general manager in the mid to late 50s and earning in the neighborhood of $400,000. Because there are few real succession planning programs, capable candidates are looking to other industries like hot new Internet start-ups with big challenges and big compensation packages.

Industry leaders such as GM, GE, Allied Signal and Emerson Electric as well as some selected mid-sized diversified companies are heading off the problem with succession planning, management development, aggressive compensation packages and strong retention strategies. They are developing packages that include stock options of 5,000 to 15,000 shares on top of rolling three-year annual bonuses.

Manufacturing firms that are struggling to find general managers must provide a faster route to management within their companies. A 40-year-old can run a $50 million to $100 million division and develop what it takes to eventually run a billion-dollar division or corporation, but the opportunities aren't there now. In the meantime, they may be forced to expand their searches to other industries. For example, auto manufacturers are recruiting from the aerospace industry.

Manufacturing companies that don't recognize the current danger risk serious management control problems in the future. There are solutions to this internal threat, but companies have to take action now.

--Jon Robbins is with the industrial practice at Christian & Timbers, a retained executive search firm based in Cleveland that can be reached via the Web at www.ctnet.com. Robbins can be reached at 216-464-8710.