Multiple approaches taken to develop new leaders
By: Susanne Retka Schill
A generational shift is underway in the ethanol industry, sparking discussions of succession planning and leadership development.
Documentation of roles and processes is important for succession planning, says Connie Lindstrom, director of benchmarking at Benchmark Insights, LLC (formerly Christianson Benchmarking). “We’re seeing this generational shift with so many people aging out of the workforce,” she says. Though not tracking ages in benchmarking, she is seeing the shift in the data. “Plant general managers(GMs)/CEOs have an average tenure of nearly 10 years in their role, with a quarter of plants exceeding 15 years’ tenure for their GMs,” she says. “A similar tenure pattern exists for many other top-level roles including chief financial officers, plant managers and commodity managers.”
In her role as an auditor, Sara DeRoo, a partner with Christianson PLLP, includes discussions about succession planning as part of assessing risk management. “I was just at a plant last week for an audit and talking about their board succession plan because they have many board members that have been there since the inception of the plant. I think the average age is pushing 80.”
As part of those audit conversations, DeRoo sees a range of approaches. Some are structured and organized, with time frames for certain executive committee roles that outline when training needs to start, what things need to happen, and identifying potential board members to move up to the executive committee. Others don’t have any plan. “It’s maybe been talked about, but it’s not a top priority as it relates to risk management.”
Looking for insights on succession planning and leadership development, Ethanol Today turned to an experienced board chairman and CEO for their thoughts.
Developing Leadership
“This industry is changing, and in a good way,” Jeff Oestmann says. “There’s a lot of leadership and board members retiring. There’s a big transition going on and the industry is getting more complex at the same time. Doing things the same way is really not going to work. The next generation of ethanol leaders are not going to win by running the plant harder. They’re going to win by running the business smarter.”
Oestmann has served as CEO of multiple biofuel companies, leading operations in ethanol, biodiesel and renewable diesel. As president of agribusiness at G37 Ventures LLC, he advises and consults with biofuels CEOs and boards, helping turn strategy into clear priorities and disciplined execution.
“Succession planning is not an HR exercise, it is a strategy conversation,” Oestmann says. He lists a series of questions that need to be asked: “What are we trying to become? Are we staying a steady, low risk ethanol plant, or are we pushing into carbon, co-products, and growth? How aggressive do we want to be? Where are we putting capital? What kind of leaders actually fit that future?” A lack of clarity can create problems, he says. “A board says they want transformation and growth, but they promote the safest operator in the building. Or the opposite, they say they want steady execution, but hire a big, swinging entrepreneur. It creates friction right away, and it’s not the person’s fault, it is a mismatch.”
“When you talk about succession planning, it shouldn't be just about replacing a GM,” Oestmann continues. “You should be building a bench across operations, finance, safety, commodities. The best operators don’t always become the best leaders. You have to develop them on purpose, and that involves a lot of coaching, which could be internal or external.”
Oestmann recalls his exposure to leadership development during his decade of experience in the marines where people are trained to make decisions. “They have habits of how they do things. They’re accountable. They follow through. They understand the mission, what comes first, what success looks like.” Veterans exemplify the type of employee with leadership potential, he adds. “They move quickly. They can be trained. They can work under stress. They take responsibility. They can work independently or work with a small team.”
In developing multiple candidates, Oestmann recommends training for future roles, not historic. “Expose successors to decision making, reports, tough conversations,” he says, “you’ll see who’s good. I tell people you want to work yourself out of a job, because you have someone coming up who’s learning, who’s hopefully better than you. And when that succession is good, people shouldn’t even notice a change in leadership.”
Developing Boards
Succession planning at the board level also requires a developmental approach. Rob Davis has served on the board at Cardinal Ethanol in Union City, Indiana, since its inception, and as chairman for more than a decade. Every year the 14-member board updates its succession plans for executives, key managers and directors. “We have a list of potential directors, and we’re trying to groom current directors.” All directors must participate in at least one committee, he explains, covering key business areas such as risk management, compensation, finance.
“Like many other ethanol boards, we had the initial old guard, with a bunch of us old guys,” Davis says. “So three or four years ago, we started adding some members that were in their 30s instead of their 60s. It takes a couple years of sitting there and listening to figure out what is going on, if you don’t have the background.” Prospective board members were interviewed by the board, and acted as advisory members for several months, participating in discussions and being asked for their input before some were invited to join.
The new recruits have become good, active members, he says, bringing a fresh perspective. “They’re current with today’s HR policies, what the workforce is looking for,” he gives as an example. “The board is a bunch of us old guys and the workforce tends to be younger. So, it’s good to have some new generation perspective on HR polices. What’s important for people?”
Board development is ongoing at Cardinal. Every month, a visitor presentation exposes the board to a wide range of topics. “It’s really to broaden our thinking and get us outside the box,” Davis says. That has included topics such as distillers grains in poultry nutrition, jet fuel, mini nuclear reactors, possible synergies with data centers, artificial intelligence applications. The board also invites key partners in once a year, such as ethanol and feed marketers, for strategy discussions. “Our board is constantly being reminded that a director is supposed to provide direction, which means we have to be looking forward and not backward all the time.”
Another board development strategy is to periodically assign research assignments to two or three members. “It’s a lot fun, but it also brings the board together,” Davis says. “It’s very helpful because our board is geographically diverse. We have members from Wichita, Kansas, South Carolina, New Jersey, Chicago.” Recently, board teams considered the company’s mission and values statements and reported back their insights to the full board. “It gave them an opportunity to get to know each other and their experience, which is helpful. And then, for example, it reminded the board and management why being a good neighbor is important and here’s why that’s a strategic advantage.”
The Cardinal Ethanol board dealt with CEO succession as well. The goal was to have a three-to-six-month transition for a new CEO to work alongside Jeff Painter, Cardinal’s CEO since its inception in the mid-2000s. When that didn’t work out, Davis stepped in as CEO, having recently sold his business. “We were in a very big transition period,” he says. Not only were they adding a high protein process at Union City, but they were also bringing the recently acquired 70 MMgy plant in Colwich, Kansas, back online, plus they were in the midst of developing their carbon capture and sequestration project. (Which was awaiting final permits in early February.)
INDUSTRY TURNOVER: There have been turnover shifts in the ethanol industry over time, with notable swings between administrative and production roles since 2020. Administrative type roles experienced a 10% increase in turnover rates from 2022 to 2024.
Source: Biofuels Labor Survey from Benchmark Insights, LLC
“We took our time to find the right person,” Davis explains. “We weren’t necessarily looking for a certain experience. We wanted the right person and would build our training and staff around that person.” While an ag background was important, since buying corn is their single largest expense, and manufacturing or operational experience would be a plus, the most important qualification was character— “a fine, upstanding person,” Davis says. “We value our reputation. We think people who deal with us understand that we’re honest and forthright. We don’t play games; we just get about doing business. We wanted a CEO with the same perspective. We value our community and our partners, which is everyone from water treatment people to our employees at all levels. Everybody’s important in our value chain. We wanted to make sure that person came in with the perspective that nobody’s better than anybody else here. We’re all in this together.”
Tom Ranallo got the job, stepping into the CEO role last August, bringing operations experience from both POET and ICM. “Tom’s been great,” Davis says. “He hit the ground running, and we’ve got some good things going on.”
BOARD COMPENSATION: The number of boards who compensate their board members, and the amount of that compensation, have both increased over time as plants struggle to replace retiring original board members with qualified people.
Source: Biofuels Labor Survey from Benchmark Insights, LLC
“We’ve said in our board meetings that people look back and say 2023 was a pivotal year for Cardinal Ethanol,” Davis recalls. None of the three big projects taken on in the midst of the CEO transition—high protein, Colwich, carbon sequestration— have an immediate payback, while all had a lot of immediate expenses. Fortunately, Cardinal had reserves to invest, Davis says, “Our point was to position Cardinal for the future.”
The new 30-something board members were part of those discussions. Did it intimidate them? Were they too gung-ho? Did they have to be reined in?
“Yes, to everything, plus five more,” Davis says. “Being new at the time, still learning the business, talking about investments in the tens of millions can be scary. Scary for us old-timers, too.” Not only was it an opportunity to see how such decisions are made, but also to contribute. One new board member, an attorney, participated in the HR decisions involved in buying Colwich. Another, an accountant, helped build the spreadsheets for analyzing such things as operational data and ROI to inform the board’s decisions. “They were very active,” Davis says.