ESOP Companies Continue Long Streak of Outstanding Financial Performance

The results of this year’s Economic Performance Survey (EPS) show that, once again, companies belonging to The ESOP Association have experienced positive corporate performance.

Just as importantly, the EPS once again shows that when companies perform well, employee owners share in the rewards. And this year, new data reveal a new facet of how ESOP companies distribute those rewards.EPS Report Cover_Page_1

Employee Owners Share the Rewards

For the first time ever, this year’s survey included questions on pay increases. The results show that 75 percent of responding companies increased wages at or above the national average of 2.7 percent, and 29 percent increased wages by 4 percent or more.

Sharing the wealth with employee owners is a fundamental aspect of ESOPs and one that helps align the efforts of all employee owners with the performance of the company.

In addition, 55 percent of responding companies contributed to their ESOPs an amount equivalent to 11 percent or more of their employee owners’ pay—far surpassing the typical 401(k) match.

Sharing the wealth with employee owners is a fundamental aspect of ESOPs and one that helps align the efforts of all employee owners with the performance of the company.

Profits Rose More than Revenue

The engagement of employee owners may help to explain a noteworthy trend: Companies responding to our survey realize profits that grow more than revenue.

EPS Report proft revenue

Ever since we started asking for more detail on revenue and profits in 2016, ESOP companies have reported profit margins that rose higher than the highest increases in revenue. The only explanation we can find is that these companies excel at managing costs, which is consistent with businesses that engage their employees and seek better, more efficient ways to operate.

Not every employee can contribute to greater sales or revenue. But every employee—especially those engaged in the business and who stand to benefit from its improved performance—can help reduce waste and improve efficiency.

A History of Strong Performance

Since the EPS was launched in 2000, the majority of responding companies have reported increases in profits for every year but two (2002 and 2010), and increases in revenue for every year but one (2010).

The exceptions noted above reflect the nationwide economic downturns of the prior years (2001 and 2009). Even in those challenging economic times, 29 percent or more of ESOP companies responding to our survey reported that profits and/or revenue increased.

These results align with recent academic research that found employee-owned businesses surpass conventionally-owned companies at riding out tough economic times. (See How Did Employee Owned Firms Weather the Last Two Recessions? by professors Fidan Kurtulus and Douglas Kruse.)

Looking For Non-Gambling Fun in Vegas?

So, you’re coming to the 2018 Las Vegas Conference and Trade Show, but maybe gambling isn’t your thing. Las Vegas may be home to some of the biggest casinos and hotels in the world – but there are so many other things to do besides gambling. Check out some of our favorite places to visit and activities to do:

Have you heard of The Neon Museum?

Image result for neon museum

With more than 200 retro signs, like the signs from Binion’s Horseshoe, Caesars Palace, and Golden Nugget, we definitely recommend bringing a camera. Once you see all the colorful signs, you’ll want pictures!

Are you looking for something a bit more rugged?

Maybe the Las Vegas ATV Tours are for you!

Image result for las vegas atv

Only 15 minutes away from The Vegas Strip, you can hop on an all-terrain vehicle and explore the Nellis Dunes!

Perhaps you’re looking for a quirky photo opportunity…

Check out the Art Motel Las Vegas

Art Motel Las Vegas things to do in las vegas

Not many people know about this cool abandoned motel turned beautiful art collection. What used to be the Town Lodge Motel in Downtown Las Vegas has been converted into a space for artists to showcase their unique work. Everything from the exterior walls to the actual rooms have been turned into an urban art collection that features all the talent Las Vegas has to offer.

These are just a couple of our favorite Las Vegas activities!

For more great ideas check out this list from Thrillist.

See everyone in Vegas!

Meet the 2018 ESOP Company of the Year

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Ownership Culture Runs Deep at Gardener’s Supply Company

Employee ownership is deeply rooted in the culture at the 2018 ESOP Company of the Year, Burlington, VT-based Gardener’s Supply Company. “It is part of who we are… it’s our identity,” says the company’s Director of HR Christie Kane.

Even a brief look reveals how fully the employee owners—from top to bottom—and the company are committed to broad-based employee ownership. For example, Gardener’s offers seasonal employees the chance to participate in the ESOP after their second year with the company.

Brad Bolton, who is Material Handling Lead at Gardener’s Supply, got his start as one of those seasonal employees. Bolton could tell right away that Gardener’s had a special culture: He could see it in the way employees interacted with each other.

The inclusive and motivated behavior of his colleagues spurred Bolton to become one of them, so he applied for a full time position. His understanding of and appreciation for the concept of employee ownership really kicked into high gear once he “became fully immersed in the culture,” he says.

As Bolton began to grasp that the roots of Gardener’s culture lay in its approach to living employee ownership, he became more involved in spreading the word.

Today, Bolton is the Chair of the Gardener’s Supply ESOP Committee, which itself is a prime example of the company’s cultural commitment. This 11-person group meets for an hour and a half every other week with the goal of “nurturing and sustaining the culture of employee ownership.”

Gardener’s investment in ownership reaches from its ESOP committee all the way to the top of the organization: The committee has an advisory board member who serves as the group’s liaison to the board of directors. This ensures that employee owner interests are included in planning discussions.

Including an advisory board member on an ESOP committee is fairly unique, and it is just one of the ways that Gardener’s has committed itself to living its ownership culture. The company has been an ESOP since 1987, and has invested years in refining its approach for educating employee owners and fine-tuning its interactive culture.
Examples of other approaches that have worked for Gardener’s include:

  • A Brownie for Your Thoughts. Each year, Gardener’s employee owners are personally invited to offer their ideas, questions, and concerns—in return for a fresh baked brownie. The questions are addressed and the answers are shared with the entire staff. For Gardener’s, this has been an effective way to open a line of communication with employee owners who might not otherwise feel comfortable asking questions about the organization.
  • Solstice Celebration. The anniversary of Gardener’s transition to 100 percent employee ownership falls on the winter solstice. Each year, employees remember the day by gathering to celebrate. Gardener’s includes customers in the experience: Its retail stores serve desserts to customers as a way of symbolically sharing a “piece of the pie.” This event helps open a dialogue between Gardener’s employee owners and the community they serve. This kind of interaction can help employee owners better understand customers’ needs and can help customers gain an appreciation for the passion and dedication of Gardener’s employee owners.

Pride in the company’s culture, and in the employee owners who embody that culture, is clearly something worth sharing.


“This kind of interaction can help employee owners better understand
customers’ needs and can help customers gain an appreciation for
the passion and dedication of Gardener’s employee owners.”


“We get a direct benefit for caring and doing our best, and it shows in our workforce,” says Cindy Turcot, Gardener’s President. “We have great employees, low turnover, and employees who offer ideas, constructive criticism, and solutions.”

At Gardener’s, the time invested in developing a home-grown culture of ownership and engagement certainly has paid off.

 

New Notions of Ownership

Not long ago, the main appeal for owning something was a combination of freedom and control.

Owning a car meant you had the freedom to travel wherever the road took you. (And some places where the road didn’t even exist.) It also meant a level of control over how and when you traveled, and how you treated your car. (By comparison, try painting your rental car metallic umber or replacing the steering wheel with a fuzzy one and see how far you get.)

Owning a home meant greater control over your monthly expenses, since you were no longer at the mercy of a landlord who could jack up your rent. It also meant the freedom in your “castle” to do as you pleased, when you pleased—including keeping strangers out of your home, if you wished.

These benefits of owning personal property, though, run counter to the reality of owning a business—as many employee owners can attest.

Owning a business means you take on responsibility for your product, your customers, your brand—everything. And that responsibility never takes a vacation. That doesn’t exactly mesh with the idea of driving your car off whenever you please, the breeze blowing through your hair, does it?

This disconnect between the ownership of personal property and business property often causes people to stumble when they first learn of employee ownership. They expect employee owners to have the freedom to do what they want, and to control day-to-day aspects of the business. But that is not how most employee owned businesses operate.

As a result, when some people are introduced to employee ownership, their outsized expectations can lead to crushing disappointment. As many in the ESOP community have noted, this disconnect is a fundamental challenge to explaining and expanding employee ownership.

But concepts of ownership are shifting, which may provide a new opportunity to help spread the word on ESOPs and shared capital more easily.

Today, people are far more willing to let strangers drive their cars and live in their homes—for a limited time, and for a fee. The notions of freedom and control are no longer absolute; owners of personal property are now willing to forego both freedom and control. In return, they are tapping the unused capital in their cars and homes.

In short, they are treating their personal property like business property—like something that should provide a return on investment.

There are parallels here to owners who share with employees the capital locked in their businesses. Like those who rent their homes and cars, these business owners are tapping their capital to get tangible returns. Those returns include greater participation from employee owners, who respond by investing more of themselves in the company.

These parallels are not perfect, but they don’t need to be. It is enough to note that the longstanding, fundamental, and emotional connections we have regarding ownership are starting to shift, and in ways that may make it easier for a larger audience to grasp the notion of shared capitalism.

Perhaps we are seeing the beginning of a new period, in which it gets just a little easier to have conversations about ESOPs and employee ownership. That would be a great thing—and a great thought on which to begin this year’s celebration of Employee Ownership Month.

The Five W’s of the EPS

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What is the EPS?

The Economic Performance Survey (EPS) gathers information about the performance of our corporate members. The results are shared with members of the media, policy leaders, and our members.

The EPS is sponsored each year by the Employee Ownership Foundation, which is dedicated to researching ESOPs and employee ownership.

The Foundation sponsors a variety of efforts, including the Kelso Fellowships, which conduct academic research on employee ownership and are administered by Rutgers University.

Who can take the survey?

Any Corporate Member of The ESOP Association can take the survey.

Where should I look for the survey?

On September 5, an e-mail with a link to the survey will be sent to the primary contact for each of our Corporate Members. (If you do not receive the e-mail, please check your e-mail system’s spam filter.)

The primary contact for your organization is the person who receives invoices and other communication from The ESOP Association.

When will the survey start and end?

The EPS will remain open from September 5, 2018 to September 21, 2018.

Why should I participate?

  1. The survey takes only two minutes to complete. (Seriously.)
  2. The survey results fuel content that will be shared during Employee Ownership Month and throughout the year. These historically positive figures help raise the profile of employee owned companies to the media, the public, thought leaders, and policy makers.
  3. The more responses we receive, the more statistically significant the results will be. Help the ESOP community thrive by taking part in the survey!
  4. Be a part of a historical survey. Now in its 27th year.

For more information, visit our website here.

 

Advocacy Update: Support for ESOPs Rises on Capitol Hill

You can never have too many friends in Congress. Politics is inherently changeable, and while it may seem that members of Congress have a job for life, in every session many are replaced—sometimes unexpectedly.

Some announce their retirement while others are defeated in primaries or elections. Some resign for health concerns and some leave for other factors entirely. Whatever the reason, a significant number of elected officials don’t return the following session.

(Has one of your representatives retired this year? See the Atlantic’s up-to-date retirement tracker for the latest word.)

Congressional turnover matters to us. We must constantly add new supporters to make up for the ones we will lose.

The good news for our community is that we continue to garner new support on Capitol Hill. The better news is that we continue to gain supporters from members on both sides of the aisle.

Since this session started on January 3, 2018, 32 members of Congress have become first-time supporters of the ESOP model. This support is bipartisan and bicameral. The group breaks down in this way (as of July 31):

  • 23 members (five percent) of the House
  • 9 members (nine percent) of the Senate
  • 16 Republicans
  • 16 Democrats

The percentage of new supporters in the Senate is particularly noteworthy. Another fact that illustrates our support in the Senate: In 14 states, both senators support pro-ESOP legislation.

In another five states, both senators have supported ESOPs in the past, but one or both have yet to support ESOPs this session. Those states are: Arkansas, Indiana, Kentucky, Louisiana, and North Carolina.

If you live in one of these states, please consider inviting these Senators to visit your company—perhaps during October, which is Employee Ownership Month. These Senators have supported us before, and likely will respond positively to a request for renewed support today.

To date, we have support from approximately 40 percent of the members of Congress. This is a huge success and testament to the important role ESOPs play in communities across the country.

Below is the list of the 32 House and Senate members who have joined the ranks of ESOP supporters this session. (The most recent supporters are at the end of the list.) If these individuals represent you in Congress, please consider thanking them for the support:

2017-2018 New ESOP Advocates

  1. Roger Marshall (R-KS)
  2. David Young (R-IA)
  3. Lou Barletta (R-PA)
  4. Brian Fitzpatrick (R-PA)
  5. Brian Higgins (D-NY)
  6. Jackie Walorski (R-IN)
  7. Derek Kilmer(D-WA)
  8. Josh Gottheimer (D-NJ)
  9. Don Bacon (R-NE)
  10. Deb Fischer (R-NE)
  11. Ruben Gallego (D-AZ)
  12. Scott Des-Jarlais (R-TN)
  13. Christopher Coons (D-DE)
  14. Joe Donnelly (D-IN)
  15. Patty Murray (D-WA)
  16. Ted Lieu (D-CA)
  17. Luis Correa (D-CA)
  18. Jim Banks (R-IN)
  19. Lloyd Smucker (R-PA)
  20. Dina Titus (D-NV)
  21. Mo Brooks (R-AL)
  22. Nydia Velazquez (D-NY)
  23. John Kennedy (R-LA)
  24. Cory Booker (D-NJ)
  25. John Ratcliffe (R-TX)
  26. Vela Filemon (D-TX)
  27. Bruce Poliquin (R-ME)
  28. Thom Tillis (R-NC)
  29. John Faso (R-NY)
  30. Michael Capuano (D-MA)
  31. Tammy Duckworth (D-IL)
  32. Chris Van Hollen (D-MD)

On the Hook for Saving America’s Cod Industry

Why employee ownership was the right choice for America.

What do Independence Day, ESOPs, and fishing have in common? More than you might think.

During the Revolutionary War, the British attempted to wipe out America’s Cod fleet because it was a critical part of our economy and a source of able hands for America’s growing Navy. Those efforts left the industry crippled for years after the last musket was fired in Yorktown.

George Washington, John Adams, Thomas Jefferson, James Madison and Alexander Hamilton, founders of this nation, considered the idea of employee ownership to be the single best economic plan for the republic and thus recommended it for the Cod industry.

The idea was that, instead of the fleet owners reaping all the profits, the entire Cod community from fishermen to engineers and Cod drying operations shared in the success of the industry. The shared ownership inspired and motivated each individual to work harder and work together towards a common goal – ultimately saving the industry.

The Citizen’s Share, written by professors Joseph Blasi, Richard Freeman, and Douglas Kruse, traces the development of employee ownership throughout American history and explains how today’s economy can, and will, benefit from the basic principles of employee ownership and profit sharing. While the book starts with the founding fathers and the foundation of America it quickly gets into explaining why employee ownership is important in modern times.

Capture
The Citizen’s Share, by professors Joseph Blasi, Richard Freeman, and Douglas Kruse.

In one study, conducted in 2000, Blasi, Freeman, and Kruse found that ESOP firms had, “significantly higher sales growth and higher sales per worker” when compared to similar companies without ESOPs.

Today, almost 20 years later, ESOPs are well recognized as having almost exclusively positive effects on a company. Increased motivation, increased productivity, and improved morale and corporate culture are just the tip of the iceberg when it comes to the benefits of ESOPs. ESOP companies even outperformed their peers during the great recession!

Independence Day is a time to reflect on everything that makes this nation special. The ability for employees to own a part of the company they work for is a unique and important part of what makes this country successful.

So, at the end of the day, we must go back to the old adage, “If it ain’t broke don’t fix it.” Employee ownership has been working successfully in the US since the revolutionary war and is poised to continue to perform well today and tomorrow.

Aspen Institute Holds Employee Ownership Event

On May 10, the prestigious Aspen Institute held a panel discussion on employee ownership that was attended by individuals and groups involved in policy making and thought leadership. The ESOP Association assisted in gathering potential speakers.

The event featured a visit from Rep. Erik Paulsen (R-MN), and a four-person panel representing corporate members of The ESOP Association. The panelists included:

  • Steve Vogt, retired President and CEO of King Arthur Flour.
  • Markita Madden-Puckett, Customer Service Representative at Comsonics.
  • Amy Hall, Vice President of Social Consciousness at Eileen Fisher.
  • Steve Smith, President and CEO of AMSTED Industries.

Heather Long, an Economics Correspondent for The Washington Post, moderated the discussion, which covered a range of topics and offered insights into how different companies implement employee ownership.

Congressional Momentum

Professor Joseph Blasi of the Rutgers School of Management and Labor Relations introduced Rep. Paulsen, and mentioned there are more pro-ESOP bills in Congress today than ever before.

DSC_0347 for blog

Rep. Erik Paulsen provided opening remarks at the Aspen Institute.

Rep. Paulsen picked up that theme in his remarks, saying: “More members of Congress are interested in doing what they can to promote this concept among their own constituents, because at its heart, employee ownership is about opportunity.”

At a time when “44 percent of Americans have no retirement savings planning at all,” said Rep. Paulsen, employee ownership gives “very low and modest income families a leg up in retirement planning, which is very important. And I think that’s why companies that have employee ownership consistently outperform those companies that do not have that option.”

Rep. Paulsen cited legislation he has introduced several times—with support from Representatives Ron Kind (D-WI) and Dave Reichert (R-WA)—that would encourage business owners to sell to an S ESOP and would ensure that such businesses retain their certification with the Small Business Administration.

There are about 14 million people who benefit from an ESOP plan, said Rep. Paulsen, “but there absolutely can be and there should be more.”

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The panel, from left to right: Moderator Heather Long, Steven
Vogt, Markita Madden-Puckett, Amy Hall, and Steve Smith.

Employee Involvement

Early on, the question of employee participation in decision making emerged, and the companies offered a variety of perspectives.

While Eileen Fisher has a collaborative culture where “everyone is comfortable speaking up and having a voice,” there is no formal mechanism for involving employee owners in business decisions, said Hall.

At Comsonics, the chair of the Employee Advisory Council is a full voting member of the Board of Directors, said Madden-Puckett, who filled that role for seven years.

At AMSTAD Industries, all active ESOP participants get to vote on the entire board every year. Smith recognized that the arrangement is a bit unique, but said “it’s a structure that’s worked really well for us.”

ESOPs and Culture

Throughout the discussion, the panelists touched on the interplay between the ESOP, the financial success it can bring, and the influence it can have on an organization’s culture.

“The ESOP is legally structured as a trust–but that’s not just a legal structure. It affects how management thinks as well,” said AMSTAD’s Smith. “A lot of transactions and acquisitions are done, I think, for the ego of management sometimes, or to be in the press, and you really don’t want to do that when it’s the people sitting outside your door whose futures you are going to jeopardize if you take undue risk. So I think it makes us better managers, on the whole.”

Madden-Puckett still remembers the day she interviewed at Comsonics and noticed “there was something different about the place. It was like, ‘these people are just too happy.’ There’s a certain amount of satisfaction that comes from working in a place where you show up, you do your job and it makes a difference, it reflects on that bottom line.”

Hall noted that “every year we get that statement that says what the current value is, it’s rather exciting.”

Madden-Puckett described Comsonics’ efforts to practice open communication and transparency. “We have quarterly meetings with all the employees,” she said, and the presentation the CEO gives to employee owners is “the same presentation that he is giving to our full Board.” As a former board member, she saw that for herself.

Smith said the combination of an ESOP and a culture that promotes employee engagement provides a powerful economic engine that is hard to beat. “Once you are in that structure and it’s working and the employee engagement produces success, and that culture produces success…it’s difficult for an outsider to come in and say ‘well, there is a better financial model that is ultimately going to produce better returns for the shareholders’—who are your employees.”

Imagine the Future

When asked to imagine a future with more ESOPs, the panelists offered inspiring answers.

Vogt noted that some ESOP companies, like King Arthur Flour, practice open book management and make efforts to educate their employee owners about the financial aspects of the business. And if there were more ESOP companies like that? “Imagine if we have a nation of entrepreneurs who really understand some of these tough business decisions that get made,” he said.

He added: “There’s a lot of very positive, empowering things in the employee owned companies I’ve had experience with, and to imagine a whole country focused on that, benefitting from that—that’s exciting.”

Hall said that having more ESOPs could “serve to solve a lot the inequalities that we have right now. I feel like if more companies went this route not only would we be supporting more people post-retirement in a way that we can’t—as a society—right now, but there would be that a closing of the wealth gap too.”

 

Using Social Media to Promote Ownership Culture

At Entertainment Partners, with our 1,100 employee owners spread out across more than 10 locations nationwide, we rely heavily on technology to help us communicate and connect with each other. To us, “social media” encompasses any technology that enables us to create and share content and make those connections. It could be software specifically geared toward fostering collaboration in the workplace or it could be the same website you use to share hilarious cat videos or that perfectly angled selfie.

Internally, our intranet serves as our main communication hub for company news and information. We our intranet—and the articles and videos we post there—to:

  • Foster our company community, ownership culture, and communication.
  • Increase company pride (because we work in an amazing industry!).
  • Increase our work efficiency.

External social media tools allow us to communicate with clients, coworkers, potential new hires, and totally random strangers. That’s what we’re trying to do, right?

As employee-owned companies, we’re doing more than communicating to plan participants. We’re also promoting ourselves and the idea of employee ownership to the world at large. If we want people to know the potential impact of ESOPs, we need to start getting our stories, photos, comments, and videos out there.

For us, it starts with our dedicated social media accounts for recruiting @epworklife. To attract the right talent, we need to tell them who we are, the value of working here, and what programs we offer—from wellness, to our new hire buddy program, to employee development and learning opportunities.

We have to show how employee ownership is better for individuals, companies, and the economy.

What can you do to support the employee ownership movement? Post all your advocacy work with elected officials. Share when you’re attending culture-building related events or conferences. And of course, post about all your internal ESOP activities!

We are all in this together. More than 13.5 million Americans participate in ESOPs and share in our special style of productive, collaborative work culture, while enjoying better job and retirement security.

So get social and connect with ESOP organizations and other ESOP companies. Then share, retweet, repost! Getting the word out about the power of employee ownership is up to all of us and we can help each other do it.

Lauri Veverka will be joined by Aaron Moberger from Harpoon Brewery for a session on this topic at The ESOP Association’s Annual Conference in Washington, DC. Register today to learn more about available technology and social media platforms and how you can use them to connect internally, promote your own culture externally, and support the ESOP movement.

Helping Employees Own Health and Wellness

By Jim Winterscheid, SVP-HR, Travel and Transport

Most businesses wrestle with their health care costs. Being an ESOP does not make us immune to this challenge.

Travel and Transport is a 1,400-person company with offices from Boston to Seattle. We have a self-insured health plan in which approximately two thirds of our employee owners participate. Our plan has run large deficits the past several years and, as a result, we are in the midst of making some major changes.

In 2019 we will move to a high deductible health plan, coupled with a health savings account for all insured employee owners. While this will present a savings for many of our employee owners, those who are high-consumers of medical care and pharma will face financial challenges.

We also are moving to a new wellness provider, and are looking to maximize the investment on our wellness investment for our employee owners and the business.

To that end, we are working to build a wellness program that will provide premium discounts to employee owners who complete certain registrations, wellness assessments, and biometric screenings. We will look to add additional discounts via wellness down the road, but want a measurement that everyone will be able to achieve the first year.

For all these changes to be effective, we must educate and communicate with our employee owners. Being an ESOP, we feel these efforts have a tremendous advantage over businesses that are conventionally owned, In short, our employee owners are used to thinking of the big picture. They understand our business model and the factors that cause our stock valuation to go up or down.

As owners, they understand the need to efficiently manage costs. They also understand that culture is not something we throw out the window when times change.

And times do change. Health care has become increasingly expensive for all businesses. But not all businesses have employee owners who are invested in the outcome of the total enterprise, and will—we hope—be better suited to seeing the big picture of how health and wellness affect everyone.

Jim Winterscheid and Chris Shimokawa, Travel and Transport‘s Director of HR, will present a session on this topic at The ESOP Association’s Annual Conference in Washington, DC. Register today to learn more about the challenges they face and their strategy for incorporating wellness into the fabric of their employee owned company.