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Why an ESOP?

By Jeff Pett, Fleetwood Group, Inc.

While they have been around since the mid-70s, Employee Stock Ownership Plans (ESOPs) are not all that well known among the general public.  There are about 11,500 ESOP companies in the US (of over 13 million) employing about 10 percent of the private sector workforce.  Only about 2,500 ESOP companies are 100 percent owned by the employees.

During the mid-70’s I worked for one of those companies that added a partial ESOP as a way to establish a retirement savings vehicle for the employees.  While only a small portion of the company ownership was shared by my teammates and me, we were highly motivated to perform once we started seeing the returns on that ownership.  As the company succeeded, we were able to share in the financial success.  And we knew that if the company lost ground we would also lose ground.  An equity stake is a huge motivator.

Now fast-forward to 2006 when I joined the Fleetwood Group, one of those few 100%-employee-owned companies.  It is definitely a little different working in a company where there is not a single owner, or not family owned.  In addition, we are not publicly held, so the only stockholders are we employees.  The longer you work here the greater your ownership stake.  This was made clear to me early on when one of my subordinates, who had over 20 years of experience, sat in my office and told me that he had a significant ownership stake here and that I had better not do anything to diminish it.  He was respectful, and had a smile on his face.  But he was definitely “acting like an owner.”  I love that!  That was a new experience for me, but a good one. 

We have a highly motivated workforce, minimal single-digit turnover, and most TMO’s (Team Member Owners) have a real ownership mentality.  It is different being a leader in an ESOP like ours, but there are very few down sides to it.  There is a lot of work done to make sure the TMO’s all have as much information as they need to understand what is being done in the company, and why.  For instance, we share a lot of information on the financial performance of the company with all TMO’s on a quarterly basis.

We do not vote on things… leaders still have to use their skill set to lead and make good decisions.  However, there is a different feel to being a leader here, a different sense of accountability.  Not just to the board of directors, or the CEO, but to all of your teammates.  You want to make sure that you are leading in a way that reflects you are all co-owners.  There is a little more finesse involved. The leadership team here had that pretty well figured out long before I got here.  In fact, in 2006 our company received the national ESOP Company of the Year award.  Being on this team has been a great learning experience for an older guy like me.

An ESOP is not the answer for every company, but it is certainly a great way to enlist the “owner” in everyone on your team.  I highly recommend looking into it.

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