Pacific Outdoor Living is a leading Southern California outdoor landscape design and construction firm. It set up its ESOP in 2017. Employee ownership fit well in an existing open book, high involvement culture. As part of that, Terry Morrill, the CEO, developed a booklet called “Am I Making Money?” It is an easy to read, illustrated guide for all the employees, with clever cartoon-like characters. The book walks employees through understanding how much projects are making and what the various components of that are.
The interactive part is a software system everyone can access. It is essentially a job status board that looks at each project, how it is progressing, who is responsible for each phase, etc. Employees can track material delays, labor hours, labor days, wages paid, gross product and gross product margins, commissions, and sales price. Estimating and scheduling software is also used. From these, employees can track whether projects are making money or not. The schedule board and job management system total the gross profit made at the end of each day. There is no more waiting for monthly or quarterly reports. If the hours involved are more than what is needed to hit targets, teams can talk about ways to solve the problem. They also now do coaching with other contractors to teach this system.
This 100% ESOP-owned water treatment company has more than half its employees in the field on any day, and about half are selling Barclay Water Management’s products. Most of its contracts are for a fixed price and term.
For many years, Barclay paid its sales staff incentives based on total sales. But soon after its transition to an ESOP, it started to pay based on contributions to overhead and profit instead of sales.
To make this work better, an engineer at Barclay developed an internal software system that every salesperson could use and update on a real-time basis. As any modification was made, the salesperson would immediately see the impact on overhead and profit— and so could all the other salespeople. Salespeople started trading ideas on what contract changes they could charge for or provide differently without losing customers.
This system operates within a larger structure of a long history of sharing financials with employees quarterly through a newsletter and president’s discussion, as well as a detailed discussion at the annual meeting.
Van Meter Inc. is a 100% ESOP-owned wholesale and electrical supplier in rural Iowa. After building a base level of ESOP understanding for its employeeowners, its ESOP committee saw the next step as finding ways for each employee to contribute to increasing the stock price. To do that, employeeowners need to understand something about valuation. The committee quickly realized that valuation analysis is long and complicated, so they looked for a way to translate the factors that drive value into easy-to-use terms. The result is the “your two cents worth” campaign, which the committee launched in 2005. Based on their then-current numbers and some simplifying assumptions, the campaign created a simple formula: improving VMI’s bottom line by $5,000 creates an expected increase of $0.02 in the value of a VMI share. This equation doesn’t capture the complexity of the actual valuation process, but it does close the loop between each employee and the value of the company.
CMC Rescue is a manufacturer of specialized equipment for high-risk rescue environments, such as fire, search and rescue, swift water, air operations, and more. The company is owned by its ESOP.
One of the ways it shares numbers is through its line-of-sight program. Each employee has a chart with a graphic that links individual to department to company performance. The individual’s line of site is a specific set of metrics and commitments each employee makes, with a heading of “How My Contributions Affect CMC’s Rescue Performance.” They are all posted on a common site. For instance, a planner and scheduler’s line-of-sight included:
● Improving on-time delivery percentage.
● Providing the right due date to the right team.
● Identifying if orders are late and letting customers know.
● Communicating priorities to shipping, manufacturing and warehouse to make sure everyone is on the same team.
● Providing accurate information to those who need to know about scheduling issues.
By linking these objectives to specific numbers in a cascading way, from the individual to the team to the company’s overall profitability and sales goals, everyone makes commitments to what they can do to move the company forward.