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Guest: Kerry Siggins, CEO of StoneAge, one of the world’s leading manufacturers of automated waterblast equipment and tooling for industrial companies and contractors worldwide. Kerry is also a keynote speaker, a member of YPO, and a client of CEO Coaching International.
Episode in a Tweet: Could an Employee Stock Ownership Plan motivate your workforce to hit BIG?
Quick Background: For the past 25 years, StoneAge has been experimenting with ways to give its employees a stake in the company’s success, a path to personal wealth-building, and more ownership over their individual job performance. What began as a profit-sharing program evolved into a homegrown stock ownership program, and now a federally-regulated Employee Stock Ownership Plan (ESOP) that could provide a model for other businesses looking for creative ways to build an inclusive, winning, and productive culture.
Kerry Siggins has evolved along with StoneAge as well. On today’s show, we discuss her 11-year rise from general manager all the way up to CEO, and why she believes more businesses should consider forming an ESOP to get employees on board with making BIG happen.
Transcript: Download the full transcript here.
Key Insights from Kerry Siggins on a Winning ESOP
1. Value your most valuable asset.
“Our two founders really understood that they would not be where they were in the marketplace and with the products that they had without their employee base,” Kerry says. “And so they wanted to figure out different ways to motivate and reward everybody who was part of the team and part of making all of that happen.”
While the particulars of StoneAge’s profit-sharing and stock programs changed as the company grew, the message to employees has been consistent: we’re all in this together. Kerry says that the value StoneAge’s executives placed on its people impacted the company’s culture in ways that were obvious from the moment she joined.
“The sense of ownership and engagement that the employees had, the care that they had for customers, the pride that they had in their jobs and the products we were developing, it was just something that was very unique,” she says. “When you know that your work is going to give you a bigger reward than just a paycheck and that you actually have a piece of the company and a piece of the success and you can see how your job is tied to the strategy, I would say that it’s very, very tangible.”
2. Share without losing control.
One reason that StoneAge decided to phase out its old stock program in favor of an ESOP was to ensure effective management of the company as the founders neared retirement age. “The conversation I had with them a few years ago was, ‘If something happens to you, who really owns this company?’ Kerry says. “Our employees have been buying shares within the organization as an investment, but all of a sudden you have your top few shareholders who are the true owners of this company and they’re not really prepared to take on the responsibility that that brings.”
StoneAge’s founders didn’t have any family members interested in taking control, but they didn’t want to sell the company either. Forming an ESOP allowed StoneAge to broaden its ownership while also keeping in compliance with SEC safe harbor rules.
“It was a definite switch,” Kerry remembers, “because with an ESOP, that is a Department of Labor regulated program, a retirement benefit and entitlement benefit. And so we had a lot of debate here on how that might change us when employees, rather than investing in the company, they’re given it as part of their compensation in a retirement plan, but there’s no skin in the game outside of coming in and performing well and helping the company continue to grow.”
It was also an expensive switch. Kerry estimates that StoneAge spent $250,000 organizing its ESOP. If you’re considering an ESOP for a business that hasn’t hit over $10 million in revenue yet, make sure your finance team factors in the total costs of navigating all the red tape.
3. Help your employees plan ahead.
The internal discussions StoneAge had about changing its program raise an interesting point about the benefits of an ESOP versus a more traditional profit-sharing or stock-buying program. But as the comfy pensions and matching 401(k) plans that our parents and grandparents enjoyed become rarer, workers need to find new ways to prepare for retirement. An ESOP could be a smart way for CEOs to attract and retain top talent who do have their eyes on the big picture.
“What I believe we’re doing here is through our ESOP program we are truly generating a middle class,” Kerry Siggins says. “And our founders are continuing to gain wealth in this program. They’ve decided to do a much longer buyout period than just, ‘Okay, we’re going to sell 100% to private equity or to a competitor.’ So they’ve taken more of the long vision, and that wealth instead of going to a top few people or to a corporation is really being spread to all of the employees. And if we continue to perform the way we’re performing we can have the opportunity to create millionaires here if you stay with the company and help the company perform.”
4. Create “an open-book company.”
One trait that Kerry Siggins shares with many of her CEO colleagues is her belief in radical transparency. “We are an open-book company,” she says. “In fact, I believe in oversharing rather than under-sharing. What we try to do is remove the blinders and remove the fear of the unknown. And it’s better to know what we don’t know than pretend. And that includes the financials.”
StoneAge’s internal information is protected by employee confidentiality agreements. And while Kerry admits this system isn’t foolproof, she’s seen firsthand that the benefits of transparency far outweigh any downsides.
“One of the biggest mistakes that I’ve made in my career here was when we were making a significant change in our business model and we didn’t want anything to leak out,” she remembers. “And so we set up a war room so to speak, and we locked the doors. And that took me almost two years to recover from. There was so much concern about what was going on behind those doors and why we didn’t want employees to know and why we didn’t trust anybody to walk in there and see those white boards. And after that moment on I vowed that I was always going to be transparent in everything that we were doing because the damage was just too great.”
1. What’s good for your employees is good for you. If your employees feel like they have skin in the game, their productivity – and your profits – will both grow.
2. “We always turn our stories into demons instead of angels.” Employees who are left in the dark are going to fill in the blanks themselves with paranoia.
3. Make more than money. A company that helps its employees build wealth will establish a lasting legacy and attract top talent who believe in that mission.
Transcript: Download the full transcript here.