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Home > Resources > ESOP > ESOPs Create More Valuable Companies

ESOPs Create More Valuable Companies

March 10, 2020 by Kevin Long

In this podcast, Kevin Long talks about how participatory management in an Employee Stock Ownership Company can strengthen the company for eventual sale to a third party.

Transcript

If you’re thinking about an eventual exit or succession plan for your company, you really should be talking about improving your company value internally.

Speaking of benefits, this is Kevin Long.

There is a lot of talk in the middle market about exit planning, succession planning, and increasing company value to get ready, to position for an event.

If your company is resilient, is lean and highly productive, it goes without saying that you’re more valuable and more attractive to suitors, and you’re going to have a more sellable company. But how? How do you do that? It’s not just about cleaning up the financial statements and other conventional quantitative advice.

One of the proven, time-tested and measurable approaches is to open-source your approach to managerial improvement – internally. Turn your employees into a prime force for improving the things they do which drive the value of your company. 

Believe it or not, your employees can be the idea factory to get the company the results that you need. They can make things on the ground, a little better or a lot better, for figuring out how to cut waste or increase sales, creating new products and processes, and serving customers and clients better. Doing that takes involved employees with a stake in the company who feel empowered to effect change in their own jobs.

It just so happens that this approach is proven to be the most effective, and prevalent in employee-ownership companies. Research has repeatedly shown that companies using participatory management outperform their peers in every industry. Research also shows that ESOP companies weather economic downturns better in contrast with their peers. They lay off fewer people in a downturn and they always recover faster. The great recession’s data taught us that.

One great tool that has finally come to market to succinctly tell us how it’s actually done is a publication that distills real examples of how this principle works.

Dr. Corey Rosen, the founder of the National Center For Employee Ownership (NCEO), just published a concise, readable book that helps you understand this. The book offers concrete suggestions for turning ESOP employee-owners into idea incubators in chapters like “How To Create An Ideas Generation Process” and “Developing Work-Level Teams.”

But I think one of the most important things the book does is back up its thesis with storytelling. One of my favorites is about an ESOP company that provides chemicals to prevent corrosion in water pipes in buildings.

A client that was a hospital asked the company’s salesperson if they could treat water for Legionella bacteria. The salesperson took the question to the lab technicians who looked into the question themselves and said yes, they could.

Then they developed a better product than what was already on the market. That product went on to become a substantial part of that ESOP company’s business and profit.

The bottom line is your employees are your biggest asset and they need to be managed, involved and empowered to get improved performance and value. Your employees are assets, not liabilities. Fully deploy them, best in an employee ownership context, to make your company better, well in advance of any plan for exit or succession

Speaking of benefits, this is Kevin Long.

If you need specific guidance on this topic, let’s start a conversation. This podcast is for general informational purposes only. It does not create an attorney-client relationship between Employee Benefits Law Group and the listener or reader and does not constitute legal advice for a specific situation.  

Beyond Engagement: Turning Your Company Into An Idea Factory

This latest publication from NCEO brings together the best ideas from companies who unleashed the power of their employees, and shows you how to make it happen in your own company.

Filed Under: ESOP

About Kevin Long

Kevin has personally worked on every one of our 400 ESOP cases. Designing new ESOPs or assuring sustainability for existing ESOPs, he guides companies to achieve goals with their benefit plans in a tax-advantaged manner while incentivizing their employees to greater productivity.
Learn More About Kevin

EDITOR’S NOTE: We did the best we could to make sure the information and advice in this article were current as of the date of posting to the web site. Because the laws and the government’s rules are changing all the time, you should check with us if you are unsure whether this material is still current. Of course, none of our articles are meant to serve as specific legal advice to you. If you would like that, please call us at (916) 357-5660.

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