Employee ownership (EO) can be transformative for businesses across a wide range of industries. As more Baby Boomer-aged business owners reach retirement age (sometimes known as the Silver Tsunami), we are seeing more and more interest in EO models such as Employee Stock Ownership Plans (ESOPs), Worker Cooperatives, and Employee Ownership Trusts (EOTs).
While every organization has unique reasons for pursuing EO, we have observed two primary motivations.
Reason #1: Employee Ownership for Succession Planning
EO helps retiring business owners preserve their legacy, keep the company’s continuity, and preserve jobs. Instead of selling the company to a third party that might prioritize profits over people, owners can pass the business onto their employees through a tax-preferred exit strategy.
This ensures that the business remains rooted in its original mission and continues to serve its community. EO preserves jobs and the region’s economic health while giving selling shareholders a great return on their investment, such as in the case of Blythe Development.
The Blythe Development Story
Jack and Frank Blythe founded Blythe Development in North Carolina in 1989. Over the next 35 years, they grew the company into a key regional player in construction, generating $230 million in revenue annually and employing nearly 1,000 people.
By 2022, nearing retirement, the Blythes opted to sell the company to an Employee Stock Ownership Plan (ESOP) instead of the highest bidder. Their family had had a bad experience selling a prior business to a large player, and they wanted to do better by their employees and better cement their legacy, this time around.
By transitioning to an ESOP, the Blythes transferred ownership to employees, fostering loyalty and retention. This ESOP structure will build a strong, motivated workforce, which is essential for tackling industry challenges like a shortage of skilled labor.
ESOPs enhance employee engagement and equity. The Blythes’ decision underscores a commitment to legacy and employee welfare, proving once again how ESOPs can be a great option for succession planning for family-owned businesses.
Reason #2: Employee Ownership for Workforce Engagement
Another compelling reason for EO is to create a better workplace culture, where employee-owners have a substantial voice in how the business operates. This structure promotes a high level of engagement among employees and ensures that the business can adapt more effectively to challenges.
Employee-owned companies like Caktus Group have demonstrated that involving employees in ownership and governance can lead to greater resilience and engagement.
The Caktus Group Story
Caktus Group, a North Carolina-based tech company, embarked on its journey toward employee ownership with a pragmatic suggestion from its accountant.
The founders were advised to consider a succession plan to secure the company’s future in the event of unforeseen circumstances. They realized that passing the business on to their invested employees was far preferable to handing it over to a family member who might not share their passion for software development.
The founders were also concerned about selling the business to a third party, which could lead to efforts to extract maximum value at the expense of employee welfare. This was fundamentally at odds with the mission and values that Caktus Group had set out to achieve. That’s why the founders decided to convert the company to a worker cooperative.
Combatting “Quiet Quitting” with Employee Ownership
“Quiet quitting” is a term that has gained traction in recent years, describing employees who do the bare minimum at work, lacking engagement and enthusiasm. This phenomenon reflects a growing disconnect between employees and their work environments.
However, companies that adopt employee ownership models enjoy better employee engagement and retention. Employee-owned businesses foster a sense of ownership and investment among their staff.
Workers in these companies are typically more motivated, as they have a direct stake in the business’s success. This results in a vibrant company culture where employees are more likely to go above and beyond – not just because it’s their job, but because it’s their business.
Moreover, employee-owned companies often boast great workplace cultures, attracting talent eager to work in such environments. These businesses have people lining up to join them, not only because of the financial benefits, but also because of the sense of community and shared purpose they offer.
That’s why EO provides a natural antidote to “quiet quitting,” creating workplaces where employees are fully committed and enthusiastic about their work.
Learn More About Employee Ownership Options
Employee ownership brings a myriad of benefits that can transform the dynamics of a business and its community. Employee-owned firms ensure stability and growth in North Carolina by preserving jobs and maintaining the local economic impact. They also attract and retain good employees, thanks to engaged work cultures!
Take the next step and learn about EO models that could work for your organization here.
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