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Employee Ownership: It’s Good for Business – and for the Soul
By Martin Staubus, Beyster Institute Staff
Study after study has confirmed the fact that employee ownership helps companies be more productive, more competitive, and more profitable. In short, employee ownership is good for business. And that’s a great thing.
But there is something more that is at work in employee ownership companies. In the way they operate, and by their very nature, these companies tap into the universal human hunger for meaning, for the pursuit of a higher purpose – one that transcends the drive for personal benefit. These companies generate outsized returns not only for the pocketbook, but for the soul.
As we prepare this week to enjoy the incredible event known as the Beyster Institute/NCEO Annual Conference, it is fitting to take a moment to consider what we can learn from previous sessions of this event, and especially from the gifted leaders who have addressed us as keynote speakers. What stands out from this review, remarkably, is the special power of employee ownership to speak to our human desire to contribute to something that makes the world a better place for others.
In 2004, for example – when our conference took place in Chicago as it will this year – our keynote business leader was Frederica Thode, President of Hot Dog on a Stick. She spoke of how she, as the company’s leader, was motivated at the highest level by two things. One was her commitment to stay true to the vision of the company’s deceased founder as she led the company forward. The other was her belief that as an employee owned enterprise, the company could provide a rare opportunity to own a piece of something important and to achieve an increased level of dignity that would speak to the aspirations of even the very young people who make up the workforce of this quick-service food business. With the help of some colorful young associates, she vividly communicated just how passionately these young people had responded to that opportunity. Employee ownership certainly created a higher purpose for them – but even more so, for Freddie Thode herself.
In 2005, our venue moved to San Francisco, where we heard from Bob Stiller, CEO of Green Mountain Coffee Roasters. This publicly traded company stands out as one of the best investments that Wall Street has had to offer over the past several years. But it stands out in other ways as well. Unlike the standard-issue public company executive, Bob Stiller has never preached a mantra of “building shareholder value” as justification for an unimaginative and soul-crushing slog toward reportable earnings. Instead, Bob has generated those stellar financial results while shining light on a higher vision. He is committed to operating a great coffee company that contributes positively to better lives for everyone the company touches. So the small farmers in developing nations that grow much of the coffee that Green Mountain buys are dealt with respectfully and offered fair prices. Likewise, the employee-owners – who as a group are the company’s largest shareholders – are treated as vital partners who share the vision of a company that is making a positive difference.
In 2006 we gathered in Minneapolis. There we heard Richard Hassel of Lifetouch, Inc., who told us about the founders’ vision that fueled the success – on all levels – of this national leader in the school photography business. Hassell quoted Louis Kelso, the creator of the ESOP, who was concerned by how poorly the conventional ownership system addressed the lot of most employees: “It is humiliating to possess nothing, to own nothing, and hence to produce nothing and to count for nothing." Hassell went on to explain the commitment felt by the company’s founders to address this at their company, leading to the formation of one of the nation’s first 100-percent ESOP-owned companies.
"The Lifetouch ESOP made the employees the beneficiaries of the founders' mission," says Hassel, "and it has allowed thousands of employees to retire with dignity."
As at Hot Dog on a Stick and Green Mountain Coffee, the pursuit of higher purpose at Lifetouch did not mean a sacrifice in business performance. To the contrary, Hassell explained how the dynamic growth that the company has experienced is a direct result of employee ownership. "The kind of creativity you see in our work doesn't come from someone standing over employees with a whip," says Hassel. "It comes from allowing employees the freedom to be creative and work hard."
Last year, we met in San Diego. That city is home to the headquarters of Science Applications International Corporation (SAIC), founded by the legendary Bob Beyster. Dr. Beyster shared his thoughts about employee ownership not only via his personal remarks, but through the debut of his book “The SAIC Solution: How We Built an $8 Billion Employee-Owned Technology Company.” He made clear that his vision for SAIC had always been to create a company that was committed to two things above all else: delivering the highest quality technological services and deliverables to the nation; and being fair to those who did the work to increase the company’s value. No amount of perceived “business imperative” would cause Bob to stray from those higher values. These commitments made SAIC a very special place to be.
Does a commitment to such higher goals come at the cost of business results? Not if these companies are representative. Hot Dog on a Stick has been growing and building wealth for its young employees for decades now. Green Mountain Coffee has been lauded as one of the best investments in the market over the past decade. Lifetouch has grown from a small cadre of rural itinerant photographers to a dynamic company of more than 18,000 people using cutting-edge technology to provide a diverse range of photographic services. And SAIC, which continues to be majority-owned by its employees after going public, has created more than 1,000 millionaires among its employee ranks. Rather than being a drag on business performance, their commitment to a higher purpose seems to be a part of their edge in the competitive marketplace. Go figure.
©2008 The Beyster Institute and its authors and their entities. All rights reserved.
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