Five lessons learned from a successful ESOP transition

Learn more about an Employee Stock Ownership Plan (ESOP)
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In 2020, amidst the COVID-19 pandemic, new working models and general uncertainty, Design Workshop became 100% employee owned through an Employee Stock Ownership Plan (ESOP).

Under this plan, ownership of the company is held in an ESOP Trust, is funded entirely by company contributions, and all employees are enrolled upon meeting eligibility requirements.

This is designed as a long-term retirement benefit, with the employees’ accounts increasing as the value of the business increases. Not only does an ESOP provide long-term wealth building opportunities for employees but it offers a clear succession plan for organizations creating a framework for ownership transition.

With approximately 6,700 ESOPs in the US, being an employee owner is a special opportunity for staff. ESOPs naturally cultivate a culture with a collective interest in the growth and success of the organization. When the company succeeds, employees directly benefit. This drives employee performance. For organizations in industries such as landscape architecture, where company success is dependent on employees consistently delivering high quality results on projects, a shared commitment to excellence is vital. An ESOP rewards this excellence, making it a natural choice for Design Workshop.

This April marks the one-year anniversary of Design Workshop’s transition to becoming 100% employee owned. Despite navigating a global pandemic and a mostly remote working environment, it’s been a successful transition because Design Workshop took the actions outlined below to prepare.

Understand Your Organization and Plan Ahead

Design Workshop is built on client service. The firm thrives on long-term relationships and delivering solutions to our client’s most challenging problems. Connecting the firm’s values to the business helps employees share the long-term success with all. Take the time to understand ESOP structures and evaluate how they align with your culture. Identify the team who will lead the effort, regularly meet and assign responsibilities. This group will drive the conversion process. Make sure that your current shareholders understand the transition and its impacts.

Educate Your Transition Team

There will be a vertical learning curve for the team assigned to manage the ESOP transition. Utilize existing resources to help you navigate the process. The National Center for Employee Ownership and The ESOP Association are just a couple of entities that provide resources and tools for ESOPs around the nation.

To help advise and facilitate the ESOP conversion process, assemble a professional team of ESOP conversion experts. Take the time and interview consultants to ensure you find the best fit. It may be expensive but executing the transition properly is worth additional funding.

A successful ESOP transition team typically includes: ESOP attorney, ESOP Independent Trustee, Valuation Consultant (engaged by the Independent Trustee), Corporate attorneys to assist with shareholder buyout documents, Accountants, a Third Party Administrator, Communication consultants and a bank (if external debt will be needed).

Engage Your Internal ESOP Team

Assemble an internal ESOP team focused on providing employee owners with educational opportunities, resources, and assistance that increases the common knowledge of the ESOP. This group will play a critical role in educating your employee owners. They will act as internal advocates for staff and further develop the teamwork, communication, positive and productive atmosphere and creative thinking amongst all employee owners.

At Design Workshop, we used an application and interview process to assemble our internal ESOP team. After serving for two years, an ESOP Team member relinquishes their spot on the team to give the opportunity to someone else. This group is given the autonomy to create their own education and engagement calendar and provides a monthly update to our Board of Directors.

Communicate with your Employee Owners

Our shared investment means that we are all dedicated to continuing to collaborate and provide value to our clients. We continue to educate our employees about their important role in the firm and what the ESOP means to them, both now and well into their future. Our ESOP team developed our firm’s “responsibilities of an employee owner” which serves as a code of conduct and communicates expectations to our staff.

Develop and Grow Your Culture of Employee Ownership

How you-develop your culture of employee ownership defines the personality of your organization. Make it fun! There is an incredible opportunity for employee pride to grow when they own the company. The ESOP Team can manage an education and engagement calendar for the organization to consistently spread your key messages. Involving spouses, partners and kids gets families involved too. Take advantage of National Employee Ownership Month in October to offer exciting programming.

Aimee Duffy Design Workshop Aimee Duffy leads Design Workshop’s people initiatives across all studios as Director of Human Resources. She is responsible for all HR processes including talent management, compliance, benefits, learning and development, performance management, as well as employee relations and engagement. Aimee is PHR and SHRM-CP certified. She holds a Bachelor’s degree from Saint Michael’s College and a Master of Strategic Human Resource Management from the University of Denver and belongs to World at Work Society and the Society for Human Resource Management.

Categories: Business Insights, Management & Leadership