The term ESOP can be heard at every Central States Manufacturing plant, office and Metal Central location. Those four-letters are so much more than an acronym. They have weight in every employee-owners life. As we recognize Employee Ownership month, Dave Barr sat down with Central States Chief Financial Officer Chad Ware to talk Employee Stock Ownership Plans and their impact on every facet of our business.
DB: How big of a decision is it for a company to decide to become an ESOP company?
CW: If you really want to track it back to how the company became an ESOP – it all started with the Carpenter family. They started the company, and they believed that providing ownership for employees created an environment that people cared more and wanted to grow the company and to have a stake in the outcome. The Carpenters believed in that and so they were the ones that were willing to give up ownership to help grow the company even more. Because of that mindset, the profits that the company earned were given back to the employees. So, they were the really the ones that spearheaded that and converted it to an ESOP. Since 2012, when we went to 100% employee owned, we’ve added more sites and have continued to grow and continued to focus on the customer. That has always been at the center of who we are and I think being an ESOP is also the core of Central States. It’s a very important part of our culture.
DB: How rare is an ESOP employee-owned company, particularly one the size of Central States?
CW: One graph that I saw is that only 0.7-percent of all companies in the U.S. are employee owned. When you break that down, it’s even fewer 100-percent employee-owned ESOP’s like we are, meaning that all of the value of the company generates is given back to employees through shares contributed to the employees and the growth in the share value over time. So, when you start breaking that down, it is like a fraction of a percent that have the same business structure as we have. It’s pretty rare.
DB: Talk about the growth you’ve seen over the recent past with ESOP and how you’ve seen financial freedom through ESOP really impact our employer-owners.
CW: There have been several individuals who I’ve personally heard say that I would never be able to retire if it wasn’t for the ESOP and certainly wouldn’t be able to retire as soon as they did. Those stories certainly resonate and are impactful. It’s the power of the ESOP that allows people to retire so much sooner than they would have otherwise. Those are the cool stories. It’s not like a certain group of people either, it’s spread across all of the different roles in the organization. If you look at the chart on the materials that we put out, the people who have $500,000 or more in their accounts is split. At the end of the day, it’s all about tenure.
DB: In a time when recruiting is difficult. How has the ESOP program positively affected the recruiting message for Central States?
CW: I think it certainly adds what I call another tool in our tool belt to be able to get out and promote the company. A perfect example is that last week I was at new driver and new hire orientation. I was talking to those individuals and the main thing that they said that attracted them to the company was that we are an employee-owned company with a family culture. It is a fantastic benefit and a great selling point. One of the most attractive things is knowing that you don’t have to put any money into your ESOP account. It’s all contributed to you; it’s given to you for just working at Central States. So as long as you’re here, you get that allocation of shares and over time, as long as the company continues to grow, those balances can become substantial.
DB: How does Central States being an ESOP company impact our partners?
CW: I think the old saying that people quit people, people don’t quit companies is still true meaning if you don’t have a good boss, even here, you’re probably going to leave no matter what the benefit is of the ESOP. I think what the ESOP does is help provide a mindset that’s different than other companies in that it gives people more ownership, figuratively and literally, in that they care more about what they’re doing. They care about the company more. That’s not to say that every single person that works here has that mindset, but certainly when you get to three, four or five years, and you get the stock certificates, and you see your balance growing that incentivizes you to care about the quality of your work and those customer relationships. Whatever area you work in, knowing what’s at the end of the financial tunnel, you want to do a good job and help the company continue to grow and buy into the mission of the company. We are all about serving customers and being very easy to do business with, as well as improving the customer experience and all those things that we think that helps grow the business and help us to succeed. That ownership mindset is different when you’re an owner of a company opposed to working for a company that’s owned by an individual. By nature, that just flows into how you treat customers, vendors, each other.
