Business Record - Iowa Biz

ESOPs: A Good Plan For Retirement

ESOPs are a powerful tool that allow average workers to accumulate some sizable retirement accounts.  Non-ESOP companies, on average, contribute close to 4% of wages into a 401k retirement.  Public ESOP companies contribute 6% of wages, and private companies contribute somewhere between 8%-10% into their qualified ESOP accounts (source NCEO)

Some critics say that this is putting everything in one basket and is very risky.  The good news is that many ESOP companies also offer a 401k plan.  The logic would lead one to think that employees in an ESOP company would not contribute  into another retirement plan when they are receiving significant allocations into their ESOP.  A study by the NCEO that will be published in 2010, says ESOP employees are just as likely to contribute to a 401k plan as non-ESOP employees.

Teaching and involving employees to be owners is a good plan to a happy retirement.  There are no guarantees, but there are no guarantees with a 401k stock accounts or that Social Security will continue to be available to those who retire.

Flickr photo by sweetie pie rebecca

 

Time For Education

This spring there will be three tremendous educational opportunities in regards to employee ownership, ESOPs and open-book management. There will be three annual conferences held this April and May, and two of them are right here in the Midwest.  They are long- standing events that provide a wide range of perspectives and speakers on the issues of employee ownership, ESOPs and open book management.

I have attended these conferences over the past 10 years and have never been disappointed.  I have always walked away with new and pertinent information that I could use.  The speakers are knowledgeable and passionate about their topics.

It is also a great way to meet your peers as owners, leaders and employees who are living the experience and more than happy to share their story and knowledge.  You will hear the real life version of how these concepts are played out from these individuals. 

Please check out the links below and make plans to attend one of these educational events.

The NCEO/Beyster Institute Employee Ownership Conference  April 20-22, 2010 Minneapolis, MN

The ESOP Association's 33rd Annual ESOP Conference May 12-13, 2010 Washington D.C.

The Great Game of Business's 18th Annual Conference on Open-Book Management May 5-7, 2010 St. Louis, MO

Do Not Waste A Good Crisis

There seems to be crisis everywhere and it is touching most everyone in some way.  Most people do not like crisis, but within crisis there are many opportunities that are wasted.

During a crisis, people and organizations are much more willing to be creative, change, and venture down paths that were once avoided.  Crisis pushes organizations to clean things up and get rid of "dead" weight, just as trees do during storms.  The clean up allows for new growth in different ways, which ultimately creates a stronger and leaner organization.

Crisis pushes leaders to address issues that have been put off or neglected.  In many cases the "gut" feeling that leaders may have had for sometime are now either confirmed or dismissed.

Crisis also allows past mistakes to rise to the surface and be exposed to everyone who may be impacted by those mistakes.  Crisis creates accountability for those who made the mistake and the opportunity to learn from those mistakes.  Make no mistake, the lessons that are learned can be hard and cruel.

A crisis is only a crisis if nothing is learned and nothing changes.  A crisis is an opportunity when mistakes are accepted, learned from, and there is a plan put together to avoid them in the future.

Practice Makes Perfect?

The saying practice makes perfect is used by parents, teachers and leaders to encourage their children, students and employees to improve themselves.

It is a great idea and it works, but only if they are practicing the right thing.  There are far to many instances where individuals spend countless hours practicing, only to learn they were practicing the wrong thing.

A lot of resources and efforts are wasted by companies during organizational change because the organization practices the wrong thing.

In many cases companies practice the wrong thing because they fail to engage the employees in the organizational change process.  In these instances programs are implemented and the employees will implement the program knowing full well that it will not work - they will practice the wrong thing.  Until the leadership of the organization becomes enlightened to the situation, the organization will continue to practice the wrong thing and get lack luster results.

 Engage your employees in change and practice will make perfect.

Work: The Means or the End?

 This time of year gives us pause to evaluate what life has given us and what more do we want from life.

When we evaluate life we have to evaluate work, since this is where most of our time is spent.  How do you evaluate your work - is it the means or the end?  The end, meaning it consumes your life and negatively impacts all other life activities or...The means, meaning work feeds a full and balanced life.

We can choose the answer ourselves, but the culture of our company plays heavily on this choice.  A company that supports a culture where it is a priority for employees to attend the ball game, music recital or visit the sick family or friend in the hospital, will get back ten times more effort from their employees.  The saying "the more you give the more you live" is so true.

There are many companies that support the scrooge mentality that work is first no matter what.  The rest of your life is captive to the demands of work and there are no alternatives.  Work is the end and when the ghosts of Christmas come calling, these companies will suffer in the end.

To put it in perspective, a year from now, five years from now, ten or twenty years from now, what will you remember?  The fact that you missed a half day or full day from work or the fact you missed the ball game, music recital, or failed to visit the sick family or friend.  What will be your answer when the ghosts of Christmas call on you?  The means or the end?

Company for Sale?

The economy is slowing coming back.  People are beginning to realize that the values that existed before the crisis will not be seen again for some time.  The new values of homes, businesses and the stock market are not going to be over inflated as before.

Business owners that were thinking of selling their companies are starting to test the waters again.  The value of their businesses may not be what they once were and the values are based on a new market reality.  Owners are realizing that it is time to move forward.

When looking at the impact of our financial crisis and how it impacted everyone's net worth, employee ownership is one of the best ways to transfer ownership of a business.  One employee ownership methods for transitioning ownership of a business is an ESOP (Employee Stock Ownership Plan).  The following is a short list of the benefits of using an ESOP as a strategy for selling a business:

• Owners of C corporations can realize significant tax savings if they sell at least 30 percent of the company to the ESOP.
• S corporations that are 100 percent ESOP pay no corporate tax (providing certain state laws).
• The equity of the business is spread broadly to all employee owners.
• An ESOP is a qualified retirement plan that is governed by the DOL & IRS (giving some comfort to employee owners that there are rules to play by).
• ESOP companies, with participatory cultures, will out perform their non-ESOP competitors
• Employee owners have greater control over the value of their accounts in an ESOP as compared to an IRA or 401k.
• The owner gets the satisfaction of sharing future equity with the employees who helped build the business.

Any business owner that is considering selling his or her business would be amiss to not evaluate if an ESOP would work for them.  There are many more benefits than those listed above and there are disadvantages that need to be considered.  An ESOP can provide benefits to the owner, the business and the current and future employees.

A Paint Can of Cookies

Gifts come in many ways, but I was very surprised the other day when I received a UPS package that contained a paint can.  Needless to say I was very curious as to what the paint can contained.  It was a "welcome to the team" note with cookies from my new employer RSM McGladrey.  I have not even started the position and they are sending me a signal of their culture . Very impressive.  Even more impressive is an agenda for my first day that includes lunch.

What are the signals your culture sends to new employees?  Do they wait in the lobby with no conversation, wait for follow up calls or emails, have no idea of what the first day will bring or is it the standard paper work and then get them to work? 

First impressions are powerful and difficult to change, just as it is difficult to change a company's culture.  One of the greatest tools in changing company culture is new blood.  New employees bring no baggage and are eager to prove themselves.  They will be the first to accept change and step up to take on new challenges.

If culture change is a priority for you, it may serve you well to examine the process you use in bringing new people to your company.  It may be time for some new paint.

Recession 101

The other day I saw a billboard that had this message:  "Recession 101: Self Worth Beats Net Worth."  What a wonderful message in these trying times.

I have had several conversations in the past weeks with people who feel tired, worn out, beat up and defeated.  The constant pressure is tearing down their self worth.  They are giving their best efforts to keep their businesses alive and profitable, but they feel like they are dropping the ball.

Many organizations say that their people are their greatest asset.  I fear that even those that truly do care about their people are beginning to cave in to the pressure of this recession.  The constant bombardment of bad news makes it difficult for individuals to feel like they are making a difference.

I have a "feel good" file that I pull out when I am feeling down or frustrated. I pull it out and read the kinds words that have been given to me by my friends, peers, customers and supervisors.  It usually takes about five minutes to read and I am on my way to being refreshed.

If your organization is feeling the pressure of the economy and morale is low, you may try a "feel good" event.  Conduct a meeting where all you talk about is what you have done well.  Get people talking about all of things you have done right.  You will be amazed at how it will give new energy to your organization and make it a brighter day for all.  We all can use a little help sometimes in remembering that we are good people and have done great things.

It Is All About Perspective

Have you spoken or heard the phrase "Walk a mile in my shoes and then you will understand?" This saying clearly explains the power of perspective.

Understanding the perspective of individuals, work teams and the organization is critical when implementing change.  In many cases organizational change has unintended consequences for failing to appreciate the perspective of those impacted by the change.

You may think that everyone is in the front row ready to take action, but there are most likely groups that are in fear of the front row.  Understanding others perspectives is like peeling an onion.  It will take some time, it may well stink, the stink may linger and may not go away easily, and there could be tears involved.

Making the decision of what is right or wrong is not easily decided until you can appreciate why a person is the way his or she is.  This appreciation takes time, effort and patience.  

It will not eliminate hard decisions, but it will lead to a stronger culture based on respect, responsibility and acceptance.  Remember, we each have our own skeletons in the closet!

The Power Of Passion

My father has lived alone the past two years and has just recently started to see a wonderful woman. The other day, he made this statement to me: "Vacuuming and dusting the house is not so bad when you have a good reason for doing it." He has a new passion for life and it has changed his perspective at all levels (he was married to my mother for 40+ years, the only women in his life until two years ago).

I am sure that all of you can relate to the feelings that my father is experiencing. It is truly amazing what happens to individuals and organizations when passion has been lost. Daily tasks become burdensome, we start to question why we do what we do, and cynicism comes alive. Our energy seems to leak away and we feel like we can never make any headway.

Why is that organizations and individuals loose their passion for life? It is fear, lack of knowledge and getting stuck in the rut.

It is safe to stay in the rut or routine of life or work. We know what to expect and it is simple. As time goes on the safety is comforting, but everything starts to dull and tarnish as we continue to do the same thing. Gaining new knowledge can change this. New knowledge allows us to change perspective and gives a new luster to the former dulled and tarnished tasks.

The lesson, as my father would advise, is to face yours fears and take the first step. There is knowledge to be gained everywhere. Break out of the rut once in while to truly see what life has to offer.

Find your passion and you will find a new way to live life.