Ask any member of the ESOP transition team whether our future as a 100-percent, employee-owned company is bright and they’ll tell you the lights were all on from the beginning. It would be discourteous to give you an abridged version of the comments made by our expert counsel, so we share their answers here to the many questions we asked.
BKD is a national CPA and advisory firm. The Wichita office of BKD had just taken over as Conco’s company auditor when the firm was engaged to evaluate the viability of Conco becoming an ESOP. We talked to Cara Benningfield, BKD’s ESOP practice leader, about the two-year process to earn our proud company-owned badge.
Tell us how it got started.
We met with Craig Nelson and Josh Gordon. Josh previously worked with an ESOP-owned company and liked the concept. But of course the devil’s in the details of whether an ESOP will meet the goals and objectives of the stockholders, management and employees. We put in a lot of thought and analysis to make sure this was the right step.
We conducted a feasibility study, modeling out the transaction from the perspective of all stakeholders. It was a good fit for the shareholder group and management team. Craig had really focused on continuing the legacy of the company and creating opportunities for the management team to step up and own its future success and trajectory. He believed an ESOP would be sustainable and a good benefit for the employees.
Were there indicators for success?
Obviously a company must demonstrate financial performance and sustainability. That’s a given. It tends to be the intangibles that make a difference. You need a seller who 1) is doing it for more than financial reasons, 2) desires to continue the legacy and culture of the company, 3) wants to support their management team and see it be successful, and 4) has the best interests of employees at heart. We see these interests over and over in successful ESOP transactions. It was clear to me that leadership was interested in a lot of other people and their success.
How do you determine probability of success?
ESOPs are transacted on the premise that the owner will eventually retire, so it’s absolutely critical that you have a good team of managers behind it. It was clear to me when I met the Conco management team that they have a really great group of leaders who are ready to propel the company to future success.
I’ve been in the ESOP business for 20 years. You’ve got to have great people. We meet a lot of different companies. Every company has a different dynamic…some have great management teams, some not so great. To me it’s apparent that you have probability of success when you have people who are excited about their business, know it well and are confident they are able to perform.
What would you say to Conco’s clients about this new business structure?
ESOPs are a really good thing for the long-term success and succession planning of the company. I believe many clients of ESOP companies realize the relationship is with more than any one person. It’s with a group of engaged and committed employee owners who are empowered to take care of their clients.
To the employees?
You are embarking on a really special opportunity. There are not many companies in the country that are 100-percent employee owned. You have a significant opportunity to directly impact the value of your retirement plan, and you will get out what you put into it. The more effort the more benefit you and your fellow employees will see through this plan.
You will enjoy unique benefit most employees don’t have. With that comes responsibility to think about your daily jobs differently, to think as owners. How you work together as a group will impact the future success and trajectory of Conco and your retirement benefits.
What creates stress fractures in the life of a new ESOP?
Every company faces unique challenges and opportunities related to the economy as a whole. The right people on the management team in the right seats will meet those headwinds.
“There is great opportunity for Conco leaders to prove to themselves what they can do and for employees to seek their full potential within the organization.
“Conco is well positioned to take advantage of the ESOP for the next 10 to 20 years. Most ESOPs outperform expectations, and I’m confident Conco has great things on the horizon.”
—Cara Benningfield, BKD’s ESOP practice leader
Polsinelli, an Am Law 100 firm with 900 attorneys in 21 offices nationwide, represents the ESOP. Attorneys Bob Grossman and Wally Brockhoff served as legal counsel. Robert Grossman, a nationally recognized ESOP authority who leads Polsinelli’s national ESOP practice, answered our questions on behalf of Polsinelli.
You are an ESOP authority. In your opinion, what are the leading factors setting Conco up to experience success as an ESOP?
Over the years, we have come to recognize that successful ESOP companies often have certain things in common, and we have learned to listen very carefully, even during the earliest conversations with potential ESOP companies, to see if some of those things might be present. That was certainly the case in my early discussions. The sense I got was that Conco had very strong leadership at the top, combined with a keen understanding of the importance of ownership and management succession planning.
It struck me that Craig had a very clear understanding of what Conco was, of the things that had made Conco successful, and of the things that would carry Conco forward into its next chapter. More importantly, it seemed clear to me that Conco understood the importance of identifying talent and potential in upcoming leaders, both inside and outside the organization, and a willingness to empower them and even share ownership opportunities with them.
From that, it’s not a huge leap for a principal shareholder to express willingness to share ownership opportunities with the employees who contribute every day to making the company what it is.
Add to that an observation that Conco was already quite accomplished at openly communicating between and among its employees.
These are all hallmarks of great ESOP candidates.
What would you like Conco employees to hear from you?
That virtually every full-time employee of the organization now has an ownership stake in the company. As a result, everything that every employee does every day—whether it’s a relentless focus on client service, on quality performance, on the reduction or elimination of waste, on being a good, cooperative, constructive, productive team member and a good teammate—has the potential to impact the performance and the value of the company. While people throughout the organization will still be asked to perform their specific jobs, all should now think and act like owners in performing those jobs. In so doing, every single employee has the potential, every single day, to drive the value of Conco stock that they now own.
What advice would you give the leaders at Conco as they take the reins?
You have earned an important opportunity to lead an employee-owned company. You should treat your owner-employees with respect, share information as appropriate and do your part to help every single employee think and act like an owner.
TI-Trust is nationally recognized as a premier provider of fiduciary services that serves clients across the country. In a conversation with TI-Trust’s Dawn Goestenkors, our ESOP trustee located in Quincy, Illinois, she said, “This is like ‘seeing success in the stars.’”
What was Conco’s “why?”
One of the things that stuck out first, and that we consistently heard from various individuals, was the culture. Conco has a really good, open culture, characterized by good communication and a good team mentality.
Craig had already given ownership to key individuals and spent a lot of time preparing the company for future success. We looked at the talent they have and the talent they bring in.
Conco has had other ownership structures over the years. Craig wanted everyone to share in the company’s financial success. We see a lot of good things for the future.
What is your role in the growth and development of Conco as an ESOP?
We exclusively serve for the benefit of all employee-owners. We set the value of the stock every year and elect the board of directors for the ESOP. We make sure the ESOP and trust are planned appropriately, safeguard the assets, make sure the employees are taken care of and facilitate payouts for eligible employees.
From the beginning our goal was to set the company and plan up for long-term success. We estimate the potential benefit over 30 to 40 years, and create a tangible picture of what this could truly mean to the owners in the long term. It’s like seeing success in the stars.
What message or advice do you want Conco employees to hear after transitioning to an ESOP?
I’ll start with congratulations. You’re now part of the American dream…part of the ownership of a successful company you helped build. You will have direct impact on your retirement because of what you do so well in your daily job.
We’re very passionate about employee ownership. This comes down to culture and the people leading the ship. I’d tell everyone this ESOP requires you to be in it for the greater good.
“We faced an unknown business environment in 2020. Conco didn’t pull back. They didn’t skip a beat with compensation or benefits or development. They went all in, worked hard, brought in great new talent, kept winning work.
“People see Conco as a world-class partner and want them on their jobsites. The ESOP creates a long-term plan of ownership so the company is not distracted or growth slowed in the future.”
—Dawn Goestenkors, ESOP trustee, TI-TRUST