July 23, 2024 • 22 mins
Discover how employee ownership can reshape the business landscape and drive social change! Join me, Joel Skeen on the Mindful Marketplace, as I sit down with Alison Lingange, the brilliant co-founder of Project Equity and the Ownership Capital Lab. Throughout our conversation, we'll uncover how democratic business models are making a difference for companies and employees alike. From the inspiring story of the Industrial Commons' role in the textile circular economy to the groundbreaking antitrust lawsuit against Apple, we cover a broad spectrum of topics that reflect the evolving dynamics of today's marketplace. Plus, get practical tips on managing personal and business debt amidst the growing credit card usage among Gen Z.
Is employee ownership too complex or just a myth? Think again! In this episode, we debunk common misconceptions about Employee Stock Ownership Plans (ESOPs) and illustrate their numerous benefits. Hear firsthand how New Belgium Brewery's transition led to financial rewards for its employees, and learn why employee-owned businesses often outperform their peers. We'll also break down the mechanics behind financing these transitions, showing that substantial personal savings aren't necessary for success. Don't miss out on this enlightening discussion about the future of employee ownership and its potential to transform the business world for the better.
https://project-equity.org/press-releases/project-equity-co-founder-alison-lingane-announces-transition/
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Joel (00:00):
What if investing in each other could change the world?
I'm Joel Skeen with bizradious,and this is the Mindful
Marketplace.
Welcome to the MindfulMarketplace.
Alison (00:13):
Welcome to the Mindful Marketplace.
I am so glad to have you here.
I am Joel Skeen from Bizradiousand I am particularly excited
about today's conversation.
Joel (00:21):
I'm getting to talk with someone that co-founded an
organization that I havereferenced quite a bit on this
show.
Alison Lenang from Project,who's the co-founder of Project
Equity and is from the OwnershipCapital Lab, is going to be
here with us to discuss employeeownership, democratic models of
ownership and how businessescan utilize them to their
(00:42):
benefit.
But first we got to hit thebalance sheet.
It's time to go over the assets, liabilities, debts and
investments.
All right, here in the assetscolumn, I wanted to talk about
an article that was here inForbes that was talking about
steps to growing a climateresilient workforce.
(01:02):
So the article talks about howsmall and medium-sized
businesses can unlock the fullpotential of the green economy
by fostering cross-industrycollaborations, enhancing things
like early education, tailoringtheir messaging and increasing
training opportunities.
And Forbes actually mentions alocal North Carolina group here
that I want to highlight, theIndustrial Commons, which is a
(01:25):
leader in the textile circulareconomy, with a focus on
reducing textile waste andpromoting environmentally
sustainable practices within theindustrial sector.
The organization helps peoplestart and partner with other
companies while developingskills training.
Their support enables frontlineworkers to learn a broad set of
(01:46):
skills that contribute to acircular textile economy, one
that's good for workers,businesses and the environment.
The Industrial Commons hasactually supported more than
2,500 workers through theircollaborative, member-owned
network of textile manufacturersand workplace development
programs, and they've convertedbusinesses to employee ownership
, providing training andarts-based programming to
(02:08):
thousands of youth, and managedand invest over 15 million worth
of grants into our region'seconomy.
They've also developed a ruralwealth blueprint that is
changing the face of ourcommunity and informing others
so awesome that they got thatshot out there In the
liabilities column.
So we're going to talk about bigtech and talk about the recent
(02:29):
antitrust lawsuit filed by theJustice Department against Apple
.
So the lawsuit accuses Apple ofcreating an illegal monopoly in
the smartphone market, stiflinginnovation and keeping prices
artificially high.
Though the suit alleges thatApple's control over the iPhone
has locked consumers into itsecosystem while excluding
(02:49):
competitors from the market,ultimately hindering industry
advancement, apple has, ofcourse, strongly refuted these
claims, stating that the lawsuitis based on incorrect facts and
law.
The lawsuit addressesallegations that Apple
restricted the functionality ofnon-Apple smartwatches, limits
access to contactless paymentfor third-party digital wallets
(03:09):
and refuses to allow itsiMessage app to exchange
encrypted messages withcompeting platforms.
It also seeks to prevent Applefrom undermining technologies
that compete with its own appsand crafting contracts that
extend its own monopoly.
And crafting contracts thatextend its own monopoly.
The lawsuit's part of a broadereffort by the DOJ to promote
competition and innovationwithin the tech industry.
(03:30):
We've already talked aboutGoogle.
We've already talked aboutwhat's going on with
Ticketmaster and Live Nation.
Many argue that Apple's productsare often priced at a premium,
making them inaccessible to alarge portion of the population.
Additionally, the closedecosystem, which limits
connection of Apple devices withnon-Apple products, is a way to
lock customers out of the Appleecosystem, limiting their
(03:52):
freedom of choice.
Moreover, there are concernsabout Apple's stance on
repairability, with a lot ofpeople arguing that the company
makes it difficult for users torepair or upgrade their devices,
leading to unnecessary waste.
All right, so next in the debtscolumn All right, so there was
an article here that was talkingabout how the young folks, the
(04:15):
Gen Z, are using credit cards atkind of an astounding rate.
The factors contributing to thisare providing, you know,
providing and providesuggestions and helping the
younger generation manage theirfinances more effectively.
There was a, so there's thisrecent study by TransUnion that
revealed 84% of credit activeGen Zers had at least one credit
(04:39):
card, a significant increasecompared to 61% of credit card
active millennials.
Also, the Fed Bank Reserve ofNew York found that nearly one
out of every seven Gen ZAmericans have maxed out their
credit cards.
Compares that to only 12% ofmillennials and just under 10%
of Gen Xers.
The article does attribute twomain factors in the rise in
(05:02):
credit cards inflation and highinterest rates.
Inflation, reaching its peak in2021 at an annual rate of 70%,
has led to higher prices fornecessities like housing,
groceries, gas We've talkedabout that before the rise of
more online lenders who aretaking advantage of that.
(05:22):
The article also highlights thechallenge of finding employment
for a lot of young adults,particularly those who came of
age during the pandemic.
The job market has beenparticularly rough for younger
people, as many were unable tosecure the internships or
starter jobs during lockdown andthen face competition from
older and more experienced jobseekers once COVID precautions
(05:43):
were lifted.
Just a reminder that, in orderto help combat the debt crisis,
the Mindful Marketplace isproviding all of our listeners
with a free, customized reporton how to best eliminate
personal and business debt,based on everyone's unique
situation.
Lots of families are using thisreport and the information in
it to get out of debt in nineyears or less without spending
(06:05):
more than they were.
So go ahead tomindfulmarketplaceshowcom and
click on the link to get yourfree report about how you can
eliminate your debt faster, allright.
Lastly, in the investmentscolumn so I want to talk real
quickly about I mentioned ImpactAlpha before.
They are a partner with oursister show, community Capital
(06:26):
Live, and there was a recentarticle article here by Ellen
Frank Miller, who talks aboutemployee ownership and talks
about how, when combined withquality jobs, it is increasingly
becoming recognized as apowerful driver of value
creation and improved financialperformance within companies.
Private equity firms like KKRand Blackstone are leading the
(06:47):
way in implementing employeeownership programs globally,
adapting the model for localmarkets and including
broad-based employee ownershipat firms in which they take a
controlling interest.
The shift suggests that thesefirms see the potential for
improved job quality to generatesuperior returns throughout the
organization.
Contrary to the belief thatfinancial incentives alone drive
(07:10):
better financial results, therecent research indicates that
the relationship betweenemployee ownership and improved
financial performance is a bitmore complex than that.
While financial incentives doplay a role, two other key
factors have been identified.
She talks about organizationalidentification and social
exchange obligation.
(07:30):
So these factors, rather thanjust financial incentives, are
crucial in explaining why morebroad-based employee ownership
generates better financialresults.
So to achieve this, companiesdo need to focus on their
ownership behaviors and thepractices that ignite them.
She talks about how thisinvolves measuring and fostering
ownership behaviors, such asemployees employees
(07:52):
discretionary efforts to improvethe company's fortunes, while
implementing managerial andoperational practices that
support these behaviors.
So really fascinating stuff onthe future of capital and
employee ownership, which Ithink is a great place to
introduce our next guest,because she is someone who has
been working in the space ofcapital and of employee
(08:14):
ownership longer than most haveknown about it.
I feel like at this pointAllison, thank you so much for
being on the show.
I'm so excited we get to haveyou here.
Alison (08:22):
Oh, thanks, Joel.
I appreciate being here andreally looking forward to our
conversation.
Joel (08:26):
Yeah.
So I'm sure a lot of people outthere don't know who you are or
know the work that you've done.
I know you're the co-founder ofan organization we talk about a
lot here called Project Equity,and you are also moving into
something called the OwnershipCapital Lab.
Tell us why did employeeownership strike you as
(08:49):
something that you I don't knowthat hit at your heart and that
you became passionate about?
Alison (08:53):
Yeah, well it's, you know the, when you look at your
career in the rear view mirror,the path makes sense.
My career has always been aboutunlocking opportunity for
people who may not have as muchof it as as, frankly, they
should.
And you know, I I spent many,many years in the education
(09:15):
sector thinking that, you know,oh, it's all about helping
people get more access toeducation.
And I kept coming back to well,yeah, that's true, unless and
the unless is unless you are,you know, growing up in poverty,
living in an over-policedcommunity, right, I could go on
and on, but all of these thingsthat get in the way of, you know
(09:38):
, education being sort of thatclear and obvious path.
And so I kept really searching,for there's got to be a way.
You know, I started actuallystarted my career in job
training, but started asking thequestion why are we training
people in poverty level jobs?
And I just kept networking andtalking to people and was
randomly introduced to HilaryAbel, who became my co-founder
(10:00):
at Project Equity.
You know, we launched theorganization a decade ago and,
as you mentioned, I'm nowtransitioning out of the
organization.
I'll get to that in a second,but the you know, for me it was
this massive light bulb?
Because with an employee-ownedcompany, all you do is get a job
.
You get a job and that job hasopportunity baked right into it,
(10:21):
so that can be financialopportunity.
Employee-owned businesses tendto pay significantly better.
One study showed 33% higherwages in an employee-owned
company as compared withindustry peers.
Not only that, but you can endup with significant assets,
savings, assets, retirementbenefits.
(10:42):
That same study showed thatemployee owners have household
net worth of nearly twice ashigh as non-employee owners.
And then, depending on theemployee-owned business, you
might even have the opportunityto serve on the board of
directors of that company.
And that I mean I would ask allof the, all of your listeners
to say well, is that anopportunity you've ever had, to
(11:02):
serve on the board of directorsof the place where you work?
Talk about an incredibleprofessional development
opportunity.
But at a minimum, one of youknow to that article that you
were just showing about.
You know private equity andemployee ownership.
At a minimum, employee ownedcompanies ask people to bring
their full selves and to beengaged in the workplace and to
to think and act like an owner.
(11:24):
Because, guess what, you are anowner, and, and that in and of
itself is a is a tremendousprofessional development
opportunities.
So you know, 12, 13 years ago,when Hillary and I started
talking about you know what doesthis look like I kept coming
back to the question of well,why didn't I ever hear about
this?
You know, I went and got my MBA.
It was in every single networkof whatever the words you want
(11:47):
to use responsible business,good business it was nowhere to
be found, and I think one of thereal problems has been that
employee ownership has been verysiloed, and so over the past
decade, what we've really put alot of energy into is how do we
bring it out of its silos?
I often say, if you Googleemployee ownership, there's a
lot of information to be found.
But the problem is most peoplelike me back before I'd even
(12:10):
heard about it, don't even knowto Google it, and so we've been
doing a lot of work over thatpast decade to bring it out of
its silos.
It's a very exciting time rightnow in employee ownership.
There's so much interest andactivity, a lot of new entrants,
a lot of opportunities forbusinesses that are interested
in looking at employee ownershipto be able to get support and
(12:32):
help and financing to help makethat a reality.
Joel (12:35):
Yeah, it just makes.
What makes sense to me about itis something that you said
earlier about how when you givepeople ownership, they take
ownership.
When someone has ownership,they kind of treat their job
with more.
They take more ownership overtheir work and the quality of
their work that they, that theydo, you do.
I feel like that's actually agrowing trend.
Is that mindset within thebusiness community?
(12:57):
Because I've noticed that frompeople that I've worked with or
coaches that I've talked to andhad on this show here, there
really is an understanding thatlike, hey, if I'm going to take
a long view of business success,not just like what can I
squeeze out of people this yearor this quarter, but how do I
keep good people here and how doI give them more ownership of
(13:17):
the work and it's like sometimesmaybe that actually might mean
yeah, you may actually give themownership of the business.
And so it sounds like this isreally just an extension of that
same kind of long term and moreholistic thinking.
Alison (13:31):
Yeah, the way I often describe it to people is, if you
think about your workforce onthe expense side of your
accounting, you're gonna reallywork to try and minimize that
cost.
But if you think about yourworkers on the asset side, then
you're gonna do what you can tomaximize the return on that
asset.
(13:51):
And from a short-termperspective, yeah, maybe
thinking about the workers asexpense, maybe that does have a
short-term.
But you are really, you know,shooting yourself in the foot
from a business perspective ifthat's how you always think
about your workers.
But because if you really thinkabout them as an asset, then
you're going to be investing inthe workers, you're going to be
(14:14):
making sure that they are beingeffective in their work, you're
engaging with the workforce andthat's what ultimately creates
that ownership culture.
But certainly the best way tocreate the ownership culture is
to pair it with actual ownership.
Joel (14:27):
Yeah, you mentioned that employee ownership has been kind
of siloed, and I think that'sdefinitely true.
Like you know I think you haveto work in certain spaces to
have even heard about it whenhas it been siloed up until this
point and what does that looklike to break down those
barriers?
Alison (14:44):
Sure, yeah, well, I think that you know the biggest
form of employee ownership inthe United States and for
business owners or businessadvisors who may be listening to
this, there's a form called theESOP Employee Stock Ownership
Plan that's been around sincethe 1970s.
It was actually created by thefederal government in the same
(15:04):
legislation that they createdthe 401k plan.
So, you know, the federalgovernment envisioned that there
is this real benefit to havingthis high engagement culture and
they created a structure thatprovided a whole lot of tax
benefits to business owners thatare interested in pursuing the
(15:25):
ESOP form of employee ownership.
And so, because of that, therehas been really this growth of a
whole marketplace, if you will,of service providers who
specialize in ES.
That community and it's a deepand rich and you know community
(15:54):
of practitioners who know how tostructure ESOPs, how to finance
ESOPs, how to support ESOPsonce they are in existence, but
from, but you know, the averagebusiness owner or business
advisor or MBA doesn't reallylearn about what that looks like
.
It's not being taught in mostbusiness schools today.
You know, in here and there youmight get a professor or two
(16:19):
that's mentioning it, but it'snot, you know, structurally, a
part of the curriculum, whichreally is unfortunate because,
you know, corporate financeteaches you all day long how to
manage not only the ratio ofdebt and equity within your
business, but also how to manageyour tax liability and how to
(16:40):
think about that, how tooptimize that and, frankly,
given the many tax benefits,especially of ESOPs, it should
belong in MBA programs and inCPA programs and all of the
above.
Joel (16:53):
Yeah, because it seems like you know, it's kind of like
with you know, if you go studyeconomics you don't actually
learn different, a bunch ofdifferent models of economics.
You learn one model ofeconomics and it seems like
there's some of that coming intoplay here, where you're right.
I don't think many people whenthey go to business school, or
maybe if they just kind of readthe general business literature
(17:15):
on entrepreneurship how to starta business you're starting to
see people more put in thingsabout social entrepreneurship in
there, about triple bottom linebusinesses who are have a
social mission along with theirbusiness, but you still don't
see a lot of education aroundthat employee ownership is a
model that is not only possible,it's one that can be pretty
(17:38):
profitable.
Is that right?
Alison (17:40):
Absolutely yeah.
Employee-owned businesses.
If you just take a step backand think about it, okay.
Well, if I have a workforcethat's highly engaged, what's
the chance that I'm going tooutperform my peers?
Well, it's a very high chance,and there's reams of data that
show that employee-ownedcompanies do just that
outperform their peers, outlastthem in business cycle downturns
, higher rates of profit, notone year, but year over year.
(18:04):
So think compound interestright, higher rates of profit,
higher rates of growth, higherrates of profit, higher rates of
growth.
And so so really is that highengage, engagement culture.
That is is the secret to toemployee owned companies.
You know, outperforming.
Joel (18:18):
Yeah, I think that's.
That's probably one of thebiggest misconceptions out there
is that if something's a workerowned co-op or if it's, I think
a lot of times when people hearthe word co-op they just think
of you know the, the littlegrocery store, um, you know
something that is small and cute, but you know you were.
You come to realize like thereare actually these examples of.
You know, one of the mostsuccessful micro breweries in
(18:40):
the country that's located herein our backyard, new Belgium, is
a is a worker owned cooperative.
You know there's one in Spainthat makes pretty much
everything.
Uh, you know that that thatgets produced over there is in a
worker-owned cooperative, andso I think that that's one of
the biggest misconceptions aboutit.
Do you think?
We've got just a couple minutesleft on this half and we're
(19:00):
going to pick back up on thesecond half of this conversation
?
But are there any other kind ofbiggest misconceptions that you
feel like you've heard overyour years about the idea of
shared ownership or democraticownership of businesses?
Alison (19:14):
Yeah, absolutely, and just real quick.
New Belgium was an ESOP andthey were actually acquired by a
company and at that point ofacquisition, all of those
workers got a big payout fortheir ESOP shares.
So the ESOP was dissolved, butbig, big payout to each of those
worker owners.
(19:35):
So misconceptions we often talkabout the myths of employee
ownership.
One is that, oh, my employeescould never run my business.
Well, in an employee ownershipmodel, it's not that your
frontline workers are suddenlygoing to all become co-CEOs of
the business.
You still have a CEO or ageneral manager and you still
(19:55):
have a hierarchical managementstructure most typically, and
that's because those areeffective ways to manage large
groups of people.
But the difference is that youhave a broad set of stakeholders
now who ideally have a voice inthe business in one way or
another, and that can be from ahigh participatory culture.
(20:16):
It can be all the way up tohaving employees on the board,
or even to having employees bethe majority of the board and be
in the controlling seats on theboard.
So there's a whole spectrum ofhow you can do that.
But yes, your employees are notrunning your company.
Your employees areparticipating and bringing their
(20:37):
full selves in a highengagement culture within the
regular hierarchicalinfrastructure.
Another really important myth isoh, my employees can't buy,
they can't afford the company,they don't have the money to buy
it.
Well, the beauty of an employeeownership transition is it's
actually the business that takesout the financing in order to
finance the payout that is goingto the selling owner right.
(21:01):
These are market-based pricesof the business.
The company is selling at amarket sale price and the
business is the one taking outthe financing based upon its
typically decades, sometimesgenerations, of positive cash
flow.
So, yes, you don't need anemployee base that has a lot of
money in their personal savingsaccounts or a lot of credit to
(21:24):
be able to make thesetransactions work.
Joel (21:26):
Yeah, and what I'm excited to dig in with you on part two
here is really about examples ofbusinesses that have done that,
what it looks like, how it goes, why it's happening now, why
there's more popularity aroundthis right now and what you see
is the future of capital andemployee ownership working
together.
So everyone out there, tune innext time and follow us on all
(21:48):
the podcast networks andremember we are each other.
What if investing in each other could change the world?
I'm Joel Skeen with bizradious,and this is the Mindful
Marketplace.
Welcome to the MindfulMarketplace.
Alison (00:13):
Welcome to the Mindful Marketplace.
I am so glad to have you here.
I am Joel Skeen from Bizradiousand I am particularly excited
about today's conversation.
Joel (00:21):
I'm getting to talk with someone that co-founded an
organization that I havereferenced quite a bit on this
show.
Alison Lenang from Project,who's the co-founder of Project
Equity and is from the OwnershipCapital Lab, is going to be
here with us to discuss employeeownership, democratic models of
ownership and how businessescan utilize them to their
(00:42):
benefit.
But first we got to hit thebalance sheet.
It's time to go over the assets, liabilities, debts and
investments.
All right, here in the assetscolumn, I wanted to talk about
an article that was here inForbes that was talking about
steps to growing a climateresilient workforce.
(01:02):
So the article talks about howsmall and medium-sized
businesses can unlock the fullpotential of the green economy
by fostering cross-industrycollaborations, enhancing things
like early education, tailoringtheir messaging and increasing
training opportunities.
And Forbes actually mentions alocal North Carolina group here
that I want to highlight, theIndustrial Commons, which is a
(01:25):
leader in the textile circulareconomy, with a focus on
reducing textile waste andpromoting environmentally
sustainable practices within theindustrial sector.
The organization helps peoplestart and partner with other
companies while developingskills training.
Their support enables frontlineworkers to learn a broad set of
(01:46):
skills that contribute to acircular textile economy, one
that's good for workers,businesses and the environment.
The Industrial Commons hasactually supported more than
2,500 workers through theircollaborative, member-owned
network of textile manufacturersand workplace development
programs, and they've convertedbusinesses to employee ownership
, providing training andarts-based programming to
(02:08):
thousands of youth, and managedand invest over 15 million worth
of grants into our region'seconomy.
They've also developed a ruralwealth blueprint that is
changing the face of ourcommunity and informing others
so awesome that they got thatshot out there In the
liabilities column.
So we're going to talk about bigtech and talk about the recent
(02:29):
antitrust lawsuit filed by theJustice Department against Apple
.
So the lawsuit accuses Apple ofcreating an illegal monopoly in
the smartphone market, stiflinginnovation and keeping prices
artificially high.
Though the suit alleges thatApple's control over the iPhone
has locked consumers into itsecosystem while excluding
(02:49):
competitors from the market,ultimately hindering industry
advancement, apple has, ofcourse, strongly refuted these
claims, stating that the lawsuitis based on incorrect facts and
law.
The lawsuit addressesallegations that Apple
restricted the functionality ofnon-Apple smartwatches, limits
access to contactless paymentfor third-party digital wallets
(03:09):
and refuses to allow itsiMessage app to exchange
encrypted messages withcompeting platforms.
It also seeks to prevent Applefrom undermining technologies
that compete with its own appsand crafting contracts that
extend its own monopoly.
And crafting contracts thatextend its own monopoly.
The lawsuit's part of a broadereffort by the DOJ to promote
competition and innovationwithin the tech industry.
(03:30):
We've already talked aboutGoogle.
We've already talked aboutwhat's going on with
Ticketmaster and Live Nation.
Many argue that Apple's productsare often priced at a premium,
making them inaccessible to alarge portion of the population.
Additionally, the closedecosystem, which limits
connection of Apple devices withnon-Apple products, is a way to
lock customers out of the Appleecosystem, limiting their
(03:52):
freedom of choice.
Moreover, there are concernsabout Apple's stance on
repairability, with a lot ofpeople arguing that the company
makes it difficult for users torepair or upgrade their devices,
leading to unnecessary waste.
All right, so next in the debtscolumn All right, so there was
an article here that was talkingabout how the young folks, the
(04:15):
Gen Z, are using credit cards atkind of an astounding rate.
The factors contributing to thisare providing, you know,
providing and providesuggestions and helping the
younger generation manage theirfinances more effectively.
There was a, so there's thisrecent study by TransUnion that
revealed 84% of credit activeGen Zers had at least one credit
(04:39):
card, a significant increasecompared to 61% of credit card
active millennials.
Also, the Fed Bank Reserve ofNew York found that nearly one
out of every seven Gen ZAmericans have maxed out their
credit cards.
Compares that to only 12% ofmillennials and just under 10%
of Gen Xers.
The article does attribute twomain factors in the rise in
(05:02):
credit cards inflation and highinterest rates.
Inflation, reaching its peak in2021 at an annual rate of 70%,
has led to higher prices fornecessities like housing,
groceries, gas We've talkedabout that before the rise of
more online lenders who aretaking advantage of that.
(05:22):
The article also highlights thechallenge of finding employment
for a lot of young adults,particularly those who came of
age during the pandemic.
The job market has beenparticularly rough for younger
people, as many were unable tosecure the internships or
starter jobs during lockdown andthen face competition from
older and more experienced jobseekers once COVID precautions
(05:43):
were lifted.
Just a reminder that, in orderto help combat the debt crisis,
the Mindful Marketplace isproviding all of our listeners
with a free, customized reporton how to best eliminate
personal and business debt,based on everyone's unique
situation.
Lots of families are using thisreport and the information in
it to get out of debt in nineyears or less without spending
(06:05):
more than they were.
So go ahead tomindfulmarketplaceshowcom and
click on the link to get yourfree report about how you can
eliminate your debt faster, allright.
Lastly, in the investmentscolumn so I want to talk real
quickly about I mentioned ImpactAlpha before.
They are a partner with oursister show, community Capital
(06:26):
Live, and there was a recentarticle article here by Ellen
Frank Miller, who talks aboutemployee ownership and talks
about how, when combined withquality jobs, it is increasingly
becoming recognized as apowerful driver of value
creation and improved financialperformance within companies.
Private equity firms like KKRand Blackstone are leading the
(06:47):
way in implementing employeeownership programs globally,
adapting the model for localmarkets and including
broad-based employee ownershipat firms in which they take a
controlling interest.
The shift suggests that thesefirms see the potential for
improved job quality to generatesuperior returns throughout the
organization.
Contrary to the belief thatfinancial incentives alone drive
(07:10):
better financial results, therecent research indicates that
the relationship betweenemployee ownership and improved
financial performance is a bitmore complex than that.
While financial incentives doplay a role, two other key
factors have been identified.
She talks about organizationalidentification and social
exchange obligation.
(07:30):
So these factors, rather thanjust financial incentives, are
crucial in explaining why morebroad-based employee ownership
generates better financialresults.
So to achieve this, companiesdo need to focus on their
ownership behaviors and thepractices that ignite them.
She talks about how thisinvolves measuring and fostering
ownership behaviors, such asemployees employees
(07:52):
discretionary efforts to improvethe company's fortunes, while
implementing managerial andoperational practices that
support these behaviors.
So really fascinating stuff onthe future of capital and
employee ownership, which Ithink is a great place to
introduce our next guest,because she is someone who has
been working in the space ofcapital and of employee
(08:14):
ownership longer than most haveknown about it.
I feel like at this pointAllison, thank you so much for
being on the show.
I'm so excited we get to haveyou here.
Alison (08:22):
Oh, thanks, Joel.
I appreciate being here andreally looking forward to our
conversation.
Joel (08:26):
Yeah.
So I'm sure a lot of people outthere don't know who you are or
know the work that you've done.
I know you're the co-founder ofan organization we talk about a
lot here called Project Equity,and you are also moving into
something called the OwnershipCapital Lab.
Tell us why did employeeownership strike you as
(08:49):
something that you I don't knowthat hit at your heart and that
you became passionate about?
Alison (08:53):
Yeah, well it's, you know the, when you look at your
career in the rear view mirror,the path makes sense.
My career has always been aboutunlocking opportunity for
people who may not have as muchof it as as, frankly, they
should.
And you know, I I spent many,many years in the education
(09:15):
sector thinking that, you know,oh, it's all about helping
people get more access toeducation.
And I kept coming back to well,yeah, that's true, unless and
the unless is unless you are,you know, growing up in poverty,
living in an over-policedcommunity, right, I could go on
and on, but all of these thingsthat get in the way of, you know
(09:38):
, education being sort of thatclear and obvious path.
And so I kept really searching,for there's got to be a way.
You know, I started actuallystarted my career in job
training, but started asking thequestion why are we training
people in poverty level jobs?
And I just kept networking andtalking to people and was
randomly introduced to HilaryAbel, who became my co-founder
(10:00):
at Project Equity.
You know, we launched theorganization a decade ago and,
as you mentioned, I'm nowtransitioning out of the
organization.
I'll get to that in a second,but the you know, for me it was
this massive light bulb?
Because with an employee-ownedcompany, all you do is get a job
.
You get a job and that job hasopportunity baked right into it,
(10:21):
so that can be financialopportunity.
Employee-owned businesses tendto pay significantly better.
One study showed 33% higherwages in an employee-owned
company as compared withindustry peers.
Not only that, but you can endup with significant assets,
savings, assets, retirementbenefits.
(10:42):
That same study showed thatemployee owners have household
net worth of nearly twice ashigh as non-employee owners.
And then, depending on theemployee-owned business, you
might even have the opportunityto serve on the board of
directors of that company.
And that I mean I would ask allof the, all of your listeners
to say well, is that anopportunity you've ever had, to
(11:02):
serve on the board of directorsof the place where you work?
Talk about an incredibleprofessional development
opportunity.
But at a minimum, one of youknow to that article that you
were just showing about.
You know private equity andemployee ownership.
At a minimum, employee ownedcompanies ask people to bring
their full selves and to beengaged in the workplace and to
to think and act like an owner.
(11:24):
Because, guess what, you are anowner, and, and that in and of
itself is a is a tremendousprofessional development
opportunities.
So you know, 12, 13 years ago,when Hillary and I started
talking about you know what doesthis look like I kept coming
back to the question of well,why didn't I ever hear about
this?
You know, I went and got my MBA.
It was in every single networkof whatever the words you want
(11:47):
to use responsible business,good business it was nowhere to
be found, and I think one of thereal problems has been that
employee ownership has been verysiloed, and so over the past
decade, what we've really put alot of energy into is how do we
bring it out of its silos?
I often say, if you Googleemployee ownership, there's a
lot of information to be found.
But the problem is most peoplelike me back before I'd even
(12:10):
heard about it, don't even knowto Google it, and so we've been
doing a lot of work over thatpast decade to bring it out of
its silos.
It's a very exciting time rightnow in employee ownership.
There's so much interest andactivity, a lot of new entrants,
a lot of opportunities forbusinesses that are interested
in looking at employee ownershipto be able to get support and
(12:32):
help and financing to help makethat a reality.
Joel (12:35):
Yeah, it just makes.
What makes sense to me about itis something that you said
earlier about how when you givepeople ownership, they take
ownership.
When someone has ownership,they kind of treat their job
with more.
They take more ownership overtheir work and the quality of
their work that they, that theydo, you do.
I feel like that's actually agrowing trend.
Is that mindset within thebusiness community?
(12:57):
Because I've noticed that frompeople that I've worked with or
coaches that I've talked to andhad on this show here, there
really is an understanding thatlike, hey, if I'm going to take
a long view of business success,not just like what can I
squeeze out of people this yearor this quarter, but how do I
keep good people here and how doI give them more ownership of
(13:17):
the work and it's like sometimesmaybe that actually might mean
yeah, you may actually give themownership of the business.
And so it sounds like this isreally just an extension of that
same kind of long term and moreholistic thinking.
Alison (13:31):
Yeah, the way I often describe it to people is, if you
think about your workforce onthe expense side of your
accounting, you're gonna reallywork to try and minimize that
cost.
But if you think about yourworkers on the asset side, then
you're gonna do what you can tomaximize the return on that
asset.
(13:51):
And from a short-termperspective, yeah, maybe
thinking about the workers asexpense, maybe that does have a
short-term.
But you are really, you know,shooting yourself in the foot
from a business perspective ifthat's how you always think
about your workers.
But because if you really thinkabout them as an asset, then
you're going to be investing inthe workers, you're going to be
(14:14):
making sure that they are beingeffective in their work, you're
engaging with the workforce andthat's what ultimately creates
that ownership culture.
But certainly the best way tocreate the ownership culture is
to pair it with actual ownership.
Joel (14:27):
Yeah, you mentioned that employee ownership has been kind
of siloed, and I think that'sdefinitely true.
Like you know I think you haveto work in certain spaces to
have even heard about it whenhas it been siloed up until this
point and what does that looklike to break down those
barriers?
Alison (14:44):
Sure, yeah, well, I think that you know the biggest
form of employee ownership inthe United States and for
business owners or businessadvisors who may be listening to
this, there's a form called theESOP Employee Stock Ownership
Plan that's been around sincethe 1970s.
It was actually created by thefederal government in the same
(15:04):
legislation that they createdthe 401k plan.
So, you know, the federalgovernment envisioned that there
is this real benefit to havingthis high engagement culture and
they created a structure thatprovided a whole lot of tax
benefits to business owners thatare interested in pursuing the
(15:25):
ESOP form of employee ownership.
And so, because of that, therehas been really this growth of a
whole marketplace, if you will,of service providers who
specialize in ES.
That community and it's a deepand rich and you know community
(15:54):
of practitioners who know how tostructure ESOPs, how to finance
ESOPs, how to support ESOPsonce they are in existence, but
from, but you know, the averagebusiness owner or business
advisor or MBA doesn't reallylearn about what that looks like
.
It's not being taught in mostbusiness schools today.
You know, in here and there youmight get a professor or two
(16:19):
that's mentioning it, but it'snot, you know, structurally, a
part of the curriculum, whichreally is unfortunate because,
you know, corporate financeteaches you all day long how to
manage not only the ratio ofdebt and equity within your
business, but also how to manageyour tax liability and how to
(16:40):
think about that, how tooptimize that and, frankly,
given the many tax benefits,especially of ESOPs, it should
belong in MBA programs and inCPA programs and all of the
above.
Joel (16:53):
Yeah, because it seems like you know, it's kind of like
with you know, if you go studyeconomics you don't actually
learn different, a bunch ofdifferent models of economics.
You learn one model ofeconomics and it seems like
there's some of that coming intoplay here, where you're right.
I don't think many people whenthey go to business school, or
maybe if they just kind of readthe general business literature
(17:15):
on entrepreneurship how to starta business you're starting to
see people more put in thingsabout social entrepreneurship in
there, about triple bottom linebusinesses who are have a
social mission along with theirbusiness, but you still don't
see a lot of education aroundthat employee ownership is a
model that is not only possible,it's one that can be pretty
(17:38):
profitable.
Is that right?
Alison (17:40):
Absolutely yeah.
Employee-owned businesses.
If you just take a step backand think about it, okay.
Well, if I have a workforcethat's highly engaged, what's
the chance that I'm going tooutperform my peers?
Well, it's a very high chance,and there's reams of data that
show that employee-ownedcompanies do just that
outperform their peers, outlastthem in business cycle downturns
, higher rates of profit, notone year, but year over year.
(18:04):
So think compound interestright, higher rates of profit,
higher rates of growth, higherrates of profit, higher rates of
growth.
And so so really is that highengage, engagement culture.
That is is the secret to toemployee owned companies.
You know, outperforming.
Joel (18:18):
Yeah, I think that's.
That's probably one of thebiggest misconceptions out there
is that if something's a workerowned co-op or if it's, I think
a lot of times when people hearthe word co-op they just think
of you know the, the littlegrocery store, um, you know
something that is small and cute, but you know you were.
You come to realize like thereare actually these examples of.
You know, one of the mostsuccessful micro breweries in
(18:40):
the country that's located herein our backyard, new Belgium, is
a is a worker owned cooperative.
You know there's one in Spainthat makes pretty much
everything.
Uh, you know that that thatgets produced over there is in a
worker-owned cooperative, andso I think that that's one of
the biggest misconceptions aboutit.
Do you think?
We've got just a couple minutesleft on this half and we're
(19:00):
going to pick back up on thesecond half of this conversation
?
But are there any other kind ofbiggest misconceptions that you
feel like you've heard overyour years about the idea of
shared ownership or democraticownership of businesses?
Alison (19:14):
Yeah, absolutely, and just real quick.
New Belgium was an ESOP andthey were actually acquired by a
company and at that point ofacquisition, all of those
workers got a big payout fortheir ESOP shares.
So the ESOP was dissolved, butbig, big payout to each of those
worker owners.
(19:35):
So misconceptions we often talkabout the myths of employee
ownership.
One is that, oh, my employeescould never run my business.
Well, in an employee ownershipmodel, it's not that your
frontline workers are suddenlygoing to all become co-CEOs of
the business.
You still have a CEO or ageneral manager and you still
(19:55):
have a hierarchical managementstructure most typically, and
that's because those areeffective ways to manage large
groups of people.
But the difference is that youhave a broad set of stakeholders
now who ideally have a voice inthe business in one way or
another, and that can be from ahigh participatory culture.
(20:16):
It can be all the way up tohaving employees on the board,
or even to having employees bethe majority of the board and be
in the controlling seats on theboard.
So there's a whole spectrum ofhow you can do that.
But yes, your employees are notrunning your company.
Your employees areparticipating and bringing their
(20:37):
full selves in a highengagement culture within the
regular hierarchicalinfrastructure.
Another really important myth isoh, my employees can't buy,
they can't afford the company,they don't have the money to buy
it.
Well, the beauty of an employeeownership transition is it's
actually the business that takesout the financing in order to
finance the payout that is goingto the selling owner right.
(21:01):
These are market-based pricesof the business.
The company is selling at amarket sale price and the
business is the one taking outthe financing based upon its
typically decades, sometimesgenerations, of positive cash
flow.
So, yes, you don't need anemployee base that has a lot of
money in their personal savingsaccounts or a lot of credit to
(21:24):
be able to make thesetransactions work.
Joel (21:26):
Yeah, and what I'm excited to dig in with you on part two
here is really about examples ofbusinesses that have done that,
what it looks like, how it goes, why it's happening now, why
there's more popularity aroundthis right now and what you see
is the future of capital andemployee ownership working
together.
So everyone out there, tune innext time and follow us on all
(21:48):
the podcast networks andremember we are each other.
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