How do you speed up the transition to engaged employee owners taking on more responsibilities in a founder-managed ESOP company? This was a question that Kelly McDole, founding CEO of Delta Managed Solutions (DMS) in Sacramento, needed to answer quickly in 2015. “I didn’t have the freedom to go slowly at this because of my health,” says McDole. “I was sick, and at the time it looked like I was getting sicker. I had to face the possibility that I may not be able to come into work in six months or a year.” ESOP companies wanting to speed up the transition can learn a lot from the DMS experience.

Leading by example was not enough

DMS — provider of comprehensive back-office, administrative and financial services to charter schools in California — established a 30% ESOP in 2011 with a plan to go 100% when the time was right. “We have a unique approach in our industry and great people,” explains McDole. “I thought leaders would emerge and employees would start acting like owners by watching my example.” Four years after the initial ESOP sale, that just wasn’t the case. “The business was still very dependent on me. The ‘leading by example’ strategy was not working.”

McDole explains her frustration at the time. “These are the smartest, most dedicated people I know. They wholeheartedly support the idea of sustaining this business with the ESOP but something was missing.” Despite desire, talent and belief in the concept, McDole was not seeing the transition in leadership. She turned to the internet, ESOP community and books for information, models and approaches. “I read a lot of books and ‘googled’ everything. I didn’t want to reinvent the wheel.” McDole discovered information from TED talks, business books, articles on participative ESOPs and this is when she contacted me at Workplace Development Inc. (WDI). McDole remembers thinking, “I knew other companies are doing this and I was convinced we could figure this out.”

Stepping up and acting like owners

Fast forward to 2018. The business made a successful transition to 100% ESOP ownership but more importantly the next generation of leaders are now making day-to-day business decisions without McDole. Employees throughout the company are taking more responsibility for overall business success. The next level of managers at DMS report a tangible change in their role in operations.

“Two years ago, we thought we needed to run all things past the CEO and CFO before taking action,” explains Kari Wallace, an operational supervisor in HR and payroll services that DMS provides. “Now, we feel confident that our team will make the decision and inform executives of what we did.”

“A few years back we didn’t have an employee-ownership mentality. Now, if we have a decision to make, we know we will consider whether it brings value to employees and value to our customers.” explains Berenice Oceguera, finance coordinator at DMS.

Below are three things that the DMS team says accelerated the process:

1) Resolve to transition responsibility
“The business is different from when I started it. It needs a team, not a duplicate of me,” says McDole. She resolved to transition different aspects of her leadership role to different people in the company, and she works hard at not taking the responsibility back. McDole helps, guides, and listens with the goal of leaving the ultimate responsibility with the person who’s learning to take it. “No, she won’t take your monkey,” says Wallace, grinning about the way it works at DMS. You can get guidance and help, but the “monkey” — the thing you are responsible for — comes back to you after the conversation. And it is not only the founder who is learning to give back monkeys at DMS, supervisors give employees back their individual job-level responsibilities. Leading is not about taking over problem-solving responsibility, but about finding a way to leave responsibility where it belongs.

2) Adopt a framework for working together
Many a well-intentioned founder or executive has started a transition and then reverted to old habits. Here’s where having a clear framework comes in. The team of managers and McDole agree that having framework was essential to their success. They chose the framework in the book Traction by Gino Wickman. All successful frameworks have certain elements in common: A forum for regular two-way communication, forward-looking goals, individual and shared accountability, clarity about company vision, learning from mistakes, and continuous evaluation of the process. “Meetings in the past were considered a waste of time and frankly they often were,” admits McDole. DMS no longer holds meetings where people report on what they are doing in their daily work. In fact, they stopped calling them “meetings.” Instead DMS runs “work groups” where everyone has a role with collaborative problem-solving about the highest priorities, with continuous evaluation and improvement.

3) Teach new business knowledge and skills
“It all started coming together when we did training on the business and on soft skills for working together,” says McDole. WDI worked with DMS to deliver customized training for supervisors and employees about understanding what drives value, ESOP concepts, giving and receiving feedback, job-level connections to value, ownership roles, and managing change. While implementing the training, McDole moved into the role of the subject matter expert and put Oceguera in charge of training. Oceguera worked with WDI to create a Certified Employee Owner (CEO) program that can be used to introduce new employees to the participative environment that now exists at DMS.

The training experience revealed that there was never any employee resistance to acting like owners at DMS. Many employees simply did not know how innovation and improvement was part of their business success. In addition, they did not have much practice in sharing their ideas and trying things that may not work at first. DMS is in the business of providing accuracy for clients — they have a culture where no errors should go “out the door.” The company is filled with talented people who get the details right, follow processes, and avoid errors. The idea of exploring automation or experimenting with innovation (which is not yet perfected) was uncharted territory for employees and their supervisors. For this reason, it was important to combine training in the big picture of the business with increased awareness about how our personal strengths can unwittingly block us from taking the action needed.

Thankfully McDole’s health recovered and she says, “now I have an opportunity to watch this amazing team move forward together.” With some resolve, a framework, and training, the employee owners at DMS showed that you can speed up the process of transitioning business responsibilities to an engaged team. Oceguera sums up the changes at DMS in the last few years like this, “Now, we have the confidence to collaborate, try new things, and learn from what is working and what is not yet working.”

To learn more about how Workplace Development Inc. can help you accelerate the development of engaged employee owners contact Cathy Ivancic at 330-896-7285 ext. 101, or