A collective “gasp” filled the room when the owner of a successful small business stood before employees last month to announce that — after a difficult and anguishing process — he had decided to sell his business. The room fell silent for a few moments until it broke into an uncomfortable round of applause.
The room was full of mixed emotions: fear of the future, gratitude for the past, confusion, and shock. Then, with dramatic punctuation, the owner of this business announced that he was selling it to the employees through an Employee Stock Ownership Plan (ESOP). The group burst into an enthusiastic applause for this—although most had absolutely no idea what this meant. ESOP ownership must have sounded better than the “not-so-attractive” alternatives they were imagining: sale to a competitor, sale to an investor with a short time horizon, or sale to someone who doesn’t understand their business.
The leadership team wanted to create an announcement that both captured the excitement of the transition but also clarified the benefits for everyone. I worked with them to anticipate questions and create presentations for this larger group and another for deeper conversations in smaller groups. For three days we ran interactive meetings tackling questions about what the new ESOP means for employees and what it will mean for the company going forward.
During the sessions a participant asked “Why would the government would provide tax incentives for a company that is ESOP owned?” This company is just the kind of company that makes this very easy to answer. Just look at what this ownership transition achieved. It was able to:
- Keep a healthy business intact with no disruption for customers, suppliers and employees.
- Add a wealth-building component to employee retirement benefits in a way that no other ownership transition would.
- Bring in the next leadership team at the right pace for the business.
- Enable hundreds of people to more fully participate in our economy as owners of capital (eventually paying their taxes and putting dollars back into their local communities.)
- Stabilize a company that is committed to retaining long-term employees (ESOPs have proven that they are slower to lay off in recessionary periods thus reducing the overall cost of unemployment on our communities.)
- Sustain a powerful sense of community and common purpose among the employees – inspiring the spark of innovation that will continue to grow this business.
When rolling out a new ESOP you get a chance to clarify your company’s unique messages about what this transition does for employees and set expectations for the long-term future of the business. You can contact me at firstname.lastname@example.org or call on Cathy Ivancic’s direct line 330- 896-7285 if you’d like help communicating your new ESOP.