Employee strong

Twice a year, Gary Griffin goes on an investor road show, but it's not Wall Street he's visiting.

The president of B&I Contractors in Fort Myers visits with employees at construction job sites to share financial details of the company's performance. “I try to answer every question they have because it's their company,” he says.

Welcome to the world of employee ownership, where employees are accountable to each other. You might think such a scenario might be fraught with conflict, but employees own three of the best-managed companies in Southwest Florida. Besides B&I Contractors, Home-Tech in Fort Myers and Pelican Wire in Naples also are employee owned.

“Looking back, it was one of the best decisions I made in my life,” says Steve Marino, president and CEO of Home-Tech, whose appliance-repair company now has about 70 employee owners.

Marino and other leaders of employee-owned firms often repeat what sounds intuitively true: Employees who have an ownership stake in the business are more focused on their work than those who don't.

“It forces you to be a better organization,” says Ted Bill, president of Pelican Wire, which manufactures specialty wires for the medical, aerospace and flooring industries. Of the company's 75 employees, 36 are part of the employee stock-ownership plan.

Still, just because a company is employee owned doesn't mean it's going to be well managed. The successful ones say there must be a strong management team and corporate structure in place just like any other successful firm.

Golden handcuffs
One of the biggest threats to any business today is employees catching the entrepreneurial itch and leaving to form their own competing companies. At Home-Tech, Marino says that's why he gave away shares totaling one-third of the company he founded in 1981. If he hadn't, Marino says, “I honestly feel we would have spawned off some serious competition. I couldn't have kept the key talent.”

As a result, Marino says, Home-Tech has tripled in size. “I personally think it is a model of any successful small business if you want to keep your help,” he says. “I have a number of entrepreneurs who owned their own business, so they get that satisfaction.”

B&I Contractors learned this lesson years ago. Two of its major competitors were formed before it became an employee-owned company in 1994. “We were training our competitors,” Griffin says.

Griffin has been president of B&I since 1996 and leads a team of veterans, most of whom have 20-plus years with the company. “Construction is a very high-turnover business,” Griffin says.

This was critical during the recession, when B&I had to shrink its workforce by half in response to tough economic conditions. “The big thing that benefited us was the longevity of the management team,” Griffin says. “When you're the owner, you say we've got to survive this.”

B&I remained profitable even during the downturn. “We're really proud of that,” Griffin says, noting that each share in the employee stock plan has risen from $35 in 1994 to $163 today.

At Pelican Wire, employee ownership is a big recruiting tool. “It's a huge benefit,” says Bill. “It's a very good selling point.”

With the help of a management consultant, employees recently created an aggressive goal: To be debt free and create the company's first millionaire. “We think this is a reasonable goal,” Bill says.

Employees are engaged because they understand the financial position of the company, in both good times and bad. “By being transparent they actually learn how a business works,” Marino says. “I think that makes for a better employee.”

At Pelican Wire, the company shuts down the plant once a year and all employees spend a full day attending meetings on company strategy, establishing sales goals and getting a report on their company's employee stock-ownership plan. Pelican doesn't share revenues publicly, but Bill says he expects sales to rise 15% this year compared with the previous year.

Strong management and structure
Being an employee-owned company doesn't mean everyone has an equal say in the management of the business, but it does mean that leaders give up some authority.

“That's the biggest sacrifice,” says Marino, who has counseled other business owners on the topic. “At the end of the day, I don't know one that actually did it because it took authority away,” he says. “That is the No. 1 reason why individuals don't set up employee-owned companies.”

Still, at Home-Tech there's a board of seven directors elected by the shareholders of the company. It's an effective board that doesn't rubber stamp the chief executive's decisions. “I've been outvoted many times,” Marino says.

Because so many employees belong to B&I's employee stock-ownership plan, Griffin says it's important to give everyone the opportunity to participate in major decisions. “We use committee structures to make important decisions,” Griffin explains.

Committees at B&I range from safety to investments and cash management. The executive committee has 12 people. “We want to make sure our stakeholders are involved,” Griffin says. “We get a lot of good information from these groups.”

But Griffin says it's important to establish goals and deadlines for committees so decisions don't get bogged down. In addition, Griffin says the company has had to be careful not to establish too many committees and he's learned to delegate. “I used to try to get into all those meetings,” he says.

At Pelican Wire, the board of directors is the central authority making important decisions and it's mostly made up of independent directors. “It's very similar to a public company,” says Bill, whose father Larry Bill started the company. “I'm the only full-time employee on the board.”

Jacksonville attorney James Urbach is the trustee whose fiduciary duty is to represent Pelican's employee stock-ownership plan and approve the board. “The trustee has all the voting responsibility,” Bill says.

“Just because you own stock doesn't mean you have that much authority,” says Marino. Shareholders at Home-Tech vote for the board of seven directors, who each serve two-year terms. “You can put your name in the running,” Marino says.

Marino says he's still the single-largest shareholder of Home-Tech, but he no longer owns the majority of the shares. “I just can't think of negatives other than I don't own the whole thing,” he says, adding quickly: “I'd rather own what I do today.”