Giving the employees ownership in the company can keep them around for years.
By Gary Shawver, MGWC
If you employ people to help you conduct your business, you probably know they are your most valuable asset—regardless of the physical value of your company.
You can’t conduct the volume of your business and build its reputation without good employees. It’s just that simple.
When I came into my father’s business in 1976, my dad had one employee who had been there 32 years and stayed another seven before he retired. Another had been employed for 30 years as well.
That type of loyalty today is becoming rare as many employees switch jobs several times during their careers and even switch occupations.
The water well industry demands long hours by its nature. Trying to work around the long-hours issue is extremely difficult in order to make a decent profit.
We’ve found many new applicants simply don’t want to work more than 40 hours. We’ve also found it increasingly difficult to find people who are interested in staying with the company, rising to the next level, and taking the responsibility of running a drill rig.
While we currently have one employee who has been with the company more than 25 years and several approaching 20 years, these employees are still from the “old school”—those who grew up on farms, were used to long hours, and had been brought up with a good work ethic.
But there are fewer “farm boys” out there today. And the few who are often stay on the farm as farming has become a lucrative business.
So what is one to do to attract and keep people in this industry? As I “aged,” that question was joined by another one in my mind: “How am I going to exit this business and what am I going to do with my business?”
An idea addressing both questions presented itself when I attended the 2011 NGWA Groundwater Expo and Annual Meeting. My then general manager and I attended a workshop on “ESOPs” (employee stock owned plans), which is in essence an employee-owned company. The presenter was excellent and it piqued our interests enough to go home and look further into the subject.
This column does not have the space to go into all the details about ESOPs, but I will hit some of the highlights on why I elected to sell my company to my employees.
First and foremost, I always worried about what would become of my employees and how they would be taken care of if I sold my company. After all, they were the ones who got the company to where it was at; I was simply fortunate enough to sit at the top.
My then general manager was willing to step forward and take over the company and all its operations, which is a must if you are going to go the route of an ESOP—someone has to lead and it should be someone who knows the water well industry.
After looking into an ESOP more, I eventually decided to do a 100% ESOP sale. I could have done a minimum 33% sale (ESOPs are highly regulated by the U.S. Labor Department), but after looking into it I opted for the 100% sale.
In a matter of six months, the transaction was complete.
One of the primary reasons we opted for an ESOP is it gives the employee a chance to be “an owner.” With an ESOP, there is no cash outlay by the employee and no financial liability is attached to any of them.
Given the difficult hiring environment, I felt this ESOP option was an excellent hiring and retaining tool. People usually want to stay somewhere when they have a financial interest in doing so. We were cautioned by those in the ESOP industry that it usually takes a few years for the benefit to sink in, but after obtaining their first few year-end financials, the employees began to see their nest egg grow.
In talking with other people who work for companies that are ESOPs, I found older employees often have more increase in their stock value than they earn from their salaries each year. This often gives them the incentive to continue to work—yet another benefit for the company.
Interestingly enough, the general manager who was with the company at the time of our ESOP has moved on to a position with a state agency. The number of employees I have lost to state and county jobs is phenomenal. Competing with government positions (state, county, or even federal for that matter) and their benefits is extremely difficult.
However, we had an employee who had been with the company in a management position for 13 years step up and take over. This person is doing an excellent job.
Hiring and retaining good people is extremely important. The fact we had an employee of 13 years on board to take over the company after the loss of our general manager was critical to continuing the ESOP.
While an employee stock ownership plan may not be an option for everyone in this industry, I believe it is an option to consider when one is ready to sell their company. After all, it can keep the firm’s most valuable asset—the employees—around for years to come.
Gary Shawver, MGWC, is president of Shawver Well Co. Inc. in Fredericksburg, Iowa. He has been in the water well industry for 40 years and is a Master Groundwater Contractor. He has served as president of the Iowa Water Well Association, the Iowa Groundwater Association, and most recently served on the NGWA Board of Directors. Shawver is semi-retired, having sold his business to his employees. He contributes to NGWA’s member e-publication and can be reached at email@example.com.