Quality employees are an essential element of successful businesses. Employees who are invested in their company’s success have fewer sick days, improved performance, longer tenure and greater stability through normal economic cycles. One way for employers to foster quality employees is by making employees partners in shared success.
On April 10, 2019, Colorado Governor Jared Polis signed an Executive Order creating the Commission on Employee Ownership, housed within the Colorado Office of Economic Development and International Trade (OEDIT). This advisory commission has three primary charges:
1.) Establishing a robust and wide-reaching network of technical support for businesses wishing to convert to employee ownership;
2.) Educating businesses and communities across the State on the economic and community benefits of employee-owned businesses; and
3.) Identifying barriers to the development and advancement of employee-owned businesses and recommending State actions and resources to remove such barriers.
The 2016 Census Bureau’s Annual Survey of Entrepreneurs found that 8,266 Colorado business owners out of a total of 85,899 reporting, or 9.6 percent, indicated their succession plan/exit strategy for their business was to sell it to employees or managers of the business. Less than 10% of Colorado’s small businesses are partnering with their employees to foster long-term success.
Employee Ownership offers a win-win outcome for business owners and their employees. For business owners, it offers a ready, willing and able buyer for their business. It eliminates the expense (typically 10 percent) of hiring a business broker to find a willing buyer. Conversely, employee ownership can aid in employee attraction, retention, and performance while providing tax benefits to the business owner(s). This all contributes to a higher quality of living for the employee-owners themselves and secures greater economic stability for the communities. Most importantly, it provides a clear exit strategy and succession plan for an owner’s life’s work. Productivity meets peace of mind as owners can ensure that the business they have built up over their entire life can seamlessly pass to a group of employees with a vested interest in preserving and growing the owner’s legacy.
For employees, a clear set of benefits and goals come from an employee ownership structure including a chance to enjoy higher wages, higher net worth, less turnover, and access to a better set of benefits, which are all commonly associated with employee-owned firms(Insert link to NCEO article Benefits of EO).
Colorado is proud to be a leader in employee ownership and is working quickly towards becoming the national leader among the states for cooperative law. Part of this effort involves the creation of the Employee Ownership Network (EON) housed within the Colorado Office of Economic Development and International Trade (OEDIT). The EON brings together key partners and subject matter experts such as employee-owned businesses, attorneys, lawmakers, financial and accounting professionals, rural leaders and economic development experts to promote employee ownership in Colorado. Key partners of the EON include the Small Business Development Center Network (SBDC), Rocky Mountain Employee Ownership Center (RMEOC), Rocky Mountain Farmers Union (RMFU) and several others.
Colorado has some great employee-owned business success stories such as New Belgium Brewing Co. in Fort Collins. They began as a partial Employee Stock Ownership Plan (ESOP) in 2000 and by 2012, co-founder Kim Jordan and her family decided to sell the remaining shares, making it a 100 percent ESOP.
The decision to become an ESOP was significantly influenced by their shared core values and business model. New Belgium’s purpose statement explains their primary goal “to manifest our love and talent by crafting our customers’ favorite brands and proving business can be a force for good.” For New Belgium, becoming an ESOP was an obvious choice that furthered that mission.
New Belgium Brewing Co. is said to be a high-involvement work environment where employees are passionate about the work they are doing. This passion has only grown since their transition to an ESOP.
The transition to ESOP often comes naturally to small businesses where employees are passionate about the company’s success. When businesses have employees that are deeply invested in the work they do, that sense of pride is only amplified with the opportunity to hold a personal stake in the company.
Featured photo courtesy of New Belgium website