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By Nick Wakeman

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Nick Wakeman

Is now the time for more employee ownership?

It was just a happy coincidence Thursday that after a briefing by the senior executives at Agilex that I saw a notice on Facebook about the documentary We the Owners being released on DVD.

We the Owners tells the story of three employee-owned companies: New Belgium Brewing, Namaste Solar and DPR Construction. One of the points of the film, which I haven’t seen, but I have watched the trailer, is extolling the benefits of employee-ownership.

Why should we care in the government market, and what’s the connection to a government contractor like Agilex?

First, Agilex is one of several employee-owned companies in the government market. Others include Calibre Systems, picked as one of the best contractors of 2012 as part of the Greater Washington Government Contractor Awards program, and American Systems Corp. And there are others that are either partially or totally employee-owned.

And while We the Owners does not look at government contractors, the movie is the brainchild of Mary Ann Beyster, the daughter of Robert Beyster, the founder of Science Applications International Corp., and a true believer in employee-ownership. Before he retired from SAIC, he founded the Beyster Institute at the University of California-San Diego and the Foundation for Enterprise Development, both of which promote entrepreneurship and employee-ownership. Mary Ann Beyster is the executive producer of the film and president of the foundation.

Whether we talk to someone such as Agilex vice chairman Jay Nussbaum, or Bill Hoover, the CEO of American Systems, or Joseph A. Martore, Calibre president and CEO, the fact their companies are employee-owned is front and center when they talk about their companies.

They attribute morale, the quality of their employees, and the quality of the work they do to being employee-owned. For them, it is a differentiator from competitors.

We had a guest column back in October by Jamie Waldren of Wells Fargo, talking about employee-ownership as a viable option over a traditional sale for owners looking to cash out and retire.

From the traffic on our website, and from the comments we received, I know the story resonated with readers. Not surprising in a market full of small businesses owned by entrepreneurs.

As I stacked up my conversation with Agilex on top of the release of We the Owners, and conversations and coverage we’ve over the last year, I began to wonder if conditions are right for a surge in employee-ownership.

I know employee-ownership isn’t the right answer for every situation, but I can't help but think, as companies feel the budget squeeze and the need to bring innovation and lower costs, that having a company full of owners has got to be an advantage.

I haven’t fleshed out all of my thinking, and maybe I’m on the wrong track, but I’m curious what others think.

Posted by Nick Wakeman on Feb 15, 2013 at 9:48 AM

Reader Comments

Thu, Feb 21, 2013 Girish Seshagiri McLean

We need to transition to an ownership society for greater participation in the wealth creation offered by the knowledge economy. The knowledge workers' productivity increase is a key factor in corporate profits. Congress created ESOPs with significant tax benefits to encourage ownership. As a follow up, what do you think of the idea of set asides for ESOPs? I set up an ESOP in my company after I made sure we have a culture of participatory management. Creating employee ownership mechanisms without the culture of involving employees in key decisions, does not produce the benefits of employee ownership. Our employees take ownership for cost, schedule, and quality performance of our contracts. This has enabled us as the only company in the world to offer lifetime warranty against software defects.

Tue, Feb 19, 2013 David Binns Silver Spring

It's worth noting that there are many more than "several" government contractors where employees have a substantial ownership stake. Our company, Macfadden, used an ESOP to buy out our retiring owner and that strategy is quite commonly used to facilitate succession planning, including among government contractors. If given the option, many private company owners will opt to sell their company to their employees rather than selling out to other companies. And whereas ESOPs (Employee Stock Ownership Plans) are the most common form of employee ownership, stock options and stock purchase plans are still in use by a wide range of companies from start-ups to some of the largest contractors in the business. There are complexities to deal with, for sure, but research going back several decades suggests that involving employees as owners is an effective means of boosting productivity, broadening ownership of productive assets and fostering greater corporate accountability. David Binns President & CEO Macfadden

Tue, Feb 19, 2013 Terry Fitzpatrick DC

Employee Ownership was a key component of SAIC’s growth. I was there for 21 years and had the honor of working for Bob Beyster and his teams in opening new markets. The goal of any company should be to sustain a stream of quality products or services that deliver client efficiencies and innovations with a marketing and delivery mechanism honed for speed-to-market. You do not need EO to accomplish this. You do need a culture of excellence, transparency and empowerment. EO serves those three functions well. The challenge of public companies and some private owners is creating a culture where it is expected for high achieving employees to raise their voice and help chart a vision for the firm. Most innovative employees do not aspire to organizational management roles. They want their voices heard and have the ability to lead the company into new solution areas. An organization of achievers sustains a voice that propels the company forward despite the limitations at times of management’s vision. High achievers will tend to attract and hire other achievers resulting in sustained growth of the company. This is difficult for companies that give the impression to their employees that cost reductions and profit are more important than intellect and innovations for the client base. Beyster set up SAIC to have 97% of the company owned by employee plans. Clearly he was driven by pursuit of excellence over pursuit of maximizing short term profit. He understood a basic tenet and drove it for 34 years: Focus on delivering quality and innovation to each engagement and the client will ask you to take on more business.

Tue, Feb 19, 2013

Nick;I hope you and your family are well. I have always been a supporter of employee ownership and agree with the many positive virtues it can promote. I have found, however, that the biggest deterrent to ESOPs have been the difficulty they present when looking at M&A. The presence of an ESOP can often be an impediment to companies considering an acquisition. I think the revitalization of ESOPs will need to be tied to a greater acceptance in the M&A arena. Take care, Jim Ballard

Tue, Feb 19, 2013 Dave

When would employee-ownership NOT be the right answer? If every dues-paying union member was instead using that money to buy stock in the company they work for, there wouldn't be a "management vs. labor" divide.

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