Raising the stakes and increasing employee motivation through employee ownership

Leadership Trust member Amy Loth Allen, CAO and General Counsel of Emery Sapp Construction, explains that ESOPs can create ownership mentalities in employees and an unmatched company culture. 

At Emery Sapp, employee-owners have a personal stake in the company’s success thanks to the national infrastructure company’s ESOP (Employee Stock Ownership Plan), which began in 1999.

Employees aged 18 and older who have worked at least 1,000 hours in a plan year are eligible to enroll in the company’s ESOP. The vesting period is three years.

Amy Loth Allen, Emery Sapp’s chief administrative officer and general counsel, explains that in construction, an industry facing recruitment challenges, offering an ESOP as an employee benefit can go a long way.

“We find our ESOP is one of our biggest differentiators,” Loth Allen says. “At Emery Sapp, we change lives and transform communities through employee ownership. That’s our mission — that’s what we stand for.”

How ESOPs can benefit employers and employees alike

According to Loth Allen, ESOPs can benefit both employers and employees. At the core, she says, ESOPs create an ownership mentality in everyone on the team — and help build wealth for all involved, not just executives.

Case in point? Emery Sapp’s “millionaire club.”

“Out of all of our employee-owners who have over a million dollars in their ESOP accounts, 63% of them work in the field,” Loth Allen says. “They dig ditches, they operate big heavy machinery, they are craft workers.”

The ownership mentality drives the company’s culture, according to Loth Allen.

“Our employee-owners learn about the ownership mentality during the recruiting process and their new employee orientation,” she says. “Beyond that, employee ownership is woven into everything we do. We campaign, for example, around owning your health and wealth, owning your safety — taking initiative of things to act like owners.”

On the human resources front, Loth Allen explains that ESOPs “can be a wonderful recruiting and retention tool when people understand them.” In fact, a survey of executives at ESOP and non-ESOP firms conducted during the Covid-19 pandemic (between August 5, 2020, and September 23, 2020) revealed that “ESOP companies were between 3 and 4 times more likely to retain staff, at all levels.”

“We’ve found that establishing that ownership mindset quickly has a direct impact on retention,” Loth Allen says. “Those who grasp and understand that ownership mindset want to stay at our company because they have a stake in its success. They get a portion of the profits. Our ESOP is also a great accountability tool. Those who aren’t thinking and acting like owners get weeded out pretty quickly by their fellow employee-owners.”

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Evolving an ESOP over time

Loth Allen stresses that for an ESOP to be effective, a business has to make money.

“An ESOP won’t cure a bad business model,” Loth Allen says. “And you can’t future-proof an ESOP if the business doesn’t make money.”

Successful and mature ESOPs, Loth Allen stresses, are not static — given economic, market and regulatory shifts, it’s crucial for employers to gather third-party advice so they can proactively update their ESOPs accordingly.

“Part of my job is to pay attention to those shifts every day,” Loth Allen says. “We have a very active board and an ESOP committee. There are decisions that our board needs to make every year, such as the amount of shares to give employees and how much reserves to set aside for repurchase obligations, for example.”

Having sustainability goals and strategies for the ESOP, as well as an active board, she says, are key to sustaining Emery Sapp’s ESOP.

“The board needs to pay attention to your plan, but also what you’re trying to accomplish in terms of the ESOP’s sustainability and business goals,” Loth Allen says. “That way, board members can make sure the right goals are in place and that you’re assessing yourself on how well you’re doing meeting your goals so that 10 years from now you can not only pay off people who are ready to retire or leaving, but you’ve also built the mindset with new employees of staying and growing their retirement.”

That mindset development ties into another crucial aspect of sustaining an ESOP — employee education.

“You have to think about how you’re reaching out and making sure that employee-owners understand what an ESOP is,” Loth Allen says. “You have to help them understand what it’s like to think and act like an owner and realize that if they do so, they’ll contribute to the bottom line which in turn comes back to benefit them. It’s a constant education and communication process at Emery Sapp.”

Loth Allen also emphasizes the importance of celebration when it comes to maintaining and evolving an ESOP.

“We have a number of events to celebrate our ESOP,” she says. “For instance, in October, we have family fun days and barbecues. In March, we host stock price reveal parties across the country. It’s our way of showing our employees who are working really hard that when the company makes money, those profits go back to them. It’s also about celebrating this unique element of our culture.”

Advice to other company leaders who want to start ESOPs

Loth Allen believes that it’s beneficial for companies to offer ESOPs to their teams. In particular, she says, ESOPs can be great exit strategies or succession plans for business owners who are ready to step away. However, she stresses that leaders should do their due diligence before implementing ESOPs at their companies.

“Do your homework,” Loth Allen says. “There are a lot of things to think about, and a lot of experts to consult, such as financial planners and lawyers, who can help set you up for success — and determine if an ESOP is right for you and that you’re doing it for the right reasons. Really leaning into what the concept is and how employees can share in that success will help you determine whether or not it’s right for you.”

Additionally, Loth Allen says it’s important for leaders to keep in mind that it will take time to develop and implement a successful ESOP.

“You can’t just decide one night to do it, sell the company the next day and expect it to be a wild success,” Loth Allen says. “It does take some time and some patience to start an ESOP. It’s hard work. But it really is worth it in the end.”

As seen in The Business Journals.