Practical Solutions for Common Communication Problems Presented to the CAWS Chapter of the ESOP Association October 13, 2017 10:30 am to 11:45 am Presented by Mike Davidson Gardeners Guild, Inc. Heather Svahn Mountain Hardware & Sports Sean Cleveland H2C2 & Associates, Inc. Please fill out a session evaluation form and drop it off at the table outside of this room Your feedback on topics and presenters is important and will be used to develop subsequent CAWS programs Take a moment to silence your cell phone 1
Landscape Contractor serving the greater S.Francisco Bay Area since 1972 Full service maintenance & construction - commercial & residential Employees: 125-160 full-time Revenues: 11 million ESOP: 100% Employee Owned S-Corp 2017: 45 Years in Business & 20 years ESOP 3 Key Dates Description 1998 ESOP Formed 40%, partially leveraged purchase Included provision to purchase 100% of stock in future 2002 Debt from the initial stock purchase paid off 2003 Partially leveraged purchase of remaining 60% of stock to become 100 % employee owned Company elected S-Corp status 2008 Debt on ESOP Loan paid in full - May 2008 2017 Celebrating the Company s 45 Year Anniversary & 20 Years as an ESOP Current Focus is on protecting enhancing stock value through growth and proactive management of repurchase obligation 4 2
Mountain Hardware & Sports - Opened 1977 in Truckee, CA - Celebrated 40 th Anniversary September 15 th 2017-2 Retail Stores, 1 Equipment Rental Store - Over 85 Employees in 3 locations with 50 miles - Started ESOP in 2001, became 100% S-Corp in 2013-2012 Awarded Coolest Hardware Store by ACE - 2017 ESOP National Award: Best ESOP Marketing Parent Corporation For 3 Companies California Specialty Contractor Established In 1993. Originally Provided Hazardous Material Remediation Now We Also Perform Demolition And Insulation Services Commercial, Industrial, Public Work, And Marine Industries. Union Contractor: ~300 Employees 6 3
ESOP Since 2008. ~48 Employee Owners 67% Employee Owned. 2016 Communication Committee has 8 members. Each Financial Quarter We Have a Company ESOP Meeting 7 Defined Studies, examples Questions to ask to improve success Who, What, Why, When, How? 8 4
We are all part of the problem and the solution. Depending on the study, any will suggest workplace issues arise from miscommunication at least of the time. 5
Message becomes not what YOU want to communicate but what they NEED - Conveying ESOP information: Legally required Need to know Culture development Benefit plan - What do you want your message to be? - Is the message being received? 12 6
1) Summary Annual Report 2) Statement Annually 3) Summary Plan Description 4) Participant wants Plan Doc., can charge up to $.25/page 7
1) Beneficiary Forms Updated Annually 2) Transparency of Company Info: Share all company financial info with exception of individual pay roll 3) Graphic of stock value over our ESOP history 1. New Employee ESOP Communication 2. Participant Stock Statement Distribution 3. Developing ESOP Culture 4. Ownership Thinking Impacting Stock Value 5. Effective ESOP Communication Teams 16 8
ESOP Education or learn how to mow? Day One focus is to ensure the basics - policies, job description, safety, etc. Solution Developed FAQ s in as basic terms possible When do I get my money? Developed Owner s Manual basics, pictures, employee testimonials about ESOP English & Spanish Distributed and overviewed at Day One orientation Follow-up and solicitation of questions, ideas going forward not so good Idea From company at ESOP National Conference pre job interview strictly about ESOP and what it means to work for an ESOP company then recommended for formal job interview only if deemed a fit 17 1) Trifold Available 2) Hold 3-4 ESOP education nights 3) Offer individual meetings once a year *From meetings you can discover potential new committee members 9
Company Summary Plan Description Available to all Employees at All Times Company Valuation Procedures Quarterly Meetings To Answer Questions Participant Statement Communicating Actual Or Potential Value 19 ESOP Statement Distribution Different Strategies Employed Company Meeting - All Staff Division Meetings (10 15 staff per meeting) Mailed Home with Cover Letter Solution All Staff Meeting to talk big picture future owners get information too Overview of statements along with other financial and ESOP education Mail statement home with cover letter opportunity to reinforce information and retain confidentiality ESOP Statement Content & Format Statement alone provided no context on how stock was performing Solution Include an individual history of participant account (see sample) Provides opportunity to link Company performance to share value to account balance 20 10
EXAMPLE 21 EXAMPLE 22 11
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Find Your ESOP Champions Within our organization, over the 20+years since becoming ESOP, there are always a handful of individuals who fully embrace ESOP Celebrate them, support them, reward them and leverage them! The best, most successful, best attended events are the ones initiated and directed by staff vs management Once staff see s other staff being provided opportunities and rewards to participate in new ways outside of job description, can be contagious Opportunities provided to champions GGU University, Ownership & Safety Jamboree, ESOP Seminar/Conference attendance 25 1) Core Values 2) Celebrate company milestones - April 13 th 100% owned - Employee Service Records 3) Discuss and teach impact of individual performance on stock value 4) Celebrate ESOP ownership month in October Core Values THINK & ACT LIKE AN OWNER Keep our long-term vision grounded in our decisions & investments; take actions that make a difference; think bottom line impact; walk the talk as servant leaders; develop our people. CREATE MOMENTS OF MAGIC THROUGH OUTSTANDING GUEST SERVICE EVERY DAY Empower ourselves to make decisions to do what is right by our guests; exceed expectations & build raving fans who are evangelists for our service; offer the right products; no job is too low if it serves our guests. LAUGH OUT LOUD Enjoy what we do; have fun & make friends at work. LOOK FOR & EMBRACE CHANGE Look for innovative improvements everyday with an open mind. We re passionate about our business; strive to improve ourselves, our skills and our environment. ACT WITH INTEGRITY Do the right thing even when no one is looking: be honest, accountable and reliable; be consistent; act with humility. RESPECT OURSELVES, OTHERS AND OUR ENVIRONMENT Live the Golden Rule, value our own & other s health, safety & opinions. OYS Own your stuff. 26 13
Listen to curmudgeons to improve your message Embrace everyone on the spectrum Create moments of belief to move curmudgeons from the edge 27 Listen to curmudgeons to improve your message Embrace everyone on the spectrum Create moments of belief to move curmudgeons from the edge 14
Establish a Clear and Simple Message Embrace an Open Book Approach Maintain Consistency 29 Two samples on attached slides from educational sessions from Gardeners Guild University (GGU) that try to help bridge the gap between performance and stock value. 30 15
A Single Dollar GGI Sample Revenues $1.00 (-) Direct Costs $0.56 $ 10,000,000 (-) $5,600,000 Gross Profit $0.44 (=) $4,400,000 (-) Variable Overhead $0.24 (-) $ 2,400,000 (-) Fixed Overhead $0.14 (-) $1,400,000 (-) Other Inc/Exp $0.01 (-) $100,000 Net Profit $0.05 (=) $500,000 31 Revenues Sales to Clients GGI (-) Direct Costs Labor, Materials, etc. Gross Profit Portion of remaining Revenues (-) Overhead Expenses Non-billable labor, vehicle expenses, small tools, advertising, building rents, etc. (=) Net Profit How do WE spend/invest??? Individual Gross Pay Wages from hours worked (-) Income taxes, health benefits, EDD insurance & 401k Net Pay Take home pay (-) Living Expenses Food, rent/mortgage, utilities, auto, etc. (=) Disposable Income How do YOU spend/invest??? 32 16
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Employee Communications Team (ECT) Historically we have had both highly effective and highly dysfunctional teams Solutions - (when ECT has been most effective) Leadership & Management Buy-In seen as investment vs expense A committed ESOP champion chairs the ECT Members of the team are afforded time to be effective in this role Commitment/budget to participate in Association Events Implementation of internal events both training and social that relate back to ESOP Most successful events focused on Ownership Behaviors vs the ESOP Benefit 35 1) Employees from each of our 3 locations 2) Regular meetings to plan trainings, company activities 3) Combination of leaders within the company and ESOP champions 4) Provide transparency of company information to employees 5) Committee members attend CAWS Chapter Conference and National ESOP conference in DC 36 18
Establish a Clear and Simple Message Embrace an Open Book Approach Maintain Consistency 37 Some effective ESOP Communication Strategies Tenants of our communicating strategies Keep it Simple! Pictures tell a thousand words Translation don t fight it Train/communicate in small groups Communicate when employees most receptive Tie it all back to the success of the ESOP Have fun with it where you can Multiple voices where ever possible outside perspective Keep trying new things a must 19
- Please fill out a session evaluation form and drop it off at the table outside of this room - Your feedback on topics and presenters is important and will be used to develop subsequent CAWS programs 39 Mike Davidson VP/CFO Gardeners Guild, Inc. 2780 Goodrick Ave. Richmond, CA 94801 510 439 3702 mdavidson@gardenersguild.com 40 20
Vice President, Merchandising & Marketing Mountain Hardware and Sports 11320 Donner Pass Rd Truckee, CA 96161 530-587-4844 heather.svahn@gmail.com 41 Sean Cleveland Marketing Associate P: 510-544-5221 C: 925-413-6760 E: scleveland@bvdmi.com 42 21