An ESOP Case Study: Much more than an Exit Plan
Enviro-Stewards is an engineering company based in Elmira, Ontario, however they are not your average company. Their mission is to cultivate resilient businesses and improve lives, which is acted out day-to-day through its service offerings (integrated energy, water and product efficiency) and through its safe water social venture projects in war-torn countries.
With direction from Bruce Taylor, the owner, the firm developed a unique business model that guarantees savings for the client. As a Best for the World (2018) Benefit Corporation (Bcorp), Bruce saw that the ESOP concept aligned extremely well with Enviro-Stewards’ values and the fact that he was looking for a gradual exit strategy. In January 2021, they launched the Plan.
Bruce realized that he needed to plan for his eventual exit, even though it was still years away. He saw this plan could provide peace of mind for him and his employees, and preservation of the organization’s mission. Like any business owner, his options included selling to a third-party multinational firm or selling to family. Family transition was not going to be feasible, and selling to a multinational would have gutted their mission, eventually causing staff to move on. However, selling to the employees presented a more viable solution. Even in the midst of COVID-19 Bruce was sure it was the right time to launch an ESOP.
How We Helped
ESOP Builders (EBI) was engaged and through the ESOP Transformation Model™️ assisted Bruce and the team to build a plan that helped them continue the Enviro-Stewards mission by engaging and retaining employees as owners, and attracting the best and brightest to the company. Just as important, the ESOP was designed to transition ownership of the company to the employees within 10 years, which was Bruce’s planned exit timeframe.
Along with launching the Plan, EBI conducted the CORE4ESOP survey to measure the baseline perceptions from employees at the start of the ESOP journey. It is a voluntary survey that measures perceptions (scoring responses on a point scale from 1 to 10) related to company direction, internal communication, financial information, training and development, etc.
Each year the survey is conducted to remeasure and track trends to assess how the company is doing to engage employees and ensure the ESOP is achieving its goals. If it is lacking in any area, the data shows this and an action plan can be implemented.
Actions from CORE4ESOP Results
Bruce and the team immediately noticed that the Financial Information category scored the lowest and decided to build an action plan to implement over the year focused specifically on increasing the score for that category. They made sure to focus their actions rather than trying to improve many areas at once. To positively increase employees’ perceptions on the Financial Information category, Enviro-Stewards’ finance manager walks through the financials with employees during each quarterly staff meeting and Enviro-Stewards’ founder outlines strategic areas of growth under development for the firm.
ESOP Results Since Launch
- 85% participation rate in the ESOP (2023)
- About 15% ownership of the company has been transferred to the employees
- Positive growth and good share appreciation for the shareholders (more than 5 times the returns staff would have received from the S&P 500)
CORE4ESOP* Results Highlights:
- Higher participation rate in 2022 compared to 2021
- Working together, taking care of employees, positive work environment and organizational direction are categories consistently ranked high each year
- Financial Information category improved the most from 2021 to 2022 and was no longer in the lowest category ranking in 2022
- Overall, Enviro-Stewards employees’ perceptions were better in 2022 than in 2021
*at Enviro-Stewards, it is available to all employees, not only shareholders.
In 2021 CORE4ESOP showed many categories that Enviro-Steward perceived very positively and scored them highly (working together, taking care of employees, positive work environment and company direction).
What we are also interested in are the areas the employees perceive less positively or even negatively. The Financial Information category, which includes perceptions on training and education for financial literacy, received the lowest score.
In 2022 the same categories scored the highest, but the Financial Information category no longer scored the lowest, in fact it showed the greatest improvement. The team’s action plan and efforts paid off!
“I am very thankful to be a part of this company, and this initiative is a good way for me to affirm that I want to be more than a standard 9:00 to 5:00 employee. I can invest my time and my effort, but here is a way to invest further. It is a nice way to be more involved and helps instill a further sense of accountability with my fellow workers and with the work that I do.”
-Wesley Palmer, Employee-Owner at Enviro-Stewards