Ep10 - We The People - "Employees" - Cultivating Talent for your ESOP

Thanks for listening and joining us. I'm the ESOP guy and let's continue on this journey to an ESOP. Now, if you're new to the podcast, this podcast is for those individuals that are considering using an ESOP as a potential strategy for growth, succession, or even exiting of their business. I've also sent this podcast out to other ESOP professionals just to continue to get their feedback because I want it to be. A great resource for those people that are interested in learning more about ESOPs. Today's podcast is entitled We the People, and it's all about what you guessed it, people. How do your employees affect your potential transition to an ESOP? We, the people of the United States, in order to form a more perfect union, establish justice, ensure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity, do ordain and establish this Constitution for the United States of America. So quick quote from our preamble, and I quoted that and I entitled this we the people. Because as a, as a nation, we gather together under a new menace, the menace of this coronavirus, and it's very important that we all work together and even though this podcast is not going to be about the virus, I want to know, I want you to know that the spirit of, of our country has never been stronger in terms of binding together to work towards a solution to a very common problem. And this really is the same thing that happens when we bind together as as a business with our employees and I use that as a An analogy or a comparison because I think it's very important when you think about the value of the people that work for you in terms of your current value and your future value of your business. And when you start thinking about your business being transacted as an ESOP company, there couldn't be any more value when you link, when you think about what gets done than, than your people because everything kind of starts and stops with your people. They, they could be your greatest. Strength to your business. If you like what you hear from this podcast, please subscribe and of course, share it with a friend. So the essential step towards your journey to an ESOP is assessing this most crucial asset of your business, your employees. To start off, I just want to say I love business. I always have. I don't know why. When I was young, I was, I remember watching that show called Family Ties with Michael J. Fox. And if you remember from the show, Michael J. Fox, always wanted to be a businessman, and he was a weird teenager because he was always dressing in business suits. Um, he was a Republican, and I'll tell you, I've never dressed in business suits when I was a teenager, but I always thought, I always liked that and I think there's a, there's something in some of us that just love business. And when you get down to it, maybe it's the challenge of what a business really does, it's, you really work hard towards a goal and you try to accomplish that goal, you innovate around the competition, it pushes us to be better, but I think ultimately, What it does is it challenges us. To work better together. Because if you think about this, history has proven that when you have a great team, there really isn't much that can stop you. So I would just kind of digress a little bit and say hashtag Chicago Bulls, #American Revolution and hashtag Berman Hopkins. So these are not real hashtags, so don't go out looking for them. But the point is, All of these examples are filled with the ultimate success story because it engaged people. Towards a common goal to meet challenges along the way. But I would say even more than just engaging people, what it, what, what it has done, what, what, what happens when you have a very solid team working towards things is it engages talented people to use their talents towards accomplishing those goals and meeting those challenges. And so talent obviously is very important when you think about it, and that's gonna be something we're gonna hit on in this episode. Companies that become ESOPs are statistically more successful. In the largest and most significant study to date. And the performance of ESOPs. A study was done in the year 2000 by Douglas Cruz and Joseph Blay of Rutgers University, and they found that ESOPs, and this is of course a long study a long time ago, um, but ESOPs had an increase in sales, employment, and sales employment by about 2.3% to 2.4% per year over what would have been expected absent of an ESOP. For companies that are looking at becoming ESOP companies, this is an aspect of the ESOP that really appeals to them, being more successful. And, and I think when we talk about this at the very front and with, with the client, the question is, what is this going to look like afterwards? And one of the things that comes up very frequently is the reason they're doing an ESOP is because they care about their employees so much. And so it, what's in my mind as an ESOP advisor is how do we help build something that's going to be sustainable and be successful. So the, so the question and deep down is this, how does it happen? Does it happen automatically once the ink dries on the ESOP documents, once the certificate of evaluation has been issued? No, I don't think, I don't think there's any automatic thing, and there's a lot of work being done in the process of, of building out this part of your business, this what I'm going to call just generally speaking, your employee base that helps companies become successful. It has to be something that is addressed early on in the process. So questions that that get asked to business owners that are thinking about ESOPs have a lot to do with their existing employee base. And the quality of that employee base. And this brings us to a very important element of really what this podcast is going to be about, is assessing the value. Of your employee base or in some cases, we talk about this is your talent, you know, the talent in your business. The reality for some of us, and when I say some of us. You really know who I'm talking about. It's the people that have the job of running the whole business. Those are the CEOs. And I would say in addition to that, you're going to have those that run whole departments and and then even those as we talk through this, that run even just managed through a few people that report to them. So that's basically everyone probably listening when I, when I, when I talk about that, it's really important in a position of leadership. To be able to understand what you have from an employee based standpoint, and I, and I do think that the smaller businesses are maybe mid-sized businesses, the issue is that that is an assessment that's done more subjectively than objective. Now, we all can tell who who our best people are. They make our lives in business great. They don't ask questions about a lot. They just jump in, they're effective. We all have our own kind of pet peeves and we all have our own, you know, managerial styles in terms of people that work better for us, you know, so there's some variants there. But the idea is that you know who your best people are, and they just do their job and they get it done and they make your life really, really great. Then you also know on the other side of the spectrum who your worst people are. And I don't mean like they're bad people. I just mean they're not functioning the way they should be in your business. And you know that. Because they make, it can make your life miserable at different stages of things. And when that comes about, you know, there's a lot of different um approaches to it. Some companies, some business owners are very quick in making decisions when it comes to their worst people, others not so much in giving people more and more time. So the idea here is that you have this, this real polarized spectrum, you have your really your best people and your worst people. When I start thinking about where businesses assess talent, they get, they get a little bit. Um, stuck in one of those two different places. And what I mean by that is A lot of the attention of the leadership goes, goes into those two different regions. And I think that the value of building out the value of this as this part of your business is really a critical thing and we have to bring ourselves or maybe force ourselves to start focusing on more of the middle section. So I'm gonna go into the terminology of, of something that we use a lot in our business and it's the idea of, of engagement of engaged employees. So Jim Harter with the Gallup Research, um, quoted this, engaged employees are more attentive and vigilant. They look out for the needs of their co-workers and the overall enterprise because they personally own the result of their work and that of the organization. Research tells us that the engaged employees are more productive. According to Harvard Business Review, organizations with a high level of engagement report 22% higher productivity. In addition, those organizations with an engaged workforce see an improved quality of work and health. In other words, it's just really good for people, for employees to be um engaged, doing good in the things doing the uh the highest level of work in what they're called to do. So it takes engaged people, um, but it also takes people, when you start thinking about engagement, that are talented and in the right seats of your organization to move the dial. So, the Gallup poll also tells us from the research that 70% on average of workers and businesses are or organizations are not engaged. And that's, that's the, that's a big number and it's something that that really challenges us as business owners. To, to put our attention to and assess that talent and understand how to, how to really move organizations forward. And if we're moving it forward towards the possibility of an ESOP, we need to bring in, we need to continue to cultivate and strengthen that part of our business, um, in a way that is, is keeping with the logic of I want to create a company that sells to an ESOP for this company to go on and be sustainable. And so if I digress there for a second, really, I think the initial questions I ask people when they say they want to have a company sell to an ESOP. Is, is what do you feel? How do you feel about the employees? And that's an important question because if they answer that question in terms of, I really want my employees to succeed and, and they've helped me get this far. So I want them to be able to be successful, then we come back, now we come back out of that and say, OK, now let's talk about what you have in an employee in your employee base. And so that's the whole, the whole process begins with assessing this element of your business. So one of the tools that I turned to in advising on this issue, again, this is something I used in a prior podcast, but is a tool that I picked up out of Gino Wickham's book called Traction. And the tool itself is called a people analyzer. And so if you haven't used this, um, I'm gonna go into this in a, in a brief summary, but you can get this tool if you just log on to uh EOS worldwide.com/e. So, EOS. Worldwide.com/people. And it's a free tool that Gino Wickham um provides and it's an effective tool and we use it in our business every year. So the way that the tool works is that it allows you to move from what I believe a lot of a lot of times happens from a very subjective process where we, we have these feelings about people that work for us to a very objective process that you can use in an open forum with your leadership group, so that you're participating, everybody's participating in the discussion. And in a sense, it allows you to really organize in in some way inventory, the talent pool that you have. With, you know, the document is basically uses kind of like, it's more of a just a spreadsheet really, but it allows you to kind of put your employees and then specific areas where you, you want to align your business with the right people. Now, this is when I, when I were moving out of this idea that the whole beginning of this podcast was kind of generally, how important generally is it for employees to be valuable or that they're valuable to the business organization. And that's very general, you know, speak. So we all know that that's true. And then we talk a little bit deeper about how important is it and how valuable is it for our employees to be actively engaged in in the business. And those are all truths. But what's happening, what happens a lot of times is we, we have all these very, um very important concepts and we got to work those specifically into our, our business. And so my point to this, Is that we need to align for specifically for our business, what's important in our talent pool. And the way what this tool does is it aligns the core values of your, of your leadership team and of the business itself with the actual employees, so that you might have in your business, somebody that has some kind of talent. But they're, they're, they don't line up well with your core values. Um, maybe from like an example of this would be an accounting firm and we need, we need people that, um, from a very detailed oriented standpoint have um a sense of highest quality and there are other people that would be very talented, but they're really more creative and so they're not as detail oriented and so our our core value is, is high, high levels of quality. Um, in their production. And even though a creative person can put together something that's, that's um valuable, it may not be really valuable underneath the type of thing an accounting firm would want. And so understanding what your core values are, and within this document, there are three other aspects of it, which is, do they, first off, the, the, do they get the job that they're supposed to do? Then do they want the job that they have? And then do they have the ability to do the job, so get it, want it and have it. And, and so those are all measurements. So between measuring and aligning the core values of each each individual team member and asking those questions about whether they get it, want it or have it, you're able then to discuss and have open discussions that bring the entire leadership group when you're evaluating your entire employee base. To, um, more of a more of an objective approach to understanding and how each person is rated. And it's effective in the sense that it gives everybody, um, input into the process that needs to. And so that's why I always like to use worksheets and documents when I'm doing a planning meeting. So that everybody has the ability to, um, team leadership team members have the ability to input on that because I think sometimes people that have input, we just, people that talk a lot like me, you, you kind of like just run over them because they're not, they're not speaking up as much as they should. I think it's really important to get all that input to create the most objective assessment you can. And what we're doing in this is not just evaluating to assess the, the value to the organization. And that's really the beginning step. The goal of this is to create a stronger company and therefore a stronger ESOP company by, by leveraging these tools and cultivating the value we need. So if we go into specifics within this, this uh planning process, what we're really doing is we're evaluating each person within that uh within the people analyzer tool. To determine where they fit in our organization and where they need to fit. So then now we can from a big picture standpoint, we can plan for the future, like 1st, 1st off, what are our gaps in our organization that need to be filled? And how do we get those filled, you know, with the people that we have. So it might be, we have gaps, but we have somebody in the people analyzer that could fill that spot. So it helps us to see how we might plug in those gaps as a, as a comprehensive way um to look at the business plan side. We also want to look at it from the employee side. I mean, one of the, one of the key aspects of being an ESOP company is that it offers a, a benefit of providing employee a strong employee retention tool. And when you are communicating a career path in front of an employee that's been very logically planned out with a big picture, you're able to now provide them. With something that, that really makes sense for them and ask the question, this is where we see your skill set. We'd like to move you more towards this area. And maybe it's, maybe it's um a person that has done so well at um a technical job, but they also have such strong proficiency and communication that we want to move them into the sales, a sales role and, and give them the opportunity to make a lot more money in that from a, from a commission base using their technical experience to help them advance. And so, promoting within and especially within the, the last year, promoting within has been such an important strategy. Now, I'd say with all of the things that have happened, you know, there's, there's definitely gonna be some changes within employment, but certainly, I'd much rather it would, I would much rather transfer somebody that I know into a specific job function then hire um outside of the company and take a chance and I think that's probably just good logic. So other than putting, getting everybody on the same page, which I think, I think it is very important with objective data, um, I think it also then comes back to how do I get the, the portion of people that are in my business that are not actively engaged, more engaged. And I think that the tool here and it's just a tool, because what we're really getting down to is the style of communication that you have. There has to be an ongoing approach. To cultivate an atmosphere of engagement in your business and using all sorts of tools that, that I don't really have time in today to talk about, but all sorts of engagement tools that help you measure and track engagement because businesses that have more actively engaged people are going to be more successful. And those people that take on the ownership of what they're working on, because they When they do that, they own the results of that in the organization, and they become truly your best people. And as you align the goals and the core values with the right people, then you create a very strong business that um can go into this ESOP process and go through and all of the challenges that an ESOP company has, um, and the benefits of an ESOP can be in a much better position to be a successful ESOP company. So, This is a big step for companies. This is an ongoing step as well. It just keeps going on and but it's a very important step towards a journey to an ESOP. So if you like what you hear, please subscribe to the podcast, share this with a friend. Our next episode, I'm excited to announce is going to be an interview with a bonding agent. And this is for um companies that are going east. That have concerns over how their surety company is going to look at this. This is an individual who has been in the bonding industry for over 30 years. So I'm excited for the interview to come up next. So look for that podcast. Have a great day and we'll talk to you then.