Zingerman's Perpetual Purpose Trust: A Radical Model for Succession Planning

what's up okay okay three two one hello welcome in hi Ari hi Natalie hi Ariana hi Natalie hello hello welcome everybody Welcome in and thank you so much for joining today's webinar Zingerman's Perpetual purpose trust a radical model for succession planning my name is Arana I am a Zing train trainer and Resident interviewer I will be your host today and I'm thrilled to be here alongside Natalie wman white and Ari Von Natalie is the expert who help helped zingerman establish our Perpetual purpose trust she works with organizations to ensure that a company's missions values way of doing business are preserved into the future and Ari of course is co-founding partner of Zingerman's community of businesses who's here to share his story of of doing this work of preserving Zingerman's purpose and Legacy for generations to come we also have with us Katie Alexander our community Builder here at train she's here behind the scenes modering the chat and the questions with me and we are coming to you live from an Arbor Michigan we'd love to hear where you are tuning in from so if you want to open up the chat hello um you can jump in and and drop in your location so if you click on the chat button you can put it in there if you see any neighbors around be sure to say hi we are going to dive into the good stuff really soon but before we do that I have three helpful tips to make our time together feel really good the first one as far as the format of the webinar I will be interviewing Natalie and Ari but you will also have a chance to ask your questions as you listen you can submit your questions by clicking on the Q&A button excuse me Q&A button at the bottom of your Zoom screen and at the end I will read those questions out loud to Natalie and Ari we will do our very best to get to as many questions as you can but if we were to not answer your question look for resources in our followup email um you'll receive that follow email uh tomorrow by the end of tomorrow and if you have any questions right now right as we start the webinar you are welcome to click on the Q&A button there and send them on over the second helpful tip there is cloes captioning available Katie is going to drop those details and get that going you can find the Clos captioning button at the bottom of your Zoom screen and the third item in business we are recording this conversation and we'll be sending it out to all of you by the end of tomorrow in that follow-up email it will also live on our website Zing tray.com along with all of our other webinars and free resources so three orders of business and I'm really excited to get to start asking you all questions so welcome ar welcome Natalie we're so excited to have you here to talk succession planning and Perpetual purpose trust so my first question of the day is for Natalie Natalie what inspired you to get into this work of ownership and governance thanks Ariana um so I started I guess my career maybe my career as an activist in college working on environmental and social justice issues and you know at the time I was kind of protesting corporations and and what they were doing in communities and um then I met a group of people working in business who were doing it differently who are really trying to have a positive impact on their communities through their business and that group of people was at organically Grown company and their whole mission of their business was helping people eat healthier food and the way they did that was by helping the farmers make a living growing healthier food so they worked early on on organic growing methods and how to distribute that food to the community and so I was very inspired by this is a model of business that was making the change that I wanted to see in the world which seemed pretty productive versus just kind of protesting against what we don't like and um I started working with them um nearly 20 years ago and um learned a lot uh working alongside the founders and through that work I met a lot of entrepreneurs in the organic and Natural Foods industry and many of them were you know growing their businesses um had similar ethos around um you know Community benefit and um it was a hot industry it was experiencing rapid growth and so when when I was there we went from you know 100 employees to 300 employees and many of these businesses were growing very rapidly and one of the things I found out over time is how businesses are owned matters for the long term um ownership is uh denotes who has the decision-making power and where the economic benefits go and one of the things that I found was that um businesses during this kind of growth of the organic trade would sometimes take on investors and not necessarily talk about the long-term vision for where the business was headed ownership wise and I saw Founders um some of my peer uh peers in the trade lose control so um you know all of a sudden uh production was being moved out of where they were founded um maybe the formulations of their products were changing um maybe they were even um getting away from their historic supplier relationships and and relationships that they had built over many years so um it's not that uh you know uh people are are bad people coming in and investing in businesses but oftentimes um in industries that are hot there's more and more consolidation and ownership gets further and further away from the people who are doing the work and have those relationships with the employees um with the customers with the supply chain then it becomes easier to um start to just look at numbers and not um you know that that ecosystem of relation ship that you've built so I was really curious about how we have successful businesses that grow but stay rooted in their values of why they were started and um that benefit the multiple stakeholders in those businesses and so I started looking at alternative model ownership models that would keep companies Independent Community rooted and benefiting the multiple stakeholders who are bringing Capital to the table so you know investors are an important part of the relationship they bring Financial Capital but we've got human capital in businesses for the people bringing their creativity and life's energy every day we've got community capital of you know the communities in which we operate and we've we' even got you know environmental Capital that we also have to care for and Steward for so really thinking about a business as you know it's this engine for driving value and how do we keep that engine um continuing to drive value for multiple folks so that's what got me into this crazy topic of ownership and finance and um why I'm so passionate about working on it today because if it gets misaligned your your business um can you know quickly change yeah that's um really really fortunate for us because on the zingerman side Ari I'd like you to talk a little bit more of business as a tool to do good this ecology this this community of zingerman and how we like zingman came up from the other side of it it's like here's our business how did you get to this perpetual purpose trust in working with Natalie that was a lot of questions in one um questions well it's 42 years well actually 41 because we formally rolled it out a year ago this week actually this is the oneyear anniversary Natalie of our trust um so how did we get to the trust uh probably 15 years ago so we were already a good 25 plus years in business one day Paul Sagen my partner uh started to ask me uh what was going to happen when the second one of us passed away so to back up for those who are in ownership which looking over the list is a lot of you uh we had and Ariana if something doesn't make sense please ask but we had buyout Insurance on each other's uh lives in order to allow the one who didn't die to purchase the shares from the erors of the one who did and fortunately neither of us has died so it never went into play but if I were to passed away then Paul's the money would go to Paul who would buy out my heirs so that he wouldn't be working with my heirs or vice versa and what he was asking me is what happens when the second one dies and I kept saying well we have the insurance like whatever no it's not about the money where do who owns the shares and I had no idea and he had no idea and that started years of conversation and trying to figure out what to do uh we looked at all the models that everybody has looked at there aren't actually that many but uh one day I don't know when three or four years ago I was five years ago I was probably more than that even I was reading EF Schumacher's book small as beautiful which just had its 50th Anniversary last year it's from 1973 and uh it's a wonderful book for many reasons and although it's not the main point of the book uh somewhere in there about halfway through Schumacher talks about the Scott Bader Commonwealth in England uh and what they had done was something that I thought was awesome which is Mr Bader uh in started the business in the 20s but by the 1950s they were doing quite well and he wanted to essentially do what I had thought we could do too but there was no legal construct that we had ever heard of that allowed it which is essentially for the company to own itself uh and the benefit to go to the people who work there and what that all lot I thought would do is what Natalie was trying to avoid having happen in a good way she was trying to avoid people getting the companies getting sold and ownership as she said moving in power and profit moving further and further from the place of business and the people who worked in it and what this did was the other way it allowed it to stay the power in the business The Profit go to to the people who are working in the business and it was they called it a commonwealth uh now we know it as a Perpetual purpose trust and so I started asking questions about how we could make that happen here uh the E newss that I do this week is uh about non-conformance and in essence this was an act of non-conformance because it didn't fit with the usual plans for succession which would be typically selling the business to an outsider leaving it to an air within the business uh going public or maybe on a more radical end doing an ESOP or an employee stock ex uh ownership plan but none of those appealed and this did and so I started asking meeting with ey rolls resistance crazy looks Etc and I just in a good way kept poking around and uh one day Maggie bis from Zin train who Ariana you know very well uh called me and she said I think I found somebody who actually knows about this this and I was like awesome so I called him and he was uh working with uh or uh organic valley uh and he sent me to the People Natalie worked with at uh organically grown out in Portland and so uh after a couple conversations there we ended up with Natalie and her peers uh and because they had the expertise of how to actually pull this off so that's how we got going on it I I do love that it's radical and I know that a really common question is why not an ESOP doesn't ESOP you know being able to give the business to the employees that sounds really good and why is this just a little bit different or a lot different you want me to try that one or Natalie I want both of you so AR I'd like to hear from your side and then also well I'm I am not an expert I'm just a line cook uh so it's over my head in a sense but I was I never Lov loved it uh it seemed like a lot of legal compliance burden uh that didn't seem that uh aligned with the way we were trying to work and then as I learned more about it and understood that the esap sounded good but then the ESOP could be sold uh which defeated a lot of the purpose for us which was to keep zingerman in the community and so if the ESOP as I and Natalie knows more than I do so chime in but if the esap gets sold it clearly it benefits the employees who own shares at that time but then you just end up one step removed from just selling it outright to somebody right from the get-go so this way with the Perpetual purpose trust and as as we understand it and are working with it it keeps zingerman in the community so that it can't be sold and that yes benefit will acre to the people who work here but more slowly over time uh in what I would suggest is a more natural and sustainable way rather than a big windfall and everything goes away Natalie yeah um well the company I was working with organically Grown company was actually about 50% ESOP at the time and our plan had been to go to 100% ESOP and we chose to actually uh buy out the esap and move to a Perpetual purpose trust and um we did that for a few reasons um you know I was actually the plan administrator of the esap so I kind of saw the ins and outs of the plan um you know one of the main reasons was what Ari had said is that um we were interested in the the company staying independent and self-governed and we didn't want it potentially being sold down the line and um there's a fiduciary fiduciary duty of plan administrators in an ESOP to consider a sale if it's very lucrative for the employees doc retirement and so there are um situations where ESOP have sold also um we found the plan to be really expensive and complicated to administer so we were a growing company a lot of young people joining our Workforce and it's really a Employee Stock retirement plan so the goal is that you're rewarded in an ESOP when you retire and leave the company you get the value of the stock so it's really award a reward upon exit and we had a lot of young people where they were feeling like that seemed like a long time away and they'd rather th just be more motivated to share in the profits each year and feel the real-time performance reflected in in their contribution um and kind of the thought about something for the long term um wasn't as as meaningful to folks and people can still take their profits and invest in something for the long term if they want it's just not in the company itself um the other thing that that we experienced was actually kind of a a paradigm shift and you know this resonates with some people not with everyone but you know we kind of felt like okay you know originally we had start formed as a farmer cooperative and it was like farmers are at the center of the universe they're the ones who have all the the decision-making power and get all the economic benefit and the employees like well wait a second we're part of creating the value too shouldn't we be co-owners and get to have a share in the decision making and share in the benefit and then you know over time you know investors want to potentially join and we' always said no because we didn't want investors to be at the center of the universe hey we get to make all the decisions and and we get to reap all the benefit and so for us we were looking for something that was a bit of a paradigm shift which is to say you know what the purpose is at the center of the universe we exist to to carry out our company through our products and services our mission which is to provide great healthy food to the communities and help the farmers make a living and so we want to put the purpose at the center of the universe and say none of you can take this over and say it's mine for my own personal benefit but while you participate you get to share in the governance of of ensuring it stays on track to the purpose and then you get to mutually share in the value that's created as we go um so we actually have it where the employees the farmers we we do have some investors and the community share in that um so for us it was more of a paradigm shift around like uh you know thinking about that the business is is not a commodity and not personal property of anyone but is a a living thing that should reward those who contribute while they are active in a sustainable way as Ari saying if you make the money you get it in the bank and you can share it but we're not speculating that it's maybe worth more than it is or it isn't and leaving it to the next people to kind of pay the bills yeah all right I was wondering if you could elaborate more on that you had mentioned like having the the windfall of money coming into a company and have having the Perpetual purpose trust be much more sustainable can you share a little bit more about how you think of that yeah I'd be happy to and again I'm coming at it as the lay person you know Natalie has that the the technical expertise and has studied it far more in depth than me but I when a company gets sold and many of my friends have sold their company so I'm not trying to be negative about it there's a lot of money comes in and as Natalie just said it's based a lot on the speculative increase in value that the purchaser believes is going to happen um so there's a big windfall like if you own shares in a company that got sold I mean I don't know we read articles in the news you know that somebody was working at Google when it went public and all of a sudden they had all this money Etc and again I'm not criticizing that but it wasn't really the point of what we were trying to do was not to make a one-time wealth for a particular group of people but more to keep Zingerman's community of businesses in the community as Natalie just alluded to as well and to keep the the the power and the profit mostly focused within the business and not have it move further and further a field uh because what ends up happening is we get the E you know if you did at ESOP and now it got sold to somebody else and then they sell it to somebody else and all of a sudden you have somebody Halfway Around the World deciding what the you know which coffee should get served and the person working in the counter has no you know they saw the owner on TV on a screen once but they have no idea who's who it just seems like it loses a lot of what was so important to us which was the the the rooting literally and metaphorically in the community uh and the contribution to the community that we're in not the contribution to somebody else's Community halfway around the world so for me that was for us that was a big a big driver Ariana I'll add um that with a Perpetual purpose trust some people also refer to them as just an employee ownership trust but it's the same thing basically you're putting the ownership of the company into a trust that will never sell it and there are no human beneficiaries you say the purpose is to hold the company to continue to have it operate into perpetuity and nobody can take this asset under out of the trust so long as it continues to operate um but you can just make the purpose about running a great company and having the employees sh and all the governance and all the rewards and some people refer to that style of Perpetual purpose trust is just an employee ownership trust but it's again the employees don't own stock the trust holds all the stock in many ways it's simple because you've created an owner who will never retire never need liquidity or an exit from the company and never die because it's perpetual so you've got an owner now that's a permanent owner so you never have to deal with that change again um and it's a trust that doesn't need any income so all the income the company makes can just be kept in the company and shared with the employees as you go so that style of Perpetual purpose trust where you focus on governance and a benefits for employees people are now referring to it as an employee ownership trust but in the United States it's it's using the Perpetual purpose trust um model or vehicle legally um so it's actually similar to I saw some some of our folks have joined from the UK so in the UK they have the stock ownership plans like eaps but they also have what they call employee ownership trust which are essentially this um the PPT is just the American legal form and then a further question for you Natalie is since this is really radical what's it like to work with a company or a Founder a couple of Founders so you can use zingerman as an example or another example um what what's it like to kind of transfer from the the current owners into this idea of this this Perpetual owner doing this work yeah well um it's been just really heartening the companies that I've gotten to work with um from all over the Spectrum so I've worked with a number of food companies because that's the industry that I came out of but now I've worked with a Science Education company I've worked with a um socially responsible Investment Company um craft manufacturing uh exercise equipment Landscaping there's all sorts of companies that I'm finding where business owners you know maybe they started their business to make a living but over time they started to really care about their employees care about their supply chains care about their customers get really passionate about what they do and so there are thousands and thousands of business owners who are thinking about succession thinking about how they keep the impact going as they retire or exit from their businesses and looking for Solutions and what's cool about these um trusts is really getting to work with a business owner on designing it unique to their circumstance so um I've worked with businesses that are uh 16 employees and a thousand employees um and you can design these trusts um because they're basically your simplifying ownership over time you move to having one main owner that's a trust that'll never go away and then you get to think about you know what is the purpose that you want this business to continue to benefit um over time through its operations um you know is it your cult you know what are the aspects of your culture um your employees your benefits um maybe your product and service mix that you want to ensure endure and you can actually write that into a trust agreement so I've had some businesses say you know what we're fine with this business evolving at product and service mix so long as we're always doing man manufacturing here locally in Vermont and they just want to make sure that they always have that commitment to to local community but they understand 50 years from now they might be doing different things with their businesses so long as it stays in that Community I've had others that say you know what for us it's really about ensuring um craft manufacturing stays alive in America and um they they make HomeGoods and a lot of this has been you know kind of outsourced to uh larger and larger corporations where it's less about craft and more about Commodities and so that business they said we're okay with this business maybe moving and expanding in different regions of the the us so long as we're still using craft producers who know their stuff who make stuff by hand um and Source locally so there's all sorts of purposes that people are passionate about ensuring endure in their business and so it's a matter of working with those business owners to say What are the things that you want to ensure stay into the future that you continue to benefit how do we write that into your trust and then designing the governance around that so you have a group of people who have demonstrated their capacity to lead the business to deliver those results and then also talking with them about how they want to um you know divide up the the returns over time because most Founders they want to get some value out theyve created value in the business so they want to get some retirement and and nest egg out of the business but after their paid for you've basically done paying for ownership and you can use the free cash flows to reward people working in the business so really thinking about you know what that looks like is it just the employees some people set up charitable trusts or even in patagonia's example there they've decided to put 98% of excess profits towards climate change mitigation through a nonprofit using one of these purpose trusts so they're really the spoke to the business and what the purpose is and who they want to govern it uh and who they want to benefit over time so really preserving C businesses yeah yes and it's preserving craft businesses but also a craft way of doing that so it's very true to itself so I know that there are people who are listening in who are thinking gosh I probably need to start thinking of my succession plan and my options but there is a lot to think about so I want to ask this question to both of you starting with Ari um what is your advice for starting to think about succession planning well it's externalized advice but everybody says you can't start too early uh so it's probably a good idea um I I think you know to Natalie's point I mean every situation is different and part of what I liked about the way that this can work is that it can be designed for each business or each organization's uh approach to life and efforts to uh create something that fits its own values and its own Vision um Ariana you know well and Natalie knows now from having work with us I mean we start everything with a vision so there actually is a vision that was written for the Perpetual that we wrote for the Perpetual purpose trust uh so having vision of where you're going uh is very powerful and a lot of people don't quite think about it and I understand that but you can write vision for long after you're there uh and not to try to lock in the future in every level of detail because I think in my mind we want to leave people who are in the future to design their own future but if you have a sense of what it's like what your relationship what the business is like if you've left the business uh etc etc you can write a vision like that so I've seen people write Visions for postretirement uh how the company's going how they relate to the company etc etc so having some sense of vision uh documented shared and actively bought into certainly makes a huge difference uh governance is a second thing so I I think Natalie I mean we were a little bit of an aberration because we had this long-standing governance model that had nothing to do with this uh I would say not saying this judgmentally at all but most businesses including most businesses owned by good friends of mine are still kind of run like monarchies uh it's not the end of the world but it's still sort of king and queen or king or queen or whatever Royal figure so ultimately even if people delegate a lot and involve people more uh extensively through the organization still the ultimate decision-making power and the legal ownership is still held uh very tightly by in quotes the royal family and I'm not judging that it just makes it harder for succession so if you have a kid that's going to take over then it that model can work I guess uh but we didn't have that we never wanted that that was never Our intention so in a good way uh for us uh we it's 30 years this year is the anniversary of starting to run our organization by consensus of our partners Group which in the beginning I think Maggie's on this was Maggie I think six seven eight people we were meeting in Maggie's living room at her house on on Cambridge Street in Burns Park if I remember right now it's I think 21 or 22 people including four Staff Partners Etc but because we're making decisions by consensus of that group it's really long since past me or Paul having to be present for a decision to be made so I hope I'm to be here for quite a while still but if we were to have as I always said if the Martians were coming to come and get us one day and we were gone the group still knew what to do the procedure for decision making at this organization level still applies so those two things Vision uh and and and governance are big pieces of this that don't need to wait until the actual trust itself is completed uh and then I think it's implicit but having values documented in in our case also now the beliefs uh are documented makes it easier too because you're not just coming up with some construct that's floating out in space it needs to be uh created built designed Etc around the values the vision the mission uh and the governance and Maggie confirms that yes seven or eight people in that original Zingerman's Partners group thank you Maggie Natalie um I also want to pose the same question to you of what is some of your advice for for getting started what are some of the things folks can think about yeah well um 100% want to back up what Ari's saying around um an owner's starting to think about the multiple hats that they wear and succession planning for those multiple hats so there's your day-to-day leadership hat and there's your ownership hat and thinking about both and what you're doing to cultivate the next generation of leaders in your business and then also thinking simultaneously about your succession plan as a as a shareholder um and in terms of cultivating the Next Generation I mean that work of documenting how you've operated that's made you successful that's that secret sauce of your business of how you behave how you treat your customers how you treat each other how you show up in the world what your quality you know and value commitments are and writing that down and you can write it down operationally in ways that you can build it into your human system so you know from uh how you Orient people when they join your business and train to how you evaluate people's per performance over time or they not just you know getting this out on time but they they're doing it a way where they're living your values and and demonstrating those um and um then when it you know comes to ownership and one of these purpose trusts we can actually say these commitments are going into the trust agreement that the future trust stewardship committee which ensures governance over time ensures that the leaders are leading the company with these values intact and that we're seeing evidence these values are still being carried forward um so you're actually embedding it in multiple levels of the organization there from across your human systems and even in in your your ownership structure um so articulating what those things are and uh what um in kind of training and promoting and um rewarding around those things is how you get people who step up into those leadership roles carrying those values that aren't necessarily your kids but they're your your values kids I guess you'd say right and they're bringing their own stuff to it too um the other uh thing I would say is start talking about ownership succession planning I think some people are a little bit hesitant to talk about ownership it's that thing in the background who owns the company and what do they do um but employees start to get a little anxious when they see Founders like getting older maybe you want to retire someday what's your plan so I actually think it can be very um motivating to say hey guys open book I'm considering my succession options and I'm looking into these things and be clear about what the options are you're looking into um and what um you're committed to in any sort of option so for example if it's important to you that the business will stay local um continue to operate with a certain amount of things say I'm looking into options that will do these things um and uh engage people in the process so we found it to be very successful sometimes when businesses actually get the next generation of leaders to help them design what the future ownership plan will be um because they'll have to execute it uh together with the founders and carry it on past the founders so I think starting to talk about ownership early in an open way and engage people and what the plan is um is important so the followup yeah all right go ahead oh I was just gonna thank you Natalie I I didn't mention but so I early on in this I started to look at succession and again I don't know if this is right it's just how I was framing it mentally in three broad categories uh in no particular order one is the governance succession which we talked about another is cultural succession it's kind of implicit in what Natalie was bringing up uh and then the third is the legal or SL Financial succession and there really three different things that certainly overlap uh we were fortunate here because like I said we had the governance succession whether we called it succession or not it was there was a systemic approach to it that involved more than me and Paul for many years cultural succession one never knows but I I feel like the way that we work with all the open meetings and the classes and not thinking hierarchically and staff partners and million things that are good talk good for other webinars or that I write about or in the zinc train seminars those all have enhanced the likelihood that we can have positive cultural succession I I really you know I don't know that I'm right but I feel like there's literally hundreds of people in the organization who could step like I could walk tomorrow and they could step into that role would they do it the same no of course not but I think they could do it and and do it well including you Ariana uh and then the third was the one that we didn't have the answer answer to which is the legal Su and financial succession and that was where uh with Natalie's help putting the Perpetual purpose trust in place has been a huge Plus for us and then thank you um I really like having those those three different options because I think owners as far as I've seen you you don't go into it saying like oh I really want to have these three different structures and think about all of this you just show up today to work and do the work so I think it's really helpful to kind of like divide out those different areas how what was the reaction like from staff at Zingerman's because Natalie set us up for it could be it could feel a little scary to share well Ariana you you could speak to it probably better than me because I'm not staff but uh I I think here and and Natalie will have experience in other places where this is probably uh is was probably very different here because we have open meetings because we have open book because we have been using this governance model for so long um there really was no day-to-day change in the way the organization worked uh that would be immediately noticeable to anybody and I I think that's good uh it made it way easier I mean the only tangible difference was that people who own a what we call a community share which is a whole another conversation but like Ariana that are and I each own one Community share it's all you can own it's like a co-op so for those people they're going to get a little extra money every year now because of this and that little extra will grow over time until over uh 50% of the of the intellectual property or in Business School the brand will be owned by uh the community Sher so from an employee standpoint it's like awesome I just get more money uh there's you know and it's not that much money that they're going to change their life overnight it's just a little bit more you know it's particular point in the year so for us I think the transition was much more as I've described it like flowing from One River into another uh it wasn't like tear down this building and build a new one and move everybody into the new one I I know people who are doing this where it's a lot different or more uh significant change because the whole governance of the organization needs to change as part of it but for us I think I don't know Ariana you could comment as well as I can but I think it's really been relatively fluid yeah and I think that folks have had a lot of questions but because we are familiar with what Partners group is and conversations that come up um Community shares all of these details it kind of it made sense and just the way you talk about it with like um it Zingerman's continuing I think that's what people they just want to know and I just want to know will zingerman continue to be zingerman and when there's when we can see all of these details that say yes I think that is is the relief it's like yes we're working towards something that will continue on into the future yep awesome and Natalie what have you seen with reactions from staff or Community yeah well I think it's um definitely positive along the lines of what Ari was saying um one thing that sticks out in my mind is I remember um a warehouser in a business we did this whole presentation on the change of ownership to have the business be self- owned by a trust moving forward and to share the profits um with the employees and and stakeholders as we go and they said uh well I get it we really are owned by the mission is what he said he saidou know a lot of people they say oh you work for the mission but you really work for the man you work for somebody else yeah and that's the company is their property and they can choose to cash in on it when they want and they can take out of it what they want and they might treat it as a steward where they don't just take use it as a piggy bank to take tons of cash out and they don't just think about selling it to the highest bid they might really think about in a stewardship way but who will replace them and so I think what this uh guy was saying is hey um a lot of people say you work for the mission but you really work for somebody else and who will that next somebody else be and will they keep the jobs here and will they keep the culture here and while they keep everything we're actually making a plan where we're actually going to have the company self-owned by and for its Mission over time and as I come to work every day I'm working for that mission not somebody else and I get to to share in the return so he saw it as a kind of putting your structure where your mouth is or your money where your mouth is to say a lot of people say work for this but you know you work for somebody else we actually do work for this here and we actually get to share as we go um so you know I see a lot of that and the continuity thing is important for a lot of people a lot of people want to work to someplace where they believe in what they're doing and the disruption that can be caused and maybe you find a great aligned buyer the first time but then what about the next buyer and the next buyer and so people get anxious about how that might change um the future so I think it you know the security of continuity um sharing their rewards as you go and knowing that you really do work for for the mission very inspiring we do also have some really awesome questions so I will ask them to both of you the first one for now Natalie uh Molly asked does this information those Perpetual purpose trusts or employee how does it apply to nonprofits as well as for-profit organizations yeah so um no and we're talking about I mean nonprofits can exist where uh they exist for a charitable purpose right to fulfill and they carry it out through their operations whether they get donations for those operations or they can actually sell products services and reinvest that money back into the charitable purpose but in a nonprofit technically the employees that are working there or investors or others can't share in the profits it's supposed to 100% go back towards a charitable cause um we've actually had a few nonprofits talk to us about reincorporating as a for-profit but under a purpose trust um for example one I talked to they were working in the recycling industry and they started off as an nonprofit to create the infrastructure for recycling but they decided you know we'd like to reward our employees working here over time and so forth and but we want to keep to this this Mission so they were actually looking at putting those in a for-profit operation but ensuring that the company would say self phoned nobody could cash in and sell it to some larger recycling company you know who um and um and and sharing as they go so it's it is the Perpetual purpose trust can be a shareholder and for-profit not a nonprofit but it's a way of locking in a for-profit saying self-owned Mission driven and sharing the rewards and governance with people you designate um so um those are some examples um I saw another question in the chat about you know um how do employees get paid when they leave or can they cash in um these models are really built to kind of share as you go so uh again it's not about kind of leaving and cashing in stock you don't actually hold stock uh the trust holds the staff the company self-owned so you share and profits as you go but that doesn't stop people from building um plans with the profits to um create long-term savings so we've seen some companies rather than put it all towards profit sharing they'll put it towards retirement plans 401ks um other vehicles that can can grow value um so there are ways to um have something that somebody is gaining over time that maybe they have vesting based on a number of years um almost mimicking some of the aspects of stockholding but not actually having direct stock ownership in the company itself on the the other scale of things what if you have a really small business so Heather asked if you have say 10 employees and you set it up what happens if the employees were to leave or what happens when you actually like need that capital and there's no owner to kind of uh fill up the the capital bucket yeah well uh changing the ownership structure doesn't um mean that you don't have to run a great business so you still have to run a great business and um keep keep the business out operating make sure you have positive cash flows um and as we do these structures we actually really encourage folks to think about what they need from a capitalization standpoint to make sure that um you know they can get money from a bank uh over time to cover their expenses and if not some companies do uh structure relationships where they do have ongoing investors alongside a purpose trust to provide working capital for the business uh or growth capital and that can be done where you can put a trust in place to ensure the company's never sold and keeps the company committed to the purpose and the shares held by the trust the profits go to benefit your employees or others but alongside the trust you can have investors in stock that can uh gain in a portion of the profits you just have to make sure that their return on investment isn't predicated on the sale of the company someday because that would be at odds with the trust so it's um you w to sharing as you go model with the returns that are made um through the company to both your investors and your employees so you got to think through capitalization and giving the company the the financial resources to operate and and running a good business um in addition to this I think the next question switches over to the governance leadership side so Emily asks how do big decisions get made well that's something everybody can every organization can decide for itself what they want to use and Zing train in the leading with Zing seminar teaches some of the different models but like I said here we've been using a consensus model for decision making at the partner level uh for 30 years so that can mean a our partners group uh which is all the managing Partners plus me and uh until Paul pulled back Paul and then as of eight years ago uh first three and now four what we call Staff Partners it's another conversation but they serve two-year terms but it's by consensus so uh I'll be voting next November don't worry but this is the opposite of voting so instead of there's 21 of us so 11 say yay and 10 say nay and we just then that's the end of it what we do is stay in conversation as awkward as it may be until we come out of it with a positive uh outcome and I I it's a whole another talk but I I know there's a lot of negative beliefs about consensus and it can be certainly used poorly but we seem to have made it work and for clarity we did manage through the entire pandemic by consensus of that group and came out the other side um then we also use consensus within each business at the partner level too there's no right or wrong I mean you can use voting you can do this and still have one person in charge for us uh We've separated in essence I'm saying it's more black and white than it is in practice but separated the governance of the organization from the decision making within the brand so when we uh decide to do some licensed work Ariana happens to be on uh the board with me uh where we make those decisions but there's uh five of us that are on there right now uh including Ariana and Roger Bowser from one of the partners at the Delhi so but that that board only makes decisions about the use of the name uh it doesn't make decisions about the price of coffee or which chocolate buyer to carry at the candy store that sort of thing the other question too is AR you're still in the organization yeah what is the role and contribution as of a Founder as they're in the organization to stepping away from the business well Natalie again can speak to more broadly to what possibilities are but I took this you can kind of like she said it's bespoke that was a little throw out to the UK folks but and uh but anyway in a good way but uh it can be tailored to what you want to do so Paul and I uh continue to get our salaries I can't remember exactly how many years but for a while so that we can feel confident that as long as the organization to Natalie's Point remains well-run that we will continue to get paid and have some money to live on but over time then we're essentially I mean in practice it's buying it out but not at we're not getting bought out at the price we would get if we were to have sold it to a third party uh who might pay a lot of money for the Zingerman's name so they could open zingerman all over the country this is uh a way for us to continue to have an income and feel some level of confidence that we won't be uh looking for a job at the age of 85 uh and and uh and and have that income so how we've tailored it so I know Sharon had asked about that I think it can be designed in whatever way Natalie can chime in knows better than I do but can be designed in whatever way is sustainable for the organization and sustainable for you as the founder yeah so uh yeah not much to add um it can be you're still actively involved in leadership and governance when you make the change you're starting to pull back from leadership you're ready to pull back from both leadership and governance um it really depends on the on the P of Founders at I mean when that when the article started to come out in a good way like I've had quite a few customers go like I heard you retired I'm like no none of that's changed I'm still doing exactly what I was doing before what this is doing is getting out front of how the succession will work and that the biggest piece of it is that it it keep as Natalie said it keeps the organization from being sold uh and it allows to Ariana's point that people can feel confidence that 20 30 40 years from now if we run the organization well I me and Paul it's unlikely we'll still be on the planet but other people will be and that zingerman won't have ended up uh being run by some multinational in in whatever the Middle East or Manhattan or Manhattan Beach in California it can still be based here uh nothing against any of those three places but they're not in Arbor I I'll add that um there's a a term that's been coined in in Europe that is being used for these uh types of ownership models where the the businesses are self-governed and sharing their rewards with people who are active in the business versus kind of absentee folks and that they are perpetually independent it's called stewardship ownership so it's a different way of thinking about ownership that you're passing it on to people who are Steward the business moving forward they share in the rewards and nobody can sell the business office their their own commodity um I see a bunch of questions in the chat about kind of financing um there's a lot of technical stuff there but yes businesses that are owned by a trust can take on debt so long as the business can prove to the bank that it has the collateral or the capacity you know Revenue wise to pay back the debt so we found that Banks look at businesses the same as they do when they're owned by people when they're owned by a trust in terms of what is the business's capacity and track record to pay it back sometimes you do have to transfer some of the guarantees from individuals to um to the business and and there can be a little bit of complexity there um and as I said you can also have investors participate in these models so long as money doesn't equal power it's again about stewardship of the Enterprise and money can participate and have economic rewards and and um guaranteed mechanisms to pay investors back over time but it's not about selling the business um over time similarly I want to say you know um some people think you have to just donate your business into one of these trusts um I mean Patagonia has now famously donated their business into the trust ofun and are donated the business but um in most circumstances Founders have invested significant resources of their own funds a lot of Sweat Equity over the years they need a nest St out for retirement so uh basically the owners just take on an agreement to have the business buy back their stock over time in many cases so the business will say we will buy your ownership stake out at x value over 10 years over 15 years and we just model out the business's capacity to pay out the owners based on its cash flows um sometimes we can even take on thirdparty financing to um borrow some money to get a first chunk of ownership out and then pay the rest over time so um just wanted to to address a few of those financing questions in the chat and I know there are a lot more more questions so one which I believe you can answer very quickly Natalie is there a list of companies that have become Perpetual purpose trusts yes um we've been working with a a a researcher at a University of Texas and we have a list of companies that are owned by purpose trust now in the United States or employee ownership trust is another name for them um as well as we've created a a list of service providers Consultants uh lawyers um funders who are actively working with businesses on on purpose trust so um I can share those um out and I also um shared with Ariana a a link to a International Organization for stewardship ownership that promotes these models obviously the legal form is slightly different in Europe and different jurisdictions and as is the United States but is this philosophy around stewardship ownership and how you design a business structure to do so um some links there and yes so where else can people go to if they just want to like learn more for themselves well certainly I'll send out this this toolkit on Steward ownership uh and my website um has some some resources I work with with business owners to design these structures and I can certainly route them to also we have a growing list of people who are doing um doing these trusts who have the capacity to do these so um kind of direct people to somebody in their area who might be available to help awesome and Ari we can get your email too but would you be willing to answer questions if folks would like to reach out yeah no absolutely uh to John's question very quickly uh John Paul and I we have ownership in the businesses and ownership of the brand so we've had to separate in order to do this we've separated those two uh but again that's you know to Natalie's point it's like a bespoke a customized application to each business's uh approach all right thank you to any final words from either of you to share on this on this topic on the it it is really inspiring so I'd like to end on that what are some of your final thoughts well I seeing this as the wave of the future you know there's 12 million businesses small and mediumsized businesses in the United States that are still privately held that um according to surveys will be turning over in the next five to 10 years so they can you know shut down or they can look at selling um and I'm hoping that a bunch of those businesses will choose this path of Steward ownership I think that it can have a lot of positive results for using business as a Force for good and kind of capitalism 2.0 where we have wealth broadly shared um and businesses operating in the responsible way so um I'm hoping that this can be a solution that is more widely adopted and and more advisors can help companies do this thank I'll just appreciate Natalie who was awesome to work with and I appreciate Ariana who's been part of this from the beginning uh as a participant in the organization and an active one at that so uh it's been great I agree with Natalie as I said when this conversation started here we didn't know anything about it i' like a lot of the People Natalie just referenced in those surveys when we started whatever like succession was not at issue um but I think this is for me is it may not be for everybody but this approach is really great uh for us uh because it allows zingerman to stay in our community which is a really big piece of what's been an important uh it's component of our work for all these years uh tomorrow's e newss is about non-conformance and this is a conforming uh model in that it doesn't fit with what 99.9% of people have done but uh it references the uh artist Ben Shan who wrote about non-conformity and uh he said what I think is true which is that greatness comes from non-conformity uh you can go along Ong much more easily by following the plans that everybody else has used but they don't achieve uh meaningful greatness in this way and I'm I'm deeply appreciative to Paul and uh to Ron Mau here and Gary Bruder our attorney and Natalie and just everybody in the organization that's helped to create this it's highly imperfect there will be problems there's always problems uh but I think that we've created something that hopefully as Natalie said will be of help to other people around the country and hopefully even around the planet and it is as Tim Redmond said thank you Tim it's a much nicer way to do it and metaphorically as I've been writing about you know the typical model is that you start the forest as owners you plant trees then you do it for 30 20 30 40 years then you clearcut the forest because you're done you take the money and move somewhere if in our case warmer uh where there's not ice storms like this morning and you're done and it goes off and gets passed to some big company and this is a a way instead to create what I look at as a old growth forest and you don't have to do a ton of research on Forest to understand that the impact of an old growth forest on its ecosystem is radically bigger than merely the number of trees that it could be replaced by in a New Forest so that's really what this is about thank you thank you Natalie thank you Ari thank you all so much for being here for answering your questions yes we will absolutely share the recording it will be on our website it will also be in the followup email and we really appreciate you all joining us today if your question went unanswered um we'll get back to you and we'll try and connect you with some answers um but yes thank you Katie and the background for helping us with questions but Ari and Natalie for having these conversations I know that it's been so much time but thank you for from my side for preserving zans for that that feeling that I know that I'm working towards something that will continue to go but also Natalie for all the other organizations that you're bringing in and and sharing these creative ideas um for for working with purpose uh for those of you listening in we would love to hear what you thought of today's conversation um if you have thoughts for future webinars please let us know Katie is going to put a link to a survey into the chat there that you can fill out and then a follow-up email will come soon and we look forward to continuing the conversation so please let us know and Natalie and Ari I hope you have a wonderful rest of your day it's been such a pleasure and everyone have a wonderful rest of your day we'll see you again soon thank you thank you all thank you all really appreciate it thank you