Marcia Gebarowski is the director of business development for Livingston County with Ann Arbor SPARK. She joined SPARK in 2017 after a 10-year career with the Michigan Economic Development Corporation (MEDC). A Livingston County native and current Howell resident, she builds relationships with area companies and discovers how we may help amplify stories of Livingston County’s economic development and business successes.
Along M-36 in Hamburg sits an industrial operation with around 90 employees that has a long-standing presence in the community. Flexible Metal is a Tier 1 automotive supplier producing exhaust manifolds and air cooling ducts among other uniquely designed products for the automotive, diesel, marine, and military engine markets. When I recently sat down with plant manager Joe Baxter, he enthusiastically shared with me how the company recently celebrated one year as an employee-owned organization.
An employee stock ownership plan (ESOP) is a business that provides an ownership interest in the company to its employees, tying a personal incentive to the success and profitability of the company. As Joe explains, “It’s a get rich slowly program,” where the longer you stay with the company, the more company stock you earn. Employees also gain a voice shaping the direction of the company.
The organization shifted to this model when the owner of Flexible Metal’s parent company, Hyspan Precision Products, started thinking about ensuring the legacy he had worked his life to develop. He felt the best way to preserve his company was to sell it to the employees and make it an ESOP. Flexible Metal is a 100 percent ESOP, meaning that all of the company’s shares will be transferred to the employees and no one person will retain a majority of the stock. According to Joe, “We believe that becoming an ESOP will ultimately make us more competitive in the marketplace by building a stronger, more engaged workforce focused on common goals and interests.”
Right now, close to 7,000 U.S. companies operate as an ESOP. These companies employ about 11 million people which is approximately nine percent of private sector workers. Additionally, it is estimated that employees own 100 percent of the stock in about 2,000 of these companies!
Flexible Metal is still early in its ESOP journey, so employees are just starting to understand the long-term potential and how the change will positively impact the company. Its already fostering conversations about employees’ future with the company as well as helping recruit new talent. According to Joe, it’s also influencing how management approaches day-to-day decisions. “Across the organization, we are starting to realize it is our money, and conversations are becoming more uniform.”
While an ESOP is a company with a uniquely created culture that can build pride and ownership among everyone, it can be a bit tricky when talking to prospective employees. Joe starts most conversations asking if candidates are familiar with the ESOP model. Since most people are unfamiliar, Flexible Metal created a handout to show how its ESOP operates that helps guide the conversation.
In just one year, Joe has become an ESOP advocate — encouraging any company to look into the opportunity. He says interested owners will need to be the ones to champion it and that many closely held, smaller firms would benefit the most. Looking across the ESOP landscape, while many successful ESOPs occur at smaller companies like Flexible Metal, Publix with thousands of employees is an example of a successful, large ESOP.