Our team asked our CEO, Rebecca Andino, about why Highlight became an ESOP company. The ESOP will benefit Highlight and its employees in many ways. Listen or read this interview to hear Rebecca’s plans and goals with the ESOP.
Hi, I’m Rebecca Andino, CEO of Highlight.
Why did Highlight decide to become an ESOP?
Over the past few years we explored different acquisition paths for the company, such as selling to a larger company or getting acquired by a venture capital firm. We ultimately decided that an Employee Ownership Stock Plan, or an ESOP, which gives ownership of the company to the employees was the best choice for Highlight.
Having an ESOP allows us to keep our current leadership team intact, maintain our unique corporate culture and values, and gives our employees an ownership stake in the company.
Another reason we decided to become an ESOP was based on my personal experience. My dad worked for an ESOP-owned company and I saw how it benefited my family. Also, my first job out of Graduate School was with an ESOP owned company. I worked there for seven years and when I left, I got a nice-sized ESOP payout, which eventually became the savings that I used to start Highlight 13 years ago.
What are the benefits for the business?
Having an ESOP provides some tactical benefits, such as being a tax-free entity that allows us to reinvest 100% of the profits back into the business. However, the fundamental benefit for the business is the alignment of interests and the shared ownership across the company.
We are now truly all in this together. If the company does well, the stock price goes up and we all share in the increased value. It’s a process that we’re just starting now, but having an ESOP prompts us to include the entire workforce in a new level of conversation, sharing information such as how the company is doing, what we have achieved, what challenges we’re facing, and where we’re headed.
Other companies also share this information with employees, but I think that now that our employees are also owners, this conversation takes on a new level of significance.
Now I’m not only no longer just briefing our workforce; I’m briefing our shareholders on the status of the company. I believe that having this ownership mentality will prompt all of us to think more about the health of the business and how each of our actions directly impact the business.
Hopefully people will be asking questions, like:
“How does my contract impact the company?”
“What do we need to do to maintain our success?”
“What are the risks for us as a company?”
“Where could we be saving money?”
“Could this be a new opportunity for us?”
And so on.
Not everyone will have these ideas or feelings of ownership, but just having a few more people think about these questions and talk about them will eventually turn into small wins, which will eventually turn into big wins. But I think we will ultimately perform even better than we expected.
My prediction about this ownership mentality impacting the company is based on my intuition and is also backed by research. According to the National Center for Employee Ownership, NCEO, in general, ESOP companies that practice participative management grow 8 to 11% per year faster than they would have otherwise.
How will the ESOP help our employees?
First, the money is a critical component of support.
The ESOP will be another source of retirement savings and wealth-building for our employees. Each year we will close the books on December 31st and do an independent valuation of the company in the first quarter of the year.
After that, employees will receive a statement showing the price per share, the number of shares they have, and their total ownership value.
Additionally, having the ESOP allows our employees the opportunity to help build a company and share in the real rewards from the increased value of the business. And I think that being involved in that level of the business will be exciting and empowering to many employees.
We will be working on providing more educational sessions that explain the components of how the share price is calculated, how we make profits, what our expense drivers are, and how our current contracts and business development pipeline directly impact the share price. This is another way that we will be involving all of the employees in the conversation about the business aspect of our company.
Additionally, these sessions may give employees a new perspective about how firms in our industry operate in general. And back to the bottom line, which is always important: according to NCEO employees of ESOP-owned companies make 5 to 12% more in wages and had almost three times the retirement assets as workers in similar non-ESOP companies.
According to NCEO, the average ESOP participant receives about $4000 per year in company contributions and has an account balance of about $55,000.
Highlight’s results may vary, but it is my intention to ensure that Highlight’s ESOP contributions are fair and generous.
What are we hoping to achieve with the ESOP?
The ESOP helps to fulfill my long-term vision for the company, which is to develop and sustain a business that provides flexible and rewarding careers for dedicated individuals by delivering outstanding value to our customers.
The ESOP is a key way to help us provide rewarding careers to people, from a financial and emotional perspective. The ESOP is designed to reward people for long-term service and growing the business. I’m hoping that the ESOP will really help with retention, which in turn helps the company perform better in our contracts, as well as strengthen our institutional knowledge and community.
Given the significant financial rewards investing structure of the ESOP, I hope it becomes a reason people think twice before looking for a new job or leaving. We are in such a competitive recruiting environment, and I know people have choices. If the ESOP could entice just a few more people to stay on and be part of our company for just a few more years, that’s a huge value.
I do recognize that people sometimes need to move on, and I do support our employees in their career choices, regardless of where they decide to work.
I want to make Highlight the best, most attractive and rewarding company we can possibly be for employees. And the ESOP is a tool to help us with that.
I am so pleased with the amazing team of people that makeup Highlight and I’m so excited to work with all of our employee owners on this next step of the company’s journey.
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