Hansen Plastics Corp. (Elgin, IL)
Elgin plastics company's ESOP breaks the mold discusses Elgin, IL based Hansen Plastics Corp., a 100% ESOP-owned plastic moldings company with 60 employees. Their employee averages 10 years of employment and they have a low turnover rate:
The company Hansen currently has 60 employee-owners who have an average of 10 years employment with low turnover, a characteristic that's not uncommon for an ESOP, according to Michael Keeling, president of The ESOP Association.
The company uses employee ownership as a way to distinguish them from their competition:
"When we do a sales pitch, usually what this potential customer wants to know is, why to go with us," said Roy Lilly, president and CEO, "We have a completely different, positive attitude. These employees have stock in the company."
The company is run by a three-person Board of Directors and an ESOP Committee and the company uses Open-Book Management, which increases quality and productivity:
When employees are a company's owners, they have a vested interest in the company's bottom line, which increases quality and productivity, explains Vice President of Operations Tim Bayer. "No one is departmentalized," he said. Employees have open access to the company's statements of profits and losses.
The company also credits part of its growth and success to the input of the employees:
Hansen's growth and success is also based on internal changes and advancements, due in large part to the input to management provided by the employee-owners, according to Lilly.
Outside his office door, which is directly adjacent to the manufacturing area, sits a stack of bright pink "Continuous Improvement" forms, filled with workers' suggestions, each of which Lilly carefully considers. Throughout the work area, Lilly can point out machinery that once took one person per machine to operate, but through employee input has increased efficiencies that require only one person for four or five machines.
UPDATE 4/29/08:
Breaking the mold: Hansen Plastics competes globally provides a company profile, discusses how they compete globally, and how the ESOP was setup to reward long-term employees and serve as a morale builder:
Before stepping down, Watermann sought to reward Hansen's longtime employees who helped fuel the company's steady growth, according to Lilly.
"He found this ESOP (employee stock ownership plan) option and decided to sell the business to us," Lilly said.
He said the nice thing about ESOP is that employees need not purchase the company out of their own pocket. "You buy it from company profits -- so it didn't cost employees any money," Lilly said.
He described ESOP as a morale builder as well, "because when an employee makes a bad part -- it gets them right where it hurts -- in their wallet."
1 comments:
Congrats to Elgins Plastics. What a wonderful story (for a change). So often, employees do not feel any ownership in the business. This great company has learned a valuable lessons that most do not. All managers know that turnover is expensive. However, as managers, we have not done our jobs very well. Ask any managers if they believe turnover is costly, and they will get to sputtering and slinging words yet not be able to quantify the estimated costs. Don’t believe me? Go out and survey your top managers. If you research this area, you’ll find a wide array of answers ranging from the ridiculously low to the outrageously high. The cost of turnover can vary greatly—estimates of turnover costs range from ten percent to two hundred percent of annual compensation. The hidden costs are more difficult to estimate and include customer service disruption, emotional costs, loss of morale, burnout/absenteeism among remaining employees, loss of experience, continuity, loss of “corporate memory,” workers’ compensation expenses, relocation costs, interview time, advertising, recruitment fees, lowered quality standards, poor community image, etc. Indeed, I don’t believe you can ever capture all of the true costs of turnover. At best, it is only going to be an educated guesstimate. I personally like the one-third rule, that is, turnover costs about a third of the annual salary of the person you are replacing. This is probably too low, but we have to start somewhere. Michael L. Gooch, SPHR author of Wingtips with Spurs: Cowboy Wisdom for Today’s Business Leaders http://www.michaellgooch.com
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