In the News: A Different Approach to Management and Compensation and Aligning Business Objectives with the Clients’ Objectives

North Highland: A Remarkable Consulting Firm Built on a Culture of Ownership discusses the story of North Highland, a 100% ESOP-owned consulting company with 500 employees. They used an ESOP to help transition the company from a local consulting firm to one that has a national and international focus:

Dave decided to share company ownership with employees from the very beginning, although it was a 10-year journey before the company was fully owned by its employees. A formal employee ownership program began in 1998 in the form of a leveraged employee stock ownership plan (ESOP) consisting of 30 percent of the company. As employees left and the company bought their stock, the ESOP gained controlling interest in about 2001. In December of 2007, the ESOP purchased the remaining equity-holders' shares, making the company 100 percent employee-owned…."When we became 100 percent employee-owned, there wasn't anything new as much as a recommitment and rededication to employee ownership," says CFO Kirk Hancock. "We try to look out for our clients and our people, and the company is a net result of that. A sense of entrepreneurship is what we strive for. That's always at the heart of employee ownership."

The company uses a different approach to management and compensation:

"Through employee ownership, we understand that the long-term health of the company is our responsibility," says Kirk. "Employees are charged with wearing their employee hats and owner hats. There's a complicated compensation structure at all levels of the organization, all tied to the quality delivery of their particular area. People are very well aligned to the success of their work. Their current compensation is tied to utilization, account growth and profit. Their long-term compensation is tied to the growth and success of the company. Those two aspects vary a lot. When times are tough they understand why we reduce our variable compensation. When times are good they know why they're getting more. I love to see that healthy tension. It shows that we're doing things right."

"At first, employees are interested but skeptical," says Dave. "Early on they see the unique culture. It takes a few years of getting annual statements before they see the benefits." The results for the company are low turnover (less than 10 percent, half of which is voluntary), an alignment with clients, and taking risks to make sure consultants do a good job on every assignment.

The company has aligned the objectives of the business with their clients' objectives by developing an ownership culture, holding semi-annual meetings, communicating financial results, and providing a two-day course for new employees to introduce the company culture and values.