Developing a High Performance Ownership Culture The ESOP Association New South Chapter Fall Conference Orlando, Florida October 18, 2012 Alex Moss Praxis Consulting Group, Inc.

TEA New South Chapter | Ownership Culture Agenda Attendee demographics Success Drivers & Employee Ownership Foundation Ownership Culture framework & tools Discussion TEA New South Chapter | Ownership Culture October 18, 2012

TEA New South Chapter | Ownership Culture Who’s Here? Size: employees Over 1,000 Over 500 Over 100 100 or fewer ESOP % 100% Majority (50%+) Minority (under 50%) C-Corp / S-Corp Leveraged / Unleveraged ESOP age Over 20 years Over 10 years Over 2 years 2 years or less Board of Directors Internal / external ESOP Trustee Professional advisors Guests TEA New South Chapter | Ownership Culture October 18, 2012

ESOP Success Drivers Supportive legal / regulatory environment Well-managed ESOPs Competitive ESOP companies Public support TEA New South Chapter | Ownership Culture October 18, 2012

Employee Ownership Foundation: Silent Auction Goal $4,000 Progress: $2,000, so far Drawing: coming right up! Impact Jobs research Other performance research, Kelso (& other) Fellowships UPenn CEO program Case studies: www.caseplace.org, CLEO Edmunson Scholarships TEA New South Chapter | Ownership Culture October 18, 2012

Future Vision [From Southwest Chapter, September 2007] Imagine that it’s October 2012, and you are celebrating the past 5 years’ achievements under employee ownership In what ways does your company look the same? In what ways do we look different? Stories that illustrate our success? So: what are you learning? TEA New South Chapter | Ownership Culture October 18, 2012

The Big Picture: Alignment Drives Performance Strategy Culture Leadership High Performance TEA New South Chapter | Ownership Culture October 18, 2012

Employees Generally Value: Payroll Cash: today Security: next month / next year(s) Job quality Work environment: people, physical Learning / advancement opportunity Making a difference Short term benefits, e.g. vacation, health care, profit sharing, etc. Retirement benefits, e.g. Pension, 401(k) Ownership = ESOP TEA New South Chapter | Ownership Culture October 18, 2012

Intrinsic Motivation: Daniel Pink “There’s a mismatch between what science knows and what business does.” Extrinsic motivators work for narrow, fixed, known tasks Intrinsic motivators work for the kinds of problems that increasing define our work and our economy Autonomy Mastery Purpose TED talk: www.ted.com/talks/dan_pink_on_motivation.html Book: Drive TEA New South Chapter | Ownership Culture October 18, 2012

TEA New South Chapter | Ownership Culture Running your company so that employees think, feel and act like co-owners Employees at all levels understand who decides what and why have access to structures, training, information and management support for participation participate actively, effectively and appropriately to continuously improve company performance TEA New South Chapter | Ownership Culture October 18, 2012

ESOP Governance…and Opportunity Shareholders Individual Owners ESOP Trustees ESOP Participants when meet eligibility requirements are represented by select elect Board of Directors appoint and oversee CEO / President ESOP Committee: Promote Ownership hire and oversee Leadership Team hire and oversee Employees TEA New South Chapter | Ownership Culture October 18, 2012 10

We Know It Works: Sample Research Findings Dramatically lower job loss during Great Recession: ~4:1 Improved worker productivity Increased sales growth rate Reduced employee turnover Substantial individual account balances Better retirement benefits: ESOP + other TEA New South Chapter | Ownership Culture October 18, 2012

How do ESOPs Affect Business Performance? Ownership Participation Improved Performance TEA New South Chapter | Ownership Culture October 18, 2012

TEA New South Chapter | Ownership Culture Bottom Line The ESOP creates an opportunity for you to share the wealth you help create The data is on your side: it can be very successful There are no guarantees, success is up to you TEA New South Chapter | Ownership Culture October 18, 2012

What Kind of ESOP Do We Want? Level of Engagement Change Fantasy ESOP Culture Change Not everyone needs to use the ESOP to change things. Here’s a framework to understand it how to think about the ESOP in your company’s culture. So every consultant has a matrix… X axis- level of engagement and participation Y axis – degree of change. Benefits only Many companies choose to be here. It makes more sense given the management and priorities of the business. That’s fine– the important thing to make sure here.. Its to not communicate too much. You don’t want oversell the idea of ee ownership if you’re not going really going to listen to ee input, or give them more opportunities to provide input– you’re just going to raise expectations and not meet them. In these cases, it’s better to still communicate, but make sure you frame and emphasize the retirement benefit aspects and financial rewards of the ESOP Supporting Pillar You may already have a lot of elements of ownership culture in place… or you may have a strong distinct culture that you want to preserve. Then the ESOP needs to be communicated in the context of who you already are: - ClifBar – 5 aspirations Chemonics Telecare Culture and Performance You’re using the ESOP as lever to change the culture and increase engagement Process that takes place over many years. Initial communication– provide basic education, and give a sense of the change to come in the future as a result of this. Fantasy ESOP I want change and performance benefits, but I don’t want EE participation I’m not aware of this existing. Sorry. Fantasy ESOP. Benefits Only Supporting Pillar TEA New South Chapter | Ownership Culture October 18, 2012

TEA New South Chapter | Ownership Culture How: Step 1 Formulate “Ownership Vision” linked to business strategy: what’s the value of being employee-owned, what does “good” look like? Finance Independence Operational What evidence would tell you that it’s working? TEA New South Chapter | Ownership Culture October 18, 2012

TEA New South Chapter | Ownership Culture How: Step 2 Clarify “Ownership Behaviors” What should employee-owners do? What do leaders & managers need to do to support this? Learning goals What knowledge & skills does each group need to support these behaviors? What will you track / measure? TEA New South Chapter | Ownership Culture October 18, 2012

TEA New South Chapter | Ownership Culture How: Step 3 Assessment & gap analysis What are we already doing that is most successful? What is consistent with ownership culture…we just don’t call it that? What do we need more of? What do we need less of? TEA New South Chapter | Ownership Culture October 18, 2012

TEA New South Chapter | Ownership Culture How Step 4: Planning & ongoing execution Education & communication Incentive alignment Participation structures / mechanisms Step 5: Monitoring & evaluation Periodically review data Corrective action Learning & continuous improvement! Step 6: Lather, rinse, repeat TEA New South Chapter | Ownership Culture October 18, 2012

TEA New South Chapter | Ownership Culture It’s a Balance Passion Planning Resources TEA New South Chapter | Ownership Culture October 18, 2012

Discussion / Questions TEA New South Chapter | Ownership Culture October 18, 2012

TEA New South Chapter | Ownership Culture Contact Information Alexander P. Moss Principal Praxis Consulting Group, Inc. 9 West Highland Avenue Philadelphia, PA 19118 www.praxisCG.com alex@praxiscg.com 215.753.0303 Article: “Building Long-Term Value: Developing a High-Performance Ownership Culture” www.praxiscg.com/published-work/building-long-term-value-developing-high-performance-ownership-culture TEA New South Chapter | Ownership Culture October 18, 2012