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Study: Employee-owned businesses fared better in pandemic

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Posted at 8:35 AM, Apr 28, 2022
and last updated 2022-04-28 10:24:16-04

KANSAS CITY, Mo. — When the COVID-19 pandemic and rising inflation cut into the bottom line of businesses, employee-owned companies did better than traditional public or privately-owned businesses.

Research from Rutgers University showed companies with employee stock ownership plans (ESOP) laid off fewer employees, cut fewer salaries and required less help from federal aid packages.

“They understood their people are their owners and therefore their most important asset,” explained Greg Graves, the former CEO of employee-owned engineering firm Burns and McDonnell.

Since retiring from the Kansas City, Missouri-based firm, Graves wrote a book called “Create Amazing” highlighting the benefits of converting to an ESOP.

He said the pandemic put some of his theories to the test and data from Rutgers backs up his book’s point: ESOPs are more resilient and allow for the redistribution of wealth despite global economic hardships.

In an ESOP, every employee owns a piece of the company, so they own a piece of the profits, and they own more of a responsibility to ensure profits go up. That ownership means employees across the board have access to more wealth instead of it going to a select owner or group. That wealth is usually realized in the form of a cash-out at retirement or upon leaving the company.

“We can make a huge difference to the country’s retirement challenge and we can make a huge difference to the economic disparities that exist like never before,” Graves pointed out.

The equity aspect of an ESOP attracted Henderson Engineers. The Lenexa, Kansas-based firm switched to an ESOP in November 2021. Longtime employee Kevin Lewis was involved in that process and took over as CEO two months later.

“With all of our employees being beneficial employee-owners, the distribution of wealth is more equitable across our entire employee base,” Lewis pointed out.

He said he’s noticed an ownership mindset in his employees since the switch. They treat the company as if it’s a car they own, and not a car they lease. They make sure to do the maintenance so the "car" lasts for years to come.

“One of our goals is to be a legacy firm, meaning we want to carry on in perpetuity. ESOP really allows us to do that,” Lewis said.

He added being an ESOP is a recruiting and retention tool in what he calls a “war for talent” in the engineering industry.

Graves' book, Create Amazing, is a finalist for the 2022 Business Book Awards in the international category. The winner will be announced in mid-May.

In one year, Graves has sold more than 5,000 copies and was the number one selling business book on Amazon for a short period. The book has led to more than 25 speaking engagements for Graves since its release in April 2021. Graves hopes his work leads more companies to switch to the ESOP model.

In and around Kansas City, other employee-owned firms include Black and Veatch, McCownGordon, JE Dunn, RYAN Lawn & Tree, Global Prairie marketing, Hy-Vee, Scheel’s and many others.