EOX State Centers

Episode with guests: Steve Storkan

Executive Director at EOX

(This episode was recorded in July of 2021.)

Key Episode Take-Aways:

1. The purpose for EOX State centers is to supplement employee ownership organizations. (click to jump to this topic below)  State Centers kind of supplement what the other organizations in the employer ownership world are doing. So the ESOP Association, NCEO, Democracy at Work, you know, even great game of business, to name a few do a great job of working with those businesses. But there's no organization who's got boots on the ground within a state.

2. Being an employee owned company is not any more expensive or complex as selling a business. (click to jump to this topic below)  Everybody says, not everybody, but a lot of people say it's expensive, it's complex, stay away from it. It's not any more expensive or complex than selling a business to someone else. Let me tell you, I've been doing this long enough to know the truth of that.

3. There are different ways for owners to leave the business, but if leaving a legacy is important, employee ownership is a good route to go. (click to jump to this topic below)  So, I would say, leaving a legacy, to me, is probably one of the most important things that an owner has to be thinking, if they're going to send you know, work with employee ownership. They really want to be able to live in their community after they after they sell, they want to drive by the plant, the manufacturing plant, and know that the people that helped them get to where they were, 

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Announcer 0:03

The "Change the Game" Podcast is sponsored by Prairie Capital Advisors, helping businesses think forward. For more information, visit prairiecap.com/ggob. That's prairiecap.com/ggob.

Announcer 0:23

Welcome to the "Change the Game" Podcast, where we share stories of open-book management and highlight capitalism at its best. Thank you for tuning in to this episode of the "Change to Game" Podcast with special guest Steve Storkan. In this episode, Steve outlines what it means to be an employee-owned company, and what an EOX State Center can do for owners considering employee ownership. Here's your hosts Rich Armstrong and Steve Baker.

Steve Baker 0:51
Welcome to the "Change the Game" Podcast where we are changing the game by doing business differently and highlighting stories of capitalism at its best. I'm Steve Baker. And here with me is Rich Armstrong, president of the Great Game of Business. How are you, Rich?

Rich Armstrong 1:07

I'm good. Steve, how are you?

Steve Baker 1:09

I'm great. Great. Very excited about our special guest today. Steve Storkan, Executive Director of the employee ownership expansion network. Now, Steve, we're going to call this the EOX from here on out. But Steve has been involved with employee stock ownership plans for over 25 years, which is awesome, because we think that's the one of the big keys to America's future. Most recently, the director of ESOP administration for Alaris retirement and benefits, we work closely with businesses in the creation of an ESOP and the technical administration and compliance required in subsequent years. Steve spent 11 years as a member of the board of directors of the Minnesota Dakotas chapter of the ESOP Association, where he also served as chapter president and vice president of government relations. Steve holds a certified financial planner designation from the University of Minnesota State Mankato, that man, that's a lot of letters you could have behind your name. Steve, welcome to the podcast.

Steve Storkan 2:15

Hey thanks Steve. Thanks, Rich. Glad to be here. Thanks for having me. I appreciate it.

Steve Baker 2:19

Well, you know it. We're very happy to have you here because we're a big passionate supporters of employee ownership as employee owners ourselves. And, you know, I've only been involved for 15 years, and I see why I should have found employee ownership when I was 20, instead of 40. But let's go with this. Well, you know, the first question would probably be about the employee ownership expansion network, or EOX is fairly new, it's only a few years old, and maybe you can tell our listeners a little bit about what EOX is, and why it was created.

Steve Storkan 2:55

Yeah, for sure. EOX or an employee ownership expansion network was incubated inside of the National Center for employee ownership. There are a lot of great organizations out there that support the employee-owned companies across the country. But there really has never been in the history of employee ownership that really started in 1974, there really hasn't been an organization whose only focus is the creation of new ESOP's. So, the creation of new employee ownership across the country. So, some gentlemen that are on my board of directors and ladies as well, that were interested in this, including the head of the NCEO Lauren Rogers, said, you know, State Centers, seem to be doing well across the country, it seems like the ESOP's are concentrated in states where there are state centers, we should try to figure out how to do some new state centers, and how do we do that and make that happen easier. So that was about 2015 or so and by 2018 and had really grown to be its own organization. So, on July 4 of 2018, in Philadelphia, you know, the all-American day, EOX was incorporated in Philly on July 4, 2018, and started as an organization to simply open State Centers across the country.

Steve Baker 4:08

Nice.

Rich Armstrong 4:09

Steve, I think it's really a great initiative to really build some awareness around employee ownership, which has been one of the challenges to really have businesses understand employee ownership. And for us, we have many listeners that may be employee own, but others that are really not aware of employee ownership at all. Could you give our listeners maybe just a brief education on employee ownership and what is it and you know, what should they know about employee ownership that would be beneficial to them?

Steve Storkan 4:41

Yeah, generally, you know, employee ownership, just like the words convey, it's when an employee or the employees directly or indirectly have ownership in the company that they work for. You know, this can come in many different forms. The four most common are the ones that we really talked about here at EOX. In the state centers are employee stock ownership plans or ESOP's worker cooperatives. So, it's, you know, just Co-Ops, employee ownership trusts EOT's, as they're known, which are fairly new to the United States that came over from Britain, are from the UK. And also, other forms of stock options, you know, maybe a stock appreciation rights or Phantom stock, or just, you know, General stock options like some people know them. You know, we talk about the forms of employee ownership, but they are really less important than what employee ownership really means to a worker, their family or the communities where they live. As my dad used to say, getting up and going to work every day for the man is a little different than when you get up and go to work in a place in which the profits of the company are shared with you. And or, you know, where you might have a voice and how things are things operate. So, no, for us employee ownership, we'd say employee ownership is good for everyone. It's good for the community, good for workers good for the places that they work. It provides equity and wealth for people that may not have it, or may not have saved for retirement, you know, it just has a lot of great attributes in the employee ownership world.

Steve Baker 6:16

I'm glad that you pointed that out. There's a lot of forms of employee ownership. But the decision to go to an employee ownership model takes a lot of courage on the behalf of the ownership, there may be going from, you know, a family-owned company or something like that. And I just think it's amazing that leaders have the guts to do it. So, you kind of touched upon what the EOX state centers are all about. How many are there now? And where are they mainly located? Because you did allude to that there's a lot of ESOP concentration around the center, you know, those states that have centers, where are they now.

Steve Storkan 6:57

So, prior to EOX being started, in 2018 2019, there were eight state centers that had been created on their own by different individuals, with Ohio and Vermont being the longest standing state centers. And so, in the last 30 months, since the US really got ramped up when I started in January of 19, we've directly helped open nine states centers, new State Centers, with Connecticut and Washington, DC being our two newest and just in the last two weeks, actually. And so, there's a total of 17 State Centers across this across the country now. I can list them all if you want me to the state that they're in. But we do have a really good map on our website, EOXnetwork.org. That shows that network of State Centers, many of the ones that we've opened have been on kind of on the East Coast area started to have a little bit more towards the Midwest.

Steve Baker 7:48

Gotcha.

Rich Armstrong 7:49

Steve, what's the purpose of the State Center? What do they do every day? What's their mission?

Steve Storkan 7:58

Well, the

1. The purpose for EOX State centers are to supplement employee ownership organizations.

State Centers really are there, as I kind of said before, to kind of supplement what the other organizations in the employer ownership world are doing. So, the ESOP Association, NCEO, Democracy at Work, you know, even Great Game of Business, to name a few do a great job of working with those businesses. But there's no organization who's got boots on the ground within a state. You know, all of these other organizations are national organizations. So those State Centers enters have boots on the ground, working with business owners, their advisors, community groups, government officials, and really educating them on what employee ownership is how you can use it as an exit planning tool, how you can use it as a business growth tool. That's really the first mission of a State Center's to do that education and outreach, and to serve as an unbiased hub for that education. You know, I was a service provider, and then ESOP world for 23-24 years, and I had passion for employee ownership, I sat across the table from hundreds of business owners, and I thought it was all about me sharing my passion for employee ownership. And what I learned when I jumped over to this nonprofit side was that many of those business owners looked at me as a sales guy who said, of course, Steve thinks employee ownership is awesome. He wants us to be a client. And I honestly never looked at it that way. But I've really seen a shift as I work with State Centers, and now sit across from business owners and community leaders and talk about employee ownership and tell them I'm not selling anything, this is truly passion for something that we think can change America. And so that's what the State Centers do. Number one. And then secondly, once we get that outreach and education done, and we find a specific business owner, who is interested in taking that next step, the State Centers are a hub for those resources. So, we're backed by service providers, technical assistance providers who really have been doing this employee ownership as part of their work for many years. We've benefited them, they're good work, they're, you know, they're good companies, and we make that connection between the business owner and those technical assistance. advisors so that they can take the next step without having to kind of just, you know, do a yellow pages search, you know on the internet and say, you know, type in ESOP provider, we're trying to connect them with local service providers that really can take care of them and that we trust.

Rich Armstrong 10:14

That's great. And one of the new centers that you've started is the Missouri Center for employee owned

Steve Storkan 10:23

Yeah, yep.

Rich Armstrong 10:24
And, of course, being an employee-owned company in Missouri. Are we part of the SRC holdings group? We certainly have a vested interest in how the Missouri Center Employee Ownership fares. Can you share with us just a little history of this particular center, Missouri?

Steve Storkan 10:42

Sure. The, you know, one of the things I didn't mention is EOX has a stated goal to have 70% of the US population live in a state that has a state center. And so, you know when we started this, we certainly looked at states with larger populations. But since California, New York already had a state center, we, you know, we look to start in states like Florida, Texas, Pennsylvania, and those are obvious choices for us. But then outside of that, we really, more importantly, we go to states where there's a large concentration of employee-owned companies and service providers, it makes our job a lot easier. And, you know, we looked in places then like Minnesota, Michigan, and certainly Missouri were states that we looked at early on Missouri is typically people may not know this, but Missouri is typically around eighth or ninth in the country each year. When we look at the number of ESOPs in the state. There's quite a few of them. That you know, may or may not be well known to listeners, like you, of course, SRC, burns, McDonald's, inland truck, PFS brands, just to name a few. Those are large ESOPs that are very active in the ESOP community. So, we had our eye on Missouri from the beginning. But we started in a few other states. And then in November of 2020, just about two years into my gig, we made a connection with the Ewing, Marion Kauffman Foundation out of Kansas City. And we had an opportunity to apply for a grant a very competitive grant to help fund the Missouri center. Because each of these centers starts from scratch. And when they start with no volunteers, no dollars, EOX is there to support them with some dollars with a three-year grant, but we're really looking for supporters. And we were super pleased to find out just a couple months ago, that we were one of the six organizations picked by the Kauffman Foundation to receive a large three-year matching grant. So that was one of the best days in my new career here at EOX was to get that first foundation to believe in the mission that we have. But you'll notice that I said it was a matching grant. And it took a village of volunteers and donors to prove to the Kauffman Foundation and that application process that the Missouri Center is a viable organization that we can make this work. We had about 10, Missouri based service providers and employee on companies to step up and support the MLCEO financially and with time, with the most significant one of those being SRC, and Great Game of Business that made a significant three year pledge that really put us over the top and we can't be I can't say thank you enough to the organization's for doing that and for stepping for I know that it was that last step of hurdle that we were able to get that Kauffman Foundation grant.

Rich Armstrong 13:21

Well, we're really excited about it. And as Steve mentioned earlier, you know, that's our purpose, that's our mission is to find ways to close that gap between the haves and have nots, and we they employee ownership is, is a very powerful tool in doing that. Not necessarily the only tool, but a very powerful tool to do that. So, we would love to support that in any way we can. I'm curious about what some of the initial plans are for the Missouri center.

Steve Storkan 13:47

You know, we, we just received the grant about two weeks ago. So, we are in total startup mode, for sure. First and foremost, starting to get the ad out there to hire our first staff member, the executive director. So if anybody that's listening to this knows of somebody who's passionate about employee ownership and passionate about running a new startup organization, or just someone who doesn't know a thing about employee ownership, but as passionate about leading an organization like that we are looking for someone who has deep roots and ties into Missouri, Eastern Kansas that can you know, that can help us move this organization from day one to you know, five or six years from now having changed, taken Missouri from eighth or ninth in the country's number of ESOP's to maybe you know, third or fourth that will be that'll be a great thing. So definitely in the in the hiring mode. But then also really preparing for all the program that we're doing, trying to make those connections with the Small Business Development Centers, some trade associations and Community Economic Development groups really trying to start the plan where that programming is going to be happening. So, you know, our mission, like I said, is education and outreach and it's hard for a startup organization to have an audience and so we Depends on those community organizations and other trade associations that have that audience that have the business owners or have the advisors to dispel some myths about employee ownership.

2. Being an employee owned company is not any more expensive or complex as selling a business.

Everybody says, not everybody, but a lot of people say it's expensive, it's complex, stay away from it. It's not any more expensive or complex than selling a business to someone else. Let me tell you, I've been doing this long enough to know the truth of that. So, trying to find those audiences is really the first thing. And then the last thing, you know, to try to put some formal programs together, there's a couple different organizations that we're thinking about working with in Missouri, that really have some formal organizations, or formal programming, that we can be part of this long term, some cohorts where we can really get involved and dig really, really deep and business owners and community groups.

Steve Baker 15:50

That's great. You know, one thing that I'd like to do for our listeners right now who are not familiar with employee ownership is that I love how you dispel the myth immediately that it's more costly or difficult than selling your business or exiting your business in another way. And further, at the beginning of this, he did a really nice job of talking about there's a myriad of different ways that employee ownership can be shared on a broad basis. ESOP is one of the most famous of those you mentioned. ESOP, ownership, trust, SARS, all different kinds of ways to do this. So EOX is really teaching all of those different ways. So, people can make the choice of what's right for them. Now, our listeners are not just in the US, but all over the world. And I would assume that, you know, there's a lot of people who may not live in a place where there's a state center, how can they learn more about employee ownership and get involved?

Steve Storkan 16:47

You know, think, if you just if you're not from the US, indefinitely, there are it's popping up across the country, we might even be late to the game. But you know, I've worked with people from Scotland, in the UK, and Spain is, you know, has as a great worker cooperative. So, I think, you know, it's been great Google machine, if you're looking up employee ownership. in your country, I think you'll find some organization similar to what EOX and the ESOP association or Democracy at Work are doing, I think that's the best way to do that. If they can find it, they certainly can get in touch with me. And I'm always happy to connect people with employee ownership, whether they're here in the states for across the pond, we're happy to help connect them in any way we can.

Rich Armstrong 17:32

That's great. Steve, you and you'd mentioned earlier, some of the benefits, obviously, for the employee and the community. What are some of the benefits for the owner? I mean, when they're thinking considering an exit, and they're looking at their options out there? How does employee ownership kind of stack up to those options? You mentioned, the myth of being expensive, but are there some other business benefits to the owner?

Steve Storkan 18:01

You know, I tell people that anybody can sell their company to their employees. And it can be successful, no matter how you go about it, whether you're doing it for tax reasons, or other reasons anybody can sell it, and have it been successful after they leave. But in my experience, the companies that already have that family feel with the owner, are the ones that work best going forward, you can teach employee ownership culture, and I know that's what you do a Great Game. But if it's already there, you're going to have more success.

3. There are different ways for owners to leave the business, but if leaving a legacy is important, employee ownership is a good route to go.

So, I would say, leaving a legacy, to me, is probably one of the most important things that an owner has to be thinking, if they're going to send you know, work with employee ownership. They really want to be able to live in their community, after they sell, they want to drive by the plant, the manufacturing plant, and know that the people that helped them get to where they were, are still working in that plant still have good jobs to the best of the ability. And I don't know that they can always get that guarantee when they sell to anybody else, specifically a third party. I don't want to bash private equity, but private equity definitely gets a bad rap and rightfully so sometimes that, you know, they come in and strip the company down and reduce the, you know, reduce wages or reduce the staff size. So, I think caring about the people that got you to where you are today is first and foremost. Secondly, I think you know, people have to realize that employee ownership when the employees buy the company from the owner, they have to play pay fair market value. So that's where it gets a little bit of a bad rap. Of course, a strategic buyer can come in and pay whatever they want, but the employees have to pay fair market value. When you take into consideration the tax treatment of a sale. If you're a C Corp. There are ways to defer any capital gains after you sell your company. And then also the ability to stay on board and work in your position as maybe the CEO or the Chairman and to share in the profitability as the company goes forward. You know, you want to stick around you want to work, but you also have a vested interest in making it work because you might have some payout at the back end, when you pull all of those together. I can't say this every situation, but boy, there's a lot of times where you're making more money selling to an ESOP then you are selling to a third person or third party or another buyer. So those are the two that come to mind when I think about what a business owner should think. I'll just throw this out there. We have a video on our website. From a gentleman in North Carolina. His name is Bernie Mann and Bernie Mann tells this tells a great story. He owned a magazine or owns a magazine. He's still there, I think Bernie Mann’s late 70s, early 80s. And he had some buyers come in to buy his magazine. And he was not really excited about the people that he met with the he knew that they would give him top dollar. But he couldn't walk away from the business and tell his employees. Here's your new boss. I can't stand working with the guys and gals that are buying your company they just been total. You know what? He says it in the video. But here they are. You're their union bosses. And you know, thanks for helping me out here the handshake in $250. I think that story just when I heard that story, I had to get it on video because it just resonates with me of the perfect seller for Bernie software and worker cooperatives or any form of employee ownership.

Rich Armstrong 21:24

Yeah, that's a great story. So, what does the future look like for EOX? What's next

Steve Storkan 21:31

Think we're going to breathe for a second. We've, you know, we've got nine or 10 State Centers, because Michigan is just around the corner, there'll be our 10th one here soon, we're going to breathe and try to get them up and running. You know, one of the biggest challenges we have right now is that gap between forming an organization getting the volunteers to help move the mission forward. But it's all about funding. And until you get funding, you don't have boots on the ground. And until you get boots on the ground, you don't have people that want to fund you. And so that's kind of a gap period that we're in. So, we're going to breathe a little bit to those 10 centers up and running, get some activity happening. And then you know, just continue to try to hit that 70% goal by 2025. We're at about 61% right now. So, we just have a little bit of ways to go. So, I think we'll hit it. I know we'll hit it. Yeah, it's kind of a take a breath and focus on making those state centers strong and finding the financial support. To do that finding some more Kauffman Foundation's in different states finding some more Great Game of Business supporters. Every dollar helps. So yeah, that's kind of where we're at right now.

Steve Baker 22:36

That's awesome. Well, it's great to have you on the on the show. And we always like to wrap up our podcasts by asking, what's one question we should be asking you, Steve.

Steve Storkan 22:50

One question that you should be asking me is how I can get involved. And you can get involved in your state by you know, going to our website, seeing if there's a State Center in your state, if you're interested in employee ownership are passionate about helping bridge the wealth and income inequality gap that's out there. Even if you don't know anything about employee ownership, we'd love to have you take part in any way you can with the state center. Whether that be giving up your time or giving financially, we're always looking for that support. The other side is if you look at our new map, and you say, Man, that West Coast is missing a lot of state centers, I'd love to open one in Idaho or Arizona or wherever we're missing out there. I'm always interested in talking to people who are passionate and have time to give back to help me round up the ambassador's that want to help the State Center get rolling. That's how it happens. I get a phone call that says I want to do this. I want to help. Next thing you know, you know, six months later, we have a state center in name and volunteer board. So that would be, the question I'd love for people to ask.

Steve Baker 23:52

That is awesome. And for those of you listening from the State of Hawaii I, Steve Baker, when I throw in my hat and say I'll give you the first dollar and I'm happy to speak or whatever to

Steve Storkan 24:05

You and make you I mean both. I never thought of that I should be. That's the question I should ask is who's out there from Hawaii? Right?

Steve Baker 24:12

Let's be strategic, Steve. Yeah. It really is great to have you in the movement. And I love how you're passionate about closing that gap between the haves and have nots, we certainly believe in ourselves. And thanks for being on the show. Let's keep the conversation going. If you want to talk with Steve, be sure to check out his website EOXnetwork.org. And be sure to check out that Bernie Mann video, it sounds like that's the first thing I'm going to do as soon as we are done with this recording. So, folks, be sure to send us your questions, your stories, your best practices, ideas, challenges, and especially your victories because that is capitalism at its best. Thanks for joining us and we'll see you next time.

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