ESOP Roundtable 2

Victor Aspengren, Rebecca Alvarez, Marshall Jespersen, Deanna Walker

(This episode was recorded in August of 2021.)

Key Episode Take-Aways:

1. Having a plan to become 100% ESOP is a good starting point. Using a leveraged ESOP is a good way to go about achieving this status. (click to jump to this topic below)  As it sits today, it's about a 10-year plan. And really, it's based on our ability to afford it. We're a leveraged ESOP, meaning we borrowed money for the transaction. And so as soon as we can pay down the first round of our first loan, then we'll be back out there with another with the second round of transaction.

2. Structuring bonuses while being an ESOP. (click to jump to this topic below)  What we do in our planning, is we plan for what we need to do to cover our expenses plus a basically an amount that is covering contingencies so we have an expense plus some basically, what if you were to look at it would be a return on invested capital. And that's our base. And then anything over that base from $1 over that base, we split with the into the stake in the outcome fund. 30% for the stake in the outcome, 70% for the company,

3. Being an ESOP provides great benefits in the long run, job security, and increases the chances of having a healthy company. (click to jump to this topic below)  If you're an ESOP and seeing how this will benefit in the long run about the health of the company, more than an instant gratification of a large bonus, I think anybody would prefer job security and longevity over instant gratification of a bonus. Or at least those are the types of employees, we want to hire our company. So, transparency, that's what it's about having fun and being transparent.

Continue scrolling to read the full episode transcription.

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 the Game" Podcast. This episode was recorded at a live roundtable event discussing the benefits and pitfalls of being an ESOP company. It is not required to be an ESOP company to enjoy the benefits of the Great Game of Businesses practices and principles, but they definitely pair well together. For more information on ESOP's, download our new white paper, Five Rules for Building a True Ownership Culture Inside an Employee-Owned-Company at greatgame.com/ownershipculture.

Victor Aspengren 1:07

Good morning, everybody. It sounds like we are ready to roll this morning. So panelists, if you go ahead and unmute and start your video, we will get this ball rolling. There's Rebecca, we got Marshall. And we got Deanna’s picture up, so she'll be live here shortly. Well, welcome everybody to the ESOP Roundtable. We've got 90 minutes to spend together today. And just for the format, the first 60 minutes will just be the stories and the lessons learned from each of the three panelists here. And including myself, I'll probably chime in with a few things. And then the last 30 minutes, we'll look for Q&A. So at the bottom of your screen, there's a Q&A little tab. So if you have any questions you would like to submit, if you could submit those, we'll address those questions in the last 30 minutes of our webinar. So we'll do introductions here quick, and I'll go ahead and just start myself. My name is Victor Aspengren. I am the facilitator. I've been in the employee ownership Great Game space since about 19. I think my first Great Game was 1998. And my ESOP experience began in 1999. So I've been in this space open book management employee ownership. I've been I say, I'm a recovering CEO, HR manager, sales and marketing director, inventory warehouse manager I've held about every position is going to hold within a company, as well as I've been on the service provider side in the ESOP space for ESOP administration, as well as devaluation investment banking transaction perspective. So I probably have been through hundreds of ESOP transactions. So, I'm very familiar with things that take place and go on. So with that, that's my short introduction. Why don't we go to Marshall, would you like to introduce yourself quick and tell us a little bit about international cars?

Marshall Jespersen 3:16

I'd be delighted to do that, Victor, good to see you again. International cars. Let's see I joined international cars in 1988. At that point, it was a single point Honda dealership that was not doing very well. We managed to turn it around. I did not come from that industry. So it was a little difficult. I did go back to school, get an MBA and joined up industry groups and have been learning ever since we became an ESOP in 2000. The philosophy behind that was that the people who were helping us be successful. When I looked at it, they really had no long-term financial plan or stability. And so I thought, well, this is a good way of doing that. And my bet, if you will, was together, we could do a better job than I could do alone. And so I thought a rising tide will raise all boats. It has so far, we've been quite successful. We are now five dealerships plus a used car store we've gone from I started with 22 employees. We are now 293.

Victor Aspengren 4:38

Wow.

Marshall Jespersen 4:41

And we actually I had read the Great Game of Business book when I was in graduate school but did not really start to apply it until about 2017, we sent a group to the Gathering of Games, they came back they went as employees, they came back as evangelists. It's very hard to buck that trend. And we have been devotees ever since. And it has been a very fruitful and remarkable journey for us. So that's probably enough to get started. Victor.

Victor Aspengren 5:29

So, Marshall, when you sent the group, were you with the group? Or was it a group separate from you that you sent?

Marshall Jespersen 5:35

It was a group separate from me, I was able to go for the first two years, and then I have gone now for two years, will be going again this year.

Victor Aspengren 5:44

So, when they came back, they were pushing you to start doing all these things instead of you pushing them when it came to Great Game.

Marshall Jespersen 5:52

Yes. And you know, the wonderful thing is, you know, I keep saying we are smarter than me. And when some of my people have a good idea, my job is to get out of the way. And so I did that supported them. And it's been, it's been a success story, ever since we've had some bumps along the way. But by and large, I would do it again, only I would do it sooner.

Victor Aspengren 6:21
Yeah. Just a quick question. You became an ESOP in 2000. Was that what percentage? are you now? or What were you then? Or did you do a couple of different transactions since 2000?

Marshall Jespersen 6:32

We did. We've done three transactions at the first transactions were 30%.

Victor Aspengren 6:38

Okay.

Marshall Jespersen 6:38

And then we wanted to grow. So I actually invested, and we recapitalize the company. So they were down to 15%. Then we did an extraction bringing the transaction in 2005, bringing us up to 20%. And the last transaction bringing us up to now 40%. We finished up last Saturday.

Victor Aspengren 7:05

Super, thank you for that, that helps paint the picture. So with that, let's go to our next panelists. Rebecca, would you like to go next, please.

Rebecca Alvarez 7:14
Good morning, sure. I'm Rebecca Alvarez. I'm the president and majority owner of Gaia engineering. We're a civil engineering land surveying company headquartered in Tulsa, and we have another office in Oklahoma City. We do primarily government work, anything with public so tribes, counties, state federal government, and we became an ESOP and GGOB. Back in 2013, when our former owner, Julie Gaia, Gaia engineering, she was looking for a way to sell her shares to some of our employees, and it just the financing for a public service, to get a loan for that kind of stuff is really, really hard. You know, we don't have widgets, we don't have a lot of assets. So if she read the Great Game of Business book as well, and we jumped in, I think I told Victor the other day, I don't know how to separate ESOP from GGOB, because we started at the same time. So for in 2013, Julie retired, sold some of her shares the ESOP became 49% owner, and then our president that time was John Blickensderfer. And he was 51%. Owner. Just last October, I purchased his shares. And so now I own the 51%. And the theme throughout that why we wanted to maintain that they're doing percent ownership is in the government side, you guys probably are familiar with set asides, different things like that. So I'm Cherokee, a tribal member, and I'm a woman so we get special, Disadvantaged Business or set asides for that, on the government contracts that's really critical to our business, and we've been able to maintain that they're out. See what else I am that third president since we started the ESOP transition, or the ESOP group, and so it's also with open book management. We don't do financial huddles. every single Friday, we do a financial one on one Friday, and then the alternate Friday, we do a teachable moment. And so part of those teachable moments was when John was selling to me, we've talked about that whole process very openly with our employees, like they were part of our team. There, you know, they're employee owners. So it's really interesting getting their feedback, hearing their concerns, being very transparent with it all and showing them the benefits of going to 100% ESOP versus staying at a 49 percent. So we've really enjoyed it.

Victor Aspengren 10:03

Yeah. And how many employees do you have within your firm Rebecca?

Rebecca Alvarez 10:06

35

Victor Aspengren 10:07

35.

Rebecca Alvarez 10:08

A lot smaller than Marshall.

Victor Aspengren 10:12

Yeah. So, 20 years later, you'll be a 230. Right? Just. Yeah. Goodness gracious. Well, thank you. That's very good. And Deanna, you made it in Deanna was have a little technical difficulty, everybody. But she has arrived. And so I'm going to turn it over to you to Deanna, to do introduction about you and your company.

Deanna Walker 10:35

Okay, great. Well, I'm Deanna Walker, I'm the chief Revenue Officer for Vincente financial partners. I've been with our company for a little under 18 years. We are a professional services firm that works with companies to assist them with all aspects of their back office, from accounting to CFO to operational consulting services, all in an attempt to help them get better information, solve problems, and be a resource on the back-office side as it relates to the accounting and finance function. So we have been a GGOB practitioner since 2017, I think something like that, and really play the game very consistently and religiously, and it's just really been transformational for our business. We sold 20% of our company in the stock transaction last November. So we're very new to the world. So we did a little bit different from some of the other folks on the panel today in terms of the order of operations. So not necessarily new to the GGOB world, but definitely new to the ESOP world.

Victor Aspengren 11:49

Great. Well, thank you. And then just one point back to Rebecca on yours. I think a lot of people don't know that there's a lot of minority ESOP's out there for the specific purpose just like you do, whether its minority woman owned Native American or whatever it may be. And in the ESOP world for several years now they've been trying to get legislation passed, so that that status could transfer through and be 100%. ESOP, but they haven't been able to get that done. I know that it's been on the table for quite a while now. Maybe someday they will get that change, because there's a lot of ESOPs that have that status, that would much rather go to the 100%. And as we all know, there's some tax advantages when you're,

Rebecca Alvarez 12:33

Major Tax advantages yes,

Victor Aspengren 12:35

Yes, basically, for those of you that don't know, I'll just say this. In theory, if you're 100%. ESOP, there is no corporate tax it goes away. And people say that's crazy. How can that be? Well, the reason is, is the tax gets paid by the participants at retirement. So the whole theory is, is you give up the tax base today, the research shows that we'll get actually more of taxes down the road, because ESOPs tend to grow, build up higher revenue, and they actually get their taxes at the end. So from an ESOP perspective, it's quite a big advantage to be that 100%. Now all of you are minority, ESOP's. So now Deanna, you just started. So maybe this question won't get you as much. But for Rebecca and Marshall, I would assume there are people saying, well, maybe not with you, Rebecca, either because of your situation, but maybe, when are we going to go 100%. And the reason I asked that is in my first ESOP in 1999. We were minority ESOP; the founders were still around. And we been about three or four years and people kept saying, well, if the ESOP's not in control, who's in control and make we could go back to the old way, and we liked the new way, because we became an Aesop and we started practicing Great Game, and people were chomping at the bit. Well, when, when so Are any of you getting those kinds of questions from your people?

Rebecca Alvarez 14:04

We did for sure. whenever it's probably because our leadership at that time said that was the direction we were going because the financials of it just seemed so appealing. So, when we transferred to the 40%, you saw back in 2013, the intention was to go to 100% until, you know, around 2019 or so we started doing the analysis and for our business in the way the laws are right now. It doesn't make sense. I haven't that's how we made that decision. But Marshall could speak to his, I'm sure.

Marshall Jespersen 14:39

Well, ours is similar, Victor, we our intention when we started this was to go to 100% ESOP overtime as we could afford it. One of the issues that we have which is different than anybody else, is, of course, we represent some manufacturers of automobiles, and we have an agreement with them. And that agreement says Thou shalt not sell to anybody else without my permission. And they say, and they have no bones about it. We don't think ESOPs are a good bet. Even though there are some automotive firms who are 100%. ESOP, and I'd like it to the publics. But we have been fighting that battle for you know, all of the time that we have been in ESOP's over 20 years now. And we have been at the top of the things that manufacturers measure as far as Are you a good dealer? Are you a good representative for us? And resoundingly they've had to say, yes, we've won all of the awards. But still, there's the reluctance on their part, to go ahead and allow us to increase and so to increase to 40%, which we just finished last Saturday, took us a year of getting permissions from the factories before we could get that done. So that's it's a continuing story. We want to do it. But it looks like it's going to either be a court battle or somebody else is going to do it first.

Victor Aspengren 16:31

Yeah, there you go. Deanna got any.

Deanna Walker 16:35

We definitely have plans to get to 100%.

1. Having a plan to become 100% ESOP is a good starting point. Using a leveraged ESOP is a good way to go about achieving this status.

As it sits today, it's about a 10-year plan. And really, it's based on our ability to afford it. We're a leveraged ESOP, meaning we borrowed money for the transaction. And so as soon as we can pay down the first round of our first loan, then we'll be back out there with another with the second round of transaction. So the way it's currently mapped out, it's about a 10-year process. But you know, as you guys know, for some of the reasons for doing this, the quicker we can pay down the debt will drive the timing of the of the next transaction.

Victor Aspengren 17:12

So, is your firm, I know you're a consulting firm, but is it considered an accounting firm, a CPA firm, or no?

Deanna Walker 17:20

No, we are a professional services firm. So we have CPAs on staff, but we really look like a big bad office accounting firm.

Victor Aspengren 17:27

Okay. And the reason I asked that Marshall, you said that the car dealers, there are certain industries like CPAs, there are certain some states where accounting firms can actually become ESOP's. There are many states where they cannot law firms cannot become ESOP's. And there are other restrictions, sometimes pharmacy any of your professional license industry sometimes have some quirky state laws of why they can't become an ESOP, or they have to work around it. Or as Marshall said, it's a journey, that they might be able to go a step a minority, but go majority is a whole different beast, because of the control issues and the liabilities that go with that control. So just something to consider. So I would say overall that the vast, vast majority, I would say probably 80% of all ESOP's now are 100%, because of the tax advantage. That being said, there's a thing called repurchase obligation, which is you have to pay out these people down the road when they retire, whatever. And so Deanna, you're just starting your journey. Rebecca, you're probably close to being everybody 100% vested, or maybe you already made everybody,

Rebecca Alvarez 18:42

Yeah, we have a ton of people 100% invested. And we've already started paying people back.

Victor Aspengren 18:47

Right. So you're in that vesting period in Marshall, you've been doing this for 20 years, so you probably have been paying people out some dollars from the ESOP and funding. I'm sure that's not been a problem since you're a minority ESOP.

Marshall Jespersen 19:04

It hasn't been a problem, but it is something that we pay close attention to. So that when we show our financials, we show a reserve for our ESOP distributions as we forecast them, we've been up to date. And yeah, we've put out a lot of distribution already. And it hasn't been a problem for us. And I don't think it will be.

Victor Aspengren 19:34

And I'm going to go in the weeds just a little bit here for you folks out there with a minority ESOP because there is a great advantage because an ESOP is a shareholder. So, when you're a minority shareholder, you get a distribution that you pay out to all of the owners while the ESOP gets that same distribution and typically, that cash goes into the ESOP plan is that how Rebecca yours is structured? Marshall and Deanna said that they will get cash into the plan.

Rebecca Alvarez 20:07

We've only done it to the profit distributions to cover our repurchase obligation, because we have a couple of years left on that. And we're still in the gray area of, do we actually do profit distributions at that point? Or do I just get executive bonuses, and keep the cash in the company to grow the company? So we're in that grey period where I would love to hear more from especially Marshall, about what he's done with the minority? Because we're not sure what to do yet. We're in that grey period?

Marshall Jespersen 20:34

Well, I'll jump right in with that. Rebecca, what we have done is, we have actually paid enough cash to take care of paying down the debt. And so we are distributing stock. But we have not distributed anything else. We have kept cash in the company, looking for ways to grow. And, you know, as it mentioned, we've grown from one location to now we are six locations we're in in negotiations to look at two more locations. So what are people see as the benefit, two benefits, actually, one is the appreciation of the value of the stock in the ESOP. So that's their sort of the goal in the end to have a nest egg and the stake in the outcome, which is the ongoing if we are doing a great job, then we're not going to do distribution. But we'll have a great stake in the outcome. Just as a matter of record last year, our stake in the outcome and we are actually people voted to make it very egalitarian. So everybody across the board president down to the fellow will move the cars on the lot gets the same amount of money. Last year, it was 4500 bucks.

Rebecca Alvarez 22:07

Awesome.

Marshall Jespersen 22:07

Or someone who's working close to minimum wage. That is a huge, huge pay up. And we had a lot of people come up. I remember one of them came up, he said, you know, this is so great, because now I can stay in my apartment. He was facing eviction in it served a lot of people really, really well. And this year looks like it will be another one.

Rebecca Alvarez 22:31

What are your majority? direct shareholders? Since they don't get a profit distribution? Do you compensate them in other ways?

Marshall Jespersen 22:41

The No, we don't as a matter of fact.

Rebecca Alvarez 22:46

Okay,

Victor Aspengren 22:47

Super. And Deanna on your ESOP, will you have you made the decision? I know it's new. But have you put cash in the plan or what are you doing with your distributions?

Deanna Walker 22:59

We're focusing on paying down the debt first and foremost, and similar to Marshalls just out allocating the stock and focusing on the appreciation and value of the business.

Victor Aspengren 23:09

Yep.

Deanna Walker 23:10

For right now.

Victor Aspengren 23:11

Yeah. So again, for the audience when you're 100%. ESOP, there's no required to put to put anything in there when you're a minority ESOP, you can put that distribution that you would give any shareholder into the ESOP plan. So there are a lot of there are some ESOP's that actually do put cash in the plans to fund that repurchase obligation, which kind of goes back to what kind of bring this full circle back to the Great Game of Business. A lot of people you know, you become an ESOP Marshall In your instance, you became an ESOP 20 years ago, you know, we became an ESOP we were not practitioners of the Great Game. And it's like, well, do you understand what you have here with this ESOP? Do you understand how it works? Do you understand how you get paid out? Where does the money come from all those good things? So with that Marshall, I'll say back in your let's say, in the first 10 years, did people understand the financial where the money came from, how it was allocated to How to Grow share value, and then where was the money gonna come through? Or is it just miraculously, you know, underneath the cabbage leaf in the garden, there's a pile of money that you pay out.

Marshall Jespersen 24:24

It's a really good question. And we had a lot of meetings to tell people how this whole thing worked. But it went in one ear and out the other. It was just this is not my job. This is not what I do day to day, you're wasting my time. Thank you for the you know the statement at the end of the year, but it really didn't have the a lot of meeting even though they He said, Yep, this is our company, we use that in all of our lines. In fact, our motto for our company is customer flow, employee owned and customer focused. And so that has always been in the forefront. But what I learned was that you know in our business, people going through MBA school, you learn a whole lot, and then you forget that not everybody has that information. And even if they have the information, they don't know how to how to utilize the information. And so that, for all of those years, that probably 17 years, before we got into the Great Game of Business, was the most frustrating teaching. We did. And we do a lot of teaching in our company. But that one was the one that was the most difficult because we didn't have a simple way of doing.

Victor Aspengren 26:09

Deanna, you're nodding your head, you were gonna say something I think earlier. So

Deanna Walker 26:13

Well, we're just getting started in the process. So we're obviously less than a year into it. And I think we're taking some baby steps to get there. And we have a plan. And it involves a tremendous amount of education and just continued discussions and reinforcement. I do say that a couple of things, because we're an accounting firm. But I even think more importantly, because we've been playing GGOB for five or six years, the idea of you can make an impact, you can have a stake in the outcome, you're empowered to do your part to affect the bottom line. And our folks can see by the choices that they make how that has played out. And we do pay GGOB bonuses. So they've learned that concept. So I think we do have a little bit of a leg up in that area for from the standpoint of the education. But, you know, just understanding the financial transaction first and foremost, and understanding how the payout works, and the fact that it is a longer-term type of realization, you know, what you are investing now to get later. I think there will be some, for sure, some education and some understanding around really what that all means and how it all comes together. Because it's not a tomorrow thing. Right? So it's understanding that and really grasping that and buying into it, quite frankly.

Victor Aspengren 27:38

Yeah. So you're just starting that kind of EOSP education, you're I'm sure you've done it. But it is a journey. And just on a broad base. This has been around for many years. Whether ESOP practice old book or not, it typically takes two full statements before the light bulb kind of goes on in people's head from a financial perspective, because they get the first allocation. It's like, okay, big deal. It's a number on a piece of paper, and there's a stock value. And it's not until they get the second one where the value goes up or down, depending on how the business is performing. But they start to go, oh, no, I kind of get it. And in all the years I've been doing it I don't know anybody that's figuring out how to accelerate that two years. You need that two statements to kind of see the numbers. But Rebecca, you did them both the same time. So you are so now we've got somebody that was an ESOP for a long time, started later, had a practitioner for many years. And then did the ESOP and you did them together. So how did that work?

Rebecca Alvarez 28:43

I think it was great. You know, we had switching to ESOP and GGOB. At the same time, we had a coach from GGOB come in, and help us set up our mini games do our scoreboards are forecasting, it was just kind of altogether instantaneous. And I think what you know, people not understanding the p&l statements, or we don't understand this is this is free to our employees, they don't have to do anything else other than come to work and do a great job and they get this free retirement plan. How is that like? We emphasize that all the time how this is you know, an additional retirement, maybe you guys because we also have a 401k but um, I like if you had an ESOP, and he didn't do GGOB I think it would be I don't know how you would do that. I'm trying to think about it because we're so open book, we'd have this scoreboard like we're we share everything except for individual salaries, basically. And it makes us be a team. We had some unfortunate staff events happen here at our office at the beginning of the year. And man, you should see these people They're on fire. They're like, man, we're gonna go get those burglars you've been in the past, I think they were just like, ah, whatever. But this was a hit to our team like this is our company and our retirement plan. And just to see people get so excited about that, I feel like it's brought our team a lot closer together to because we do play these games. It is part of our culture, to do the high involvement planning to do employee surveys to do the forecasting every week, day in day out having these huddles, I think is even. But I have found phonies work. We've been in this now, what is that eight or nine years? And we did our employee culture survey. And one of the things is people are like, man, we just seem kind of lukewarm GGOB like, hey, I would do it. Did you be every single day, it's just ingrained in our culture. We may not say we're doing a GGOB activity right now. We don't call it GGOB. It's just part of our culture. It's our guy identity.

Victor Aspengren 31:03

Yeah, so you had a coach, you had a coach, when you started? So that's,

Rebecca Alvarez 31:07
Very highly recommended.

Victor Aspengren 31:09

Yeah.

Deanna Walker 31:10

Second, that.

Victor Aspengren 31:11

So, Deanna when you implemented, you had a coach back in the day.

Deanna Walker 31:15

Absolutely. And we've actually kept our coach on, and we've kept our design team on, and they've transformed the name into the charity experience team. And it's an ongoing, you know, committee made up of folks within our organization, we call him kind of the conscience of our game. And so any initiatives that we do, you know, they're they facilitate all of that. So we're, we're getting ready. So we've done budgets in our in our whole entire team, since we've been doing GGOB has been involved in in the budgeting process. We are just now embarking on really the formal five year, you know, plus HIP process. And I'm super eager to see how that comes about. Because I think there's a real opportunity there to tie the high involvement planning to the ESOP planning and the paying down the debt and the scenarios that we run with the different things that we you know, put out there with our five-year plan. I think that will be really helpful in starting to bring a lot of that together for our team.

Victor Aspengren 32:16

Yeah, just so if somebody doesn't know when Deanna said HIP, if you didn't catch it, that is high involvement planning, just but she connected there, but just for the audience, in case you're not fully schooled on every game. No worries, no worries at all. Marshall, what about you guys? When did you do? Well, you sent a group down, and they came back fired up. So I'm going to make a guess that you kind of did some self-implementation.

Marshall Jespersen 32:40

We started with self-implementation, and we picked up a coach, we actually picked up two coaches. Because we are a little bit different in how we operate. And our first coach just didn't click with the group. And so we got a different one who did. And that has been wonderful. We've been, again, having our weekly huddles, all of that stuff is clicked really well. And so we've basically gone off on our own, we still have our weekly design team meetings. But it's been we had our coach for a couple of years anyway, to get us through to the point where we could take this process in house, we still have the ability to go back and say, okay, we need some coaching, or we need a little something on a project. But so far, we've been doing pretty well with this. Yeah. Now, I want to add one thing. While I have the floor here, Victor, because of our industry, people get into our industry for a really interesting reason. And that is you don't have to go to school. We get a lot of people with very little formal education. And therefore they are when we first started training people, they were afraid. They didn't want to have any part of training because it was like school. And so what I did is I actually went out and hired a fourth-grade schoolteacher who was able to make it fun. And after a period of after they gotten through a couple of classes and nothing bad happened. No one sent a note home to their wife or mother or anybody else. They started to realize that the education part was the part that stayed with them as an additional benefit to being an accountant. They did Great Game. And ESOP now we hired the teacher considerably earlier than we went into the Great Game. But that, that change in how we did our business by saying to people, you know, if you're here and you're a professional part of being a professional is to continue to learn to be a better person in your profession has made a huge, huge difference.

Victor Aspengren 35:31

Well, I think that's a great point Marshall, you know whether you're a coach or a teacher, but because I've seen this and professional services, firm, engineers, accountants, whatever and you would think, bingo, they would get financial literacy and whatever. And its really amazing how many people don't get it. They think they might have it, but when it really comes down to it, they don't get it. And in our instance, we became an ESOP. We went to the two-day experience back in 19. Walls right at 99. shortly. Yeah. And that's and we self-implemented. We started that way, but we did bring a coach in down the road to help kind of train the trainers, so they came in to do the yo yo training. And so they brought that in, and then I think Deanna, what's your committee called that you have?

Deanna Walker 36:27

The charity experience team we call it the vet.

Victor Aspengren 36:29

Yeah, well, we had we just called ours, the ESOP committee, but it was a committee about culture and training and everything else. And it was they had a budget, they had a manage that budget, they decided who got to go to conferences, they were part of the CEO review process, they did all the surveys on the cultural surveys. And then that committee was trained on the yo yo training by GGOB coach, because then they were in charge of the training of any new employee. So it wasn't our CFO, it was the committee that did the training. So it was peer to peer instead of quote that top down, you know, the leadership's training the people it's your fellow employee owners, teaching you, the business and what we're all about.

Deanna Walker 37:14

Yeah, now we have that we also have a subcommittee in addition to our interior experience team, too. So that focuses strictly on just, you know getting information about the ESL bout and educational process. We have a couple people that crossover in both committees, but okay.

Victor Aspengren 37:36

Yeah, Marshall, do you have any subcommittee or employee ownership committee?

Marshall Jespersen 37:41

We have we just have culture committee.

Victor Aspengren 37:44

Culture committee. Okay? Because everybody kind of names them different. Rebecca, what was your name,

Rebecca Alvarez 37:49

We have linked. And then we also have a go team. And I don't know what the goes dance floors didn't go from forever. But the Go Team helps with setting up our mini games and micro games. They call them micro games, and they're for individual departments. And then linked is sounds more like your ESOP committees, but spreading information, they do the surveys, that type of stuff.

Victor Aspengren 38:12

Yeah. There's a lot of different ways people name on that's for sure. Yes. So one thing I was going to ask all of you because it's, we've I think several of you said it, but the bonus structure. So can you just talk about you’re the bonus structure outside of the ESOP's. So this is the cash in the hand bonus, which, no matter what you do, you can't be cash in the hand, right, no matter how big daddy stop account gets. So can you just talk about your structure and what you do for bonuses, if you if you're willing to?

Marshall Jespersen 38:44

Well, I can start with that. And I'm more than happy to do that.

2. Structuring bonuses while being an ESOP.

What we do in our planning, is we plan for what we need to do to cover our expenses plus a basically an amount that is covering contingencies so we have an expense plus some basically, what if you were to look at it would be a return on invested capital. And that's our base. And then anything over that base from $1 over that base, we split with the into the stake in the outcome fund. 30% for the stake in the outcome, 70% for the company, and its very straightforward people are looking for and rooting for reaching the that point and then they follow it religiously and we only pay out once a year. Okay, that seems to be just fine for people. And it also has been very interesting Because it, it keeps people through some times when they might get frustrated and say, well, I'm leaving this so I'm going to the guy down the street because we're an industry where there's a lot of competition, a lot of different points where people can go and that has said, well, no, not till after we get the bonus. And after they get the bonus, it's like it's basically maybe we can stay a little longer. So but that's it's very straightforward. And as I mentioned before, everyone gets the same bonus, unlike the ESOP, it's dependent on your qualified wages. This one is everyone gets the same amount,

Victor Aspengren 40:48

It's the same dollar amount top to bottom,

Marshall Jespersen 40:51

Same dollar amount top to bottom.

Victor Aspengren40:53

Okay, great.

Deanna Walker 40:57

I can jump in and go next. So are people given the word professional services are more people are really our cost of goods sold, if you will. So our bonus is driven off of our gross margin and hitting a certain targeted percentage. And we track it on a monthly basis, anything over and above that targeted percentage, we split 50/50, the company keeps half and then 50% goes into our GGOB bonus pool. We pay out quarterly, but we do hold back a certain percentage till the end of the year, you know, for a lot of reasons, because sometimes we think we have our plan and things change. And so for just really to be a little bit more fiscally responsible, we hold back a certain amount. But then at the end of the year, we truly felt that that we do give something out every quarter it's earned.

Victor Aspengren 41:47

And is it just a percentage of comp? Is that how the bonuses paid out?

Deanna Walker 41:51

Yes, it's tied to your compensation level exception of our management team. the four top managers membership, do not participate in the GGOB bonus but everyone else does. Okay. Rebecca,

Rebecca Alvarez 42:07

We started with the GGOB bonus plan that our coach recommended to us. So I'm sure some of y'all are familiar with that where it's there's a threshold amount, which is similar to Marshall about making sure you can pay your bills, making sure you know, keep operating expenses, that kind of stuff, and then anything over that half goes to the bonus pool. And then we pay out quarterly but that it's not even percent kind of like Deanna said, we hold back some which is what the generic GGOB bonus plan has. So we actually shifted even more we only do 10% in the first quarter 20% in the second quarter. Not doing the math, right, another 20%. And in the last month, in the fourth quarter, we pay out 50% of that. So it ends up because our way our business goes is we oftentimes have really great second or quarters, then our fourth quarter tanks a little bit. So we didn't want to overpay out to make sure that's nice and spread out even. And we do percent of compensation, but it's the same percent across the board. The GGOB plan we started out with had executive or salaried management had a higher percent and just hourly employees because hourly’s have a chance for overtime, that that cause some grief amongst our employees. So we went the same percent across the board, everybody.

Victor Aspengren 43:37

Sure. The other there was a question here. How do you judge how they earned the bonus was the question.

Deanna Walker 43:46

Yeah, I'm not sure I understand exactly what that means. So if you hit if our company as a whole is a gross margin percentage and ultra-share right now, it's currently 40%. If we hit that 40% number, anything above that, that that trigger anything above that we get the bonus that I think that answered the question correctly, on how we earn it. It's very, very objective based on reaching that gross margin percentage as an entire company.

Victor Aspengren 44:14

Yeah, I think, do any of you have individual or is it really company focused? It's like the company's got your threshold, and then you build the pool. And then does it just it's either percentage based? Or do you actually have performance metrics for individuals to get a bonus, no, Rebecca,

Rebecca Alvarez 44:34

Christmas bonus. That's a very small pot of money that since I took over, we give the same amount to each employee kind of like Marshall does, but it's significantly smaller than the 4500. And that we consider that discretionary but it's not performance based at all. It's more of a gift. Yeah. If we have performance bases are related to raises. You get a raise.

Marshall Jespersen 44:59

If we have Anything separate, we just have a party.

Victor Aspengren 45:03

There you go, have some fun.

Marshall Jespersen 45:07

In fact, it is built into our mission statement. If we're not having fun,

Rebecca Alvarez 45:13

That's awesome.

Marshall Jespersen 45:14

We got to change it.

Deanna Walker 45:16

That is great. But prior to adopting GGOB, we had, we tracked some profit sharing based on individual teams. And we found that while certain teams, you know, bought into that and could do really well, with others, if it became clear that they weren't going to get closed, it just they lost the incentive. And so it really didn't accomplish the goal of, you know, having our entire organization focused on profitability and growing that in the right kind of way. And so, really finding GGOB was such a huge help for that, because there it is encouraged to make it at that company level, you know, across the board, and I can't stress that enough, that was a huge change for us organizationally.

Rebecca Alvarez 45:57

That's a great point, Deanna, because we had looked at doing that a little bit, the bonuses per department for a minute. But different client types have a different percent profit in our industry. And so one might have a 5% profit, right and another might have a 12. Well, that's not fair, they don't even have the opportunity to earn as much as the other group. So that's Yeah, we nixed that one.

Marshall Jespersen 46:22

And we're done. Similarly, we had gone for every basically every rooftop every franchise, and at they had a pool, and we tried to get it closed, and then we did. But when we went to doing the entire company, what changed was really interesting. Because now rather than saying, well, I'm devoted to Danvers Honda are on devoted to stratum Howdy, people would say, oh, especially during COVID, your service managers out, okay, I've got somebody who can pitch in for that, we'll just send them up there. And it starts to operate more like a single entity, then a group of separate entities vying to get to the top of their particular pile.

Deanna Walker 47:18

We had the exact same experience, it just cross collaboration, and then teams, the service level was amazing. But then also the interest to understand where business comes from, from the folks that actually do the business where before, okay, you got me gave me a new client, that's great. But they had no understanding of where that client came from, or the cost of acquisition or anything like that. Now there's a real interest, they don't necessarily have to have a take a responsibility for that number by any means, but in a certain way they do from just the interest in the understanding the education of how the business runs. So to go back to Victor, your point early on about just put financial literacy, a lot of times people will say to us, oh, you're an accounting firm, you know, it's really funny that you had to go to the Great Game of Business. To in there really is a difference, I think, and financial literacy and learning. Okay, here's revenue, this is gross profit. This is what net income is how you treat an expense, or what have you the mechanics of accounting and financial literacy. There's a whole host of different things to really understand the key drivers and the metrics of your particular business, and what drives your business, whether it's from our standpoint, capacity, or taking a team member who's got you know, how that plays out, or one understands capacity, but taking a team member who has extra time on one team, and redeploying them into another team that's buried, what that can do. And the impact that that can have, even in a given month on your numbers was really powerful once we started really having those types of conversations openly.

Victor Aspengren 49:05

Marshall, we had a question here. Were you describing the GGOB stake in the outcome bonus?

Marshall Jespersen 49:13

Okay, when are our stake in the outcome bonus is the one that I had described where we take when we reach a certain threshold of our profitability for the year after that, then we start funding the stake in the outcome bonus? Yes.

Victor Aspengren 49:31

Okay Thank you. Yeah, one of the things I and you guys maybe had this, but for those people that maybe they're not practicing the game, I know in our situation, we always had the Christmas bonus. And we had no financial literacy in the company whatsoever. So every year, the former owners of the business would pay out $300 no matter whether we did well, or we did poorly, so when we started the game, that's when we changed our bonus structure. To say, hey, we cannot be paying out bonuses if we are not making money. So one of the things just to throw this out, if you don't have a bonus plan, and you're starting, think about it wisely, because people are counting on that. $300. So then when we said, oh, we're gonna change it to performance, well, they all freaked out, Oh, my God. So we had a build a transition year in there, where we kind of said, okay, we're going to guarantee this much. And if we go over, it could be more. But if we go under, you'll at least get this. So we, we kind of had to put a safety net around that because organizationally, would have created chaos and we had to be smart about it. Now. We did, we went over, we hit the numbers, everybody performed well. So it was a moot point. But it is something that fear that people have, once they get used to, and yes, it's a bonus. But in that instance, it was becomes an entitlement. And I remember going this conversation, maybe you guys the same thing I've been doing longer. It's like I say, do not spend that bonus, folks, until it's cashed in your account. And if you spend the bonus, you own that problem, because you're an employee, owner, and owner should know better. But if you go out and spend the bonus, before we've actually allocated the bonus that's on you don't come crying to us, you know, because we practice open book, but you still can't stop the human behavior of spending it before you have it. So the other thing that I just wouldn't throw out because we got about not quite 10 minutes for Q&A. And there's not a lot of Q&A in there. But can you give let's give it a story. One of those Great Game stories, you know, somebody did financial literacy, they started to understand the business. Can you share one of those stories, it's just like, this is a really cool story for the audience out there to hear of how practicing GGOB and the open book and employee ownership all came together. And here's that fantastic story. Who'd like to go first? Okay, I'll go first. That'll work. I'll break the ice. Yeah, no worries, no worries. Well, you know, our big one is we started open book. So everybody started questioning everything. And so we outlawed the saying, "because we always have", we outlawed it. Nobody could say that. from the top to the bottom. We said, if anybody gives you that answer, that's Bs, there has to be a legitimate financial answer why we do what we do or some reason? Well, anyway, we were in the lottery industry. So if you ever grabbed those scratch tickets out of those little plastic boxes, because they're everywhere now, there's this little rod in the back metal rod behind the tickets that we used to powder coat. Well, the guys that cut the rods, said came to me one day and said why don't we powder coat those rods? I go? I don't know, I have no clue. So we went to this VP of sales? And the answer was well, because we always have more like, well, that's not a good enough answer. So they took went to the next show, talk to the customer and said, hey, you know this rod in the back of the box? Do you care if its powder coated, and they're like, we don't care if it's pink polka? Or whatever. As long as those tickets come out, and the latex not scratched on the lottery ticket. We don't care. So we came back. So this is the story. We've been making these boxes before we are an ESOP for like six years. What do you think the dollar amount was in one year? Because we quit powder coating the metal rods I guess,

Marshall Jespersen 53:46

I’ll give you $18,000.

Victor Aspengren 53:51

60 grand.

Rebecca Alvarez 53:53

Wow. 60 grand.

Victor Aspengren 53:54

60 grand all because we started opening the minds on the numbers. Why do we do what we do? So we got rid of the fear of things. It's like we need to challenge these questions. 60 grand in one year, and we've been doing it for six years, we had flushed a quarter million dollars down the toilet. All those prior years. Because nobody stepped up, they won they didn't understand the numbers to the had fear and when we change that culture opened it all up. 60 grand so Marshall to your point. We had one big party. Nobody you know those the people that came up with the idea they didn't want to eat. We don't want anything extra. We just had a big old party had some cocktails and gave everybody I think we gave everybody like chamber buffs, you know, the local community dollars instead of cash word supports the businesses. I think everybody got like 200 bucks and everybody was the static and they got packs on their back for months. And then they kept people kept saying, Come on. What's your next one? Get the next one. What's the next idea? So there's a story

Deanna Walker 55:02

That's great. I don't know that I have a story that can directly tie to GGOB Andy's not because we're so new to it, I'm hopeful that we're going to have a really interesting story around the high involvement planning and how that is affected by the ESOP ownership and just the thinking around that as we involve our team and where we're going in the next five years of our business. I would say My GGOB, my most recent GGOB story is just as centered around kind of our COVID experience in that time back in April of 20, when the world changed very quickly, and people nobody knew where they were going. Our team because they were so used to forecasting and having the information at their fingertips down to the client level, they knew exactly what to do to affect change in the organization. So while our management team was hunkered down and focusing on nowhere, we only 30% of our business and what's downside planning gonna look like, they immediately sprang into action with actually very little direction from us, because they had been training for it. For the last three and a half years to know exactly how to take this client, whose businesses slow down. And the time they devoted to that and give it to this other client that they needed help. And they didn't ask us, they just made those decisions. And with a period of two weeks, we had some conversations during our huddles about that, and our folks just put it into action. And April, where we thought was, you know, we had no idea what the impact was going to be ended up being a month where we had very little effect on our revenue. And I'm talking April of 20, it was solely because of our folks and the training they had through participating in GGOB, you know, the three and a half, four years prior to that. And then just that repetition of playing The Game every week.

Victor Aspengren 56:54

Great, thanks Deanne Super.

Marshall Jespersen 56:57
We, when we went through our transition in COVID. It was it was more a culture thing than anything. And I think I'm gonna lay this to the feet of both the ESOP and the Great Game. But we didn't lay anybody off. people understood that we had to do much like Deanna's, folks, how are we going to get through this who can stay who cannot stay, because we had a lot of people with underlying physical conditions, who said, I just can't come into work. And our work is not remote. Okay, you cannot fix a car over the phone. Sorry. And so, but we slowed down the hours, we kept people in, throughout the entire experience. And we did not keep all the money. I would that was a real big hit for our company. But it was not for our employees. And when it came around to a rebound, because we had them all there. And a lot of people in our industry just dropped people like rocks. We were able to come back really well and really quickly. But the most important thing was that people said, you stuck with us, we'll stick with you. And that spirit was worth everything in itself it's something that if we have something, you know, as a company, we're a collection of people. But having a collection of people who love the company they're part of is priceless.

Deanna Walker 58:51

For sure.

Victor Aspengren 58:53

Amen

Rebecca Alvarez 58:54

Aw my heartstrings there.

Deanna Walker 58:58

Tough to follow that one.

Rebecca Alvarez 58:55

They're like oh my gosh, mine is not quite that. But um, the last couple of years, we have seen transportation funding and Oklahoma ticket decline, especially in the local government types of work that we do. And so we played a mini game that was centered around marketing and business development, and everybody's a marketer how to upsell that type of stuff. And so during that mini game, because everybody was reaching out everywhere, we gained several new clients, we ended up getting the highest backlog that we've ever had from that mini game. So that's a huge success. So we didn't have the COVID issues, because we can work remotely, and transportation funding doesn't stop because COVID it was more. Our local economy is more dependent on oil and gas and so delayed several years but our transportation funding went down. So I consider that a huge win. Before I became president, I was in charge of Business development, and oftentimes I felt like I was working alone to support this team of 35 people with just a couple of helpers. But now we have monthly meetings to talk about marketing. And there's 10 people on the call that lead in each other's respective areas. And even, you know, our front desk, lady, she's amazing. She's like, hey, I was at this farmers market the other day, and I saw a city of so and so there and I went over and talked to them, like, yes, this is what we want, you know, team spirit, growing that backlog, diversifying our business. And so that's, it's not quite as emotional as Marshall story. But for our business. It's amazing. Everybody's in it together.

Victor Aspengren 1:00:44

That's awesome. So we do have a question. So I'll throw this out to you. The question is, they're getting ready to do the GGOB bonus, but the bonus plan is actually going to be it's going to go down. So I would assume that over the years, maybe you all have had experiences where the bonus used to have it at a higher level, and then something changed, whatever it is, and then you had a lower that bonus, the next year, you have any advice to help this person for through that transition? Any words of wisdom or anything that you did that helps you get through that bonus change from high to low? Going up? We know how that works? That's great. everybody claps their hands, but the opposite. Any experience there?

Marshall Jespersen 1:01:27

Yep, we have, and we've gone through some downturns and some really tough times in our industry. And when we do that, and when we have done that, the transparency from the start, and the understanding of you know, we can't do two or 300 units out of this dealership, now the demand is not there. Or if we get them out, there's very little gross profit, if any, we're just hanging on here, and there is not the money for the bonuses. And so we, you know, we've been able to turn that in this has been the wonderful part of the Great Game of Business and say, how can we find a mini game, that's going to bring that back. And now we haven't had to do it since we have been practicing the Great Game. But I can tell you that some of the mini games that people have played, and these come from our line people, these are not mine, or the managers or anything else have been phenomenally successful. Because these are the guys who know what's going on and how to change it. And they have done some fabulous, fabulous work.

Victor Aspengren 1:02:58

I think that's a great idea. Marshall, as far as you know, if you have to the transparency, I totally agree with that. It's just get the elephant out in the room and just get it there, especially if you're practicing the numbers are the numbers, but the idea of putting a mini game on it or some initiative to say okay, well, what can we do to get it back to that can be it's not, you don't have to lose all hope there's a chance to earn it back. If we can get creative and use our noggins.

Marshall Jespersen 1:03:27

Let me give you an example. One of the things that we do in our service departments is we sell service contracts. Now we were not selling very many. And that's because the people in the service department didn't think of themselves as salespeople. But they went through and said, well, what is the advantage to the customer to have this this service contract? And how do we approach the customer and say, this is really a great win win deal, because we that's what we practice in our company. And they didn't double the service contracts. They sold, they tripled. Because there was opportunity, but much like being blind to opportunity because it's always been there. It's always been that way or we've always outer coded the damn thing. They never then it was not part of the practice. And mini games is not so much as discovering new stuff is saying, how can we do this a little better? Or what are what are we not doing that we could be doing? That's going to get us there. And so, if things are looking down, then what are the opportunities that we can are overlooking or can manufacturer or different ways of looking at things. And when everybody is looking at that and when their bonus hangs in the balance, they’re going to look pretty hard. And we've had some people lift up fabulous things. And I remember one particular instance where we were doing a presentation where the whole senior team doing a presentation. And one of the technicians said, are we doing this? And if we're not doing this, why aren't we doing this? And nobody had a good reason. And now we do that. So it was just because we hadn't thought of it. And we're not the guys in the trenches. And the guys in the trenches when they learn to speak up and learn that you know what? There's intelligence from top to bottom in the organization. And we don't know as much as you do, because you're doing it. And if we can get over the fear of raising your hand, we get a tremendous amount of improvement out of everyone.

Victor Aspengren 1:06:04

Yeah. Deanna, Rebecca, you got anything on the bonus to share.

Rebecca Alvarez 1:06:08

I do. No, good. Okay. Um, so this the first quarter this year was the first time we paid out bonuses. And over two years, we had a rocky couple of years, unrelated to COVID, for other reasons. And during that period, and before that, we had paid out bonuses. And so you know, doing the normal GGOB of looking at your scoreboard and then connecting it to the bonus plan. It's just so depressing. Every week, we knew this. We just don't even want to look at it. It's terrible. But by sharing our financials being open and honest and transparent, like Marshall is talking about super critical, because they are employee owners.

3. Being an ESOP provides great benefits in the long run, job security, and increases the chances of having a healthy company.

If you're an ESOP and seeing how this will benefit in the long run about the health of the company, more than an instant gratification of a large bonus, I think anybody would prefer job security and longevity over instant gratification of a bonus. Or at least those are the types of employees, we want to hire our company. So, transparency, that's what it's about having fun and being transparent.

Deanna Walker 1:07:19

Yeah, I mean, I don't have a lot to add transparency was the first word that came to mind for me. So, nothing really more to add than what Rebecca and Marshall have already shared, other than to say that, I think the real beauty of The Game comes in those times of challenge where you have to dig deep it's can be really fun and easy to hit the numbers and always hit the bonus and that you know, have those great huddles, when you know you're going to have, you know, a good week or even a good month to really have to dig deep and power through. When you have those challenging months. And you see the numbers and you're all standing there together. Think is really where you grow as an organization. And you know, just to touch on the theme of this year's conference better together, I think that's when you really understand the meaning of that is when you go through that period. And I think the one thing I would say is, it may not be the last time you have that situation. We've gone through, you know a couple of those already in the last four years. But every time we do now, because we learned something from the time before, we seem to go through them a little bit faster with a little bit better mindset and positive intentions about hey, we know we can overcome this because we have done it. And we learned something every time which has just been again transformational for our business and really helped us grow as an open book management company and hopefully as an ESOP company as well as we get more into that.

Victor Aspengren 1:08:48

So your point there, Deanna I think it's a couple of you have alluded to this. But a lot of people think about open book management, the numbers and all this, but I think a lot of people miss one of the key things about the whole practice in the program and how it all comes together. But I from my own experiences. It builds trust and drives out fear. And I would just like to hear your thoughts on that. You know, what was the like before? And did you see that difference where trust started, organizational trust grew, and the fear subsided. Deanna you're nodding your head.

Deanna Walker 1:09:30

Yeah I mean, I said going back to the example I already gave of when you know, when COVID head I mean, our team instead of being fearful about what was next, they trusted in each other and they trusted in the process in the process of GGOB and just how we approach running our business together, and then they went straight into action and if they didn't trust each other's decision making, and actually probably equally, if not more important, is it the management team and our CEO didn't have the trust in the organization in their decision making. And then none of that would have happened. And you know, we've had. So that was just an awesome experience. But prior to that, we had a mini game one time where our CEO and our management team wanted to play one mini game and the rest of our organization wanted to play another. And we ended up going with the end organizations mini game it was to improve margin. And it wasn't a time of where we needed to really, critically use that game to help set turn something around. And, you know, the right choices made. I will say that, and that was also the trust building experience for all of us in an empowering experience as well.

Victor Aspengren 1:10:46

Rebecca, Marshall?

Marshall Jespersen 1:10:47

Well, let me start, because I got into our business, and it's a business that was a very top-down business, very old school. And all of the decisions were made from the top down. It was a company and a culture that I thought needed to change. And so I thought, how do we do this? How best do we do this? And this was before even, we were an ESOP. So quite a long time ago. And I thought, well, we need to put into place some values for the business didn't have any published values. And so we did that. And the first and most important one. And I think the hardest one for us, was the value of honesty within our company. Is it safe? To be honest, because that was something where somebody came up with an idea and somebody said, Well, that's a crappy idea. You're not going to get another one from that person. And so we've been battling that for a long, long time. And partly, the ESOP was a move to get to the point where we had common ownership, we had a stake in our company, and it was our company. Still, that was like pulling teeth. And finally, with the GGOB, and some of the transparency, we are getting, but we're not there yet. But we are getting to the point where we get better communication, we get better honesty, we get more things coming up from our line people, it's not 100%. There. And, and there are people who will and can be turned off by someone who is in a position of power within the company, who does not pay attention to those values, and degrade someone, or just trashes an idea that otherwise should be given some respect. And so that's an ongoing struggle for us. And we've gotten better. And certainly with The Great Game, we've gotten lots better because there's lots more communication. But it's still an issue that we have to face. And I don't know whether it's just because of our industry, and how it, the history of our industry works. But it had always been, you know, the heroes were at the top and the grunts were at the bottom, rather than the other way around. And now we have some heroes in the bottom and some grunts at the top and works out a little better, but we still have ways to go.

Victor Aspengren 1:14:12

Great. Thank you, Rebecca.

Rebecca Alvarez 1:14:15

I'm not sure you mentioned it. But as far as the top-down mentality, we during that period between Julie guide and 2013. And then we now in 2021, we actually got to where our high involvement planning surveys were like, hey, we need leadership to make more of the decisions. You know, we having a lot of this decision by committee or employees making the decisions and like we almost went too far to where Yeah, we were employee owned, but we need it so we're trying to swing it back to find that right balance of Okay, what decisions did leadership make the vision we're setting but still have the employees to be empowered to do things that will make the business better. So we're trying to find that are a couple years ago, we also were trying to find that balance between we're all about financials, we're all about the numbers, we really struggled with that having this great guy culture, we go into the GGOB, and the book management, and all of a sudden, we're about numbers and profit every single week profit, profit, like where are we at, and it was too far the other way. So the pendulum swings back. And so now, that's why we go to, we only talk about the finances every other week. And then it's something teachable moment culture related on the opposite weeks to try to have that healthy balance. So I think every company is a little bit different on your culture, and what's necessary, you just have to play with it a little bit.

Victor Aspengren 1:15:50

What are you bringing up a great point there, Rebecca, I think for every company, this journey, whether it's the ESOP or whether it's an implementation of GGOB, is organizations tend to get stuck in the rut, and our ability to ship all we don't want to change it? Oh, gosh, why do we want to do that? And I think the companies that are more open to that, and listening to the people to say, well, let's try it, because you can always go back. I mean, that's the thing. You know, it's that fear. And it's like, folks, there is no fear. So we got to get past that. And I came from the same story, it was a top down, the company shared nothing. We did open book, we started teaching everybody, here's the stuff. And it did build trust and what we did to drive out fear, because the philosophy was when do we learn the most? Anybody got the answer? panelists? When do we learn the most?

Marshall Jespersen 1:16:45

We learn the most when we're having fun.

Victor Aspengren 1:16:47

When you're having fun? Yeah, that's a good one. Yeah. And so what we did, that I'll just give this a story. Because everybody makes mistakes. We're all human make mistakes. So what we did is our committee was in charge of collecting who made the best mistake in the company,

Rebecca Alvarez 1:17:09

Oh, my gosh, the best mistake I love that

Victor Aspengren 1:17:11

The best mistake and you had to have two people had to submit it, you know, two people had to say, Rebecca, this is Rebecca's mistake, and two people had to submit it, the committee collected them all. And once a month, we would have a company meeting. And we would talk about what's kind of our top 10 mistakes, kind of like the old David Letterman, here, I'm showing my age, top 10. And people had to explain the mistake that was made. And then because this is group learning, here's what we did. So this won't happen again. So we had 10 stories of mistakes that were made. And the winner got a gift certificate to the local Steakhouse for themselves and their significant other or whoever they wanted to take to go out and celebrate. And the whole idea was, folks, it happens now, we qualified this and said, if you make the same mistake three times in a row, you might be going to HR at that point, you won't be on this list, you'll be on a different list, because it's part of being open. But we did that. And it was amazing how it just opened things up. And people started to talk about their mistakes, instead of putting them in the corner or never doing it. And it really did drive on a lot of fear. But it was the education moment by just kind of flipping it on its head and said, hey, we're open book, we have nothing to hide. Why are we hiding our mistakes? Because we all make them. So let's just get it over with. So there Oh, and you also there was an award it was actually called I give a crap. So our artistic people, we had a toilet seat that had cartoon characters and said, I give a crap. And you have and you got to wear the toilet seat all day for that day.

Marshall Jespersen 1:18:55

I have to share one thing with you hold on to sec.

Victor Aspengren 1:19:09

Oh, no. He's got a toilet seat.

Deanna Walker 1:19:13

Yeah, that's a really great one. That's a great story, Victor. And that's a great idea.

Victor Aspengren 1:19:18

Well, I just find because it's human nature.

Marshall Jespersen 1:19:21

I don't know if you can see this or not.

Rebecca Alvarez 1:19:25

Okay, toilet seat.

Victor Aspengren 1:19:28

Toilets. The head up out of the toilet. Yes.

Marshall Jespersen 1:19:30

The toilet seat award.

Rebecca Alvarez 1:19:35

I hope it's clean.

Victor Aspengren 1:19:41

Well, one of the other things because we're down to about our last nine minutes here, and I just let me check. I know there’s one more Q&A. Um, one of the things that you said Rebecca, I'd like to go back and get I'd like Marshall and Deanna you guys give your input on this, but you I can't believe Why would an ESOP not do open book and practice GGOB, and you said, why would they? Why wouldn't it because you did at the same time, so you kind of went into it. And I would love to hear Deanna,

Marshall Jespersen 1:20:15

I'm the one who was the outlier. There we did the we did. The ESOP years before we did open book management. And what it was, is, sometimes we don't know what we don't know. And in this case, we tried sharing things that we used in our company as far as the management of our budget and some other information, without realizing that it was a very incomplete package, and that we were not going at it in a systematic way. And one of the things that when we finally did read the book, again, I did read the book again, and we did start going the GGOB, and started implementing it was the idea that we really don't know what we don't know. And so we go ahead, thinking we're, we're doing a great job and doing things right. And we're still clueless. And so I have copied a mantra, from a person that we used for some marketing, which is called the case method. And the case method stands for, copy and steal everything. And so now, we are proudly practitioners of the case method, and go around looking for different ideas. But we get so tied up sometimes in doing that we forget about the thinking, forget about the evolving, forget about the time and effort necessary. Just to sit back and look at what we're doing, say, and why are we doing this? Again? I mean, Victor had that that really well, not because we've done it this way all the time. But questioning those things. And one of the things that the Great Game of Business is doing for us, and that we really want to do is we want to be one, a great company. And two, we want to be entrepreneurial. So we are going to look for what else are we going to do? How are we going to be different? Are we going Are we going to stay in this transportation industry? Or are we going to branch out from the transportation industry? What is going to be the best future for our ESOP? And boy, that's for our industry? Those are big questions right now. Because, you know, we've lived and breathed for over 100 years, the internal combustion engine. Guess what? It's got a limited timeframe left before it's not going to be there. So where are we going to go? We have some real Stark questions. And in our people are looking at that and saying, okay, what's next for us? Okay, you don't have the answers. But I'll tell you, two of our people have come up with answers. And they've come up and I said, well, you know, in one of one of our locations, we have some storage facility. How about we get into the storage facility business. Another one said, you know, we have an HR department. There are other small firms that don't have an HR department who could use our expertise. Why don't we go into the HR business? Okay, now we are starting to become entrepreneurial. Rather than saying, how are we going to develop the car business? It's how are we going to develop your business, our business, what are we going to do, that's going to be different. It's still going to keep us going and ahead of that wave of change that is inevitably coming. our way.

Victor Aspengren 1:25:02

Great examples.

Deanna Walker 1:25:04

And that comes from opening the books. I don't think that comes from being an ESOP company because you, I would think that it would be difficult to get that from seeing a financial statement a couple of times a year or getting an ESOP statement once a year. There are definitely financial reasons and tax advantages to going ESOP. And that and that alone could be a reason to do it. But if you really want to foster the examples in the minds that Marshall just so beautifully illustrated for us, you'd have to have that other side of the equation to really bring it all together. And that's what we're hoping to find as well. We did it a little bit different order, but we really, you know, believe that both of them can be very powerful, but having the information and the empowered meant to be involved in those decisions with the right type of culture, I think is really such a key important piece.

Victor Aspengren 1:26:05

While we're down to our final three minutes, let me check her out. I'll make I don't have any other Q&A. Marshall; you're laughing. It's like that the time goes fast. Yeah.

Rebecca Alvarez 1:26:18

The chat is such as every ESOP company have a bonus plan. And what are the pros and cons? Yeah, when in the Q&A?

Victor Aspengren 1:26:25

Yeah, I would say not every ESOP company has a bonus plan, I would say that far, vast majority. And it's definitely moved that way to where they do put in a bonus plan. The one thing I will tell you is if you have a bonus plan, currently, and you're not an ESOP and you put in the Aesop Do not mess with that bonus plan in the year that you implement an ESOP because you will fight an uphill battle, something fierce when you start talking employee ownership and act like an owner. And then you turn around and you start taking money out of my hands that you could have the , yeah, do not do that. So don't mess with your bonus. But I do think back to Rebecca's point, it's kind of like a prerequisite or it should be you would think an employee-owned company. Yes, you should have a bonus plan. Because that's what owners do owners get distributions in the traditional ownership, you get that extra something while if you're an employee-owned company, you should get that extra something. That should be part of it. And the other thing is, as I've been saying this for many, many, many years that the GGOB system should be a prerequisite for any company that's going to become an ESOP that if they practice it a year or two, at least a year, but two years before they became an ESOP, it just accelerates that ownership mindset. And they're actually now prepared to be an owner because when you ask this question in a company, how many of you have ever been an owner of a business? Well, that's a small, small percentage. But yeah, the ESOP world thinks what we put in the Aesop. Now you know what it's like to be an owner, it's like, come on, what do you do to get them ready? The GGOB system is the way to get them ready. And there's a lot of other things that go with that the culture and trust and fear, but the GGOB system kind of builds all those things together. And Marshalls point, it also puts in that fun component that, you know, it's built into the mini games. How do we have fun to do this whole system? So it kind of puts the whole package together? Well, folks, we're at We're at 11:30. So we are at the time, Marshall, Rebecca, Deanna, thank you so much. Great stories, wonderful things. And I’ll apart with this, since Marshall brought up the fun theme, so if you want to have some fun, put on a bunny suit, closed doors in your office, make everybody stand outside and have an Easter egg hunt with a little plastic egg, and put whatever you want inside there and let a bunch of adults go on an Easter egg hunt. And if you really want to capitalize on it, you can drop a few chocolates covered raisins through where the bunny hopped around. And then you'll have people looking for those plastic eggs for six months if you put like a half a day off, and they'll keep looking until they find every dog gone egg with that, folks, thanks for coming to the ESOP round. You again thank you for your contribution. Have a great weekend, everybody.

Steve Baker 1:29:37

But let's keep the conversation going. guys send us your stories, your best practices, your ideas, your challenges, your victories, your questions, and remember, you're not alone. This is capitalism at its best. Thanks for joining us. We will see you next time.

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The "Change the Game" Podcast is produced by the Great Game of Business. To learn more, visit greatgame.com.

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