Open-Book Management from an Employee-Owner Perspective

Episode with guest: Rob Zicaro

ESOP Advocate

(This episode was recorded in September of 2017.)

Key Episode Take-Aways:

1. Giving your employees ownership mean nothing if they do not know how to run a business or how to affect the finances of the business. (click to jump to this topic below)  You sit down, you a bunch of us read a book, and we would talk about it, we happen to read the Great Game of Business. Our organization at that time was struggling, Framingham was about that close to going out of business. And as owners, we really felt it. And it made sense reading the book, because how can you possibly be an owner, if you don't know how to run a business, and how to affect the finances of the business.

2. Knowing the difference between having ownership and having a sense of ownership. (click to jump to this topic below)  I have ownership, not just the sense of ownership, there is a difference. We're sharing financial information. Each month, we get a three-page document. And we know everything from the cost of phone cost, cost of goods sold, the whole balance sheet is right in front of us.

3. Open-book management and ESOPs can provide greater opportunities for the company and employees. (click to jump to this topic below)  Equity can provide the greatest expansion of wealth most people will ever see. It's like hitting an oil field. I can't think of any other game that offers the same odds and a comparable payoff. And I played a lot of games. I put money on just about every event you can bet on. This is the best deal around, hands down. Because you can influence the results. You can pretty much determine whether you win or lose. 

Continue scrolling to read the full episode transcription.

Announcer 0:00

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. In recognition of ESOPtober, we pulled from the vaults a recording of Rob Zicaro, former frontline employee at Web industries. Rob is now an ESOP Crusader spreading the word on employee ownership. In this speech at a past Great Game of Business conference, Rob talked about open-book management through the eyes of an employee owner, and he shared a clip from the 1990s when he addressed President Clinton about ESOP companies. We hope you enjoy this look into the ESOP world from the perspective of the employee.

Rob Zicaro 0:46

It's great to be here, it's an honor to be here. I should probably tell you a little bit about myself, to get to know where I come from. I worked as an employee owner for 26 years for organization called Web Industries since 89. And at the end of 2015, my ESOP account balance was so large, pleasantly large. And in addition to my 401k tuition, I said, you know, I now have an opportunity to stop working full time. It was at that point that I was able to move on and do other things. Coming to Web Industries in 1989, was very interesting. I started out as a machine operator; I ran machines for approximately four years. And after that I got into frontline management, which I did for another 22 years. I don't know if we have any frontline managers or anyone in management role, but the person on the frontline who's managing people or managing staff, critical role in any organization, and I learned so much about managing people and leadership on the frontline. Web Industries is essentially a converting splitting operation where they will convert and split flexible materials or materials that go into any product can be taken from a large format down to smaller format. They also do laminating, extrusion sheeting, and anything that has to be converted. It was in a very old facility back in 1989, in Framingham, Massachusetts, very old facility. And when I think back today, where they are now, amazing how far they've come. The markets they're serving is aerospace, medical, this serving wiring cable. And if you think of things like the new planes that are being built with composites, Web Industries is a leader in splitting composites. So, so much growth. Over 45 years, the company has been in business. It's tremendous when I think back, I've only started in 89. But well, before that they were they were doing their thing. There's over 550 employee owners at Web Industry. It started their ESOP in 1985. And the year 2000, was a banner year for them and that's when became 100% employee owned. And that was a big, big time for us because we realized, you know, we don't just own a small piece of it. We own the whole thing. Great, great, great time. We have facilities in Massachusetts, Vermont, Connecticut, Indiana, Georgia, we have a facility in Texas. And we also have built the facility in Germany, and a lot of growth. Bob Fulton, the original owner of Web Industries, who started out in a very small garage and Boston, Mass with one machine. As he was getting older and thinking about what he wants to do with his life. He decided that you know, based on his values, and what he believed that it was the employees who built this organization should be the ones to own it. It fit his job. So, we created ESOP in 85. And in 2000, we bought out the rest of the other company from Bob. Now my journey with the Great Game of Business and open-book management started back in 1992. And I have I don't know how many people have a copy of the original. There we go hardcover version of the Great Game of Business right with the American flag on it. hardcover, right. So, this book, we read this book, as part of a reading group at our Framingham, Massachusetts plant in 1992. Reading groups are very common and Web Industries. They still to this day have reading group.

1. Giving your employees ownership means nothing if they do not know how to run a business or how to affect the finances of the business.

You sit down, you a bunch of us read a book, and we would talk about it, we happen to read the Great Game of Business. Our organization at that time was struggling, Framingham was about that close to going out of business. And as owners, we really felt it. And it made sense reading the book, because how can you possibly be an owner, if you don't know how to run a business, and how to affect the finances of the business. You can't really be an owner if you don't understand that. So that was my introduction to it. And then in 1993, the Future of the American workplace Conference happened in Chicago. I got an invitation from the White House; President Bill Clinton sends an invitation to the Framingham plant dressed to me. So, I get this thing. They give it to me, and I'm looking at it. It's a fancy white envelope with a symbol of the President on and stuff I'm saying, okay, who is who's playing a prank on me? Right? I mean, you know, what's the joke, right? So, I opened it up. And sure enough, it's an invitation to the Future of American Workplace Conference. Jack was on a panel. And essentially, what it was, was a conference that the President wanted to see what the future of the American workplace would look like. Now, this is back in 1993. So, you got to kind of put yourself back here a little bit. Secretary of Labor, Robert Rice was also on a panel and Secretary of Commerce, Ron Brown. And I do have a clip, a video clip that I like to show of myself talking with President Clinton, it's about a three-and-a-half-minute clip, I think you may find it interesting. I just want to warn you, I look much different back then than I do now. So, fair warning on now you got to think back 1993. If we could play that, please. 

President Clinton 7:06

I'd like to now to call on Robert Zicaro, who is our frontline employee from Web Converting Incorporated, an employee-owned company to discuss the issue of innovative pay systems and how that relates to the issue that was discussed by the US West, folks. 

Rob Zicaro 7:23

Thank you, Mr. President. I do feel that first of all, I think I should probably say why I'm dressed like this. It's not a disrespect to you. Of course, this is the way I will be working every day back to me. 

President Clinton 7:40

What I was wondering is why the rest of us aren't dressed like that?

Unknown Speaker 7:43

Well, he's the smartest one. The lights are so hot up here. He's the smartest one of all of us.

Rob Zicaro 7:53

This is the way I would be working and running my company today. Being Monday, I would certainly be on the front lines running a machine, being a machine operator. And I'm also a coordinator of a self-directed work team. It's been very interesting, listening to all these discussions this morning. And to me what we're doing at Web Industries, employee ownership, seems to be the core thing that will tie all these workplace systems together. Yes, we do have self-directed work teams. We call on customers directly. We do our own scheduling of work. We do our own ordering of materials, and other problems that come into the work team. We also have a reading program that educates people, we actually read books on company time, Max Depree's Leadership as an Art, Dr. Deming, Stephen Covey's Seven Habits of Highly Effective People. We certainly believe that learning, as you had talked about in your speech at lunchtime is very, very important. And I was really interested in Secretary Rice your comments about when you were visiting various companies a sense of ownership.

2. Knowing the difference between having ownership and having a sense of ownership.

I have ownership, not just the sense of ownership, there is a difference. We're sharing financial information. Each month, we get a three-page document. And we know everything from the cost of phone cost, cost of goods sold, the whole balance sheet is right in front of us. I guess, in a sense, we're learning to become business people. And I think that's something that was missing throughout the whole thing so far today. If we want to make it real, do we want to just have workers and management like we've had for years and years fighting? Well, you want to really own a piece of American dream. We talked about bottom line, very important, because we do get our financial results. We know what the bottom line is. In Web Framingham the last six months have been the best six months ever, in the history of that plant. I don't think it's an accident. I think finally, people understanding that if we're going to make all these workplace practices more than a fad, because we'll just be here two years from now talking about something new, old wine in new bottles, that type of concept. And we're going to wonder whatever happened to last year? This answer the question why. Why would it work or want to get involved in a self-directed work team take on more responsibility, be accountable call on a customer, go there, nine, nine yards or more. If you're an owner, you have a responsibility and you know what that means. And now I think that's the difference that I think hasn't really been touched on today. And I was curious, Mr. President, what you thought of employee ownership, that's something that is just really not talked about much.

President Clinton 10:35

I'm very interested in I think the government ought to be supportive of it. The experiences are somewhat uneven, but where it works, it works very, very well.

Rob Zicaro 10:51

So, as I said, you know, this is going back away. So, when I can't tell you where my hair went, but I just know that my hair is not the same, among other things. But yes, we were struggling and just to move along on the presentation. Back then a lot of this was experiment, experimental. It really was. For the first time we were having machine operators use a calculator to figure out revenue per labor hour. Now you got to understand, we had just had a high school education. We never had to do this before and was very empowering. And what was happening was, slowly but surely, we were moving from feeling victimized, to feeling empowered. In other words, we had more control over our future. That's what started to happen, the culture started to change. And year after year, as that happened, we became more successful. By the year 2000, Web Framingham became so successful, we could build a brand-new facility in Holliston, Massachusetts. The same year, the company became 100% employee owned. So, in about 8 years, it's not overnight, in about eight years, tremendous change. Open-book management with employee ownership reinforced each other, and made it happen in my opinion. The share price of course, is growing larger, by leaps and bounds. We were generating more cash or earnings. Quarterly bonuses were getting very large. In a lot of cases, quarterly bonuses, or equaling as much as $2.50 an hour, in addition for a person's hourly wage. That's a lot of money. Okay, so this really started to take hold from the year 2000 on, it certainly made the company, in my opinion, much more successful. Some of the lessons that I've learned over the years, it's what's behind the numbers that matter. And we found that out, we moved into our new plant. Yes, we can share the numbers, of course. But what are the drivers of those numbers, the processes, the systems, you used, success principles, lean manufacturing. Once we started applying those principles, we became even more successful financially and our market share grew when we started to get new customers. I also learned that open-book management is really about organizational development and change. Once you go down this road, this journey, there's really no going back because now you've shifted to relationship to the company. You know, people have a different idea of what the company is all about in your role in it. Personally, my knowledge of finance, that I learned from the Great Game of Business, and open-book management still serves me well to this day. Employee ownership why am I passionate about, it’s the real stake in the outcome, as far as I'm concerned. It's one thing to ask people to think like an owner and act like an owner. But when you have an actual ownership stake, that's the real deal. You can't fake it anymore, right? You can't blame anyone else. You can't blame the owner; you are the owner. Well, you're going to blame right? So, it really matters in that aspect. Open-book management and employee ownership, I feel go hand in hand, they reinforce each other. You can't really have one without the other can't be a good employee on company without open-book management. Practicing open-book management I believe takes you almost all the way there. But without the equity portion in my opinion, you miss out on reaching the full potential of what open-book management has to offer. Wages make us a great living. We know that. But ideally, if you really want to build real wealth, you need to have equity. Employee ownership to me has changed my life in ways that I never thought would ever happen. Here I am standing on a stage talking to you folks. That never would have happened. Okay, if I didn't get involved in employee-owned company. It makes the free enterprise system much more inclusive. We hear a lot of talk about wealth disparity in our country. The gap is getting wider and wider. It's unsustainable, but for over 40 years, employee ownership has been shrinking that wealth gap. There's over a trillion dollars’ worth of value in ESOP accounts in the United States of America. There's over 10 million participants in ESOPs. Over 6600 employee-owned companies through ESOPs. So, it makes a difference. It's changed my life. And I like to end my presentation if you just bear with me, I like to just read a couple paragraphs from the original version again. So, I'm going back to what Jack was saying in a chapter called The Company of Owners, and it's just a couple paragraphs that really hit home for me, and I thought today made sense for us to remind ourselves about this.

3. Open-book management and ESOPs can provide greater opportunities for the company and employees.

Equity can provide the greatest expansion of wealth most people will ever see. It's like hitting an oil field. I can't think of any other game that offers the same odds and a comparable payoff. And I played a lot of games. I put money on just about every event you can bet on. This is the best deal around, hands down. Because you can influence the results. You can pretty much determine whether you win or lose. Who invented this game of capitalism? I sure didn't. It was here long before I came along. I'm just teaching how to play it, showing them what an incredible game this really is. When you hit the equity jackpot, you can do more than pay your bills. You can actually achieve some of your dreams. The opportunity is there. If you take it, you can create a better life for yourself and your family. That's the best reason I know for playing the Great Game of Business. It's the message we are constantly sending out to the people who work at SRC, equity makes the message real. And it was true 25 years ago. And I would say it's true today, it will always be true. I want to thank you very much for having me here. The staff of the Great Game have been amazing. What an incredible conference it's been. And I wish each of you much success. You are literally changing lives, make no doubt about it. You are changing people's lives. I wish you the best Thank you very much.

Announcer 17:24

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