MacFadden, Inc.

ESOP Launches Transition

To New Employee-Owned Company

The approximate 75 employees of MacFadden, Inc. recently joined the growing ranks of U.S. workers who have a substantial ownership stake in the company where they work. This ESOP’s acquisition of 35 percent of the  company’s stock from founder Jim MacFadden was the  culmination of a nearly two-year  planning process to launch MacFadden’s  conversion to an employee-owned  company.  

A diversified professional services company providing integrated information technology and program management support services to a variety of federal and state government clients, MacFadden is known for dynamic, innovative systems development and operations management. Specializing in systems development & integration, finance, health and human services, the company works in the areas of aviation safety, food safety, imaging and assistive technologies including the provision of disaster assistance and managing economic development contracts with USAID, the State Department and the Peace Corps. The majority of the MacFadden staff are technical experts who maintain close identification with their clients.

Company founder Jim MacFadden first began investigating the idea of employee ownership in 2002. Based on a feasibility analysis by the Beyster Institute, he determined that an ESOP represented the most effective means of transitioning ownership to the MacFadden employees. The company first started making cash contributions to the ESOP in anticipation of the eventual purchase of the shares. As a result of that pre-funding strategy, only a modest amount of debt was required to finance the ESOP’s acquisition of its 35 percent stake in the company. Furthermore, a majority of the shares acquired by the ESOP were already allocated to the individual accounts of the ESOP participants. The company expects to make substantial contributions to the ESOP over the next few years to repay the remaining debt, which will of course translate into growing ownership stakes for the MacFadden employees.

Having worked in several companies earlier in his career that provided stock incentives for managers, Jim MacFadden felt that broad-based employee ownership offered an effective means of incentivizing his employees. Implementing an ESOP fits well with a company culture focused on “delivering results and exceeding expectations” and offers a tax-effective means of designing an ownership transition strategy to ensure the company’s long-term success.

MacFadden’s transition to employee ownership is the latest chapter in a remarkable story that began in 1986  when Jim MacFadden first established the company as a small disadvantaged minority business. Two years later he became the first deaf person to receive 8(a) status for his company from the U.S. Small Business Administration. MacFadden graduated from the federal 8(a) program in  1998 and has continued to grow, generating annual revenues in excess of $12 million in 2003. Our flexibility and quick response to client needs.

Others use breakfasts, family picnics, team building retreats, and essay or poster contests to call attention to this unique approach to doing business. Some companies emphasize fun by throwing company parties or designating themes on certain days of the month, such as crazy hat day. Companies also use the month to educate  employees with round-table discussions, lectures, workshops or financial training with the CEO or CFO.

 

Need Other Ideas?

The consulting company Ownership Associates publishes “42 E.S.O.P. Ideas for ESOP Month,” a book of creative ready-to-use ideas for Employee Ownership Month activities. In this book, which was recently updated for 2004, ESOP stands for Educational, Smart, & Occasionally Playful Ideas for ESOP Month.

The book provides creative ideas and practical “how to” tips for activities such as educational games, community outreach, special communications, serious training, and just plain fun. It includes chapters on educational games, contests, outreach, and celebrations, among others, as well as lists of questions and facts to use in program design.

Most of the activities are lowcost and fairly easy to organize. Each activity in the book is graded and marked as being low, medium, or high cost and difficulty. To see a sample idea from the book, go to http://www.ownershipassociates.com/online_res_eomidea.shtm.

 

More Celebration

Instead of creating special attention for just one month or one day out of the year, some companies emphasize continual celebration. This is not an eight hour-a-day party but instead a laser-like focus on recognizing success. One example of this celebratory culture is Obie Media, based in Eugene , Oregon . Some of its ideas may be worth emulating.

The unique corporate culture at Obie values integrity, respect, growth, ownership, a positive environment and celebration. The company celebrates every month with management and sales meetings, all-staff lunches, or other gatherings. By telling success stories about the results of their hard work, employees have the opportunity to teach, learn and grow.

One way Obie celebrates success is through rewards. They value the intrinsic reward of satisfaction from personal growth. Financial rewards come from stock options and retirement plans. Recognition comes at 90 days and one year of employment through the gift of a pin and a watch. They focus on rewarding the right things: success and integrity.

Perhaps the company’s web site best describes its philosophy: “The corporate culture of Obie Media succeeds in part because it’s not just a program to maximize potential. Everyone ‘walks the talk.’ The managers participate in the work; the workers participate in the management. Open communication is a well-worn path.  Information gathering and disseminating is non-stop.  Everyone is encouraged to brainstorm, to think outside of the box, to challenge our  understanding, and to raise the  bar on excellence and opportunity.  And when we enjoy success we remember our foundation and go back to the  basics to strengthen our  commitment to the Obie Way .”

Author and consultant Ed  Rigsbee also embraces the  celebration of success as a way  to give employees “emotional  WORDS OF WISDOM continued from page 1  “… ESOP stands for Educational, Smart, & Occasionally Playful Ideas for ESOP Month.”   He cites recognition as one of the most powerful ways to create employees who operate as if they own the  company and always look out for the company’s  best interests.

In his words, “I believe most executives, owners and managers secretly yearn for employees who  have an emotional ownership in their company.  Unfortunately, few are willing to do what it takes to cultivate this emotional ownership. Often, I hear managers saying that loyalty is too costly.”

Rigsbee suggests that by asking employees how they want to be recognized, seeing what  colleagues have done, and not limiting creativity,  companies can find the means to reward success,  encourage loyalty, and create emotional ownership.

From a list of 50 low cost recognitions offered by  his seminar attendees, we’ve selected his few  choice items:

  • Contact with the company president through a  visit, note, email or lunch.
  • A celebratory gesture such as flowers, balloons,  or gift certificates.
  • Intangibles like encouragement, private verbal  praise, choice of work assignments, or being  included in decision-making.
  • Visible rewards like a “get off early” card, a  special parking space, permission to attend a  seminar or being “boss for a day.”

The one thing that all of these ideas have in  common is the use of creative celebration to  develop and sustain a thriving company. It doesn’t  have to be costly or require special approval. If it’s  meaningful, sincere, and imaginative, it will go a  long way toward supporting a culture of success.

This article originally appeared in the  Beyster Institute’s Fall 2004 In Focus Newsletter. The Foundation for Enterprise Development is a worldwide organization that, since May 2002, operates within the USA as the Beyster Institute for Entrepreneurial Employee Ownership.

Opinions expressed in this article do not necessarily reflect the views of the
Foundation for Enterprise Development or ESOP Services, Inc.

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