A challenge for success: increasing profits through employee share ownership

Life took a big turn last May for the employees of CHI Overhead Doors in the small town of Arthur, Illinois. Each employee was a co-owner of the business. They were told that if the business sold at a profit, they would all get a day’s pay. Now it was happening. “I’m just being candid, I’m all fired up,” production manager Jim Hill said. “Oh my God, like, we’re talking about life-changing money now!”

Hill, who joined the company in 2019, received two and a half times his annual salary. “It was, ‘Hey, Jim, it’s easier to put your kids through college now!” he said.

The average payout was around $175,000. Long-time employees received even more – about six and a half times their salary.

Josh Ryan, who works as an assembly line supervisor at CHI, said: “You’ve never seen people grab their phones and pull out their calculators so quickly! Wait a minute, I mean, $22 an hour times 40 hours a week times 52 weeks a year times four? Holy cow!“

Ryan works at CHI with his wife, Marquita Sanchez, and mother, Elizabeth Garza. Sanchez said, “I was excited, but I was nervous at the same time, because I had never had so much money before.”

Ryan said, “My nine-year-old just wanted to know if we could go to Disney.”

And the answer? “Yes, we can go to Disney!” he’s laughing.

Seven years ago, the 800 employees of the CHI plant were given shares of the company by a surprising new owner: KKR, a private equity firm that buys, manages and eventually sells companies aiming for a big return. . The private equity industry has a long history of layoffs and cost-cutting. But KKR partner Pete Stavros wants his industry to adopt a new model that gives every employee a small stake. “I think it’s a better way to run a business in every way,” he said. “It’s better for the workers, it’s better for the companies in the corporate cultures and, in the end, it leads to better results.”

So far, Stavros is overseeing seven ownership payments.

Aubrey asked, “Are you telling me what you’re trying to do is completely change the system?”

“That’s exactly what we’re trying to do,” Stavros replied.

“That sounds a bit more like Bernie Sanders than a private equity executive.”

“It always helps growing up in a family where your dad was a construction worker, so you understand both sides.”

Watching Harry Stavros build roads for four decades is where his son saw a capitalist’s opportunity. “My dad used to talk about the need to work regularly,” Stavros said. “Not too fast, not too slow to get in trouble, but just stable.”

“So he was induced to be ineffective?” Aubrey asked.

“Absolutely. If you’re an hourly worker, more hours means more pay.

But Stavros thinks incentivizing workers will help results: “They’ll be more engaged at work, less likely to quit, and that will lead to better performance for the company.” Thus, productivity will increase.

But it wasn’t all about ownership; employees needed a voice. As co-owners, CHI workers voted for air conditioning, a new cafeteria and an on-site health clinic.

This philosophy is currently being tested at Charter Next Generation, a plastic packaging company that KKR bought in 2021. Any potential payouts for workers at the company (which makes films primarily used in food products) are still in the works. years, and only if profits increase. .

“We’re going to have to find a way to get employees to really understand how their day-to-day actions translate into long-term results,” CEO Kathy Bolhous said. For example, Bolhous said, reducing waste by just 1% by increasing efficiency would bring ten million dollars in additional profits.

The collective pursuit of profit means that problem solving extends from the corner office to the factory floor. When asked who owns the company, Factory Training Coordinator Charles Marlow proudly replied, “We own this company.”

And he has a certificate to show his ownership of 3,730 shares. Actions are tied to each employee’s position and years of work. If earnings increase, so does the value of those stocks and the size of that potential payday.

“It’s pretty cool, to be honest. I never thought I would own it,” Marlow said. “I wasn’t supposed to be where I am right now.”

“What do you mean, not meant to be?” Aubrey asked.

“Born in poverty. There were no home-cooked meals; it was Doritos and beef jerky. By obtaining this certificate, I am finally on the move. »

In 2021, Pete Stavros created a non-profit organization called Ownership Works, to expand this model across the industry.

Aubrey asked, “Do you think that would narrow the wealth gap?”

“That will help,” Stavros replied. “Is this going to solve all our problems? Absolutely not. But it is a step in the right direction. »

Private equity will still keep the lion’s share of profits from any sale, but for the nearly 12 million Americans who work for private equity firms, that could mean billions in wealth.

Just ask Arthur, Illinois employees like Josh Ryan, “I mean, I probably got more than my fair share. And the truth is, businesses are being bought and sold every day in the United States. And guys like me, and ladies like [my wife and her mom]don’t touch the money.

The wages of most workers were not enough to retire. But for Jim Hill and so many others, it bought some financial peace of mind. “I have three children, a house, cars, my wife who loves me. You know, I have everything I ever wanted in life. So this is the American dream”, a- he said, “My sweat has paid off a hundredfold. So I can’t put it into words, just smiles.”

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Story produced by Dustin Stephens. Publisher: Joseph Frandino.

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