Retirement savings compound over time


Disclaimer: These communications are intended for the employees of HB Global. We recognize that the general public will have access. The views expressed in these communications represent Bob Whalen in the context of HB Global and may not apply to broader audiences.

At HB Global, one of the primary components of our mission is to create and share value, which is really the essence of being structured as an ESOP.

To make this mission a success, it is critically important that each employee owner understand not only how value is being created but also how that value is being shared back to them.

Perhaps to take a step back, it is even more important you understand that it is our goal at HB Global that every single person involved in our company shares in its success. As an ESOP, we are set up so that when we succeed, we all succeed together.

So, let’s talk about how we succeed in creating value and how we then share it back with you as an employee owner.

How do we create value?

Let’s start first by discussing the mechanics of value creation. The most tangible way to see this is through a financial lens. The revenue we generate and the expenses we incur have a direct impact on our HB Global share price. When we are increasing our revenue and holding steady or decreasing our expenses, our share price will be positively impacted. While there are many other factors involved, this is the simplest view.

When the share price increases, the value of the shares in your own personal ESOP account will increase as well. Breaking it down simply like this makes the win-win situation clear. You win by directly benefiting from the value being created, and HB Global wins by also increasing its value to invest back into the business and employee owners.

So how do we generate that revenue and keep our expenses in check?

We do this by exemplifying our core values each day. This requires us to live out our core values not only with each other but also with our clients and partners. When we do this, employee owners will feel more engaged, we’ll create raving fans in our clients, and this will create the financial success that will create value for you and the company.

This means being transparent and honest (Trust), putting the organization first (Team), never giving up and embracing challenges (Grit), and continuing your personal and professional growth (Growth).

While this is a simplified view of the behaviors that accompany our core values, you can see how living out these core values each day creates value not only for the company but for you as an individual employee owner.

Importance of Trust

While all of our core values must come together to make this mission a reality, one of the most important core values to support this mission is Trust. While you can see a direct connection behind how Team, for example, would directly create value for the organization, Trust goes a layer deeper.

For you to be engaged as an employee owner at HB Global, you have to trust that we are being true to our word and sharing as much value as we can back to you. If there’s any skepticism in this belief, the system breaks down. Why?

The system would break down because HB Global would still be making its best efforts to share value with each employee owner, but the skepticism would decrease engagement. Without engaged employees, we can’t create raving fans, which limits our ability to create financial success.

Without Trust, it’s difficult to act as a Team, there’s a lack of motivation to show Grit, and it seems pointless to want to Grow. This is why Trust is the foundational core value to this pillar of our mission.

But the Trust doesn’t just go one direction. HB Global also needs to be able to trust you as an employee owner. HB Global needs to trust that you bring the best version of yourself each day, that you are acting in the best interests of the team, that you own it and don’t make excuses, and that you invest in yourself as much as HB Global invests in you.

Short-term: How we share value

While long-term savings and benefits are most frequently thought of as it relates to ESOP companies, HB Global shares many short-term benefits as well to ensure that each employee owner can share in the success of the company in real-time and not just in retirement.

At the foundational level, value creation allows HB Global to share value through competitive market-level compensation and benefits. We will cover this topic in more depth a little later in the year.

Aside from your base pay, we offer an additional way of sharing value in the short-term: bonuses. Each year we pay out bonuses to our employee owners as a percentage of the profit generated in each of our divisions. These bonuses are to share value over and above the market-level compensation. By structuring our bonus program this way, employee owners are able to directly tie the value they are receiving with the performance of their operating division.

Long-term: How we share value

ESOP Account

ESOP share allocations are the way HB Global shares value in the long-term that you are most familiar with. The ESOP share allocations are the cornerstone of how we share value at HB Global and a key way in which we work to help each employee owner be able to maintain the same standard of living in retirement that they have in their working years.

At the end of each fiscal year, an independent third party performs an evaluation of the HB Global share price. The share price valuation impacts the balance of shares already in employee owner accounts. Then HB Global makes a share allocation based on the amount of shares that we buy back from former HB Global employee owners each year. Each current employee owner will receive a percentage of those repurchased shares based on their percentage of pay relative to the total organization. We expect that this will typically be 3-5% of each employee owner’s total compensation. Our collective goal is for this share price to increase each year, which increases the value of your ESOP account.

It’s important to understand that the HB Global share price should be considered over the long-term. If the share price happens to decrease for a year, there’s no need to panic. Our share price has increased 353 percent from 2015 to 2023. Just like the publicly traded stock market, the long-term gains should be the priority since your ESOP account is being utilized for retirement and will grow over time.

401(k) Program

This year, HB Global added a 401(k) grant program in addition to the ESOP allocations that it makes. Because HB Global has chosen to adopt a 401(k) grant option rather than a 401(k) match option, there is no contribution required from you for HB Global to make its contribution. However, we do highly encourage you for your own benefit to make your own contributions.

So how does this program work?

Each week, HB Global will contribute 3% of your base pay plus overtime to your 401(k) account for you to invest in a variety of options available through the program. Having a 401(k) account in addition to your ESOP account is incredibly beneficial in helping you to diversify your retirement savings so you don’t have all your eggs in one basket. The best part is that these contributions are on top of your share allocations you are receiving, so HB Global is now providing two different streams of retirement planning income.

The 401(k) also provides you with more liquidity by allowing you to take out a loan against this account. Furthermore, the 401(k) account is totally portable, meaning you can take it with you if you leave HB Global before retirement.

All these topics and more will be covered at our upcoming Annual Meetings. Please bring any questions to those meetings to be addressed more directly.

Stay tuned for next month’s blog where we talk about the second part of our mission: HB Global being a great place to work and what defines this.