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.
October is Employee Ownership month, and we want to celebrate 14 years of being employee owned!
HB McClure transitioned from being family owned to an ESOP in 2010. Since then, we’ve integrated all of our acquisitions into this ESOP structure. We even created HB Global in 2017 to be the parent company to each of our divisions to help foster our culture, support each division, and help facilitate the ESOP.
This month we’ll be talking about what an ESOP is, why our company became an ESOP, and what we’ve achieved since becoming an ESOP.
What is an ESOP
Let’s start with a reminder of what an ESOP is. ESOP stands for Employee Stock Ownership Plan and allows all employees to also be owners of the company. This is made possible by each employee being allocated shares over the long-term that allow them to reap the rewards of the financial success of the company in retirement.
With most organizations, people who want to have part ownership in a company need to invest their own money in order to get money back out of the company. In an ESOP structure, it costs nothing for an employee to become an employee owner. At HB Global, an employee simply has to be over 18 and have worked 1,000 hours over the last 12 months to be eligible to be an employee owner.
There are many rules and laws that regulate how ESOPs are operated. In fact, according to the Employee Ownership Foundation, companies that are structured as an ESOP are required by law to put the profit they generate primarily back into the shares of the company for the employee owners to see the financial reward.* When an ESOP company succeeds, the employee owners also succeed.
There is sometimes a misconception that being an employee owner means getting to exercise other ownership rights. However, the company is still managed by a professional leadership team. While being an employee owner has monetary benefits, it doesn’t necessarily mean that the employee owners control the day-to-day management of the company or are responsible for organizational decision-making.
Being an ESOP allows for a company to still have a traditional leadership structure while setting all employee owners up for success as they benefit in retirement from the impact that they make through their work.
Why is HB Global an ESOP?
Bob Whalen made the decision to transition HB McClure to an ESOP in 2010 as a strategic investment in the future. The ESOP structure helped ensure the longevity of the company, aligned with Bob’s vision for the culture of the business, and met Bob McClure’s goal of taking care of his employees after he exited the company.
Becoming an ESOP fostered a cultural commitment to the greater good. Because the success of the company as a whole would directly impact each employee owner, being employee owned created a focus on Team and motivated each employee owner to demonstrate Grit.
Furthermore, an ESOP structure created the foundation for a trusting relationship between leadership and all employee owners. Employee owners are able to Trust that the value created is being shared back with them. They can trust that decisions are made for both the prosperity of the company and the good of the employee owners.
Most companies that have shareholders – or people who own part of the company – need to prioritize getting the profits, or value created, back into shareholders’ pockets. This can sometimes create a rub between prioritizing shareholders and prioritizing the employees of a company.
As an ESOP, the focus becomes one and the same. By focusing on creating value to return to shareholders, the company is also focusing on taking care of the employee owners because the value that is created will be shared back to employee owners to support their financial success.
What We’ve Achieved as an ESOP
Between 2010 and 2023, HB Global has created $113 million in value that has gone to employee owners’ ESOP retirement accounts. To put this in perspective, the average amount in an employee owner ESOP account in 2023 was approximately $60,000. We are extremely proud of the value we’ve created to help build financial success for both our company and our employee owners.
Being an ESOP has also been a major component to making HB Global a great place to work. An ESOP structure enables and aligns with our core values of Trust, Team, Grit, and Growth. When the goals of employee owners and the goals of the company are aligned, it’s easier to carry out our work in a way that aligns with these core values because we trust that we’ll see the benefit of that impact.
This culture of fostering the greater good has also had a ripple effect. In our June 2024 blog, we talked about how our work positively impacts our communities. We pride ourselves on supporting causes that directly benefit our communities and for doing the right thing. In fact, receiving the financial benefits from our work motivates us to get a little better each day. These greater good causes and attitudes become easier when employee owners feel fulfilled and secure in their work.
Being an ESOP is more than just a business structure. HB Global is an ESOP because this structure sets the foundation for how we want to operate as a business. We want to create value, be a great place to work, put our people first, and create financial security for our employee owners. Being an ESOP allows us to more easily accomplish these goals.
Have your own thoughts or questions about the benefits of employee ownership at HB Global? Send them to [email protected].
* Employee Ownership Foundation, “What is an ESOP?”, https://www.employeeownershipfoundation.org/articles/what-is-an-esop#:~:text=An%20Employee%20Stock%20Ownership%20Plan,stock%20of%20the%20sponsoring%20employer.