An ESOP is, at its core, a legal structure: a trust that holds company stock on behalf of employees, governed by ERISA and a plan document. But the companies that get real performance benefits from employee ownership treat the ESOP as a starting point, not an end point. The legal structure creates the opportunity for an ownership culture. It does not create the culture itself.
That distinction matters more than most business owners realize before they go through a transaction. It is common to assume that once employees are technically owners, they will begin thinking and acting like owners on their own. In practice, many companies set up an ESOP, send out an annual share price statement, and see little change in day-to-day behavior. The employees are owners in a legal sense, but they do not understand what that ownership means, how it accrues value, or what their own actions have to do with it.
This post covers what separates companies that build a real ownership culture from companies that simply have the paperwork: how employees need to understand the connection between their work and the share price, why transparency about company financials is not optional, and why the process of building this culture rarely goes smoothly the first time.
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Video Transcript
Chapter 1: Welcome and Introduction to Certified EO
4 seconds
Hi everyone. Welcome to ESOP Radio.6 seconds
I’m Trevor Gilmore, CEO of Menke This is a great one.9 seconds
Today we have Joe Belsterling, CEO of Certified EO.14 seconds
On today certified EO is a key partner that independently certifies employee owned companies and provides education to the leaders22 seconds
of those successful employee owned companies. Welcome, Joe. Thanks, Trevor.29 seconds
Really excited for our conversation today and grateful for the opportunity to come on. Okay, let’s dive in.34 seconds
So, Joe, let’s start by telling our listeners a little about you and the story of certified EO and the work that you all do at certified EO. Yeah, absolutely.Chapter 2: How Certified EO Started: A B Corp-Inspired Origin Story
43 seconds
So I gotta first give a shout out and credit to the founders of certified EO. So I am not founder of certified EO.51 seconds
I’m shepherding on the legacy of them in the next chapter.54 seconds
But it was an individual named, Thomas and Cramer, and they really started it from my understanding, out of research at the time,1 minute, 2 seconds
in a master’s program around the economic and really just cultural benefits and work benefits of employee ownership as a concept.1 minute, 10 seconds
And there was a trend for types of associations around certification, like the B Corp industry or the B Corp Association,1 minute, 18 seconds
and thought something similar could help grow the space of employee ownership and esops and other forms of ownership as well.Chapter 3: Joe Belsterling’s Path From Ed-Tech Founder to Certified EO CEO
1 minute, 25 seconds
I had a little bit of a parallel story, so I had a previous educational technology company that I had founded, and we were not a formal Esop,1 minute, 33 seconds
but we were or we were involved in employee ownership through direct ownership.1 minute, 38 seconds
And so we had a large percentage of the company that I had given to our employees through direct ownership.1 minute, 44 seconds
And ultimately that business ended up getting acquired 3 or 4 years ago.1 minute, 49 seconds
And I always tell people that, you know, when I started that company, I thought that what would stay with me for the rest of my life1 minute, 56 seconds
was the social impact and the social mission, which was educational around career, exploration and academic planning and helping kids2 minutes, 3 seconds
figure out what they wanted to do with their life. And we served over 6.5 million kids.2 minutes, 8 seconds
And so I thought, that’s going to be my crowning achievement, that I hold on to.2 minutes, 12 seconds
But after exiting that business, what I actually realized that has stayed with me the most is the employee impact, right in the employee relationships.2 minutes, 21 seconds
Like most of our students, the millions of kids who used it, I’m sure they got value.2 minutes, 26 seconds
I’m sure they got benefit, and we’re very proud of that.2 minutes, 28 seconds
But 2 or 3 or four years down the road, they probably don’t even remember the name of the career exploration tool they used back in their sophomore year or junior year of high school.2 minutes, 36 seconds
But for the employees, I got to mentor and grow alongside and watch, develop and build their own flourishing careers2 minutes, 45 seconds
and then financially benefit from that and be really positively impacted and set up their next chapters of life, or buy their families first house, or be able to take time off from working.2 minutes, 55 seconds
Those are the things that have stayed with me, and they’ll stay with me for the rest of my life.2 minutes, 59 seconds
And I think about pretty much every day and incredibly proud of and so there was this intersection where I was kind of looking for the next thing, and I’d met3 minutes, 8 seconds
Thomas and Kramer and already was passionate about employee ownership from that perspective.3 minutes, 13 seconds
And so was able to come into certified EEO almost two years ago now and serve as president and CEO.3 minutes, 19 seconds
And I am really just grateful for that opportunity and excited for for where we’re headed.3 minutes, 24 seconds
Congrats on building that education company.3 minutes, 26 seconds
It sounds like you really helped students grow right over time.3 minutes, 30 seconds
Figuring out the life path, smart decisions, and so on, he said. 6.5 million students touch.3 minutes, 36 seconds
Yeah, it was 5000 schools and 6.5 million kids had used the platform when when the business was acquired. That’s impressive and personal note here.3 minutes, 45 seconds
Way back in 2016, I remember meeting Kramer and and Thomas in Oakland back when they were first starting certified,3 minutes, 53 seconds
and it was an idea, and we met over coffee downtown Oakland with John Mann here, our founder, and it was super excited4 minutes
to hear their idea and what they plan to do.4 minutes, 3 seconds
And then they launched, sure enough, ideal and really grew at scale with it.4 minutes, 6 seconds
And and then you came in, what, two years ago and are going to take it to the next level. So exciting stuff.4 minutes, 12 seconds
It’s been really fun to see the organization grow.4 minutes, 15 seconds
And, for listeners who may not be familiar with certified EO and its designation, what does it mean to earn that credential?Chapter 4: What the Certified EO Designation Actually Certifies
4 minutes, 23 seconds
Number one and two?4 minutes, 25 seconds
You see the logo on products out there for employee owned companies.4 minutes, 29 seconds
You see the certified yellow, it’s kind of a circular, a logo, etc.. Let’s talk about that. And the power of that logo for consumers.4 minutes, 34 seconds
And then also, Joe, what intrigued you to acquire certified EO, you know, given your background in education and so on, and with your future4 minutes, 43 seconds
plan, you know, for your own personal journey. Yeah, absolutely. Great question.4 minutes, 47 seconds
So starting off with the certification piece and, and kind of the origin of, of where this all started as I said, I know a big inspiration for Thomas4 minutes, 55 seconds
and Kramer was kind of the B Corp association and, and what had been done there, but also kind of Fairtrade labels and the impact that was having on consumer behavior.5 minutes, 4 seconds
Right.5 minutes, 4 seconds
And to your point, it’s always really cool and kind of a pinch me moment when I see a random truck on the highway5 minutes, 11 seconds
with our certified employee on trademark on it.5 minutes, 14 seconds
Or, you know, I went to a hotel, the Tabard Inn and DC that had the mark everywhere.5 minutes, 20 seconds
Or you see it on Lighthouse Products in the grocery store.5 minutes, 23 seconds
And so that’s really cool to see how far that’s come and, and just see it in the wild. And the importance of that.Chapter 5: Why Not All Employee Ownership Is Created Equal
5 minutes, 30 seconds
To your question on why does that matter is, you know, there’s a lot of flavors of employee ownership. And I do want to be clear on something.5 minutes, 39 seconds
And and sometimes I’ve encountered folks in the space who maybe don’t always agree.5 minutes, 43 seconds
But in my view, the more employee ownership in any shape, size or form, the better, right?5 minutes, 49 seconds
The more that employees are empowered and aligned to the economic incentives of the companies they work for and can share in that growth and upside, the better.5 minutes, 57 seconds
But it’s certainly not a one size fits all model, right?6 minutes, 2 seconds
It’s not, six of one half dozen of another.6 minutes, 5 seconds
The models do have differences in their value.6 minutes, 7 seconds
You know, a huge factor is the liquidity of those shares.6 minutes, 11 seconds
If you work at a high growth tech startup that’s raising tons of money and awarding employee options, but ends up bankrupting or not even bankrupting,6 minutes, 19 seconds
but being acquired for below the last, you know, share price strike price of your options. That stock has has no value.6 minutes, 27 seconds
And even if the company’s doing well but is staying profit if there’s no tender offers or no repurchase rights or anything like that, that stock has no liquid value.6 minutes, 37 seconds
It’s not like getting shares in a publicly traded company as part of your compensation package. Right.6 minutes, 42 seconds
And so from our perspective, all employee ownership is a great thing.6 minutes, 47 seconds
And we love seeing it in any shape, size and form. But it isn’t all created equal.6 minutes, 53 seconds
And we wanted to create something that was kind of a third party outside point of view around the thresholds of employee ownership7 minutes, 1 second
that, in our view, had the most significant benefit for employees and the most protections from the perspective of the employee around,7 minutes, 9 seconds
you know, repurchase rights and obligations, which esops obviously have.7 minutes, 13 seconds
And the percent of ownership, you know, giving 1% of the company to an Esop plan is very different than 30% or 50 now. And the best case scenario, 100.7 minutes, 22 seconds
And so that’s what that certification stands for.7 minutes, 24 seconds
It’s it’s allowing companies to say, hey, we’re not just claiming to be employee owned, but really it’s because all five of our family members who own the company are also employees.7 minutes, 35 seconds
It’s we had an outside, body look at our kind of ownership structure. And it’s broad based. It’s equal, it’s fair.7 minutes, 42 seconds
Everyone who works here has access to it with the same vesting requirements.7 minutes, 46 seconds
There’s potential liquidity at the end of the road for employees, and there’s a significant percentage of the company that is employee owned.7 minutes, 54 seconds
And that’s what that certification does.Chapter 6: From Certification to Education: How the Organization Evolved
7 minutes, 56 seconds
The last thing I’ll add is, you know, what excites me and where we’re going and why I got interested with my education background is actually exactly that.8 minutes, 4 seconds
So the organization started off on that certification side, but as it grew, it realized that the biggest value,8 minutes, 11 seconds
it was providing or could provide to its members was really help with the implementation of what we talk about as participative management.8 minutes, 20 seconds
So data has come out recently that shows one of the big deciding factors between whether employee owned companies outperform peers or underperform peers is participative management.8 minutes, 30 seconds
Having your employees act and think like owners and be bought into the concept of ownership and understand what it means.8 minutes, 36 seconds
And the certification in and of itself isn’t enough.8 minutes, 39 seconds
And so we’ve really leaned into and grown into educational offerings, content offerings, community building,8 minutes, 47 seconds
measuring engagement toolkits and, and things like that.8 minutes, 51 seconds
And I think that’s where our future will continue to grow.8 minutes, 54 seconds
And we’re really excited to serve the employee owned industry, the Esop, and really any sort of employee ownership, you know, is very much an education.9 minutes, 2 seconds
First, you know, process, right?9 minutes, 4 seconds
You know, to understand it, understand why a company should go there, especially if you’re a controlling shareholder and so on.9 minutes, 10 seconds
So the fact that you have this education background, it’s going to help out a lot from in my opinion, you know, when you scale up, certify d l.9 minutes, 17 seconds
And so education first makes a lot of sense to back up a bit.Chapter 7: ESOP Equity vs. Startup Stock Options: A Different Risk Profile
9 minutes, 21 seconds
You’re talking about start ups issuing, you know, stock and so on. Often we see that in ISOs restricted units.9 minutes, 27 seconds
And the goal there is to take the company through acquisition or IPO, right.9 minutes, 32 seconds
Then you’re paying a and so on, and you’re happy. Space-x. We’re recording this July 1st, 2026.9 minutes, 38 seconds
SpaceX just went public a little over two weeks ago.9 minutes, 42 seconds
You know, you’ve read about, you know, the employee wealth and so on, more of a, I would say, medium term focus there and employee ownership that we all see in our industry9 minutes, 50 seconds
where we’re talking about long term ownership, right?9 minutes, 52 seconds
And viewing it for the long term, building that long term equity, long term wealth.9 minutes, 56 seconds
So totally different focus for these companies, for the management, for the employees versus the companies that are venture10 minutes, 5 seconds
funded, maybe funded is more of a short term focus and not necessarily the ownership mindset.10 minutes, 11 seconds
It’s more, hey, let’s scale this thing, you know, and try to cash in at the highest price, you know, move on. Yeah, absolutely.10 minutes, 17 seconds
And it’s also just a, question of risk and reward. Right.10 minutes, 21 seconds
And like one of the things we talked to with members a lot or folks who aren’t yet esops, but is the seriousness of the commitment of being an Esop10 minutes, 29 seconds
because of the repurchase obligations, because of the wealth building components? Right.10 minutes, 33 seconds
Whereas in the venture world, you know, the folks who are funding those companies expect to write off seven, eight, nine out of ten of their investments.10 minutes, 42 seconds
And so it’s a question of, you know, are you maximizing the company’s chance of success, or are you maximizing your chance10 minutes, 51 seconds
of having one out of 10 or 1 out of 20 investments become a thousand x return that pays for all the losses.10 minutes, 57 seconds
And, you know, there’s there’s pros and cons to everything in life, right?11 minutes, 1 second
And there’s like merits for our economy to all types of of business.11 minutes, 5 seconds
But to your point, it’s just a very different thing.11 minutes, 8 seconds
And I think that’s where kind of the need for the certification in our eyes came from was this is a unique form of longevity, to your point,11 minutes, 16 seconds
but also employee protections, built into it.11 minutes, 19 seconds
And it’s important to recognize that and call that out and give that credit.11 minutes, 23 seconds
And it doesn’t mean, you know, giving stock options or, profit sharing bonuses or anything like that in any other type of company is a bad thing.11 minutes, 31 seconds
That’s still great for for those employees. But this is a unique and special thing.11 minutes, 35 seconds
And and we want a set of standards that can really bring visibility to that and, and credibility to that from an outside perspective. Yeah, absolutely.11 minutes, 43 seconds
I often say that when I talk to versus owners who approach us, asking, is an Esop good for us?11 minutes, 50 seconds
One key thing is a company better off saying independent.11 minutes, 53 seconds
If the answer is yes, Esop, you know, probably makes tons of sense, right. And, it’s kind of a loaded question. So what does it mean to say independent?12 minutes
It means a company has a moat, it has strong cash flows, has a culture in place.12 minutes, 5 seconds
It’s better off staying independent than being part of a larger organization, maybe a competitor or large public company, private equity role, you know.12 minutes, 13 seconds
So and that’s the world we all play in.12 minutes, 16 seconds
And it’s fun to is there companies that have high intention in staying the course, have motivated employees who have skin in the game.12 minutes, 24 seconds
And let’s talk about that that aspect of employees having skin in the game.12 minutes, 27 seconds
So, Joe, in your experience, what’s the single most powerful thing that changes inside a company once employees become owners?12 minutes, 34 seconds
And this can be culturally, operationally or financially or the intersection of all three?12 minutes, 39 seconds
Yeah, I was going to say I really think it’s the intersection of all three, you know, and and so one of the things I’ve always talked about within12 minutes, 47 seconds
the companies that I’ve run is what it actually means to be an owner.12 minutes, 52 seconds
And I think that’s the most powerful change that happens when people understand what it means to be an owner and actually act and think like that, because it shows up in how the company runs financially.Chapter 8: The Single Biggest Change When Employees Become Owners
13 minutes, 1 second
It shows up obviously in the culture, but it shows up how the company runs operationally.13 minutes, 6 seconds
You know, all sit down with with all of my employee bases and explain, like, hey, when you’re an owner, you get a lot of perks, but it comes with a lot of responsibilities.13 minutes, 14 seconds
Meaning if I have to go to a doctor’s appointment in the middle of the day, I don’t need anybody to approve my time off request, right?13 minutes, 21 seconds
If I have a family emergency popped up, I don’t even think about work.13 minutes, 24 seconds
I just handle my family emergency and it has that flexibility because I’m not answering to anybody. I’m not reporting to anybody.13 minutes, 31 seconds
I don’t need someone to approve my actions.13 minutes, 33 seconds
But on the flip side, if we have a big partnership or a big problem pops up and it’s Friday at 8 p.m., the buck stops with me.13 minutes, 41 seconds
I don’t get to just say, oh, it’s somebody else’s problem, right?13 minutes, 43 seconds
And I’m working through the weekend to fix that and make sure that works.13 minutes, 47 seconds
And, you know, all businesses function like a bank account.13 minutes, 50 seconds
And I don’t just mean financially with your customers. I mean culturally and operationally.13 minutes, 55 seconds
You’re constantly making withdraws and you’re constantly making deposits.13 minutes, 59 seconds
And when a business makes more withdraws than deposits, it heads towards bankruptcy financially.14 minutes, 6 seconds
But those same things apply towards culture and towards operations. So if all of your employees. I remember a moment with major clarity.Chapter 9: The Bank Account Analogy: Deposits, Withdrawals, and Ownership Culture
14 minutes, 14 seconds
I’ve always instilled ownership cultures coupled with financial incentives, where our employees were all making way more withdrawals than they were deposits into the company.14 minutes, 23 seconds
Everyone was like, hey, this newfound freedom and trust is amazing. We’re going to take advantage of it. Cut corners.14 minutes, 28 seconds
And the work wasn’t getting done, and our clients were being impacted, and the business would have been drastically impacted if it continued.14 minutes, 34 seconds
And we had a meeting where I was honest and called everyone out on that, and I said, you guys are taking all the perks and not stepping up with the responsibilities14 minutes, 42 seconds
you want your coworkers to cover for you when you want to be off the ball, but when they’re off the ball, you’re not covering from them. So it doesn’t work.14 minutes, 50 seconds
There’s no circle, you know, of life here because nobody’s making deposits to cover all the withdrawals that you’re making.14 minutes, 56 seconds
And I actually had multiple employees come up to that to come up to me after that meeting and cry and apologize because they were like, it wasn’t intentional,15 minutes, 4 seconds
they weren’t bad people, but it was just, hey, no one’s ever given me this freedom. This is awesome. I’m going to take advantage of it.15 minutes, 9 seconds
And, you know, being a little bit absent minded and a little bit selfish.15 minutes, 13 seconds
And from there on, we never had that problem again, you know?15 minutes, 16 seconds
And if you couldn’t show up to work for Thursday because you weren’t in the right headspace, we trusted you. You didn’t need to make an excuse. You didn’t need to explain it.15 minutes, 23 seconds
But your five colleagues would stay an extra hour or two after work to make sure the work got done, because they knew when they needed the day you would do the same.15 minutes, 31 seconds
And when that change happens, when people truly think like an owner, both on the privilege side because it makes a career more sustainable15 minutes, 39 seconds
and have more longevity and more reward, but also on the responsibility side.15 minutes, 44 seconds
And when people start focusing on depositing more into the company bank account culturally, operationally and financially,15 minutes, 52 seconds
then they’re withdrawing from it because they know in the long term that will benefit them.15 minutes, 57 seconds
That’s when something really changes internally in a company, and that ownership culture can really fuel incredible results.16 minutes, 4 seconds
The bank account analogy is powerful.16 minutes, 7 seconds
You know, it’s one that hits home and, you know, is easily understood is an awesome example there.16 minutes, 13 seconds
Joe, would you say is if is there a concentration of industries amongst your customer base.Chapter 10: Which Industries Fit Employee Ownership Best
16 minutes, 18 seconds
And we see that many certain industries just are ideal fits for esops, you know, and so on.16 minutes, 24 seconds
But Esop, at the end of the day, it’s just a shareholder, right? So it can literally work for any company.16 minutes, 28 seconds
But do you see across all your customers any concentration of industries, you know, to your two of your earlier points, one, about businesses16 minutes, 37 seconds
that are better to stay independent versus maybe getting acquired by a roll up or things like that, you’ll see industries that correlate with more independence,16 minutes, 46 seconds
you know, less consolidation than maybe some other industries. Right.16 minutes, 50 seconds
Like you look at like the Amazons and the Googles, there’s tons of consolidation because you have to be so massive to play in the space of building servers and hosting and things like that.17 minutes
Yeah, you need to have that capital, all the billions to build the data centers, invest in AI, you know, and so totally yeah, I’m17 minutes, 7 seconds
not starting a local small business in Richmond, Virginia, that’s going to offer an equivalent data center hosting option to Amazon. Right?17 minutes, 14 seconds
But a lot of the other industries, you know, retail, hospitality, trade services, things like that, there is the advantage in actually being local and having those relationships17 minutes, 23 seconds
and even in a lot of situations, lower costs and lower supply chain complexity and things like that from being local or regional.17 minutes, 30 seconds
So I would say we do probably see more of those types of businesses, maybe ones that rely on services or trades or supply chain.17 minutes, 39 seconds
But also to your point, you know, esops can be for everyone, and it’s not like we have an overwhelming concentration17 minutes, 47 seconds
of only one type of industry or one type of business.17 minutes, 50 seconds
You know, we we see everything from I just met with a company that does, you know, yacht sales and brokering to trades, to tech,17 minutes, 59 seconds
to retail, to hospitality, to grocery stores or gas station chains, to restaurant groups.18 minutes, 5 seconds
And so we do see Esops and other employee ownership structures vastly across the board.18 minutes, 11 seconds
But you will see a little bit more of the types of businesses that are more likely to stay independent or be able to compete on a local or regional or,18 minutes, 20 seconds
you know, semi national level instead of those massive monopolies.18 minutes, 24 seconds
Yeah, at a simple level, I like to say if the IP is your employee base, you’re probably going to do something that you know is your idea is tech and so on.18 minutes, 33 seconds
You know, it’s hard to compete with the mag now. Ten you’re right.18 minutes, 36 seconds
I mean just at a high level, you know that’s. Yeah.18 minutes, 40 seconds
But if your IP is is your employees, many in the human capital is what makes the company hum.18 minutes, 44 seconds
You know, and obviously we’re we’re in the age of AI.18 minutes, 47 seconds
Everyone is worried and kind of freaked out.18 minutes, 49 seconds
Hey what is I mean for employees and so on I think smart you saw companies are going to thrive because they’re they’re already figuring out how to leverage it.18 minutes, 58 seconds
You know, at the end of the day, humans imitate in humans figure out human problems.19 minutes, 2 seconds
So we’re going to be there to solve human problems, to think like sales.19 minutes, 5 seconds
People like to buy still from humans at the end of the day.19 minutes, 8 seconds
So I will certainly streamline a lot of maybe recurring tasks, you know, and, you know, it’s amazing for research, you know, and so on. Right.19 minutes, 16 seconds
But smart companies and just smart companies as a whole, you know, the human humans are going to leverage that to their benefit.19 minutes, 22 seconds
And just we’re going to see the efficiency increases and so on. I want to ask a question.Chapter 11: The Data: Productivity and Stock Price Performance in ESOP Companies
19 minutes, 27 seconds
So we’re taking a look at a study that Rover has put out a couple weeks back.19 minutes, 32 seconds
And they did this study that went back, I think 20 years that highlighted the fact that employee owned companies, on average, have a19 minutes, 39 seconds
7 to 10% higher productivity rate than non Esop companies.19 minutes, 43 seconds
And if you compound that over time, we’re talking about a tremendous efficiency increase.19 minutes, 49 seconds
And then we see that over time in the stock price growth too.19 minutes, 53 seconds
And talk to a lot of clients who have 1,013% on average stock price appreciation for the long term.20 minutes
One of my clients for over 40 years, average averages 13% a year.20 minutes, 4 seconds
So the employees that got stock and ran that company and rode that wave, and it’s still the company still performing awesome.20 minutes, 11 seconds
You know, they’re they’re getting that occurring. So do you see that in your customer base?20 minutes, 14 seconds
The efficiency increase is a part of something that certified, you know, you all are researching or having that discussion20 minutes, 21 seconds
with your employees and customers, because that’s an interesting one that is relatively new.20 minutes, 26 seconds
You know, it’s proven out, hey, the Esop really does increase employee productivity and efficiency. Yeah, absolutely.20 minutes, 33 seconds
You know, and coupled with what you saw, I think in the last month or two, I saw a new article come out that was citing 17% compounded20 minutes, 41 seconds
annual growth and stock prices on the Esop index, you know, compared to what the Russell 2000 and S&P and stuff have seen.20 minutes, 49 seconds
And so there’s a lot of data that’s come out in different flavors focused on different sectors or industries, or even the data that came out post Covid around lower20 minutes, 57 seconds
layoff rates and higher resiliency and things like that. Right.21 minutes
And so I think there’s a lot of data that’s come out that’s that’s showing employee ownership isn’t just a feel good like philanthropic strategy.21 minutes, 7 seconds
It’s actually a business strategy. Right.21 minutes, 9 seconds
But to your question on where we’re leaning into that, you know, it’s not as built out of a data set yet because it hasn’t been as studied or tested.21 minutes, 19 seconds
But there is some findings.21 minutes, 21 seconds
And this gets back to something I mentioned earlier where like the causal factor, there is actually that participative management piece.21 minutes, 28 seconds
And so the employee owned companies that become employee owned and then set it and forget it.21 minutes, 32 seconds
And you know, sometimes we’ll come across those folks who we are excited or hopeful for the opportunity to help them, but they’re like, we’ve been an employee owned company for ten years.21 minutes, 42 seconds
We send out the statement share price every year. Most people don’t even read it.21 minutes, 46 seconds
They don’t really know what it means, etc.21 minutes, 49 seconds
you’re not getting any of the uplift from being employee owned there because your employees don’t understand it. They don’t internalize it. They’re not showing up differently. They’re not acting differently.21 minutes, 57 seconds
Whereas when your employees know, you know, one of the content projects we’ll do for folks talks about what moves the share price.22 minutes, 5 seconds
And it’s not, you know, rocket science.22 minutes, 7 seconds
It’s not getting into the weeds of really technical financial stuff.22 minutes, 10 seconds
It’s very simple, but it’s, hey, if you can come up with an if you’re a, you know, fleet supervisor or in logistics or a driver22 minutes, 18 seconds
and you can come up with an idea by consolidating stops or this or that, that saves every driver 15 minutes a day.22 minutes, 26 seconds
And the average driver makes, you know, 40,000 or 50,000.22 minutes, 29 seconds
Then over 260 working days, that’s 1000 to $1500 per driver.22 minutes, 34 seconds
If you have 100 drivers or 1000 drivers, you’re talking about 151.5, 150,000 to 1.5 million savings.22 minutes, 42 seconds
And if your company trades at five times profit to keep it really simple, right, you just added $750,000 to the valuation with 100 drivers.22 minutes, 51 seconds
And so getting employees to actually understand those things, like that’s where you see those long term success stories of a company22 minutes, 59 seconds
compounding growth at 10 to 15 to 20% every year, because their entire workforce is acting and thinking like an owner and showing up differently.23 minutes, 8 seconds
And it’s their pocketbook they’re protecting, not some, you know, removed arbitrary person in a boardroom who’s who they don’t know exactly.23 minutes, 15 seconds
And it’s that’s how you get real change as well of these companies is getting everyone to start understanding, okay.23 minutes, 22 seconds
These micro changes that I do in aggregate, to your point, one simple change could lead to the stock price increase of some 50,000 million. More.Chapter 12: Case Study: Legacy Utility Group and the Value of Small Daily Decisions
23 minutes, 31 seconds
On a recent podcast, I had Dave Jay, your CEO of our client Legacy Utility Group. They’re based here in California.23 minutes, 39 seconds
They basically do all their the heavy pipeline, etc. under roadways all over California.23 minutes, 43 seconds
And they’re expanding as well too, all over the West Coast, Nevada.23 minutes, 46 seconds
There’s stuff going on in Texas and so on.23 minutes, 48 seconds
Really cool company, but we help them go Esop for minorities up back in early 2025.23 minutes, 54 seconds
And immediately because they have these trucks and, you know, gas prices etc., that tie. Right. And and so on.24 minutes, 1 second
So the drivers, instead of letting these big rigs idle at job sites, they turn off the engine.24 minutes, 8 seconds
Whereas in the past they just let the model.24 minutes, 10 seconds
So you do that aggregate across the base, and you’re talking about hundreds and hundreds of thousands of savings and gas.24 minutes, 16 seconds
And to your point, if you’re a five, six, seven next month oil company, bam, you know, you’re talking about a couple million extra value there.24 minutes, 23 seconds
And since employees get the statements every year, they see that stock price and they know what’s behind it.24 minutes, 28 seconds
And that’s the magic behind this whole thing.24 minutes, 30 seconds
When you get everyone understanding what makes up that stock price and how everyone’s collective actions drive that, you know, then the company is going to do well.24 minutes, 39 seconds
Absolutely. That’s an incredible story.24 minutes, 41 seconds
And an even better example of the theoretical content piece I just shared in the real life scenario.24 minutes, 47 seconds
And, you know, sometimes we’ll encounter I wouldn’t say pushback because nobody’s against it, but maybe skepticism, you know, especially for companies24 minutes, 55 seconds
that maybe have folks who aren’t on computers a lot or a big part of their workforce is an email. You know, it’s out in the field.25 minutes, 1 second
And maybe a CFO perspective is, I can’t pull up our piano. They’re not going to pay attention.25 minutes, 5 seconds
Their eyes are going to roll over, they’re not going to care.25 minutes, 7 seconds
And it’s like, you don’t have to take it to level, you know, a thousand out of ten to explain these concepts.25 minutes, 13 seconds
You don’t need to pull up the entire investment banking model and valuation model to say, this is how it moves the needle right to to your point.25 minutes, 21 seconds
And my point, you can just say, hey, if you find a way to consume less gas, then for every dollar you save, multiply it25 minutes, 28 seconds
by the number of people in your position and then multiply it by six.25 minutes, 31 seconds
And that’s how much it adds to the valuation.25 minutes, 34 seconds
You know, that’s a very simplistic way to explain these things.25 minutes, 37 seconds
But you can do that for every section of your workforce. You can do it in the warehouse. You can do it in the retail store.25 minutes, 42 seconds
You can do it in your graphic design department. You can do it with your drivers. You can do it anywhere. You know, on construction sites, etc.25 minutes, 50 seconds
and it’s incredibly powerful.25 minutes, 53 seconds
And so when the people have the financial incentive of participating in that upside and the educational awareness to know what to look out for,26 minutes, 1 second
you know, that’s where you really see the magic happen. Yeah, absolutely.26 minutes, 4 seconds
And it’s sort of the household economics analogy to, you know, power is expensive these days.26 minutes, 11 seconds
You know, electricity, gas and everything.26 minutes, 13 seconds
So being smarter even with households economics. Right.26 minutes, 17 seconds
That translates that same thinking, okay, you have a budget. How do you operate within this?26 minutes, 22 seconds
How do you cut back of expenses are going up due to, you know, energy, all these things beyond your control.26 minutes, 27 seconds
How do you manage that that same thinking applies easily to a business.26 minutes, 31 seconds
And to your point, you don’t need an investment making model.26 minutes, 33 seconds
And, you know, people coming in, you know, McKinsey types coming in and telling you how to do it.26 minutes, 39 seconds
It’s like most people already have this logic in their head.26 minutes, 41 seconds
They just need to know how to apply it totally in the business context. Yeah.26 minutes, 46 seconds
And be told it’s okay to apply it as well and be not even just told it’s okay, but be asked to apply the asked to say, hey, you’re an owner,26 minutes, 54 seconds
we need all of you to go out and look for savings or look for this or look for that. You know, what ideas do you have?27 minutes
What ways do you have to do things more efficiently?27 minutes, 3 seconds
You know, a lot of times the the folks on the ground who are actually doing the work have way more insight and way more data collection than the leadership team making the decision,27 minutes, 11 seconds
because the data is filtered through 4 or 5, six, seven layers, depending on how big the company is by the time it gets up to the CEO.27 minutes, 19 seconds
Right.27 minutes, 20 seconds
And so empowering and even asking and letting them know it’s an expectation or a desire is a huge catalyst for all of this.27 minutes, 27 seconds
And that definitely leads us to the next question here.27 minutes, 29 seconds
So an Esop at the end of the day is just some legal structure.27 minutes, 32 seconds
And I was told prospects, our customers and so on. You know what is Esop?27 minutes, 36 seconds
You know there’s a lot of questions and you know, comments about what an Esop is.27 minutes, 41 seconds
By the end of the day, it’s just a shareholder.27 minutes, 42 seconds
You know, it’s technically a legal structure. It’s housing the trust and so on. But it’s also much more than that.27 minutes, 47 seconds
And that’s the culture component that we’re talking about here.27 minutes, 50 seconds
So ownership culture is something you have to build deliberately.27 minutes, 54 seconds
And also it’s can be a bit hard to change as well, you know, because often companies that have been in existence ten, 20, 30, 40, 50 years,28 minutes, 3 seconds
some of our clients have been in business.28 minutes, 5 seconds
101 1880, they started 1880, you know, 30, which is awesome.28 minutes, 10 seconds
So it’s 2026 and they’ve been in business now 146 years. Right.28 minutes, 16 seconds
And the culture no doubt has helped that company thrive during that that period. But what is culture. Right.28 minutes, 22 seconds
So what are the companies that do this well.28 minutes, 25 seconds
Meaning building the ownership culture smart, deliberately and effectively?28 minutes, 30 seconds
Where do they actually doing differently than those just that have the paperwork meaning, you know, okay, they go Esop and nothing else changes, you know, and and if it’s a good strong culture, maybe nothing needs to change, right.28 minutes, 40 seconds
Because they have it already in place. But you do see the outliers in the data.28 minutes, 44 seconds
You know, you mentioned the stout the valuation data that said a 1,718% growth.28 minutes, 49 seconds
I mean, that’s outperforming that’s even outperforming the S&P. Right.28 minutes, 52 seconds
So they’re doing something well in that situation versus the ones that go Esop is just kind of language.28 minutes, 57 seconds
So Joe what would you say is that secret sauce that separates those that do it well versus those that just have it. But they don’t do anything with it?29 minutes, 5 seconds
Yeah, I’m going to keep this one simple as well, just mostly because I’m not nearly as intelligent as a lot of the policy and regulatory29 minutes, 13 seconds
experts on the inner workings of of Esops and I’m still learning from all of those around me every day.29 minutes, 19 seconds
But because of my personal limitations, it probably reflects on on the messaging we share with clients.Chapter 13: The Three-Part Secret Sauce of a Strong Ownership Culture
29 minutes, 24 seconds
But I also think keeping things simple can be a recipe for having it be more impactful and easier to implement.29 minutes, 30 seconds
And so what I would say we come back to a lot of certified yellow is a couple kind of key bullet points.29 minutes, 35 seconds
The first is does everybody understand how they can impact the share price and how the share price impacts them.29 minutes, 42 seconds
So this is everything we’ve already been talking about, right.29 minutes, 44 seconds
But like when you look at what are those key cultural things that actually make an Esop beyond just the legal structure, that’s the first bucket.29 minutes, 52 seconds
If your employees don’t know how the share price impacts them and they don’t know how they impact the share price, they’re not really owners and they can’t really act like an owner, right.29 minutes, 59 seconds
The second I would say is trust and transparency.30 minutes, 3 seconds
You know, a lot of times and I get it and I’ve seen it and I’ve experienced it firsthand myself.30 minutes, 7 seconds
But a lot of times you’ll have hesitancy from a CFO to say, well, yeah, but if we go out there and say our EBITDA is 3 million or 5 million30 minutes, 16 seconds
or $8 million a year, every one of my employees is going to come to me the next day and say, well, I need a raise and I need this, and I need that.30 minutes, 22 seconds
And and, you know, I’ve seen some of that play out myself.30 minutes, 25 seconds
And I’m not saying that’s not going to happen, but even if that is a challenge, you have to figure out how to get around that,30 minutes, 33 seconds
because you can’t have a culture of ownership without trust and transparency.30 minutes, 37 seconds
If folks don’t know, it doesn’t mean every week you have to be reporting on everything to everyone.30 minutes, 42 seconds
But if at a high level quarterly, annually, whatever it is, folks don’t know how the business is doing and what’s impacting it.30 minutes, 48 seconds
They’re not really an owner and they’re not going to feel like an owner. And there’s ways around that, right?30 minutes, 53 seconds
You don’t have to just throw out the big high level number.30 minutes, 56 seconds
You can say, hey guys, I know this looks like a lot, but we do, you know, 5 million in EBITDA, but we have this seller financing or this debt from the Esop.31 minutes, 6 seconds
And we need to pay down a million of that. A year. And so that takes it to four.31 minutes, 11 seconds
And also we’re working capital intensive business.31 minutes, 14 seconds
And so we need to always leave 1 million to $2 million buffer for materials or this or that. So that takes this down.31 minutes, 21 seconds
Then lastly we have a savings rate of 30%.31 minutes, 24 seconds
Because if economic times change or we had a hard patch, we don’t want to have to do layoffs. We want to protect your job.31 minutes, 30 seconds
And so we’re really only left with 250 to 500 K of discretionary money.31 minutes, 35 seconds
And if we spread that out across, you know, our 250 employees or 500 employees, it wouldn’t move the needle as much as investing in growth to increase the share price for you.31 minutes, 45 seconds
So we use that for new experiments. Right.31 minutes, 47 seconds
Like you can explain these things in simple ways that help mitigate that concern of of folks wanting a piece of it per se.31 minutes, 55 seconds
But if if you just put your foot down and don’t do anything with transparency and updates, it’s really tough to get people to feel like owners because they still don’t really know32 minutes, 3 seconds
what’s going on, and they still feel at an arm’s length from the business.32 minutes, 6 seconds
And then the the last piece I would say is being comfortable with bumps, right?32 minutes, 12 seconds
Like more often than not, sometimes you meet the perfect story and everything goes great.32 minutes, 17 seconds
But more often than not, when you’re building an ownership culture, it’s going to ebb and flow, right?32 minutes, 22 seconds
It’s like the story I shared with my first educational business, where, you know, we gave a lot of privilege to folks, and it was taken advantage of, and then we had to go in the other direction.32 minutes, 31 seconds
And there’s going to be those adjustment periods, right?32 minutes, 34 seconds
There’s going to be the periods before your culture really gets what it means to be an owner, or maybe wants too much themselves or doesn’t32 minutes, 42 seconds
think in the right way or takes too big of risks. Right?32 minutes, 45 seconds
Is is so empowered that they’re like taking too big of swings and they’re not panning out and and that’s fine.32 minutes, 50 seconds
Like any business owner goes through that same every business I’ve had, I’ve made bad decisions on resource allocations or investments or what the right strategy was.32 minutes, 59 seconds
But it’s a learning process, and you have to be comfortable with experiencing that as an entire company.33 minutes, 4 seconds
And I think those are the things that make an Esop and Esop beyond the legal structure is do your employees know how the share price impacts them and how they impact the share price?33 minutes, 14 seconds
Do you have trust and transparency, and are you willing to kind of go through the ebbs and flows of a learning curve that any owner or CEO goes on?33 minutes, 22 seconds
It’s just now magnified because it’s applied to your entire employee ownership base. Exactly.33 minutes, 27 seconds
And just keep it as simple as you led with. That’s my mantra as well.33 minutes, 31 seconds
Is is simple is usually the right way to explain the power of the Esop, you know, and basically the power of employee ownership.33 minutes, 37 seconds
And as you said, all employees understanding the financial metrics at a high level, transparency and understanding as well their impacts and how they can move the needle.33 minutes, 46 seconds
Let’s talk about the cool tools you all have that certified folks. We talked a lot about what is culture?33 minutes, 51 seconds
How do you get employee owners to think and drive performance?33 minutes, 55 seconds
How do you make a good culture, one that’s strong, that endures, that thrives over the long term? All great stuff.Chapter 14: Tools Certified EO Offers to Build Employee Understanding and Engagement
34 minutes, 1 second
But I know you all have a lot of tools, especially with your train the trainer model. You have as heard of Fido.34 minutes, 7 seconds
So what sort of products and and tools do you have available for your customers that basically help them with this continuous process?34 minutes, 16 seconds
You know, of educating employee owners about all the benefits and even drawbacks, you know, of Esop and employee owned companies?34 minutes, 24 seconds
Yeah. Great question.34 minutes, 25 seconds
So I would say the majority of our tools probably fall into kind of bullet.34 minutes, 29 seconds
One of my last answer, how can I impact the share price and how does the share price impact me? Right.34 minutes, 34 seconds
So we have infographics that we customize with branding, imagery, logos, you know, vesting schedule details, company information for all of our members.34 minutes, 43 seconds
And so a lot of times we’ll get asked, well, how do you compare to other associations or this or that. And and we’re much more product focused. Right.34 minutes, 50 seconds
We are a membership network, but our value prop isn’t a conference.34 minutes, 53 seconds
It isn’t a big meet up or the peer to peer pieces of that.34 minutes, 57 seconds
It’s content and tools that move the needle on that employee understanding and engagement. So that’s kind of bucket.35 minutes, 4 seconds
One is animations, videos, handouts that are fully customized to your company to help employees understand, you know, how does our company work?35 minutes, 12 seconds
How does an Esop work? How does the share price get decided? How did the distributions work?35 minutes, 18 seconds
And what can I do to move the needle on the share price?35 minutes, 21 seconds
What can I do to act and think like an owner? What does it mean?35 minutes, 24 seconds
What are the responsibility pieces of being an owner and employee ownership culture on a macro level, the second piece of it35 minutes, 31 seconds
is kind of interactive tools to really get to play out how this can affect them over the long term. So I love one of your earlier answers.35 minutes, 40 seconds
When we were talking about ownership structures and you said you know, the Esop structure is really about a long term commitment to growth, right?35 minutes, 46 seconds
It’s not this go big or go home, high risk, high reward venture approach to business.35 minutes, 51 seconds
And so most often not always, but most often, the really impactful side of wealth building for an Isa comes from compounding.36 minutes, 1 second
You know, there’s all those running jokes of compounding is the eighth wonder of the world, right.36 minutes, 5 seconds
And so when you have compounding over 15, 20, 25 years, it’s insane.36 minutes, 10 seconds
There’s a quote in business that I love, which is most people overestimate what can happen in one year and underestimate what can happen in ten years. Right.36 minutes, 18 seconds
And so we have tools focused on really helping employees internalize that piece.36 minutes, 23 seconds
We have an interactive wealth calculator that clearly disclaims it’s not projections but shows them put in your account value, put in your salary, put in your benefit level your share vesting.36 minutes, 33 seconds
And see how this actually compounds over 15, 20, 30 years.36 minutes, 38 seconds
We have educational content and information around that.36 minutes, 41 seconds
And then we have tools around kind of eliminating that friction piece. Right.36 minutes, 45 seconds
And so we have an EO based library page or the transparency piece from my last answer.36 minutes, 50 seconds
But it’s eliminating the friction around the transparency.36 minutes, 53 seconds
So we have an EO based library page where companies can set up a really simple, easy to access online EO library37 minutes, 1 second
for their company with content, the Interactive Wealth Calculator, videos, animations, and so your employees can access that anywhere at any time.37 minutes, 10 seconds
You know, we hear often from folks.37 minutes, 12 seconds
Well, communication is such a tough barrier because not all of our employees even have emails.37 minutes, 17 seconds
When you’re in, like a retailer, a field working environment, or they don’t access their computer or they’re on a construction site all day.37 minutes, 23 seconds
And so having a unique, protected secure link with no friction, no log in that houses all of this for employees37 minutes, 31 seconds
and can be their one stop shop, can really help eliminate the friction around the transparency piece and sharing that information out.37 minutes, 37 seconds
And then I would say the last piece of it is toolkits around the train. The trainer piece of it. So we have webinars.37 minutes, 43 seconds
We have a toolkit on measuring engagement, which we found is a big lacking area for employee owned companies. Right?37 minutes, 49 seconds
If you’re going to lean into being an ownership culture, you need to measure that.37 minutes, 52 seconds
You need to have that show up in your performance reviews.37 minutes, 54 seconds
You need to have that be a part of what you’re actually paying attention to.37 minutes, 57 seconds
And so we have a full toolkit built around measuring engagement.38 minutes, 1 second
We have toolkits built around setting up a committee.38 minutes, 3 seconds
We do an annual benchmark to aggregate best practices and infuse that into our toolkits and content. And that’s kind of the overview.38 minutes, 11 seconds
There’s a couple other pieces to it.38 minutes, 12 seconds
We have a job board that generates, you know, 20,000 clicks a month for only employee owned companies and a couple other cool tools like that,38 minutes, 21 seconds
but it really centers a lot on that education, that empowerment and removing friction around bringing that transparency and education to employees.38 minutes, 29 seconds
So the job board, I know that you all released that a couple years back, that I love that that’s an innovative new tool.38 minutes, 36 seconds
So it’s and correct me if I’m wrong, it’s specifically for your member customers that anytime they have a job opening, they can go on and post that and basically turn off idle.38 minutes, 46 seconds
If you’re a job hunter looking for a new opportunity, you can go on and find opportunities at employee owned companies.38 minutes, 53 seconds
So you can search way by employers, job title and so on.38 minutes, 57 seconds
And look at all those opportunities out there, Yeah, absolutely.39 minutes, 1 second
And part of the thesis there is you know, everyone I think is in tune with some of the economic challenges our country has been facing with a k-shaped economy39 minutes, 9 seconds
where asset appreciation is crazy, but you’re seeing wage stagnation or other challenges like that.39 minutes, 15 seconds
And we really believe employee ownership is going to be a massive competitive differentiator in recruitment, and folks are going to want to work at employee39 minutes, 22 seconds
owned companies over the coming years and even decades.39 minutes, 26 seconds
And so aggregating that and that actually goes full circle to one of your first questions, which is also where the certification matters.39 minutes, 32 seconds
So because we’re doing that certification on the front end, we can say these are truly employee owned companies, not just somebody who’s claiming to be.39 minutes, 39 seconds
And then we can market that to the consumer world.39 minutes, 42 seconds
And everybody publicly as certified verified employee owned companies that are hiring.39 minutes, 48 seconds
And our members actually don’t even have to upload their jobs.39 minutes, 50 seconds
They just give us the link where they post their jobs, and we have scrapers that automatically pull it in.39 minutes, 55 seconds
And then when folks click on it, it sends it to their page to apply.40 minutes
And so it’s a really simple process for our member. But yeah, absolutely. That’s awesome.40 minutes, 5 seconds
So anyone listening that is in the job market check it out. Go to sort of idle. Most Esop companies pay market wages. I mean they’re competitive employers.40 minutes, 13 seconds
So you’re not going to be taking a haircut.40 minutes, 15 seconds
Their key difference is you’re going to get this extra equity that is just above and beyond your normal cash compensation package. Very unique to companies.40 minutes, 23 seconds
And audio companies don’t have that.40 minutes, 25 seconds
So this show mentioned power of compounding.40 minutes, 28 seconds
Like let’s say you get 10% extra accruing in this Esop account every ten years.40 minutes, 33 seconds
If the stock price just goes up 7% and you’re basically doubling, you know, value and so on. So it’s real.40 minutes, 39 seconds
You know, we see meaningful use of wealth out there. So that’s that’s a cool tool.40 minutes, 43 seconds
But y’all developed I’m so glad you all did that. We need more innovation in the space. Thanks, Joe. Absolutely. Yeah we’re excited about that.40 minutes, 51 seconds
We’re excited about the EO base library page.40 minutes, 53 seconds
And we have a couple other cool things in development for end of this year. Awesome, Joe. So where can people find you. Yeah.40 minutes, 59 seconds
So a certified ecom EO is is just the singular letters.41 minutes, 4 seconds
If you Google us also on LinkedIn, we’re certified EO.41 minutes, 7 seconds
And on our website we have a newsletter sign up to get regular updates on what we’re doing.41 minutes, 12 seconds
To your point, the job board is linked on our website, so you can kind of bookmark that. And it’s employee owned jobs.com.41 minutes, 18 seconds
And always come back to that and then interact with us on LinkedIn.41 minutes, 22 seconds
You can follow us there and follow a lot of our updates and content. We post there as well. Excellent.Chapter 15: Closing Thoughts and Where to Find Certified EO
41 minutes, 26 seconds
And we’re looking forward to integrating the full certified EO products with all of our clients.41 minutes, 31 seconds
So any making any client customer listening, stay tuned for that. We’re working on good stuff jointly here. So Joe, we’re out of time today. Thank you for joining us today.41 minutes, 39 seconds
And thanks to everyone for joining us as well.41 minutes, 41 seconds
Please follow us for more episodes on your favorite podcast channel, whether that’s Spotify, YouTube, Apple or Menke.com.41 minutes, 48 seconds
We have all the videos posted up there. Take care everyone. Have an awesome day! Thanks a lot, Trevor.What the ESOP Structure Actually Provides
An ESOP is a qualified retirement plan that holds employer stock in trust for the benefit of employees. It comes with specific legal features: a repurchase obligation, meaning the company or plan is required to buy back shares from employees when they leave or retire; vesting schedules that determine when employees have a nonforfeitable right to their account balance; and an independent valuation process that determines the share price each year, typically based on a formula involving a multiple of profit and other financial factors.
These features distinguish ESOP ownership from other forms of employee equity, such as stock options at a venture-backed startup. Startup equity is generally illiquid unless the company is acquired or goes public, and its value depends entirely on a single exit event. An ESOP, by contrast, is built around a longer time horizon. Employees accrue value gradually as the company’s share price appreciates year over year, and that value compounds over the course of a career rather than depending on one outcome.
Because the value of an ESOP account is tied to the company’s ongoing performance rather than a single transaction, the mechanics of the plan matter less to day-to-day culture than most business owners expect. What matters more is whether employees understand those mechanics well enough to act on them. Tax treatment, valuation methodology, and repurchase obligation funding all vary by plan and company circumstances, and any specific application to your company’s plan document should be reviewed with your ERISA counsel or plan administrator.
The Common Factor Behind Underperforming ESOPs
Research on employee-owned companies points to participative management — not the ESOP transaction itself — as a leading factor separating companies that outperform their peers from companies that underperform. Research from Rutgers has found that employee-owned companies have averaged 7 to 10% higher productivity than comparable non-ESOP companies over a 20-year period, a gap that compounds meaningfully as it plays out year after year. But that productivity advantage is not automatic. It shows up most consistently in companies where employees understand what it means to act and think like an owner, not simply in companies with the largest percentage of employee ownership on paper.
It is common for a company to become 100 percent employee owned, distribute an annual share price statement, and see very little change in behavior. Employees receive the number, do not fully understand what produced it or what would move it, and continue working exactly as they did before the transaction. The ownership is real in a legal and financial sense, but the culture built around it never develops, and the company does not see the operational or financial lift that a genuine ownership mindset can produce.
Three Things That Separate a Working Ownership Culture From Paperwork
Companies that get this right tend to share three characteristics.
Employees understand how their actions affect the share price, and how the share price affects them. This does not require teaching every employee how to build a valuation model. It can be as simple as translating a specific behavior into a dollar figure employees can picture. For example, a company with a driver-based workforce that finds a way to save time or fuel on each route can show employees, in plain terms, how that saving compounds across the whole team and shows up in the company’s profit — and ultimately in the share price that determines their own account value.
Leadership is transparent about company financial performance. Business owners sometimes hesitate to share detailed financial information with employees, worried it will trigger requests for raises or benefits the company cannot support. That concern is understandable, but companies that withhold basic financial context tend to have employees who feel at arm’s length from the business and do not act like owners as a result. Transparency does not require disclosing every line item. It can mean walking employees through, at a high level, how profit gets allocated — debt service on ESOP-related financing, working capital needs, a savings buffer to protect jobs during a downturn, and what is left over for growth investment — so employees understand the constraints leadership is working within, not just the headline number.
The company is willing to work through early friction rather than treating it as failure. Building an ownership culture rarely goes perfectly from day one. Employees may misunderstand the level of autonomy that comes with ownership, take on too much of the associated risk-taking without enough of the responsibility, or simply need time to internalize what ownership means for how they show up at work. Companies that treat these adjustment periods as a normal part of the process, rather than evidence that employee ownership isn’t working, are more likely to come out the other side with a culture that holds.
A Real Example: Small Operational Changes Compounding Into Value
Legacy Utility Group, a California-based company that performs pipeline construction under roadways and is expanding into Nevada and Texas, became employee owned for a minority stake in early 2025. One of the changes that followed involved something simple: drivers began turning off truck engines at job sites instead of letting them idle, a habit that previously went unaddressed. Aggregated across the company’s driver base, the fuel savings were substantial, and for a company operating at a meaningful profit multiple, that kind of recurring operational saving can translate into a real increase in company valuation over time.
The underlying mechanism is straightforward: when employees understand that their day-to-day decisions affect a number that eventually affects their own account balance, and when leadership makes that connection explicit rather than assuming employees will figure it out, small changes made across an entire workforce can add up to a result no single management decision could produce on its own.
Looking Ahead
An ESOP transaction is the legal and financial starting point for employee ownership. Whether that ownership translates into better performance, stronger retention, and long-term wealth for employees depends on what a company does afterward — specifically, whether it builds a culture where employees understand how they affect the business and how the business affects them, whether leadership is transparent about financial performance, and whether the company is willing to work through the adjustment period that comes with any real culture change.
Business owners considering an ESOP, or already operating one, should treat the education and communication side of ownership with the same seriousness as the transaction itself. The structure creates the opportunity. The ongoing work determines whether that opportunity turns into results.
If you are evaluating whether an ESOP makes sense for your company, or want to talk through how to build a stronger ownership culture around an existing plan, Menke’s Feasibility Questionnaire for a Free Preliminary Analysis is a good starting point. You can also reach our team directly through our Contact Us page.
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About ESOP Radio
ESOP Radio is the official ESOP podcast from Menke — where real stories of growth, succession, and long-term wealth building are told.
Hosted by Trevor Gilmore and Ben Spadt, the show features conversations and educational episodes designed to help business owners better understand employee ownership.
Disclaimer
This podcast is provided for educational purposes only and does not constitute legal, tax, investment, or fiduciary advice.
Phil DeDominicis is an ESOP strategist and M&A advisor who has guided 300+ companies through ESOP formations, financing, and transactions over 20+ years at Menke & Associates. He specializes in selling ESOP‑owned businesses to financial or strategic buyers and in helping ESOP companies acquire other businesses.
