The Secret Ingredient of Business Success | Pete Stavros | TED
Summary
TLDRThe speaker, an experienced investor, recounts his first job at 24 and the profound impact of stock ownership on employees, from CEOs to mid-level staff. He shares a touching story of an assistant treasurer whose payout meant a college education for his children, sparking a vision of universal stock ownership. The speaker's father, a union worker, dreamed of worker ownership to address wealth inequality, lack of incentives, and voice in the workplace. Through his career, the speaker has promoted employee stock ownership, leading to significant improvements in company culture and performance. A case study of Chi Overhead Doors demonstrates how giving all employees stock ownership, coupled with transparency, education, and a voice in decision-making, can transform a company and community. The resulting wealth creation can have a lasting positive impact on local economies. The speaker's nonprofit, Ownership Works, aims to expand this model to a million workers, advocating for Employee Stock Ownership Plans (ESOPs) to foster an inclusive and sustainable form of capitalism.
Takeaways
- 🎓 The speaker's first job as an investor involved overseeing wire transfers for a business sale, highlighting the importance of shareholders receiving their money.
- 🏢 Companies of all sizes have shareholders, and as the company's value increases, so does the wealth of those who own shares.
- 🤝 The speaker's company extended stock ownership to employees from the CEO to mid-level roles, aiming to align employees' interests with the company's success.
- 📈 The emotional impact of stock ownership was evident when the assistant Treasurer, who received a smaller payout, was deeply moved by the potential for his children's college education.
- 👨👩👧👦 The idea of broad employee stock ownership can significantly impact employees' lives and the community, leading to a more inclusive and sustainable form of capitalism.
- 👷 The speaker's father, a union construction worker, dreamed of worker ownership to address wealth building, productivity focus, and a voice in the company.
- 📊 Stock ownership, or the lack thereof, is the primary driver of wealth inequality, with only a small percentage of workers granted ownership in their companies.
- 🌐 Globally, a significant number of employees are disengaged at work, which the speaker aims to change through broader employee stock ownership.
- 📚 The speaker has been researching and advocating for employee ownership for over 25 years, starting with a paper in 2002 and later implementing it in various companies.
- 🚀 A successful case study is Chi Overhead Doors, where all 800 employees were granted stock ownership, leading to improved productivity, quality, and a tenfold increase in company value.
- 💰 The financial success at Chi Overhead Doors resulted in life-changing payouts for employees, with the most tenured workers earning significant multiples of their annual income.
- 🏆 The speaker and his wife started a nonprofit called Ownership Works to promote employee ownership and help companies adopt this model, aiming to impact a million workers and create tens of billions in wealth for working families.
Q & A
At what age did the speaker start their first job as an investor?
-The speaker started their first job as an investor when they were 24 years old.
What was the speaker's initial task related to company sale?
-The speaker's initial task was to oversee wire transfers related to the sale of a business, ensuring all shareholders received their money.
What impact did the assistant Treasurer's ownership payout have on his family?
-The assistant Treasurer's ownership payout meant college education for his kids, which was a significant emotional and financial impact for him.
What three issues did the speaker's father want to address with worker ownership?
-The speaker's father wanted to address the inability to build wealth on $20 an hour, lack of incentive to care about productivity, and having no voice in the company.
What percentage of employees globally are disengaged on the job according to Gallup surveys?
-According to Gallup surveys, 77% of employees globally are disengaged on the job.
What is the speaker's belief about broadening Employee Stock ownership?
-The speaker believes that broadening Employee Stock ownership is the single most important thing that can be done to lift up workers and make companies stronger, potentially leading to an inclusive and sustainable form of capitalism.
What was the key takeaway from the speaker's early efforts in sharing stock ownership with employees?
-The key takeaway from the speaker's early efforts was ensuring that stock ownership was free and incremental for workers, not a trade for wages or other benefits.
What was the name of the company the speaker invested in, which was based in Central Illinois?
-The company the speaker invested in was called Chi Overhead Doors.
How did the company Chi Overhead Doors change its culture and improve employee engagement?
-Chi Overhead Doors changed its culture by granting stock ownership to all 800 employees, educating them about the business, keeping them informed, sharing financial information transparently, and giving them a voice in company decisions.
What was the financial impact of the ownership program on the company Chi Overhead Doors?
-The financial impact was significant, with the company being worth 10 times what it had been worth in 2015, making it the single best investment for KKR since the 1980s.
What was the community impact when Chi Overhead Doors was sold?
-The community impact was substantial, with $340 million of wealth injected into the community, which could lead to more tax revenue, better schools, new business formations, and a more robust local economy.
What is the mission of the nonprofit 'Ownership Works' started by the speaker?
-The mission of Ownership Works is to ignite a movement around employee ownership and to help CEOs and companies who want to implement such programs, with a goal to reach a million workers over the next 10 years and create tens of billions of wealth for working families.
What does the acronym ESOP stand for and what is the speaker's goal related to it?
-ESOP stands for Employee Stock Ownership Plan. The speaker's goal through a new organization called Expanding ESOPs is to pass legislation in the United States to make ESOPs easier and faster to form, particularly with larger businesses.
Outlines
💼 The Impact of Stock Ownership on Employees and Companies
The speaker reflects on their first job as an investor, overseeing wire transfers for a business sale to ensure shareholders received their money. They discuss the importance of stock ownership, which extends from CEOs to mid-level employees, and its potential to impact employees' lives positively. The speaker's father, a union construction worker, dreamed of worker ownership to address wealth building, productivity focus, and a voice in the company. The lack of stock ownership is identified as a significant driver of wealth inequality, with most employees feeling disengaged. The speaker argues that broadening employee stock ownership could create an inclusive and sustainable form of capitalism, sharing stories of implementing this idea in companies, including Chi Overhead Doors, and the profound effects on employee engagement and company performance.
📈 Transforming Company Culture with Employee Ownership
The narrative focuses on the transformation of Chi Overhead Doors, a company where initially only a small percentage of employees had stock ownership. After the business was bought, the new policy granted stock ownership to all 800 employees, leading to increased engagement and productivity. The company's culture evolved with transparent financial information sharing, regular updates on business performance, and employee participation in decision-making. Employees were given a budget to invest in their workplace and received financial coaching. The positive outcomes included improved quality, reduced waste, and increased market share, culminating in the company being worth ten times its original value. The employees' payouts upon the company's sale were substantial, leading to life-changing impacts and illustrating the power of employee ownership in wealth creation.
🌟 Expanding the Reach of Employee Ownership
The speaker shares their vision for the broader implementation of employee ownership, discussing the establishment of a nonprofit called Ownership Works. The mission of this organization is to promote employee ownership and assist companies in adopting this model. They aim to impact a million workers and create tens of billions in wealth for working families within the next decade. The speaker also mentions their collaboration with a coalition advocating for Employee Stock Ownership Plans (ESOPs), which were initiated by Congress in the 1970s. The goal is to pass legislation to facilitate the formation of ESOPs, particularly in larger businesses, to significantly expand the number of employee owners. The speaker concludes with the sentiment that their father, who had long advocated for worker ownership, would be proud of these efforts, albeit wishing they had come sooner.
Mindmap
Keywords
💡Investor
💡Stock Ownership
💡Employee Engagement
💡Wealth Inequality
💡Ownership Culture
💡Chi Overhead Doors
💡Dividends
💡Financial Coaching
💡ESOP (Employee Stock Ownership Plan)
💡Ownership Works
💡Community Impact
Highlights
The speaker's first job as an investor involved overseeing wire transfers for a business sale, ensuring shareholders received their money.
The importance of stock ownership extends beyond financial gain to creating wealth for company stakeholders.
The emotional impact of stock ownership on employees, as illustrated by the assistant Treasurer's reaction to his payout.
The concept of universal stock ownership within a company, from the CEO to factory workers, as a means to impact lives and communities.
The speaker's father, a union construction worker, dreamed of worker ownership to address wealth building, job alignment, and voice in the workplace.
The stark reality of wealth inequality driven by stock ownership, with a minority of workers granted such benefits.
The disengagement of employees globally, with a significant percentage expressing dissatisfaction with their jobs.
The belief that broadening employee stock ownership is critical for uplifting workers and strengthening companies.
The speaker's 25-year pursuit of the idea of employee ownership, including publishing a paper and leading initiatives at KKR.
Learning from early efforts in employee stock ownership, emphasizing the importance of free and incremental stock for workers.
The transformational impact of an ownership culture, demonstrated by the case study of Chi Overhead Doors.
All 800 employees of Chi Overhead Doors were granted stock ownership, leading to improved morale, productivity, and business performance.
The company's shift to an ownership culture included transparent financial information sharing and regular updates on business direction.
Employees were given a budget to invest in their workplace, fostering a sense of agency and visible improvements to the work environment.
Financial coaching was provided to employees to help them save and invest their earnings effectively.
The tangible benefits of the ownership model for both employees and the company, with Chi Overhead Doors becoming a highly successful investment.
The life-changing financial payouts to employees upon the sale of the company, with some earning multiple times their annual income.
The ripple effect of wealth creation on the local community, leading to economic growth and improved quality of life.
The establishment of the nonprofit 'Ownership Works' to promote employee ownership and assist companies in adopting this model.
The collaboration with employee ownership advocates to push for legislation making Employee Stock Ownership Plans (ESOPs) more accessible.
The ambitious goal of expanding ESOPs to millions of workers, aiming to transform the economy and create a more inclusive form of capitalism.
Transcripts
my first job as an investor was when I
was 24 years old and I'm almost 50 today
so that is half a lifetime ago but I
still clearly remember the first thing I
was asked to do to oversee wire
transfers related to the sale of a
business basically to make sure all the
shareholders got their money any company
large or small public or private has
shareholders who own the business and as
the value of the company goes up wealth
is created for those who own
shares now at this company ownership
among the employees extended from the
very top position the CEO to some
mid-level roles like assistant Treasurer
when I called the CEO to confirm his
wire transfer it was a very matter of
fact
conversation got the money thanks a lot
click now when I called the assistant
Treasurer who was making a tiny fraction
of what the CEO had made he was so
overcome with emotion he could barely
find the work
and he later explained in a tearful
voicemail that his ownership payout
literally meant college education for
his
kids so I wondered what if everyone in a
company had stock ownership not just to
the assistant Treasurer level but to the
factory floor distribution
centers how might employees lives be
impacted and how might the company and
in fact the whole community be
impacted these questions were not new to
me my dad dad had been asking them for
decades my father operated a road grader
for a union construction company in
Chicago for 45 years it's actually a
picture of my dad in his road
grader and my dad dreamt of worker
ownership to address three things he
didn't like about his job first he
couldn't build wealth on $20 an hour
second he had no incentive to care about
things an owner would focus on things
like productivity so he felt no sense of
alignment
and 30 Had No Voice without the right
incentives in place there was really no
reason for management to listen to
workers and they
didn't and my dad's experience is
certainly not
unique only a tiny percentage of workers
are granted stock ownership in their
companies and most workers have no
wealth and it is in fact stock ownership
or the lack of it that is by a mile the
biggest driver of wealth
inequality most employees feel their
opinions don't count if you look at
Gallup surveys
77% of employees globally are disengaged
on the job 18% literally hate the
company that they work for they're
throwing the wrenches in the
machines today I'm going to try to
convince you that broadening Employee
Stock ownership is the single most
important thing that we can do to lift
up workers and to make companies
stronger too it could give us a form of
capitalism that is actually inclusive
and
sustainable and I believe it could
literally change the
economy I've been pursuing this idea
most of my adult life 25 years ago as a
graduate school student I dove into the
history of employee ownership and I
published a paper on the topic in
2002 then a handful of years later I got
my first real leadership position at the
company I still work for
KKR and I was put in charge of
investing in and improving industrial
companies mostly manufacturing
businesses and that was a great
opportunity to start experimenting with
different ways of sharing stock
ownership with all employees something
we've now done with 44 different
companies over the past 15
years in our early
efforts we had some success but we made
a lot of mistakes the most important
thing we got right was making sure that
stock ownership was free and incremental
for workers not a trade for wages or
other benefits this could not be about
shifting risk onto the
workforce but we got plenty of things
wrong we didn't communicate well so if I
said something like we'd hope to sell a
business in 5 years that often led to
employees literally counting the days or
growing suspicious if things took longer
we didn't share our financial
information so people didn't know how
the business was doing nor did we ask
them how they would run the business
better you see ownership is about a lot
more than just giving out stock it's
about trying to create a whole different
type of culture an ownership
culture now let me share a story of what
this can look like when it's done well
in 2015 we invested in a company called
Chi Overhead
Doors Chi is based in Central Illinois
in Amish Country and the company makes
overhead garage doors like the one you
see here in this
picture and Chi was a good business but
from a worker moral standpoint was very
reminiscent of what I saw with my dad
out of 800 employees only 18 had stock
ownership so that means when we bought
the business most people got nothing and
just went back to work and a small
handful made many millions of dollars
Employee Engagement scores were
absolutely dismal most people didn't
even bother to respond to surveys and
this lack of alignment and engagement
you could see it in the business it
showed up in things like productivity
quality quity scrap people didn't always
try to do their
best it took us a long time to change
the culture 8 years and it started with
stock ownership so day one all 800
employees were granted stock ownership
so they would participate as the value
of the company went up through dividends
along the way and then at the end when
the business was sold when we announced
this program the employees were so
excited they gave me a
gift which was a live chicken
[Laughter]
literally two guys on the factory floor
came up and handed me a
chicken I awkwardly joked that I didn't
have a crate and I wasn't sure I could
carry a chicken on my flight back to New
York but this was about much more than
just stock ownership employees were
educated about the business they were
kept
informed once a quarter we got everyone
together and we talked openly about what
was working and what was not and where
the business was headed and we shared
our financial information transparently
all 800 employee owners were given a
voice as one example they were provided
with a million-- doll annual budget to
invest in their workplace any way they
saw fit they came up with the ideas they
decided where the money went and over
the course of several years they voted
in things like air conditioning for the
manufacturing plant one year they voted
for new break rooms
another year they wanted an On-Site
Health clinic
buildt and another an on-site cafeteria
with healthy food options we found this
was a great way to engage with employees
because not only were you giving them a
voice but they could see their voice
physically manifested in the
workplace employees were also provided
free financial coaching so that as they
received money they could save and
invest effectively and I want to be very
clear all all of this benefited the
company too it's not like this was only
good for workers we saw quality improve
scrap went down productivity boomed we
became more responsive to customer
demands and we gained market share as a
result in fact by the end of the journey
the financial results had improved so
enormously the company was worth 10
times what it had been worth in
2015 and to put that in perspective this
was the single best investment for us at
KKR since the 1980s and this this is
with a company making garage doors this
is not like a high-flying technology
business when the company was sold we
gathered everyone in our main
manufacturing plant in Central Illinois
we told them their jobs were safe and it
was time for each of them to learn what
they had earned from their
ownership the payouts were scaled based
on length of
employment with our most tenured Factory
workers earning 6 and a half times their
annual income or a half a million
dollars we had truck drivers make
$800,000 so this was life impacting
amounts of
money and I could talk to you about it
all day but it's I won't get it across
as well as the workers can themselves he
started out at 20,000 and then he went
to the next amount and the next amount
and it kept going I'm like whoa holy
smokes where where is this going to lead
$40,000 $70,000 you and a/2 times your
annual pay three and 1/2 times 4 and 1/2
times your annual 5 and 1/2 times your
annual pay
6 and 1 half
times I just kept looking around at all
the people around me thinking how much
this was going to change everyone's
lives cuz you sit there and you struggle
like how am I going to pay for this how
am I going to just think about what this
means for this area we're out here
there's a bunch of uh lower income
families and stuff that live paycheck to
paycheck and this will absolutely give
us some comfort that you know the future
is going to be okay and it just what's
wonderful I mean it's like you know it's
just it's freedom I got freedom this is
what we did and we're proud of it every
scent that we get back we
earned without ownership it is a job you
clock in you clock out you go home when
you have ownership in the business it
changes
[Music]
everything they deserve to be applauded
cuz they earned
it one of my favorite things in
that all right try and explain that
again so when Cara said we earned this I
love that sentiment because to me that's
ownership you know they earned it this
wasn't a gift it didn't happen by chance
they made it happen and it did change
the community commun $340 million of
wealth was injected into the community
and that it's forever changed I mean
that that type of wealth creation it can
fundamentally shift a whole local
economy it means more tax revenue better
schools new business formations more
restaurants in town and it means
dignified retirement for the
employees so just imagine how different
would the economy be if every company
operated in this way and include
included all employees in decision
making and in wealth creation what a
different economy we would
have when we sold the business I got a
second gift a
chicken but this time it was with a
crate and it had a little tag indicating
it had been pre-checked back to New York
City I wanted to stay married to my wife
so I did not bring the chicken home
but when I got home my wife and I
started talking about how we could give
this idea of employee ownership more
scope and we decided to start a
nonprofit called ownership Works whose
mission is to ignite a movement around
employee ownership and to help CEOs and
companies who want to go on this journey
because it is not
easy our goal is to reach a million
workers over the next 10 years and to
create tens of billions of wealth for
working
families and we're already well on our
way we've got line of sight to our first
250,000 workers being impacted and our
first 10 billion of wealth creation for
Working
Families we've also joined forces with a
coalition of employee ownership
Advocates who have come together to put
new energy behind something called an
ESOP or Employee Stock ownership plan
the ESOP was created by Congress in the
1970s and it gives companies tax
incentives in exchange for sharing stock
ownership with workers our goal through
a new organization called expanding
esops is to pass legislation in the
United States to make esops easier to
form and faster to form particularly
with larger businesses it is going to
take government support for this idea to
really take off that's how we're going
to get not 1 million new employee owners
but 30 million or 40
million when I talk about this idea and
my passion for it I always get the same
question what is your dad think of all
this well you'd have to know my dad to
appreciate this but he says what the
hell took so long
thank you
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