By Shera Dalin
At information technology firm The Newberry Group of
St. Charles, the employees are in charge of the company’s
financial future.
Chairman/Chief Executive Brenda Newberry is quite content with her recent decision to hand over ownership of the firm she has labored for 12 years to build along with her husband, President/Chief Operating Officer Maurice Newberry. The couple turned over control of The Newberry Group on March 26 to an Employee Stock Ownership Plan (ESOP) that the couple believes will provide stability for years to come and prevent an unwanted outsider purchase.
The decision to turn the company into an ESOP—one of about 11,500 in the nation —started about four years ago, Brenda Newberry says. The Newberrys were considering the growth of the company and succession planning. Their two adult daughters said they werenÕt interested in taking over the company in the near future.
Brenda, at age 54, was also acutely aware that her mother died at age 53.
"Your own mortality is present when you have those experiences," she says. "If something happened to Maurice and me, what would have happened to the company? Most business owners wait and do nothing and someone else has to clean up the mess."
During this time, the Newberrys were also considering buying other firms, but discovered that many didn't have strong leadership teams or audited financial statements. So they decided against acquisition as a growth strategy. Then a casual conversation galvanized Brenda's attention.
"What really drove it home was about a year ago someone was in my office from the Webster University trustee board, and he was telling me about selling his second company. He said, 'If I had to do it again,
I would go ESOP,'" she says. "That's when we began to look harder at it."
Two years after researching ESOPs and firmly deciding that they didn't want The Newberry Group to be an acquisition target, the Newberrys converted the company to
an ESOP.
Employees own 100 percent of the shares of the $19.2 million firm, and they have a vesting schedule of an average of six years. Each year the company's value is determined and employees who retire, resign or become disabled can convert their shares to cash based on their percentage of payroll. The 401(k) plan remains in place.
"The beauty of an ESOP is that everybody has to work somewhere; wouldn't it be better to be an owner/shareholder so you don't have to buy shares with your own dollars? All you have to do is perform," Brenda says.
Since the company already operates on open book management principles, employees are educated to be aware of its financial
performance across all divisions. That meshes well with empowering employees to see how their individual and group performance is affecting their financial future.
Already, the Newberrys have seen some anecdotal evidence of the impact of the ESOP. When the company's marketing director and his team began explaining the ESOP, employees began speculating on new business they could help develop.
"I thought, 'Why couldn't you do it before?'" Brenda says.
She also noticed during a recent community event that the company typically catered lunch for, employees suggested bringing their own lunches to save money. While those changes are small, Brenda is hopeful that more will come.
"You are always going to have your
(low-performing) campers," she notes. "But quarterly, everyone in headquarters presents their goals and actual performance. Obviously, campers have very shallow goals, and people will say, 'Hey, you're not meeting your goals."
"I would love to be able in 10 or 12 years to give the message that these 140 employees decided to stay with us and they are all worth $1 million each."
Brenda says she hopes that clients will eventually notice a higher degree of service because the employee he or she is working with is also an owner.
"Some clients have asked for more explanation," she says. "What they need to realize is that when anyone is sitting before a client now, they know that person cares tremendously."
Brenda says the decision to convert to an ESOP definitely will cut into the future earnings she and Maurice could have had.
"We left a lot of money on the table," Brenda says. "We could have sold it outright. We've got excellent people and there is still tremendous potential.
"But if you had the life experience that I had where you have a relative who passed at 53, you ask how much is enough? Yes, I like to drive nice cars and be philanthropic. But our kids are graduated and I didn't want five houses. We are at a different place than if we were business owners in their 30s. My vision was to have peace in my life."
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