Employee-owned firms may seem at odds with today’s focus on employees being free agents and taking advantage of the so called gig economy. However, there are many reasons that employee ownership, where employees have an ownership stake and decision-making power, may be a much more sustainable and resilient business model over the long term.
As I discuss in my new book, The Profiteers: How Business Privatizes Profit and Socializes Cost, I discuss how employee owned businesses are more productive and create more positive societal impact, making it a go-to option for purpose-driven leaders.
Fireclay Tile is one such company I discuss in the book that has embraced employee ownership as a solution. To delve deeper into this transformative approach, I spoke with Eric Edelson, CEO of Fireclay Tile, about their recent initiatives and the impact of their employee ownership model. Below are excerpts from my prior Forbes article on Fireclay.
Key Insights from Fireclay’s Employee Ownership Journey
Reevaluating Ownership: "I felt it imperative to really think about ownership and to do that for all stakeholders; to think about ownership being a lever to pull," Edelson explained. Fireclay’s leadership decided to buy out the founder’s shares over a seven-year period, ultimately increasing employee ownership from 14% to nearly 40%.
Motivation and Engagement: "The model is tied to increased employee engagement, reduced turnover, and bottom-line benefits," Edelson noted. Since initiating their stock option plan in 2013, Fireclay has seen an 8x increase in revenue, showing how ownership is an important growth lever.
Challenging Traditional Norms on Stock Plans: "The normal mindset for a stock option plan or employee ownership is 10% or 15% maximum. Here we were already at 15% employee ownership and asking to get to almost 40%," said Edelson. This bold move required substantial negotiation and financial modeling to convince investors.
Creating an Ownership Culture: "Anyone who’s come to visit Fireclay feels something different about it. They walk through our factory and they see engaged team members," Edelson shared. This culture of ownership contributes to a positive work environment and a strong sense of community among employees.
Advice for Other Companies: "Start small and start early," Edelson advised. He highlighted the importance of not waiting until a company is large and mature to implement employee ownership models, suggesting alternatives like phantom stock or smaller stock options as starting points.
In conclusion, Fireclay Tile's journey towards increased employee ownership offers valuable lessons for business leaders looking to create more equitable and sustainable companies. By challenging traditional ownership structures and investing in their employees, empowering workers can lead to benefits for both the company and its employees.