When Iris Harrell decided to retire in 2001, she didn't have an heir to leave her remodeling company to, and didn't want to see it destroyed by a new owner. She she decided to give the company to her employees.
Through the use of a "Employee Stock Ownership Plan," the company's profits are slowly being used to buy Harrell Remodeling from its founder and CEO. After 12 years, the 40-person company is 37.7 percent owned by its employees, who are made fully-vested owners after five years of employment.
Harrell expects the company to be 100 percent employee-owned in five to 10 years.
"As a feminist I have a different perspective of who should have ownership," Harrell said. "I think ownership should be given to those who have worked to make the company successful. That goes all the way from carpenter to top sales person or designer. I don't think it should just go to people who have money -- that doesn't make sense."
An unusual start
The unusual end to Harrell's career in the construction is fitting given its unusual start. Before taking a crack at home remodeling in her mid 30s, Harrell had been a teacher of English and history for five years, including a stint on a Navajo reservation. She was on the road with a band as professional singer and guitarist for another five years and then worked as an administrator at a non-profit.
"My spouse -- we've been together 33 years -- she had just bought her first fixer-upper when I met her, a 1920s duplex in Dallas," Harrell said. "The kitchen and baths were pretty awful. When I met Ann (Benson) I still didn't know what I wanted to be when I grew up. I was just floundering. We just started working on the house in our spare time. I just got really excited about it."
She tried to get a regular construction job, and remembers walking into a hiring hall and being brushed off -- "Honey, who would want to hold your hand at night?" she recalled being told.
"I couldn't get a job, I tried to get any kind of job," she said.
"I met one of Ann's mother's friends who was doing handyman work," Harrell said. "He and I started working together. We both worked for women mostly, widows who didn't want strange men in their houses or lesbians who didn't want strange men in their houses. I worked beside him doing framing and learned the job that way. I worked with a tool belt on for about seven years. I still have some basic tools in my trunk. I don't feel complete if I drive around without them."
Her employees say it's not like working for your average remodeling company. There's a lot more collaboration and laughter, they say. The average employee tenure of eight years is unusual for the industry, the company's executives say.
"I remember reading somewhere you should hear laughter in your workplace and we hear it all the time, even when it's really stressful," said Ciro Giammona, Harrell's president, in a group interview with five other employees. "It comes from being comfortable and respected."
Giammona said it helps that employees aren't harshly criticized for mistakes, such as was the case when a carpenter cut a supporting beam on a home by accident, causing lots of additional repair work.
"Everyone on the team learned from that because the person knew they weren't going to get yelled at or docked," Giammona said.
Project manager Kristen Kleiboer also spoke with enthusiasm about all the ways employes are appreciated, with monthly birthday parties, notes from supervisors, or by being chosen as employee of the month or year. At 10 years of tenure, employees get a song written about them.
"That's what I want, a song written about me," Kleiboer said, causing laughter.
The ownership perspective
Kleiboer said being an employee owner also changes her perspective.
"Just by doing your job you get a part ownership," Kleiboer said. "We encourage people to do your job just a little bit better because that has a big impact for yourself and other employees, so it's a sense of empowerment."
"One phrase you will never hear here is, 'That's not my job,'" Giammona said.
"You are not working for the man, so to speak, we are working for ourselves," Kleiboer said.
Marketing director Bella Babot interrupted, saying "You are working for the woman," which caused the group to erupt into more laughter.
Harrell has retained its traditional structure, although worker-owned companies are more likely than other companies to have a "participatory structure," Rodgers said, where many decisions are made collectively. Deciding whether to sell the company would be a rare instance where employees would take a vote, Giammona said.
When explaining the ownership program, new employees are told, "You should look at it as retirement plan, that's when you will see the retirement benefits," said Susan Pines, the finance and human resources manager.
Giammona said the company hires carefully so as not to disrupt the collaborative culture and does layoffs as a last resort in tough times, with every decision made "for the greater good" of the company.
Under the ownership arrangement, employees receive shares of the company proportionate to their pay levels. Upon retirement or departure from the company, the shares are paid out, possibly into a tax-sheltered IRA. The share price varies over time, depending on the value of the company. But such payouts tend to be much higher than regular 401k contributions made by companies, according to the National Center for Employee Ownership.
For a company to make the move towards an ESOP can actually be a good move financially because of tax incentives, said Loren Rodgers, executive director of the National Center for Employee Ownership in Oakland.
"There are tax incentives for owners to sell businesses to employees through ESOPs," Rodgers said. "It can be a sacrifice and it can be better than the alternative." Another incentive is that "employee owned companies tend to perform better and are more profitable and more productive."
There are 11,000 ESOP companies in the United States, including Kelley Moore Paints, Sleep Train, Round Table Pizza and Mountain View's garbage contractor, Recology. A pair of supermarket chains on the East Cast, Publix and Hy-Vee, have over 200,000 employee owners.
"If you have everyone thinking like an owner, you have better company," Harrell said.
"I will just say I wasn't really motivated by the money part, I was motivated by the longevity part," Harrell said, explaining her decision and referring to her desire to keep the company going for several generations.