CV#8 Essential Ingredients: How this 100% Employee-Owned Company Leverages Their Team's Wisdom, Strengths & Community Passions
COMPANY AT A GLANCE
Founded: 1996 by Chris Gerlach and Kris Maynard. Essential Ingredients distributes chemicals used in personal care and cleaning products (customers include Estée Lauder and Hawaiian Tropic).
Ownership: 100% Employee Owned as of 2011
Employees: 74 | 2017 Revenue: 90 million
Purpose: We sell chemicals so that we can be a blessing to others and inspire others to be a blessing as well.
Core Values: 1) We act with integrity and respect. 2) We strive to be a blessing to others. 3) We achieve excellence through teamwork. 4) We provide opportunities for growth. 5) We foster a fun and enjoyable work environment.
Community: Essential Ingredients hosts annual company events such as their product drives (where they reach out to their vendors and all donate supplies to women’s shelters). They also help employees find their causes and encourage them to donate their time and treasures (more on this later!)
LET THE TOUR BEGIN
There is so much goodness that Essential Ingredients has to share, that I decided to include as much of it as I could. This blog is a little longer than usual, and jumps around a bit - but I hope you'll find the parts most relevant to you.
I spent a wonderful afternoon with Co-Founder & CEO, Kris Maynard, President & COO, Justin Jordan, and Executive Assistant, Heidi Floyd. Over lunch, I learned about Kris and Justin’s backgrounds and how they came to know one another. We then took a tour around their facility, where I learned about their business model, (with the help of lots of baking analogies) and of course, company culture. They introduced me to folks in the warehouse and office by name and asked them to share their experiences with me. I finished the day chatting with Heidi Floyd, who has an extensive background in corporate philanthropy and shared best practices with me to help companies increase their levels of community engagement. Here’s what I learned:
1. What It Means to be 100% Employee Owned Company
After being approached by multiple private equity firms, Kris Maynard and his partners realized that selling to a private equity firm would never be the right decision for their company – nor would selling to the competitors that also were interested in acquiring Essential Ingredients. As of 2011, Essential Ingredients became a 100% employee owned company, known as an ESOP, employee stock ownership program. In short, it’s a retirement program that allows individuals to acquire ownership interest in their employer’s organization over time.
The decision to become an ESOP was largely motivated by the partner’s philosophy of business. Their purpose as an organization is to be a blessing to others, they believe that their people are their greatest asset, and that this long-term investment is the best way to sustain their company culture over time.
Quick Glance of How it Works
After one year of full-time employment, employees become employee-owners. They receive a set number of shares based on their salary/total company payroll. Every year, they gain more shares. The company is valued by a third party, which is how the stock price is determined. Employees become fully vested after six years. In addition to the ESOP, employees have a 401K, so that not all of their retirement money is invested in the company.
Essential Ingredients has an Employee Benefits Committee, which consists of six employees from various levels of the organization and President & COO, Justin Jordan, as a standing member. Employees serve for three years on the committee and are responsible for evaluating benefits and other decisions that impact the company. To be on the committee, employees must be recommended by their manager, write an essay explaining their interest, and be elected by the committee.
Impact on Culture
When I asked Kris and Justin about the impact the ESOP has had on their culture, they shared that it’s not much different from a day to day perspective, since they already led with a people-first mentality. The ESOP was more of a way to solidify what they were already doing and to give everyone peace of mind for the future of the company. However, the impact on employees’ financial well-being has been significant. In the last three years, the ESOP contributions to employee’s retirement accounts have surpassed the combined value of 401k deferrals and the company match.
To keep employees informed of the financial health of the company, they practice open book management every week. Managers share their department’s financials with employees, as well as the company’s financial health. Opening the books empowers employees to think like owners and understand how their direct contributions can impact the financial health of the company and their retirement fund! In addition to the significant value from the ESOP, employees also receive significant value from company performance through bonuses tied to achieving corporate-wide critical numbers under the open book management program. Every employee in the company receives a bonus each quarter based on team objectives. These team objectives help to ensure alignment of priorities at all levels within the company. These quarterly bonuses ensure that the employee-owners are receiving short term awards for their contributions to growing the value of the company.
2. Leveraging the Wisdom of the Crowd
Essential Ingredients believes that the best ideas come from the wisdom of the crowd. In order to incorporate employee feedback into their next company vision, Essential Ingredients asked employees to respond to the following eight questions about the future of the company:
- Write a story about our culture in action in the future.
- What do we want our customers to think and say about us?
- What will our revenue look like in 5 years? 10 years?
- What will we be doing for our community on an ongoing basis in the future?
- What is one part of our “mojo” that you want to make sure we still have in the future?
- How would you like to see us caring for each other in the future?
- What could we do in the future to put the current Essential Ingredients out of business?
- What do you see yourself doing career-wise at Essential Ingredients in the future?
In addition to incorporating feedback into their company vision, this exercise also provides the leadership team with a clear picture about what conversations need to take place around the similarities and disconnects. Pro Tip: Place the board in a high traffic area like the bathroom to get the most responses!
2. Setting Up Your Office to Promote Collaboration
Essential Ingredients recently renovated their office space and were very intentional about the design in order to promote communication and team-building. They organized the desks by pods (4 desks per pod with a different person from each department sitting at the pod). The reason for this is so that departments can learn from one another: accounting can ask questions of sales, sales can ask questions of marketing, and marketing can ask questions of leadership. Can you guess where Kris and Justin sit? In the pods, with their team.
Another great thing about their pods? They switch who sits where every six months. There are a couple reasons for this:
1) It builds relationships – when you sit next to a different person every six month, you meet new people and form relationships (often those you would never cross paths).
2) The little things make a big difference. Sometimes employees hate coming to work because their office doesn’t get enough natural light, or the colleague they sit next to gets on their nerves, or they feel isolated in the corner of the room. By switching the desks every six months, Essential Ingredients solves these issues.
4. The Three Legged Stool Philosophy In Business
This is a reoccurring theme that continues to come up, but it’s certainly worth repeating. Co-Founder and CEO, Kris Maynard, attributes their success to their three-legged stool philosophy: always serving their employees, customers, and vendors. As Kris says, the business philosophy that you can only serve one at the expense of another is wrong. Essential Ingredients will not sacrifice one stakeholder for the other. An example of this is the vendors they work with. Essential Ingredients works with fewer suppliers and give them more business, so that they can build more trusting and transparent relationships with its supply partners, and employees can build strong relationships, and better serve their customers. While some may point out that Ei’s approach results in less “leverage” in price negotiations in the short term, it’s a much more collaborative and trusting approach, which results in long-term gains. Everyone wins.
5. Uncover Employee Strengths & Invest in Them
Essential Ingredients believes in investing in and leveraging employees strengths, rather than focusing on weaknesses. In order to uncover individual strengths, they use the strenghtsfinder test. From there, employees meet with their managers to determine how they can use their strengths more frequently in their roles. Using and developing their strengths also become a part of both their personal and professional development plans, which they discuss with managers.
In addition to strengthsfinder, leadership takes note of what employees excel in both inside and outside of work. One example is Essential Ingredient’s “Director of Fun.” She was always the team mom when it came to her kids’ sports teams, so they designated her as “Director of Fun” to plan team-building activities for the office.
6. 5 Quick Tips on How to Increase Community Engagement
While lots of companies have community engagement programs, they often struggle to get employees to participate in them. At Essential Ingredients, they have 100% employee participation in their staff-driven annual donations (Ei donates on behalf of each staff member to the charity of their choice) and 70 % engagement in Corporate Social Responsibility events outside the office. Executive Assistant, Heidi Floyd, has a long history in corporate giving, so she shared some advice for how to increase engagement and design meaningful community programs.
1. Personal Ties Matter – For employees to volunteer, they often need to find a personal connection. One great way to learn their causes is to have a trusted outsider come in and ask them about their lives because it can get personal. Heidi often starts with “Tell me about yourself” and digs in from there. She shared that within a matter of minutes, a cause becomes clear. For example, someone may share that they grew up with a single mother, so a great cause becomes serving single mothers, or that they had a grandparent who died of Alzheimer’s, so Alzheimer’s becomes a great cause. Everyone has one, it just takes some digging.
2. Help Employees Connect the Dots – Once you find a cause, it can be overwhelming to find a place to donate your time, talent, or treasures. Heidi recommends employers either champion a community person within their organization who can find those resources for employees or hire an outside person to do this.
3. Five General Causes – Sometimes, companies already have a set cause either because of something close to the founder or because of a theme that year. To help make the cause more personal to employees, Heidi shared the five big themes that most people care about: Women, Children, Environment, Animals, Health. With this in mind, you can encourage employees to take a personal interest in whatever the themed cause is that year. For example, if you’re company’s theme is diabetes, employees who are passionate about women’s issues may focus on women with diabetes, while someone who cares about the environment may focus on responsible ways to dispose of syringes. If your company has a set cause, give employees the autonomy to approach it in the way most meaningful to them.
4. Employees Need to Have Skin in the Game – Heidi shared that companies are often overwhelmed with the number and variety of causes that employees come to employers with, asking for donations. To avoid confusion and promote fairness, she recommends asking employees to come with a well-documented way of how the money will be spent and what other ways they will be volunteering – whether it’s their time, or service. It’s important for employees to have skin in the game so that their overall contributions are much more meaningful and there is a higher level of engagement.
5. Eliminate Community Committees and Promote Community Champions – Heidi shared that it’s much more effective to ask every employee to champion a cause that’s important to them, versus having a committee decide for all. Placing ownership and expectation on individuals leads to higher engagement.