The common definition of “Company” is: the fact or condition of being with others, especially in a way that provides friendship and enjoyment. In business, Company has come to mean a group of individuals engaged in a commercial enterprise. I have always believed that the best companies are the ones that recognize the importance of individuals working together for common benefit, and often friendship, and enjoyment.
“Family-owned” companies are common among small to mid-sized manufacturers. Onex is no different and in 2018, Drew and I acquired Onex from Drew’s father, Ric Walters. We worked very hard and after several years of consistent growth, the company has achieved a level of success and stability which has allowed us to step back and consider next steps. We began discussing our own goals and ultimately, succession plans. I realize at 40, we may seem young to be considering succession options. However, as leaders, we must always have a clear vision for the future. Long term business success is not just about today, next quarter or even the next election… it is about the next generation.
Drew and I considered several succession scenarios including the traditional path of passing family-ownership to our two young sons. We are fact-driven in our decision making so it was important to consider the unique generational challenges family–owned businesses often face. Historically only 30% of second generation family businesses, like ours, succeed. That statistic is sobering enough, but when you get to the third generation, the survival rate plummets to only 12%. We believe in our boys but these are daunting odds and involve many factors beyond their or our control.
So, what were our other options for succession? Well, we could sell to a third party or private equity but there is no guarantee that the new owners would leave the company intact with the same personnel or in the same city. Supporting local manufacturing and prosperity for our families and the community is very important to us. In most cases, private equity looks to sell a business again after 3 to 5 years. Often shareholders or investors are focused on short term gains rather than a long-term strategy. When you consider that each manufacturing job supports four other jobs in the community, this option was undesirable.
So, what could we do? In moments of uncertainty, we did what most people do, we looked to our family. At Onex, our family is our employees and our company culture . Onex is known for experienced, creative, hard-working people committed to finding innovative solutions who treat each other and our clients like family. And as Peter Drucker and Ford say,
Culture eats strategy for breakfast.
Our family-focused culture creates the value and results that has made Onex strong. It is a unique and powerful engine for success. So, what if we changed the playing field and reimagined what “family-owned” means? What if our company could be owned by the greater Onex family, our employees?
We began investigating Employee Stock Ownership Plans. An ESOP would ensure the company’s culture and legacy remain intact while rewarding hard work with a stake in the growth of the company . Owning stock in their company will lead them to make more suggestions for improving performance, be long term members of the team, and work more cooperatively with colleagues encouraging everyone to perform at their highest standard. Everyone should feel inspired, safe and fulfilled each day knowing that the work matters in the greater economy.
For our clients, we will remain invested in making the best possible products to meet their ever-changing needs. We hope to recognize what products and services to offer to make their operations more efficient even before they self-identify their own needs. The goal is to ensure manufacturing is operating competitively and supplying living wage jobs for prideful, loyal employees for generations to come.
Also consider that America’s strength has always come from the power of many individuals working together for the greater good. In a 1987 speech, President Reagan had the following to say about ESOPs:
I can’t help but believe that in the future we will see in the United States and throughout the western world an increasing trend toward the next logical step, employee ownership. It is a path that befits a free people… In recent years, we have witnessed medium-sized and even some large corporations being purchased, in part or in whole, by their employees. Weirton Steel in West Virginia, Lowe’s Companies in North Carolina, The Milwaukee Journal, Lincoln Electric Company of Cleveland, Ohio, and many others are now manned by employees who are also owners.
Being 100% employee-owned rewards our hard working employees, excites our clients, keeps the business headquartered in Erie, ensures we have the same strong management team and leverages the tax advantages. When we considered all these positives, it made sense to make this transition now.
Realizing a Vision
Likewise, Drew and my vision has always been to revitalize American manufacturing. In particular, inspire more people to pursue manufacturing careers. In order to accomplish this goal, the culture of manufacturers must change from traditional top-down “command and control” to an empowered and agile workforce. Employees are more committed and productive when they are psychologically protected at work, fairly compensated for their efforts and contributing to a cause far bigger than themselves. As an ESOP, our families, our community and Onex are strong and healthy enough to remain in the game for many generations to come. We’re all very excited about this brand new chapter in the Onex story.
Have you started thinking about your business succession plan?