Engineering Inc - July/August 2018 - 17

ALTRENDO IMAGES/GETTYIMAGES

cash contributions made to the plan to buy out participant
accounts.
ESOP CHALLENGES

Despite the significant tax advantages, ESOPs are not for
everyone. Creating and maintaining an employee-owned firm
can bring unfamiliar pressures to bear on both the owners and
employees.
"Owners choosing ESOPs need to have a broader set of objectives rather than just looking for the highest dollar from the sale
of their company," says Massengill. "Many owners are looking to
benefit the employees who have helped them grow their business."
While selling your firm to private equity might get a better
price, you have to meet its investment goals, and selling to a strategic partner can be problematic because a strategic partner often
has its own management team, Grossman says. "ESOPs give you
the ability to sell your shares at fair market value, reward, motivate
and incentivize your employee workforce and maybe even preserve
a family or community legacy," he says.
Additionally, Grossman says owners who sell to the ESOP tend
to remain in the firm for several years. "They maintain their level
of involvement, nurturing the ownership culture within the company," he says.
Building that culture takes a lot of work by leadership. "This
can be a pretty big mind shift," says Staloch. "The most successful ESOPs are very transparent. The leadership communicates
constantly about the ESOP, what it is and how it benefits the
employees."
"We use a combination of channels to communicate our
ESOP news to employees," says HDR's Fisher "Our internal

portal has a section devoted to ESOP information that employees can access at any time. We present it visually using tools such
as infographics in addition to more detailed information. We
also use the portal and email to communicate specifics such as
buy/sell information."
Firms that adopt employee ownership also must be consistently profitable because they need to make annual contributions to the ESOP.
"High turnover companies do not work very well as ESOPs,"
says Staloch. Employees leaving at a steady clip can put a strain on
the firm's cash flow, as it must buy back their shares.
Finally, ESOPs can be a challenge to set up and to manage.
Because they are protected by ERISA, they are regulated by the
Department of Labor, which has taken an aggressive stance in recent
years to ensure employees are treated fairly in the transactions.
"There was a time when only one financial adviser was
needed to model an ESOP," says Staloch. "Today, the Department of Labor wants to see a highly negotiated transaction,
which almost always requires that both the sellers and the
ESOP trustee have financial advisers to represent them. That
adds a lot more complexity."
All the extra effort, however, appears to be worth it. According
to a variety of researchers, ESOP companies are outperforming
other firms and enjoying higher productivity, increased economic
resilience and longer employee tenure.
"I can always tell when I walk into an ESOP firm," says Grossman. "They make for really happy, successful companies." n
Gerry Donohue is ACEC's senior communications writer. He can be
reached at gdonohue@acec.org.

JULY / AUGUST 2018

ENGINEERING INC.

17



Table of Contents for the Digital Edition of Engineering Inc - July/August 2018

Engineering Inc - July/august 2018
Contents
From Acec to You
Market Watch
Legislative Action
Experienced Help Wanted
Esops Accelerating
Three-Dimensional Engineering
Pli Market Staying on Course
New Technology
Managing Conflict
Urban Restoration Projects
Guest Column
Mergers and Acquisitions
Members in the News
Business Insights
Engineering Inc - July/August 2018 - Intro
Engineering Inc - July/August 2018 - Engineering Inc - July/august 2018
Engineering Inc - July/August 2018 - Cover2
Engineering Inc - July/August 2018 - T1
Engineering Inc - July/August 2018 - T2
Engineering Inc - July/August 2018 - T3
Engineering Inc - July/August 2018 - T4
Engineering Inc - July/August 2018 - T5
Engineering Inc - July/August 2018 - T6
Engineering Inc - July/August 2018 - T7
Engineering Inc - July/August 2018 - T8
Engineering Inc - July/August 2018 - Contents
Engineering Inc - July/August 2018 - 2
Engineering Inc - July/August 2018 - 3
Engineering Inc - July/August 2018 - From Acec to You
Engineering Inc - July/August 2018 - 5
Engineering Inc - July/August 2018 - Market Watch
Engineering Inc - July/August 2018 - 7
Engineering Inc - July/August 2018 - Legislative Action
Engineering Inc - July/August 2018 - 9
Engineering Inc - July/August 2018 - Experienced Help Wanted
Engineering Inc - July/August 2018 - 11
Engineering Inc - July/August 2018 - 12
Engineering Inc - July/August 2018 - 13
Engineering Inc - July/August 2018 - Esops Accelerating
Engineering Inc - July/August 2018 - 15
Engineering Inc - July/August 2018 - 16
Engineering Inc - July/August 2018 - 17
Engineering Inc - July/August 2018 - Three-Dimensional Engineering
Engineering Inc - July/August 2018 - 19
Engineering Inc - July/August 2018 - 20
Engineering Inc - July/August 2018 - 21
Engineering Inc - July/August 2018 - 22
Engineering Inc - July/August 2018 - Pli Market Staying on Course
Engineering Inc - July/August 2018 - 24
Engineering Inc - July/August 2018 - 25
Engineering Inc - July/August 2018 - 26
Engineering Inc - July/August 2018 - 27
Engineering Inc - July/August 2018 - New Technology
Engineering Inc - July/August 2018 - 29
Engineering Inc - July/August 2018 - 30
Engineering Inc - July/August 2018 - 31
Engineering Inc - July/August 2018 - 32
Engineering Inc - July/August 2018 - 33
Engineering Inc - July/August 2018 - Managing Conflict
Engineering Inc - July/August 2018 - 35
Engineering Inc - July/August 2018 - 36
Engineering Inc - July/August 2018 - 37
Engineering Inc - July/August 2018 - 38
Engineering Inc - July/August 2018 - Urban Restoration Projects
Engineering Inc - July/August 2018 - 40
Engineering Inc - July/August 2018 - 41
Engineering Inc - July/August 2018 - 42
Engineering Inc - July/August 2018 - 43
Engineering Inc - July/August 2018 - Guest Column
Engineering Inc - July/August 2018 - 45
Engineering Inc - July/August 2018 - Mergers and Acquisitions
Engineering Inc - July/August 2018 - 47
Engineering Inc - July/August 2018 - 48
Engineering Inc - July/August 2018 - Members in the News
Engineering Inc - July/August 2018 - 50
Engineering Inc - July/August 2018 - 51
Engineering Inc - July/August 2018 - Business Insights
Engineering Inc - July/August 2018 - Cover3
Engineering Inc - July/August 2018 - Cover4
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