OWNERSHIP John Howman

Ensuring a smooth transition

Keys to a successful ESOP

PART 2 OF 2

EDITOR’S NOTE: This is the second of two columns featuring an interview with Bill Goggins, CEO of Harken Yacht Equipment in Pewaukee. Harken sold itself to employees through an Employee Stock Ownership Plan trust in 2020. This column discusses what it takes to be a successful employee-owned business.

For the founders, Peter and Olaf Harken, was it all about leaving a legacy?

GOGGINS: “Yes and no. While legacy was important to Peter and Olaf, it was more the Harkens wanting a business that could last in perpetuity (in modern business jargon, ‘business sustainability’). And it was also about rewarding employees for getting Harken to its current level of success. As long as I have known the Harken brothers, caring for the employees here has always been their number one priority.”

What was the reaction of the employees when they learned they were becoming employee owners?

“Most were shocked but in a good way. It was truly amazing the news didn’t leak in advance. Most employees didn’t know what becoming an ESOP really meant, and they certainly didn’t fully understand the ‘What’s in it for me?’ question. So, the education of the team here was, and still is, super critical. We had major initiatives for our team’s education. We hosted a live online panel discussion, also recorded for replay. Education and communication will be one of the keys to our success.

“Another key success factor is our strategic planning process. We’ve engaged in a formal planning process since 2015 and this drives high levels of accountability within our executive team. We meet quarterly as well as annually. We set 3-year, 1-year and 90-day goals. We’ve also pushed this process down to the next levels of management. If we’re going to be successful, we must be accountable.”

You have a big team around the world. Because an ESOP is a U.S. entity, the non-U.S. employees cannot participate in the ESOP. What was the remaining global employees’ reaction to the sale to the U.S. employees?

“Their first reaction was truly relief. Everybody appreciated having a succession plan in place. Everyone believed this was a much better outcome for the team than a sale to a private equity firm or another outside company. One strength of our culture is our ‘One Harken’ mentality.”

Let’s talk about culture. In your view, what are the key culture characteristics for an ESOP to be successful?

“Number one is having leadership that is service oriented. Our workforce cares about quality and shares Harken’s core values. We have done and continue to do an excellent job of making hiring decisions based first on a culture fit, and only then on experience and education. We have a team that is committed to the Harken mission.

“I also believe, in addition to great leadership, you need followership. This means teammates who are willing to be bold. We have always been good at long-term thinking and taking calculated risks. Peter and Olaf always had a willingness to invest in their business, especially in downturns.”

Does the ESOP give you any special competitive advantage?

“Yes, for sure. Many advantages, actually, but I am really most excited about the possibility of future acquisitions. The ESOP creates an attractive option for other business sellers who share common values. The ESOP is an excellent qualifier for companies that are a good cultural fit. Harken wants companies we acquire to be ‘cut from our cloth.’”

As CEO, does the ESOP change anything for you personally?

“Not as much as you’d imagine. We have always strived to take care of each other as if we were family. Harken will always be Peter and Olaf’s company, and now, it is in our care and custody. It’s a huge honor and responsibility.”

So, there it is – a brand-new ESOP company. Great for Harken, great for Wisconsin, great for business. Congratulations, Harken! n

JOHN HOWMAN

As a serial entrepreneur and business and community leader since 1983, John Howman has led a variety of businesses, from technology to consumer products companies. He leads two groups for Vistage, a professional development group for CEOs, presidents and business owners. He can be reached at JHowman@AlliedCG.com.