Mary, what can I do to keep our company private?
That’s the question I get most frequently from private business owners mulling their options or who have employee-ownership plans. With over 30 years advising and structuring hundreds of ownership transitions, I have a time-tested answer. It presents a compelling alternative in light of softening M&A markets and is especially timely as Employee Ownership Month concludes.
But rather than tell you, let me show you. Meet Trey Winthrop, CEO of Bob’s Red Mill Natural Foods. The 45-year-old whole grains food company became 100% employee-owned when its founder Bob Moore, now 94 and its brand ambassador, established the ESOP in 2010. Trey, an 18-year company veteran and former CFO, assumed the reins of the Portland, Ore., company in early 2022.
As Trey sees it (and I concur), staying private requires a company to follow its core values – Respect, Teamwork, Accountability and Determination in Bob’s Red Mill’s case – and to emphasize four other essential ingredients. Accentuate employee satisfaction. Grow the business. Innovate. Strengthen your bench. Together, they generate the special sauce enabling a private company like Bob’s Red Mill to stay “proudly employee-owned” as it proclaims.
Trey explains each recipe ingredient to help stay private:
Adhere to the core values: Bob Moore and his wife, Charlee, followed these tenets from the outset in 1978 as they sought to provide wholesome foods worldwide and offer financial security to employees. Three years after starting the company, Bob began a profit-sharing plan to give employees s real stake in its success. Before the ESOP, employees received a portion of profits in every paycheck for nearly three decades. “I am very proud that we share profits when we can.” he has said. The other core values benefit from the first: Respect.
Accentuate employee satisfaction: As the familiar business adage goes, “Culture eats strategy for breakfast.” That helps explain why Bob’s Red Mill last year retained 85% of its employees, most of whom produce grain products. That stunning retention rate demonstrates a satisfied workforce. Trey says what helps is a new two-day orientation where new employees tag along with an operations worker, or a restaurant cashier, and others to capture the ESOP’s essence.
Also every month, the company shuts down for a 30-minute, livestreamed employee update. During a recent session, 17 different employees from HR and benefits, the production floor and from receiving presented and answered questions. “The sessions generate more trust – and more questions,” Trey says.
Another sign of satisfaction: the extent to which employees give back, which is a hallmark of ESOPs. Among other Portland nonprofits, they assist the Oregon Food Bank; the Black and women-led Urban Growers Collective; Emma’s Torch providing culinary training to refugees, asylees and human trafficking survivors; and the Portland Rescue Mission. A typical volunteer activity: one Saturday, employees helped build a garden installation for the nonprofit Growing Gardens.
Pursue ambitious growth: Bob’s Red Mill has a bold growth plan, powered by product and market advances. Trey understands that while instilling growth in the company’s culture triggers positive organizational change, employes of different generations respond differently to the company’s ESOP messages. But, he says, “I gain a lot by listening to all our owners.”
Innovate. A common ESOP myth is that inventiveness suffers because owners and employees fear harming their often-ballooning plan (think retirement) balances. But innovative products and operating strategies are essential to stay private. And they describe Bob’s Red Mill industry-first protein oats products and powders; the widest assortment of specialty baking flours, baking mixes and baking essentials; vegan meal replacements; and easy-to-prepare entrees, as examples. The company even operates a popular whole grain store and restaurant in its Milwaukie, Ore., hometown.
To spur sales growth by better differentiating its customers, the company rented an event center where the entire sales and marketing team played the familiar Game of Life board game. Through a lively exploration, they developed an in-depth segmentation of customers. Among them: the Covert Connoisseur – younger career-focused suburban men with kids who value healthy scratch cooking, simple ingredients, and nutrient-rich meals – and the Epicurean Explorer: slightly older (40-plus) progressive women who are creative experimenters in the kitchen, seek unique foods, favor farmers’ markets and limit processed foods.
Strengthen your bench: A common myth is that ESOP leadership is weaker than publicly held competitors because ESOPs can’t compete for talent against the stock options and other perks that public companies can dangle. Nonsense. Consider how Trey strengthened his bench.
For senior management, he recruited as Chief Growth Officer a 13-year Kellogg Company brand marketing veteran with a Northwestern MBA; as CFO a finance and organizational management executive for such global firms as ESCO and Deloitte & Touche; and a VP of People with 15 years of experience building organizational cultures. The Chief Operating Officer since mid-2020 is the company’s former supply chain VP and is instrumental in strategic planning and process and control execution.
During and in response to the pandemic, Trey oversaw significant investment improvements and says he relied on in-house subject-matter experts – from materials handlers and benefit administrators to accountants, snack experts, and factory floor veterans – to provide expertise and experience.
As for bolstering his own management abilities, the former CFO knew operations and finance but wasn’t strongly steeped in direct sales and marketing experience. So, every other week in 2022 beginning in March, he flew to a different domestic sales market, toured the wide range of customers’ stores and grasped how each store differs by strategy and approach. This year he visited four international sales destinations.
Bob’s Red Mill exemplifies why employee ownership should have a seat at the corporate finance table when private business owners mull their and their company’s future. ESOPs like Bob’s Red Mill provide employees with jobs they love plus financial security. And research shows convincingly that ESOPs improve employment, sales, and productivity better than non-ESOPS. During crises like the pandemic, ESOPs don’t reduce employee hours or pay, while being more likely to maintain employee health and retirement benefits, compared to non-ESOPs. And they support their communities through those good jobs.
That’s Bob’s Red Mill’s story. It is following the precise recipe with the essential ingredients for staying private. It also underscores my core beliefs and passion after 30 years centered on privately held businesses: Employee ownership changes lives, communities, outcomes, and enduring evergreen businesses.