How Do You Build Companies That Last Hundreds Of Years? Make Them Employee-Owned
Back in 1985, Burns & McDonnell, an engineering and architecture company based in Kansas City, was at a crossroads. The company had originally been founded way back in 1898 by two Stanford University grads. Then, in 1971, the steel company Armco acquired the business. The crisis the company faced in 1985 was that Armco was ready to sell the business again – this time to a foreign corporation.
If the sale came to pass, the company and its family-oriented culture would fade away as it was assimilated into its new parent company.
Fortunately, some forward-minded managers at Burns & McDonnell came up with an alternative vision: Armco could sell the business to its employees instead. It was a radical plan, especially because employee stock ownership plans, or ESOPs, were still relatively new at the time. There was also the problem of finding a bank willing to lend the ESOP the funds it needed to purchase the business.
After a wide search across the country, a lender that happened to be close to home finally stepped up – the United Missouri Bank, which is called UMB today. But there was a catch: if the ESOP ever missed a loan payment, the management team would forgo their salaries until they caught up. “Those of us with the company today owe a lot to that management team and the risks they took,” says Denny Scott, the company’s Chief Financial Officer.
Loaning that money proved to be a wise decision. In the years since it was sold to its ESOP, the company has grown from 600 employees and $41 million in annual revenue to more than 5,100 employees and $2.5 billion in revenue today.
Much of that success can be attributed to the company’s employee-owners, says Scott, who joined the company in 1991. “The ESOP is the heart of our culture,” he says. “It is what we are and part of our core. When you treat an employee like an owner, you get an engaged employee. That leads to more commitment and productivity and better projects. That ultimately results in more profitability. We get everyone pulling the same direction, which leads to a sustainability that will carry us for the next 100 years.”