| HISCO: Ownership Society |
| Corporate Spotlight | |||
| Written by John Zorabedian | |||
| Saturday, 01 March 2008 | |||
 Robert Dill explains how this distribution company’s unique employee stock ownership plan empowers its autonomous branches and supports a shared vision.
 Robert Dill, President Employee ownership of companies is not so rare as to be unheard of in corporate America—roughly 11,000 US companies employing more than 10 million people offer some version of an ESOP today, including many large and well-known market leaders such as Procter and Gamble and Anheuser-Busch. But even as a closely held, 100% employee-owned company, Hisco is somewhat of an anomaly. None of the company’s 285 employee-owners has more than 3% of the company’s shares, putting just about everyone on equal footing when it comes to reaping the financial benefit of their work. Hisco President Robert Dill said the company’s unique ownership structure supports its values of accountability and autonomy while providing the kind of incentives that attract quality employees who want to stay with the company for a long time. The ESOP is “the primary driver to create competitive advantage because every employee in the company has a vested interest in the success of the company,” Dill said. “At all companies, one of the primary goals of a leader is to get everybody going in the same direction. With an ESOP, it’s woven into the fabric of the corporation.” Autonomy with unity Research on ESOP companies has shown that employee ownership increases loyalty and satisfaction among employees. A study by Rutgers University researchers in 2000 concluded that ESOPs increase sales, employment, and sales per employee by about 2.4% per year over what would have been expected without an ESOP. Employee-owned companies also tend to have more longevity, failing about 25% less than non-ESOP companies, according to the ESOP Association. ESOPs have certain associated tax benefits and have been used as a way to protect companies from takeover bids. Some companies might balk at adopting an ESOP for fear of losing management control or strategic decisionmaking efficiency. At Hisco, that is not a fear. But the decentralized nature of the company—with 23 branches in the US, Mexico, and Puerto Rico—does pose some management challenges. Each branch is highly autonomous in how it is run on a day-to-day basis, Dill said. Although “autonomy is not a bad word in Hisco’s world,” Dill said, it does have some limitations. “If you’re too autonomous, you can’t leverage the full potential of the organization,” he said. From a strategy standpoint, Hisco needed to decide how much decisionmaking authority should remain at the branches on a local level and which operations should be centralized at Hisco’s Houston headquarters. The answer to those challenges is to make the branch managers part of the strategic decision- making process through a cross-functional team of executives, branch managers, and salespeople on the Hisco executive committee. Receiving input from managers and salespeople “gives us front-line intelligence,” Dill said. “As we develop the strategy, these people are part of the process, and they become our best internal champions when we’re communicating that strategy. It’s how we get buy-in for ideas and positively affect change.” Hisco’s executive committee developed a new strategic plan two years ago. Creating this vision for the future was important for determining the company’s approach to its challenges, but it was just the initial building block, Dill said. “Once you get the vision, it’s really just a fancy Powerpoint or all academics until you get alignment and accountability throughout the organization,” Dill said. “You have to look at all the people, what they do, what their job descriptions are, key performance indicators, how they’re measured, and how they’re paid.” Translating the strategy into a shared vision requires communication throughout the organization, so that everyone understands their roles. Combined with the ESOP, this creates a culture of ownership of the ideas, performance, and results of the company, Dill said. One of Hisco’s current initiatives is to centralize its distribution of MRO materials from Houston, while leaving the mission critical production materials at the branch level. The company is able to create efficiencies with centralized procurement, and logistics, while customer service and technical support remains at the local level. “We have a very strong management team, and we believe that’s is the primary differentiation between Hisco and our competitors,” Dill said. “We want these guys to be very flexible, and they are empowered to make decisions based on the needs of their local customers. We get a high degree of customer intimacy and a lot of unique supply chain solutions.” The company has plans to augment its organic growth through acquisitions in 2008, and plans are in place to launch a line of branded products. And as Hisco grows and improves, the benefits accrue to the owners—all 285 of them. “I credit the vision and the generosity of our founder,” Dill said. “He wanted a way to attract and retain good employees. He believed if you hire them and give them a piece of the action, you’ll get good people who will stick around and create value for the company. It absolutely worked out well.” |
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© 2008 American Executive - RedCoat Publishing. All rights reserved.
American Executive is a RedCoat Publishing publication.
American Executive is a RedCoat Publishing publication.
