Would you give your senior living company to the employees?
Over the last few weeks I have published two articles that celebrate the contribution that line staff make to the success of every single senior living company, Gwyneth Paltrow Says She Thinks being a Resident Care Aide would be a lot easier . . ., and The Sherpa’s of Senior Living. Andy Morris, the CEO of Reliable Healthcare Management, is more serious about providing tangible benefit to every single employee than anyone I have ever met. A few weeks ago my friend Denise Scott, a person-centered care consultant, introduced me to Andy Morris, the founder of Reliable Management Company, telling me that he had a story I had to tell.
Reliable Healthcare Management
Andy founded Reliable Healthcare Management in the 2000. This is a seven community skilled nursing home company based in Rome, Georgia. A few years ago he surveyed his company and saw great success. What he also saw was that much of that success was the result of lots of hard work and commitment by his staff.
Andy was convicted of four things:
- He had enough money to live on for the rest of his and his wife’s lives and leave a nice nest egg for the kids.
- Much of the credit for his success fundamentally belonged to the people that did the day-to-day work.
- Because the employees were so central to the success of Reliable, he wanted to give them serious incentive to stay with the company.
- If he sold the company he would pay buckets of taxes to the government and he could not be sure the employees would continue to be well treated.
Turning the Company Over to the Employees
Andy put together an Employee Stock Ownership Program (ESOP) that put 100% of the company in the hands of the employees. It looks something like this:
- An ESOP trust is a complicated IRS approved entity that allows an owner like Andy to turn over ownership of the company to the employees.
- Andy sold 100% of the company to the trust whereby he received a 10 year note for the value of the company (paid from cash flow).
- Individual stock ownership percentages are determined by a point system that is based on W2 salaries and longevity with the company.
- Each year the trust is evaluated/appraised to establish the share price for the company. This evaluation is done using a designated formula and independent appraisal. This makes it easy for the employees to see how their contribution contributes to the value of their shares.
- If an employee leaves the employment of the company the stock must be sold back to the trust for reallocation to new employees.
- When an employee reaches retirement age or is disabled they can immediately sell the stock back to the trust. If an employee leaves the company for any other reason they are required to wait three years to sell the stock. This provision exists so that, if an employee gets into a financial jamb, they won’t quit as a way to generate quick cash which would defeat one of the purposes of the employee ownership program. Employees are also subject to a three year vesting schedule.
- The program is just three years old and one employee who retired sold their shares back to the company for more than $20,000.
- While Andy currently remains the CEO, this will not always be the case. He will also benefit from the ESOP based on the same formula and restrictions as every other employee. He is today, in a very real sense, one of them and, in fact, works for them.
While I would hope that no employee would ever set out at, say, age 20 to be a CNA, housekeeper or dishwasher for life. It is very likely that if one were to work at even that level to age 60 or 65 they could sell their shares back to the company for an amount that could very easily run into the low to mid six figures. So would you do this? Would this motivate your team? Would your company ever do something like this? Do you as an employee have any way to be an owner? Steve Moran
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