Transcript: Investing in People and Culture: Why EO= Enduring Organizations


Hello everybody. We're going to give folks about another minute or so, and then we will kick off. Thanks so much for joining us today.

Thank you.

[inaudible].

Okay.

Okay. We're going to go ahead and kick off here. Hello everyone. And welcome to the EO Equals webinar, investing in people and culture. EO Equals enduring organizations. Thanks so much for tuning in today. My name is Alison Lingane, and I'm the co-founder of Project Equity. We're a national leader in the movement to harness the power of employee ownership. Today's conversation is with Rick Plympton, the CEO of Optimax. I'm going to introduce Rick shortly. At the end of our conversation, we're going to have a live Q&A session. So, please go ahead and submit your questions throughout the program using the Q&A feature. You're going to find it right at the bottom of your screen.

When you submit a question, please include your name, where you're from. And if you're a small business owner, we'd love to hear about your business, name of your business, what industry you're in. If you miss anything, don't worry, we're sending the recording around to everyone who's registered as soon as it's available. My organization, Project Equity is one of four nonprofit partners that are leading the EO Equals campaign. So, Project Equity, along with Evergreen Cooperatives, the ICA Group and Nexus Community Partners. Our organizations came together to expand the employee ownership movement in order to help more small businesses thrive and empowering workers with higher quality jobs and building more equitable communities.

Employee ownership can take a few different forms, but it's always a business model in which the employees have an equity stake in the business, making them full or part owners. It's beneficial to business, to the employees, and the community. And we're going to learn a ton about how that actually works from Rick in the conversation today. You may have heard of EO, employee ownership, as a great option for succession planning, which it absolutely is, but it can provide really, so much more than just an exit strategy. EO can be a solution for many challenges that keep small business owners up at night, including helping them increase profits, increase employee engagement, and helping employees build wealth.

It also helps communities retain local businesses in local communities. I can't think of a better way to illustrate these benefits than hearing from Rick Plympton, the CEO of Optimax, a precision optics manufacturer based in Rochester, New York, that employs over 400 people. Rick held several roles at Optimax before becoming CEO, including beginning his career at the company in 1995, by managing the sales and marketing activities, as well as the QA department. Rick holds degrees in business administration, computer science, and engineering science from Finger Lakes Community College, FLCC, and was recently awarded the distinguished alumni award.

He furthered his education at the University of Rochester with a bachelor of science degree in optics and an MBA. In 2012, Rick received the small business administration's New York State Small Business Person of the Year Award. He also sits on the board for the Electro-Optics Standards Council and the New York photo ... Photonics board. Sorry. The situation for Optimax was that after three decades in business, Rick, along with Optimax's president, Mike Mandina, were ready to turn an eye to succession. After really considering all of their options, Rick and Mike decided to transition their business to employee ownership in 2020.

Today, we're going to chat with Rick about that transition, what it's done for Optimax, for their employees, and their communities. Thank you so much for joining us, Rick.

Thank you. It's a pleasure to be here.

Fantastic. Well, we'd love to kick off just with this broad question, why did you consider employee ownership for Optimax?

Yeah, so there's a lot to unpack there and I'm sure we'll get at it, but I think it's helpful to understand that Mike and I grew up blue collar. We started our careers on the production floor. We both worked our way through college. And we had a fundamental belief that most people wake up in the morning and they want to earn respect and make a little money. At Optimax, what we've tried to do is create an organization where people can come in and do what they know needs to get done to create value for our customers. Our mission statement is very simply enabling customer success and employee prosperity.

At Optimax, we have a corporate culture of sort of self leadership, or organic leadership. We have run the company open book since the early days. One of the unique things that we do is, at the end of each month, we'll close the books. And within a few days, we'll figure out, did we make money last month or not? How did we do? And we take 25% of the profit and we share that with our employees. And we've been doing that for over 25 years. We want to make sure everybody gets paid a fair wage, but when we work well as a team and we create value in the marketplace, we want to make sure we're sharing that wealth with our team members.

As we looked toward a succession plan for Optimax, we wanted to find a solution that would preserve the culture that we've built over the years and provide a path forward. In our minds, we're thinking in terms of decades, or maybe even a hundred years of prosperity. That's what we were shooting for.

Yeah, that's fantastic. You guys do this bonus every single month? So, you close the books on a monthly basis and then have ... So, you're really tying that teamwork success to the moment versus like an annual bonus, which is harder to tie it to kind of moment of what people have been up to.

Yeah. I'll give you a quick analogy on that. Some companies will do an annual bonus for employees. One of the problems with that is not many people change their daily behavior because of an annual bonus. People in leadership roles that need to think more long-term, an annual bonus might be appropriate, but for workers out on the production floor or working in different areas of the business, we wanted to come up with a bonus solution that would encourage people to work effectively as a team and come in each day, striving to create value for our customers. And we felt that a monthly bonus would work better.

Our accountants didn't care for the idea. But it's like the game of golf. When you get up on the tee box, even though you might have had a double bogie on the last hole, you have an opportunity to hit a birdie or par on the hole that you're playing now. With a monthly bonus plan on the first day of the new month, the slate's swiped clean, and we need to work effectively as a team again, this month to help our customers be successful. Our belief is that the customers will pay us fairly for the value that we provide to them.

Wonderful. Can you talk us through what the transition to employee ownership looked like for Optimax?

Yeah. Optimax was an S corporation. When we converted to an employee ownership trust, it was really quite seamless, which was our goal. To the employees, there wasn't a big difference. Structurally, we created ... Optimax is owned now by the Employee Ownership Trust, and there's a board of trustees that oversees Optimax, but the operations of the business is still done at Optimax. Optimax operates as a for-profit business as a C corp wholly owned by the Trust. There's a board of directors at Optimax that operates the business. The Employee Ownership Trust has a board of trustees. It's a small board currently, it's Mike and myself.

Then a third trustee, which is selected from the Optimax board of directors. And that third seat is intentionally set up to be the seat that always represents our workforce at the trustee level. Then there's a fourth trustee, and that is our trust protector, an expert in EOT law, Chris Michael, out of New York city.

Wonderful. Did you just figure all this out by yourself?

Yeah. Actually Optimax is the first manufacturing company in America to go down this path. There's not a lot written about how to do this. We were very fortunate that a few years ago, I was speaking at the national conference for employee ownership, which is largely about ESOP, employee stock ownership programs. But I was there talking about Optimax's corporate culture and how we provide opportunities for our employees. At the end of it, at the end of my talk, I talked a little bit about the path that ... Succession path that we were considering, which at the time was to create a parent nonprofit that would own Optimax.

After my talk, Chris Michael pulled me aside and said, "I've got another option for you that might work." We went out to dinner and talked, and the more he shared with me, I was like, "Oh yeah, this can work. This can work." So, the EOT really did hit on all the metrics that we were looking for.

That's wonderful. You figured out you wanted to do this. You figured out the structure and the kind of legal, how to make it work. Tell us a little bit about how you rolled it out to your company. How did you inform employees? What was the reaction?

Yeah. This all happened pre-pandemic, fortunately. At Optimax, we have three different shifts. We run our factory around the clock. We were able to have large company meetings, do presentations to the workforce and Q&A, and kind of talk through what was going to happen. Then also, there were a series of emails that supported the initiative. I think there might have been some things we could have done better, especially as we came into pandemic, it became difficult to maintain communications with people, but in 2020, the stage was set, and we went ahead with the EOT. It's still fairly fresh. It's just, we converted the company in 2020 to the EOT structure.

Yep. That's great. Are there things that you can share about how transitioning to employee ownership has benefited Optimax? Was there anything unexpected?

Well, one of the things that was very unexpected was events like this. I'm not the kind of guy that goes out looking for attention, but I do feel it's my responsibility to share our journey with others. I think EOT and ESOP, employee ownership structures, are an evolution of capitalism, where wealth created by a business or by a team is shared with the workers that help create the wealth. I really think this is something that can benefit, not only the workers, but the communities where EOTs are set up.

So, you employ over 400 people. Can you talk a little bit about how employee ownership may ... What changes you may have seen in your workforce. Business owners all around the country are just having real challenges with hiring right now, with retaining employees. The great resignation is a thing. What do you see at Optimax? And how do you think ... You've had this wonderful culture that is really an ownership culture for a really long time. And now you have this formal ownership piece. What do you see in terms of how you think that makes Optimax different from the employee perspective and how it affects your ability to attract and retain talent?

Yeah. Under pandemic, a lot of businesses were struggling. Actually, we, in February of 2020, we finished an expansion that doubled the size of our factory. And then, of course, in March the pandemic hit. We were like, "Oh no, what are we going to do?" But under pandemic, we've had very good growth of our business. And we hired over a hundred people in the two years of the pandemic. I think we've created an environment where people want to work because of this sort of organic leadership or self-led management structure, because we run the company open book, we share our financials with our employees. What I mean, we share our financials, it's high level. What are our revenues? What are our expenses? How much profit did we make?

We share the profits with the employees. We have programs that I think in a company that's managed or driven to maximize profit each quarter, it might be difficult to do some of the things we do. We're really big on making sure that people have a learning plan so that each year they're becoming stronger team members. We offer $5,000 tuition to each employee each year. Just take college courses or maybe work with a consultant to learn some new skills. It might be leadership skills. It might be technical skills, but all of us, we may be really good, but there's more that we can learn and become better team members or stronger team members.

The other types of things we're doing, I really want every one of our employees to be millionaires by the time they retire. So, through our 401k plan, we have it set up such that anybody that works with Optimax for their career, they should be a millionaire at retirement. There's just a variety of other unique benefits that we have that we provide to our workers that are part of our culture. I could go on, but I'll leave it there. Let me just say that under the Employee Ownership Trust, one of the things that's true is it's really flexible.

There's not a lot of oversight. With an ESOP, you have a RISO oversight. With an Employee Ownership Trust, it's under a different book of law. There's really a lot more flexibility for the owners or the leaders in the organization to do unique things to help take care of their workforce.

Yeah. That's wonderful. Were there any unique things that you in particular at Optimax really wanted to build into your employee ownership structure?

Yeah. When Mike and I were looking at succession planning, we wanted make sure that one, the company would never get sold. And two, that leadership would always share the profits with the workforce. Those tenets are built into a perpetual purpose trust that defines the mission and the purpose of the Employee Ownership Trust. The trustees' role is to defend the tenets of the trust. There's one other tenet where the trustees, while they have nothing to do with the operation of the business, the trustees have the authority and responsibility to make sure that the leadership of Optimax is being benevolent. And if anyone in Optimax leadership is getting greedy or misleading the organization in some way, getting power hungry, the trustees do have the ability to eliminate that person from the leadership team.

That was kind of a clause that we put in so that the trustees have the authority and power to make sure that the Optimax leadership team is continuing to move in a direction that is in the best interest of our workforce and our customers.

Yeah. With your mission statement, enabling customer success and employee prosperity, what you've really done with your employee ownership transition is set that up, I'm using air quotes around in perpetuity, because [inaudible] long time, but-

Yeah, we don't know what the world's going to look like in a hundred years, but we hope.

But in the multiple future generations. Can you tell us a little bit about a 400 person company in any community is an important employer? Just what your sense is of what Optimax, what those jobs mean in your community?

That's a great question. Back in fall of 2019, when we were finishing the last expansion, we had leaders from our town, our county, our state come visit Optimax to see the expansion that we were doing. They gave us a lot of support, and it's very much appreciated. But the soundbite that I shared with them at the end of their visit is that Optimax, in 2021, turned 30 years old. In the first 30 years, Optimax generated 500 million in revenue. And we shared half of that with our workforce through payroll benefits and bonuses. So, 250 million through the years has been distributed out to our workforce.

Then they spend it at the grocery store, the auto ship, wherever they spend their money. With this expansion, it sets the stage for Optimax to continue its growth. And in the next 30 years, Optimax will generate over 5 billion in revenue. Half of that, 2.5 billion will be shared with our workforce. That's how you ensure that people in a community have a good lifestyle. That's how you strengthen communities. If we can get companies doing this type of profit sharing, we can strengthen communities all across the nation.

Yeah. That is such an impressive set of numbers that you just shared. We haven't talked very much about what Optimax does as a company. And we'd love for you to take a couple of minutes, and you are an American manufacturing company doing really important work. Can you share a little bit about what some of that important work is?

Yeah. Optimax is located just outside Rochester, New York, and it's the home of Kodak and Bausch + Lomb, and Xerox. In a very small way, we're carrying on the legacy of Kodak and Bausch + Lomb, where we're manufacturing precision optics for research and industry. Just to give you an idea, we're a key supplier to NASA. We have been for many years. We have optics on each of the Mars rovers that are up there exploring the red planet. It's just really cool to participate and support NASA and some of their programs, and literally help mankind see thing for the first time and learn more about it, the world we live in.

Yeah. It's super interesting what you do. I'm curious if, do you have any perspectives on the role that employee ownership could play in really helping to strengthen American manufacturing more broadly?

Yeah. Employee ownership, when it's done right, provides worker voice. The organization hears from employees and can react to that to make conscious decisions about how to take care of their employees. It also should provide for worker empowerment, right? So that the workforce does not just have a voice, but they have the ability to effect change and to effect positive change within their workplace. At Optimax, we have an HR team that does a great job ensuring that we have HR policies that adhere to state and federal regulations, that sort of thing.

But we also have a wellness team. And the wellness team is a group of volunteers from all aspects of the company, all different parts of the company. And they've put together a program that helps ensure that our employees have a good work-life balance. There are five pillars to our wellness team, and they are career development, financial stability, emotional, physical, and social wellbeing. The wellness team provides resources and activities that employees can take advantage of to make sure that they're taking care of themself so that they can be an effective employee when they do come into work.

These are some of the things that I think, through an EOT, maybe the workers or the employees have more of a voice in activities like that.

That's great. Yeah. It seems great. Everything you've shared, really great for your workforce, really great for your business operations. Can you talk a little bit about how you see being employee owned impacting your customers?

Yeah, good question. This is something that we didn't expect when we started down this path. But as we went out and talked to some of the larger accounts that we support and told them about our succession plan, because we didn't want them to fear it. We wanted them to understand it and where we're going. When we talked to them about how the EOT ensures that Optimax will never be sold, that we'll continue to invest in our employees, and that we'll share profits of the employees, many of our key accounts doubled down on their relationship with Optimax. They gave us even more work.

The reason is because they know that their super supply chain will never be compromised. They can invest in what we're doing. They can help us build capabilities that will never be compromised because of ... We're a relatively small company. We do between 50 and 100 million in annual sales, but we're the size company that is perfect for acquisition, right? There are many bigger organizations looking to gobble up companies our size, and we've seen that happen to other high tech companies in our region. But under this Employee Ownership Trust with a perpetual purpose, acquisition is not in our game plan. It's something that our best customers recognize and respect.

Yeah. Really impactful all around. Now, most people when they think about, okay, I'm a business owner, I'm going to think about a succession plan, it's an exit plan. So, you haven't exited. Talk a little bit about, does this set up for an exit plan down the road? Number one. Then number two, how has, if at all, how has it changed your role as the CEO of the company?

Okay, that's a loaded question. First of all, in terms of exiting, Mike is about 10 years older than me. One of the reasons we needed to start looking at this is because we're both getting to the age where we need to start thinking about succession planning. Mike, for 30 years, was the president of the company. And last year he stepped down from that role. The Optimax board of directors voted and selected a new president, and that's one of our younger professionals that's now stepped into that role and is serving as president. I'm staying in the role of CEO for a few more years, but I think it'll be up to the board of directors how long I stay in that role, right?

I plan to keep a working for a while. For me, it wasn't all about getting out. Let me talk a little bit about the equity portion. Coming into this transition, Mike and I were 50/50 owners of the business. We gifted a block of our equity to the trust, and then the balance of our equity is being sold back to Optimax and being retired. Those shares all get retired. Going forward, the only voting shares of Optimax will be owned by the Trust. That's how we ensure that the Trust is like the governing body of Optimax. By selling some of our equity back to the company, that's how Mike and I get our bite of the apple, so to speak. In terms of how much we get, I can tell you, if we did what's easiest for small business owners to do, if we just cleaned up our financials and went out and sold to the highest bidder, we could have easily gotten 2, 3, 4 times what we're paying to ourself from the company.

But for Mike and I, growing up blue collar, at some point you need to ask yourself, how much money do you really need? We have more than we ever expected to earn, and we're living a fine life. For us, the more important issue is, how do we create a legacy? How do we create a succession plan where we ensure that Optimax can keep going on the path that we've set out and be a place where people can work, earn a good living, and have a good life. We like to think that this perpetual purpose trust has set the stage for that. So, Optimax will continue to create jobs in our community and pay fair wages, pay good wages, in fact, so that people can have a great quality of life.

Yeah, that's great. I'm sure for the business owners listening to this, or kind of asking the question of, well, does employee ownership mean that I have to take a significant haircut? Or whatever the right word is. In terms of value of my life's work. I'm curious, whatever you might be able to share, just about like, was there a range of options and you very explicitly chose to be on where on that range, in terms of value, for all the reasons you just talked about.

Yeah. With employee ownership, I don't think it means that the owner needs to take a haircut like we did. Certainly with an EOT or with an ESOP, there's a lot of different options. Like I said earlier, the EOT has a lot of flexibility. There's working with someone who's knowledgeable of an EOT and how to ... Where the boundary conditions are. There's really a lot of flexibility in what you do with an EOT. I was also very fortunate to find an attorney in my hometown in Rochester, where this attorney that helped us draft the documents, the foundational documents for the EOT, he's half attorney, half professor. He really, he had a lot of fun helping us put it all together and did a wonderful job for us.

One distinction I should make is, with an employee ownership trust, it's a little misleading in the sense that employees don't actually own pieces of stock. All the equity is owned by the trust, all the voting shares are owned by the trust. With an ESOP, employees actually get a piece of paper or a share of stock, right? In an ESOP, employees will get stock with a promise for cash later. Anytime we've surveyed our workforce at Optimax, do you want stock or do you want cash? They always tell us we want the cash. That's why, for our succession plan, we chose this path of an Employee Ownership Trust where, built into the perpetual purpose, is this requirement that we continue to share the profits with our employees.

Can you talk about what your profit model is, how you do that profit sharing?

Yeah. This could be a lengthy discussion, but let me very simply, every month we close the books, we pay out 25% percent of the profit to the employees. We did create ... We're manufacturers, right? So, some months are better than others, some years are better than others. So, we did create a bonus reserve, which is typically set to about one month sales. There's a process where we fill up the bonus reserve as we're paying out profit to the employees. When the bonus reserve is full, all 25% of the profit goes out to the employees. If we have a bad month, maybe we lose, I don't know, $100,000. When that happens, we take 100,000 out of the bonus reserve so that, for the corporation, we were breakeven last month, and then hopefully this month, we can talk and figure out how we get back on track and ensure that we make profit this month.

Then we'll slowly fill that bonus reserve back up. But it's been a great program for us where, with our bonus plan set up the way it is, we've never had to show a loss to our banks. Optimax has always been breaking even or profitable through the last 25 years. And we average 25% revenue growth per year. So, we're not a sleepy business. We're growing a business pretty aggressively.

Yeah. I'm curious if you have any stories you might share about your employees and how this profit sharing has impacted them.

Yeah. It's actually interesting that younger employees ... Well, let me say this first. For the past several years, our monthly bonus check has averaged over a thousand dollars each month for employees. I should say that, to become fully vested in our bonus plan, you need to be at Optimax for years. You're prorated until you get to your 60th month, but then once you get to the five years, everybody gets the same bonus check from the president to pick a role, receptionist, janitor. Everybody gets the same bonus check. For the past several years, the average monthly bonus check has been a thousand dollars, a little over a thousand dollars. That's really nice to see. It's funny to see some of the younger people just run out and buying $50,000 pickup truck, or what have you because they're looking for some ...

Let me spin this to talk a little bit about the 401k plan. We do require that our employees, or we request actually, we can't require it, but we request our employees put 20% of their monthly bonus payout into their 401k plan. That's part of this game plan to get them to a million dollars by the time that they retire. Some of our employees put half of their bonus in their 401k. Some of our employees put all of their bonus into their 401k. The ones that are putting all their bonus in, they're going to be millionaires early in their career and multimillionaires, if they choose to stay with us. They'll have options in life. And that's more credit to them.

That is amazing. Absolutely amazing. Rick, before we turn it over to, switch over to Q&A, would love to hear whatever advice you want to share to business owners who may be watching this and who may be looking at employee ownership for their business.

Yeah. One of the things that is really important, if you're going to choose a succession plan of employee ownership, or maybe it's not even a succession for you, maybe it's just part of how you want to run your business, having a culture of organic leadership, or some way to allow employee voice and worker power to happen within your organization is really, really critical. If you have an organization that is top down management, that is one or just a few people at the top that make decisions, and then the decisions are baked down in the organization, and you try to go down a path of employee ownership, you're going to find that it's going to fall apart.

Because for employee ownership to work really well, you need decision makers, you need people thinking on their feet at all levels of the organization. One of the things that's really powerful about that type of corporate culture is that, instead of having a few people in the offices in the front hallway making decision, you've got people making decisions throughout the organization every day, about how to do things more efficiently, how to cut expenses. We did a training a few years back about employee ownership and where we're trying to ingrain, build our culture.

If the sales team raises prices by a dollar, usually a few pennies will drop into profit. Somehow organizations find ways to spend the money if sales price goes up. But if you can find ways to reduce your expenses by a dollar, a dollar, all of it will drop into profit. The best way to make more money is to have people that are actually doing the work, thinking about how to do it more efficiently, how to reduce cost. This is one of the real benefits that we have at Optimax, is the level of engagement that employees have.

Just a couple weeks ago, we had an event at Optimax. It's our annual engineering event, where employees, we usually have about 20 people throughout the day that will give a 10 to 15 minute overview of something they did in their work area that helped reduce expenses or create efficiencies, new efficiencies, or leveraged technology in a new way to create value for our customers. And it is so powerful. All the solutions they're coming up with, they're way beyond anything that Mike and I ever imagined we could be doing. Especially the younger people in the organization, they come to us with fresh minds and new ideas, and ways to leverage technology that we never thought about. So, it's a really beautiful thing to see these people blossoming and helping us be successful.

So inspiring. Thank you so much, Rick. For everyone who has joined us today live, if you haven't already, go ahead and pop your questions in the Q&A, and I'm going to kick off with one that's already been posted. Rick, this question is, how has your ownership burden shifted since the transition? Are there things you do less of? Are there things that you have more time and attention for?

Yeah. Well, if I look back 10 years ago, it was funny, we used to have more top-down management at Optimax. There was a phase in our journey where meetings weren't called unless Mike or I called the meeting to get together to talk about something. As we started nurturing a younger leadership team, we expected they'd jump out all over it, but it took some time for other people to start calling meetings and to start engaging in solving problems. Today, I don't call hardly any meetings. I'm really in a coaching role at Optimax. We have activities throughout the organization where people are ... They feel empowered and they're calling meetings, or talking to their peers, and coming up with solutions all on their own and identifying areas for improvement, and then getting a group together to talk about it.

We've morphed into this corporate culture of continuous improvement. We do have lean manufacturing at Optimax, and so that we kind of nurture that culture through a lean manufacturing initiative. It's just a beautiful thing to see how things can be done better in ways that you never imagined.

Yeah, that's wonderful. Another question from our audience is, how does a business owner know when to start considering employee ownership?

I don't know that there's any trigger for when to consider it. I've talked to small business owners across the country. Some are just starting their companies, and some are more mature like Optimax. I think if employee ownership was more mainstream 20 years ago and people were talking to us about it, we probably would've gotten on board 20 years ago, but it was, like I said earlier, we didn't even know about it. We were thinking about creating a nonprofit to own Optimax in order to achieve our long-term goals. And then fortunately, I met Chris Michael, and he said, "No, there's actually this other way you can do it. It's not very common." Employee Ownership Trust have been used in the UK for about a hundred years.

There are many companies in the UK that have done well under the structure, but it was really quite new to the United States. Yeah, I don't think there's any trigger for now it's time to go. It depends on the owner's objectives and the workforce, frankly. It's, what are your hopes and dreams for your workforce?

Yeah. Rick, I love what you said about, gosh, if it had been more mainstream and we'd known about it or heard about it, maybe we would've considered it or done it earlier. That's exactly what we're trying to do with the EO Equals campaign is to just raise awareness, get more people to hear about it, learn that it's not just sort of crazy idea, right? It is something that not only helps with succession and succession planning, but also can help today your business operations, employee engagement, hiring, retaining, all of these challenges. So, we have another question, which is, can you please repeat how you determined the amount to be kept in the bonus reserve?

Yeah. It's hard to get into the details of that in a webinar like this, but what we do, I'll try to explain it in a little bit more detail, like peeling the onion. Let's say, at the end of the month, we determine that there's $10,000 to be handed out as bonus to the workforce. 70% of that goes into the reserve and 30% gets paid out as bonus until the reserve is filled up. Filled up means it's at a level that's approximately equal to one month's shipments. Then once the reserve is filled up, then all $10,000 would get paid out to the workforce.

Wonderful. Thank you.

Hope that helps.

Okay. Next question here. You mentioned that you held an employee ownership session for your staff. How do you onboard new employees to educate them about employee ownership at Optimax?

Yeah, this is something that's been particularly challenging under pandemic. Our HR team created an onboarding book. It's about 80 pages that kind of helps people learn about our corporate culture. When someone is hired into Optimax, they get a mentor. That's somebody that has nothing to do with their area that they're working in. It's somebody from another part of the business. Their mentor is somebody that they can spend a little time I with to learn about corporate culture. They can go to when they have questions or concerns, in addition to the support they'll get from the HR team. Then, in their work cell, they should be getting a lot of support from their peers and the team leader in their work cell.

We try to provide a variety of resources to new employees so that they can, not only learn the technical things they need to be learning, but also the cultural aspects of how we operate at Optimax. Here's something that's really challenging for us, and I think for anybody that's creating a self-led organization. The way we raise children, this is a big generalization, but the way we raise children in this country is command and control, right? Whether it's a sports team or school, or what-have-you, command and control is generally what children learn, and they think that is leadership.

At Optimax, we try to teach people that you need to be more proactive. Everyone has a voice. Everyone has good ideas. Everyone has God-given gifts, that if we can figure out how to get them in a role where they can leverage their natural talents, they can be a superstar too. Everyone should have the right to be a superstar.

That's so inspiring. We've got a question that follows right along those lines, which is, well, what if my employees aren't ready to "act like owners?" Do employees need extra support?

Yes, they do. The challenge there is to figure out how do you want to educate your workforce? At Optimax, we've had consultants come in and work with us. We ran a program, or we run a program called Read to Lead. This is just where you get together in small groups, maybe eight to 12 people typically, read a chapter or two in a book each week, have coffee or beers, and talk about what's in the book. The book is really just to tee up a conversation about, how would these principles apply at Optimax? And what are we doing about it? Are we doing a good job? Could we do better? That type ... It's just a way to tee up the conversation.

Through reading the books, we kind of opened people's minds and maybe even come up with some great ideas that we want to implement in the organization. I guess the point there is, yeah, it's not natural. This organic leadership is not natural, but it can be learned. So, finding ways to work with people and teach them, that's really important.

Wonderful. We have a similar question, a little bit different take on it, but how do you evaluate and manage performance of individual employees? And then, have you seen any lowering of motivation amongst fully vested employees? Even if it's in kind of the minority of employees, sort of like a freeloader mindset.

Yeah. That's a two part question, right? The first part was about how do we monitor employees? Years ago, we read a book called, I forget the name of the book. I'm sorry, but we created a peer review process. In a lot of companies, they'll do a 360 review on people in leadership roles. We created a 360 review that we use for everyone in the business. It's just a one pager, but we'll try to get a dozen or so people to give a review for each individual when it's their time for their annual review. The idea is that there's 10 metrics. You just simply identify from ... I think the metric is one to five.

Are they doing well at this role or do they need help? Are they not doing so well. Five of the metrics have to do with skills, or aptitude, and five of the metrics have to do with attitude or team performance. Then that can get it charted. So, it's really easy to see where they're above average, where they're below average, where they might need help or some coaching. Then there's an area for praises. Like, what has this person done really well? And an area for recommended training. Maybe, what should they learn to help strengthen a team?

It might be that it's something that is fundamental to their work area that they might need to learn, or it might be like there's a new machine. And if they were trained as the second or third person to be able to operate that machine, that would help strengthen their team. But at the end of the sheet is an area where the individual will work with their team leader and develop a learning plan. Because what the end goal is, we want everybody to understand how they're doing currently and to work on being a stronger team member. Just like building a sports team. Even though you might be a good wide receiver, what do you need to learn to be even better, or maybe be able to play tight end from time to time?

What's really powerful about the review process is the individual will do a self evaluation, and then there's the team evaluation. Their coach or their team leader will have the team assessment, and they will do a comparison. If they're is alignment, that's great. We can just talk about learning plan, and what are we going to do to help you be a stronger team member in the coming year? If there's not alignment, then we may need to have a conversation about, why do you think you walk on water and your team members don't? That type of thing. But it's a really powerful way to systematically strengthen our team year after year. What was the second part of the question?

Yeah, absolutely. That's great to hear more about that. So, second part of the question was, have you seen lowering of motivation among fully vested employees?

I'm going to say no. The reason is we continue to grow the business. Under pandemic, we hired about a hundred new people, but people come into the company and they're generally ... They don't know how to do what we do. We train everybody within Optimax, or pay for them to go get education at local schools and what-have-you. But it takes five years for an individual to get fully vested in the program. So, during that first five year period, there's a lot of learning going on.

We have a term at Optimax, being on the bus. It's really great to see. A lot of times you see people showing up at work and they're kind of walking slow, they're not really engaged, but time and time again, that same individual, you'll see them a few months later, and they're just on the bus. They're really engaged. They're talking. They figured out who they need to go to for different types of advice. And they're talking to people and trying to make a positive impact. It's great. I've seen it again and again, where our people make that transition and they're taking ownership or taking responsibility for their role in the team and for helping create value. That's beautiful to see.

That's great. Somebody's asking very specifically, is there a tool that you use for running that 360 degree performance assessment you talked about in documenting the plans?

We created our own. Yeah. I've never been a big fan of annual reviews, where you sit down with your supervisor and they tell you like three things you're not doing good enough. Actually, I'll make the comment here that, when you're doing a review of an individual, if the focus of the review is you need to get better at what you're not good at, the best you're ever going to have is mediocre team members, mediocre players. But if you focus on giving them more and more opportunity at what they're really good at, you can have exceptional team members, you can have superstars. And that's what we want to do. We want to get people roles where we recognize what their strengths are, and we give them more responsibility and opportunity to pursue those avenues then they can be superstars.

They're getting on the bus, but they're getting into that right seat on that bus.

Yeah. You got it.

Yes. Awesome. A slightly different question here, was it difficult to give up control of your business? I feel like I would be more comfortable passing my business to a trusted family member or colleague.

Yeah. It's wonderful if you have a situation where you have a family member that wants to take the leadership reigns, right? That's a beautiful thing for Mike and I, we didn't ... We both have children, but our children didn't want to work in the business. They have other goals in life. But as far as giving up the reins, yeah, that was ... It's a transition for sure. I think, both Mike and I, we grew this business, but we know we're not the smartest guy in the room. We've hired a lot of really good people around us.

When it felt right, it was like we knew we were handing the reins off to people that could do a better ... They're doing a better job than we did, and they're going to do a better job. We have a really strong team and I'm just really proud of the work that they're doing and optimistic about where they're going to take this business. There's so much upside potential.

Absolutely. Optimax. Do you guys do that play on words at Optimax? The optimism comes through strongly.

Yeah, [crosstalk].

This is wonderful, Rick. We have been able to get through all of the questions from the audience today, and just really appreciate everyone being with us. It's so inspiring to hear about Optimax and EO, employee ownership, is definitely an exit opportunity, great option for succession planning, but it definitely can provide so much more than just that as we have heard from Rick. It really addresses so many problems that keeps small business owners up at night, increasing employee engagement, which increases profits, right?

Helping employees build wealth, which Optimax is just such a great example of all of the above, as well as the importance to communities and having that wealth be felt across the community, retaining the business for the long-term. Thank you everyone for joining us. If you're interested in learning more about EO, please go ahead and visit our website, which is employeeownershipequals.org. There you'll find more information on the different forms of EO. You can read case studies from other business owners like Rick, and you can even sign up to speak with an expert. So, thank you again for joining us. I hope you enjoy the rest of your day. (silence)