Welcome to another episode of CFO Weekly with Adanma Akujieze, the esteemed Chief Financial Officer at Larson Design Group. Today, we dive deep into the world of employee stock ownership plans, also known as ESOPs. Adanma unpacks how this unique model transforms employees into business owners, the intricacies of transitioning a business into a 100% ESOP-owned company, and the challenges and opportunities of being an ESOP company and providing an ESOP plan.
Adanma is a proven leader and dynamic thinker, guiding Larson Design Group through the financial data needed for drawing meaningful conclusions and making critical business decisions. As a co-administrator of the firm's ESOP, she works to ensure that current and future objectives are well aligned with its obligations towards its valued employees. Adanma is also a Certified Public Accountant, a Certified Information Systems Auditor, and a Certified Internal Auditor.
Welcome back to CFO Weekly, where we're talking with financial leaders about how to build efficiency in their teams, create time for strategy, and ultimately get results with your host, Megan Weis, let's jump right in today.
Megan - 00:00:18: My guest is Adanma Akujieze. A proven leader and dynamic thinker, Adanma is a champion for firmwide financial literacy, guiding Larson Design Group through the financial data needed for drawing meaningful conclusions and making critical business decisions. Adanma guides the effort to enhance the fiscal capabilities of a wide range of Larson Design Group leaders and ultimately reduce potential risk to the organization. She provides transactional support to LDG's project teams and decision support for the firm's strategic initiatives and helps drive LDG's financial governance and enterprise-wide risk management efforts. As a co-administrator of the firm's Employee Stock Ownership Plan, or ESOP, Adanma works to ensure that the firm's current and future objectives are well aligned with its obligations towards its valued employees. Adanma's plans for the financial future of LDG include unapologetically marching toward innovative growth and development with an unwavering commitment to financial reporting, accuracy, and integrity. Adanma holds a Bachelor of Arts and a Master of Science in Accounting, both from Michigan State University. She is a certified public accountant. A certified information systems auditor and a certified internal auditor. An avid speaker with dynamic communication skills and excellent interpersonal capabilities, Adanma has presented at both nationwide conferences and local leadership events in the community, Adanma serves as Board Director for Evangelical Community Hospital and in a volunteer capacity on several fronts for the Pennsylvania Institute of Certified Public Accountants. She also has served as a President of the Board of Directors for both Summit Early Learning Inc. Which specializes in the delivery of early childhood education services and River Valley Health and Dental Center. Adanma, thank you very much for being my guest on today's episode of CFO Weekly.
Adanma - 00:02:24: Thanks, Megan. It's good to be here again.
Megan - 00:02:26: Yeah. I also had the pleasure of interviewing you for our 19th episode, which was a few years ago now. It's hard to believe it's been that long. Back then, we covered zero-based budgeting. Today we're going to be discussing the benefits, challenges, and opportunities associated with an employee stock ownership plan, or ESOP. We have a lot to cover, so let's get going.
Adanma - 00:02:48: Absolutely happy to.
Megan - 00:02:51: First and foremost, if you can just give us a refresher and tell us your story and how it is that you got to where you are today.
Adanma - 00:02:58: Absolutely. Thanks again, Megan. So. My name is Adanma Akujieze. As you mentioned earlier, I currently serve as the CFO and Treasurer at Larson Design Group, which is closing in on 500 people employee-owned engineering and architectural consulting firm, Fully Integrated Design Services. I've been at the firm for about six years now. Started my career several years ago in public accounting, in the auditing internal and external audit space, and just been very blessed and fortunate to have career opportunities open up in the industry and within public accounting as well, and ultimately truly enjoying adding value here at Larson Design Group, partnering with some really great minds to do some really cool things.
Megan - 00:03:42: Yeah. So can you tell us a little bit more about Larson Design Group and then your role as the CFO there?
Adanma - 00:03:50: Absolutely. Larson Design Group is an over 36-year-old firm. As I said, in the engineering and architectural design space, we are a growing company, and we described ourselves several years ago as an emerging national firm. And what you find us doing now is, having come off two acquisitions over the last 18 months, we are really growing in national presence. We currently have 18 offices in seven states and just an incredible group of professionals serving both public and private clients, including work with the federal government and federal government-related organizations. Larson Design Group is continuously seeking to innovate and do what we do better and faster. And we really hold ourselves to our set of core values, which is really our key cornerstone and fair, prominent in everything we do as an organization. Client service excellence is top of that list of core values and not just doing what's right by the customer, but also making sure that our employees are learning through each project and program experience so that they're even better for the next go around.
Megan - 00:05:12: And I'm curious, do you guys specialize in a particular kind of project?
Adanma - 00:05:17: No, we do it all. We do again, architectural services, engineering design services surveys, and again, clients cutting across different industries. Our desire is to really take the eclectic mix of experience we have on staff and truly utilize it for all our employees in different industries. We do have a niche retail group that works with big box retail stores, including grocery stores, to do both design new design and remodeling of those stores. And then actually, the way it's described, and I'll share with you how I describe it to new employees typically, is we have a niche retail group, and then we have the above-the-ground services, which is more of our building services, buildings construction. It encompasses site preparation. We have our on-the-ground services, which will be our transportation group, where we work with different departments of transportation for road design, highway design, bridge design, and those types of complementary services. And then we have our under-the-ground services, where we do environmental work and geospatial services, geomatics services, and things in that realm. So I guess an easy way to think of it is we're offering on-the-ground, above-the-ground, and under-the-ground services, as well as our niche retail. And of course, I mentioned our federal government, our federal group earlier that is dedicated to servicing our valued clients in that federal government space.
Megan - 00:06:50: So, switching gears, can you explain to those listeners, and most of them will know, but maybe some won't, what an ESOP is and how it works?
Adanma - 00:07:00: Absolutely, very delighted too. ESOPs are unique. ESOPs are a gem. ESOPs are special. It's essentially thought of it as a retirement savings plan program that allows employees to, through their careers, be a part owner of the organization they work for, but also and also set themselves up or be, well, nicely set up for retirement. I e life after active full-time work. And ESOPs are used to basically an ESOP feeds into the structure of the organization. Where a company is owned by an ESOP trust, it's bound by certain rules towards the DOL, the rules enforced by the IRS, the company has within. You'll find most ESOP companies boosting just a really great culture because, again, I'm an owner, you're an owner, and we're all owners. ESOPs are the great leveler, I like to say. We're all owners of this organization and we're working towards the same goal where we don't work for an ESOP company, we're coming to work every day. We expect a salary or some other kind of remuneration at the end of the month or biweekly or whatnot. With the ESOP, I know that I'm plowing away and sort of saving, working towards the future of my family and future benefits for my family upon my retirement, and upon my exit from the company. And it's a very powerful tool, I think, to encourage organizational engagement, to encourage posterity, and to encourage just like I said, that sort of the life, the tenure, the culture of an organization onto the future.
Megan - 00:08:41: And how did the decision to offer an ESOP program come to be? At Larson Design Group.
Adanma - 00:08:46: For sure, the organization was partially ESOP owned until 2019, when we completed a transition, very systematic transition to a 100% ESOP-owned organization. And typically you start to see the ESOP ownership come up at companies where it's owned by a few individuals. There needs to be some level of ownership. Transition. ESOP is a way to make sure that I like to call it sweat equity, the sweat equity of employees is recognized, is accounted for, and so you then have a portion of the company owned by an ESOP and then some individuals owning another piece of it. And LDG operated under that structure for several years. And now, starting in 2019, we transitioned successfully to a 100% ESOP-owned organization. It was in the best interest of our employees, one of the most straightforward methods and approaches or options that we picked to preserve our culture while ensuring continued financial stability for a growing organization. That. Like I said. Was sort of facing a fork in the road and a decision to transition former owners safely and just without disruption out of the organization.
Megan - 00:10:10: And is this something that's offered to all of your employees or just certain employees? And how did you come to the decision of who to offer it to?
Adanma - 00:10:19: ESOPs are offered universally. In other words, as long as an individual employee qualifies for ESOP enrollment, ESOP eligibility. And there's a plan document much like you would have for a 401K plan or any other retirement savings plan for ESOPs. Our plan document specifies the number of hours, and the length of tenure that allows an employee to then qualify for membership upon qualification for membership or qualification for enrollment. Then you have basically there's a uniform membership within the ESOP as long as I have the number of hours and the length of experience that it takes. So it's offered universally across all individuals, and all employees at the firm. And that is one of the benefits of this type of program where because of that, with that and that, ESOP companies are able to be federal tax-exempt from federal corporation taxes. And that's one of the big benefits of being an ESOP. And what that does is it allows the organization to reinvest in their employees who have their vested interest again and they're applying their sweat equity every day they come to work. So again, can't say enough about how excellent of a program and how excellent of an organization structure the ESOPs are, for economic and social development.
Megan - 00:11:46: So in your mind, are there any drawbacks to being an ESOP company?
Adanma - 00:11:50: There's a good amount of due diligence that needs to be done and continued diligence around compliance with regulations, a lot of specificity, and attention to detail that needs to be paid. As we work as administrators, internally we have ESOP administrators, of which I'm one of them, and we work with our record keepers, that's an independent organization and an external ESOP trustee. We all work hand in hand to make sure that not only employee allocations are calculated appropriately. We complete all the filings, the audits, and all the compliance requirements that are needed to maintain our status as an ESOP, that we're responding to employee queries, and employee questions timely and again, just all staying around compliance. So I wouldn't call it a drawback. It's more of an opportunity to do the best thing and do the right thing in the best interest of our employees. There's also the blessing and the burden of an ESOP company, you earn your right to grow because you're funding this ESOP obligation as time goes on. And so there's an internal decision, spoken or unspoken, to make sure we continue to do well and we continue to grow and gain the degrees of freedom that come with growth so that we can again maintain and sustain and meet up with our ESOP obligations on an ongoing basis.
Megan - 00:13:19: And how do you think being an ESOP company has impacted the culture and overall morale at the Larson Design Group?
Adanma - 00:13:27: Yeah, it's a great question. As opposed to being employees where each of us is called employee-owners. And so just that change of terminology alone brings a powerful message. It really rings true. As an employee-owner, I want my company. So it's my company when I'm speaking as just me or it's our company when I'm with my colleagues and we're discussing so I want my company we want our company to be the best it can be. We want to be mindful of what we commit our company to and how we spend company dollars in spending money, whether for business, travel, or any other reason on behalf of the organization. I think of it like I'm spending my own. And so it's really a mind ESOPs create over time. Obviously, it takes a while to really get the idea inculcated. But ESOPs promote a mindset shift, a paradigm shift that perhaps just maybe other companies may struggle to promote just by virtue of our ownership structure.
Megan - 00:14:35: And I'm curious to know, do these vest over a certain period of time or is it just when you retire that you're eligible to purchase these?
Adanma - 00:14:46: For benefits? Yeah, that's a good question. So, yes, just as we have the eligibility requirements noted in the plan document, we also have the vesting requirements noted in the plan document. I will point out, Megan, that every company structures their ESOP differently based on sort of what the wherewithal of the organization is as they're starting the ESOP and getting it stood up based on what the objectives are, whether it's an ESOP being implemented for an ownership transition. Whatever the purpose of the ESOP is at inception, the ultimate purpose is to act in the best interest of employee-owners and make sure you see them through to a successful retirement ultimately and of course, to build and add to economic development along the way. So it varies by organization, but certainly, there are stated vesting rules and vesting requirements by ESOP.
Megan - 00:15:39: And how do you balance the interests of the ESOP participants with the company's financial goals and objectives or does it just happen naturally?
Adanma - 00:15:49: Yeah, I think it's every year. It's something that we work towards because there is normal attrition and normal turnover. Right, so you always have new employees that you're getting oriented and acclimated to the ESOP. We found that sticking consistently to our core values is really the first step. Right. So regardless of who's here and when they turn over and all that, our core values are our core values as an organization. And we don't only talk about them, we live them out. Right, so that's number one. The balancing act is really found in making sure that our periodic strategic plans and our annual business plans are not built by a certain number of folks in leadership who just sit in a room and come up with numbers and come up with plans. But those plans are built from the bottom up. In other words, every employee-owner has some ability to get their voice heard and get their voice applied to the annual business plan again as well as the strategic plans as they occur. What that does is it aligns the individuals. First of all, there's a good understanding of what direction the company is going in. And secondly, it makes sure that just like it's our company, right? My company, our company, it's also our plan and our strategic vision and our direction for the future, and our mission. So those are just some ways it's the general participation, and collaboration across the organization and there's a lot to be said for visibility as well. In other words, at the end of the month, at the end of the quarter, every employee-owner deserves to know and has the right to know how their company is doing and make sure that an appropriate amount of visibility is applied across the organization.
Megan - 00:17:37: I love that that promotes true ownership at every level.
Adanma - 00:17:40: Absolutely. Yeah.
Megan - 00:17:42: So what advice would you give to other companies that are considering becoming an ESOP company?
Adanma - 00:17:48: Do a lot of due diligence, I would say is number one, there's a great user support group out there. Other ESOPs, whether in your industry or a different industry, that you can begin to speak to, hear about their experiences through transitions, hear about their opportunities, and hear about the wins, and struggles of ESOPs. I think that financial stability is a big piece of the ESOP world. And so for any company that's working towards that, I would strongly suggest a level of investment in financial management, a level of investment in internal controls. Right. Making sure that the financial controls are where they should be and they're working there's ownership over them, functional and technical ownership. Make sure that accountability is promoted across the organization. ESOPs are a trust-building vehicle in my opinion. Right. It's our company. And so just like we do the free fall activity when we do team building activities, being members and co-owners within an ESOP says I can fall and trust that you will catch me. Right. In other words, I do my duty and you do yours and we're all putting in our best. It's sort of the trust we come to work every day with because one person not doing what they need to do and not delivering on their commitments could truly have very big ripples across the rest of the enterprise. So I think promoting accountability, promoting strong financial controls, and then due diligence with talking to others, getting out there, and talking to others outside the organization. Another thing to have in your back pocket as a company considering an ESOP in addition to strengthening your financial controls and investing in financial management, having a very trustworthy, dependable banking relationship is going to be key. The ESOP world has a lot to do with financial transactions in and out of the ESOP trust and making sure that a reliable banker or banking relationship is set up will do the company a lot of good.
Megan - 00:19:57: And can you share any success stories or notable achievements that Larson Design Group has had as an ESOP company?
Adanma - 00:20:04: Absolutely, there are a lot of them. October is known as Employee Owner Month. I believe that's across the United States every October. And we have an excellent Employee Owner Committee here at Larson Design Group that conducts ESOP awareness activities that promote the employee-owner mindset, promotes all things ESOP. And so what our Employee Owner Committee has done very successfully and very excellently every year is come up with a campaign or a list of activities that are very engaging, very interesting, and quite honestly, sometimes entertaining right during employer month. And employees actually look forward to that. Employees know what October means, and they look forward to that. They celebrate their successes, and they look to share new information that's gained about being an employee-owned company. And also the fact that the Employee Owner Committee is made up of employees across the organization. I talked earlier about the fact that we have multiple business units, some doing very niche work. So the Employee Owner Committee has done a really good job of encouraging members across the organization, the voices of employees being heard, participation in company activities, and again, a sense of belonging and ownership, which has been really great for our growth as an organization, for our growth prospects, and for attracting and retaining top talent here at Larson Design Group.
Megan - 00:21:44: And, how should companies measure the success of their ESOP program? What metrics should they use to track performance and employee engagement? I know sometimes employee engagement in particular can be hard to quantify.
Adanma - 00:22:00: It absolutely can. I think it goes hand in hand with the normal, performance of the organization as a whole. I think that we see the performance of an organization going in the right direction, I. E. Continuously improving and increasing. We should ultimately see the value of the ESOP, and the participation within the ESOP continually growing and increasing. I think another measure of success is that we start to see some level of traction and some level of stick to fitness. Right. Employees who actually come and see the value of the ESOP and make a commitment to stick with the organization through its growth. You could have ESOP with a ton of employees, but if none of them is sticking around longer than two, three, or four years, then it's a revolving door. It's people just coming in and going out. But I think one measure of success is being able to see some longer-tenured employees in the plan, sticking with the plan, growing with the plan, and growing with the organization. That's another key determinant of growth.
Megan - 00:23:10: And how do you see the future of ESOPs evolving? What impact do you think they will have on the broader business landscape?
Adanma - 00:23:17: It's an excellent question. Quite honestly, Megan, I don't think we scratch the surface of how much ESOPs could really do nationwide for economic growth and development. I think that in the last couple of years, we've struggled a little bit with the job market. And a lot of companies have struggled to get employees and not just hire employees, but also Retain Employees. I think the entrepreneurial mindset has become a big thing in society lately. A lot of folks who perhaps worked at organizations as a member of a team now want to own their own enterprise. You see a lot of that happening more and more. If only the understanding of ESOPs was out there so that employees knew that by being a staff or an employee of an ESOP-owned organization, I essentially am being entrepreneurial. I essentially am owning my own company and determine my own fate, if you will. So I think that there's a lot more development to be had. There are several industries that I think could learn more about ESOPs and be really good at it. You see right now, a lot of professional services, industry organizations, and a lot of participation in the ESOP world through professional organizations because it's a people-driven business. Manufacturing certainly can actually go deeper in the ESOP world. I think there's some opportunity there. Again. I just think there's an opportunity to encourage a love for work, and a sense of ownership, and build a more robust job market through this wonderful unique tool that's called ESOPs.
Megan - 00:24:56: Yeah. Actually like in speaking with you, I'm surprised more companies don't offer it. seems like a brilliant way to get company or employee ownership for one and to reduce attrition for two, which is really huge in today's job market.
Adanma - 00:25:15: Absolutely. And I think for us who are members of any stop or employee-owners already, I think we need to do a good job of being ambassadors. Right. And let others know about this wonderful thing that we found and that we're happy and pleased and fortunate to be contributing to.
Megan- 00:25:33: So last question. And this is one that I ask almost every guest. But what is it that keeps you motivated? What gets you out of bed in the morning and makes you excited to go to work or just live life?
Adanma - 00:25:45: Yeah, no, that's great. That's an excellent question. My faith is my biggest motivator, and my faith in God is really the fuel. And it fires everything I do. And the family I've been blessed with is incredible and just very fortunate to have them, my family, in my corner, as my supporters. From a work perspective, the ability to not only lead but influence and help shape the careers of multiple young, upcoming seasoned professionals is an amazing honor and is something that makes me realize that again. Scripture says, to whom much is given, much is required. And so I take that very seriously. And that motivates me incredibly because my level of excellence really determines, like I said, the trajectory of the livelihoods, the professions, and the careers of several men and women that I respect so much and think very highly of. Again, to whom much Is given, much Is required.
Megan - 00:26:52: Yeah. Adanma. Thank you so much for being my guest today.
Adanma - 00:26:55: Thank you, Megan. I appreciate your time and your having me on.
Megan - 00:26:59: Yeah. I really enjoyed speaking with you again. And I thank you for finding the time to be here with us today and giving back by sharing your experience and knowledge with all of our listeners. Please tune in next week, and until then, take care.
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In this episode, we discuss:
What is an employee stock ownership plan (ESOP)?
How does an ESOP empower employees as business owners for a secure retirement?
How can a business transition to 100% ESOP ownership?
What are the challenges and opportunities of an ESOP company?
How can you balance the interests of the ESOP participants with the company's financial goals?
Empowering Employees as Owners for a Secure Retirement
An ESOP is a retirement savings plan program that allows employees to become part owners of the organization they worked for throughout their careers. It not only provides them with a stake in the company but also helps them secure a comfortable retirement. It sets them up for a fulfilling life after active full-time work. ESOPs play a pivotal role in shaping the organizational structure as companies are owned by ESOP trusts.
“ESOP is a powerful tool to encourage organizational engagement, posterity, and that sort of the life, tenure, and culture of an organization oriented in the future,” Akujieze said. - 06:50 - 08:41
Transitioning to 100% ESOP Plan Ownership
Larson Design Group underwent a transition to become a 100% ESOP-owned organization in 2019. The ESOP structure ensures that the company acknowledges and rewards employees' hard work and dedication. In LDG's case, this decision was made in the best interest of the employees, as it provided a straightforward method to preserve the company's culture while ensuring ongoing financial stability for its growth.
ESOPs are universally available, meaning that as long as an individual employee meets the qualifications for ESOP enrollment, they are eligible to participate. Similar to a 401K or any other retirement savings plan, LDG's ESOP plan document outlines the specific criteria, such as the required number of hours worked and length of tenure, for employees to qualify for membership or enrollment.
“It was in the best interest of our employees, one of the most straightforward methods and approaches or options that we picked to preserve our culture while ensuring continued financial stability for a growing organization,” Akujieze said. - 08:41 - 11:46
The Dual Challenges and Opportunities of an ESOP Company
There is a good amount of due diligence that you need to do and continue to do around compliance with regulations. You should pay a lot of attention to specificity and detail. As an ESOP administrator, you will work hand in hand with record keepers, an independent organization, and an external ESOP trustee to ensure that employee allocations are calculated appropriately but also to complete all the filings, audits, and compliance requirements necessary to maintain your ESOP status.
Being an ESOP company is both a blessing and a burden. You earn the right to grow because you fund the ESOP obligation over time. Therefore, there is an internal decision, spoken or unspoken, to ensure that you continue to do well, grow, and gain the degrees of freedom that come with growth. This way, you can maintain, sustain, and meet your ESOP obligations on an ongoing basis.
“There is also the blessing and the burden of an ESOP company. You earn your right to grow because you're funding this ESOP obligation as time goes on,” Akujieze said. - 11:46 - 13:19
Balancing Ownership and Business Objectives With the Right ESOP Plan
Balancing the interests of the ESOP participants with the company's financial goals requires consistent adherence to core values and active participation from every employee-owner. At Larson Design Group, the first crucial step is living out these values rather than simply discussing them. This approach remains unchanged regardless of staff turnover or new hires as the company strives to maintain its commitment.
To achieve this balance, the company ensures that its periodic strategic and annual business plans are not solely developed by a select group of leaders locked away in a room. Instead, these plans are constructed from the bottom up, allowing every employee-owner to have a say and contribute their ideas. Involving individuals at all levels aligns everyone with a clear understanding of the company's direction.
“Every employee-owner has some ability to get their voice heard and get their voice applied to the annual business plan again, as well as the strategic plan as they occur,” Akujieze said. - 15:39 - 17:37
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