Why 65 owners are better than one

June 19, 2017
President of a Pennsylvania integrator and manufacturer in the food packaging and ophthalmic automation industries shares 42% of the company with employees

You may have heard this one before: “I want employees to act like they own the company.” It’s a business maxim that sounds great in theory, but how do you actually get employees to shift to that mindset? Kevin Mauger, president of integrator and manufacturer NCC Automated Systems, has a simple answer: Just make the employees the owners.

On May 5, Mauger surprised his employees. While workers knew that a big announcement was coming that day, the content of it was a mystery.

“My job is not to be an all-star,” Mauger said, the rest of NCC gathered before him. “My job is to help you and to help you succeed and be the best you can be. I’m going to put my money where my mouth is because that’s not just talk. I believe in the power of the team. I believe long-term employees are critical to success. I believe in causing our own change.”

Mauger then asked his employees to stand up. They obliged. “If you’re standing you’re an employee of NCC—you’re an owner.” The room erupted in applause and cheers as the newly minted owners shared hugs and tears of joy.

NCC is now employee-owned (Figure 1). The formation of its employee stock ownership plan (ESOP) shared 42% of the company with Mauger’s new co-owners. The plan is meant to give employees a financial interest in the growth and success of NCC, while also rewarding the people who have been responsible for the company’s 30 years of success. Effectively, the ESOP is a qualified retirement plan that could potentially generate significant retirement benefits for its employee owners.

Meet the new owners

Figure 1: NCC Automated Systems employees give President Kevin Mauger a standing ovation after learning the company is becoming employee-owned.

Formed in 1986 by a former Intralox belt salesmen, the southeast Pennsylvania-based NCC was created with the purpose of building custom, sanitary conveyors. It eventually grew into conveyor systems integration and by the late ’90s became a full conveyor systems integrator.

Today, the company does most of its business outside of the Pennsylvania region with a concentration in food, its largest business, followed by ophthalmic lens manufacturing and conveyors for the assembly industries. “We buy what we can and build what needs to be customized, plus we have our own product lines that we build very well,” Mauger says.

NCC considers its primary product how it builds its own conveyors and control systems, calling itself “an integrator that manufactures.”

You down with ESOP?

Mauger joined NCC more than 23 years ago, when he was a college student running a neighborhood handyman business. NCC’s founder had offered Mauger the job before he left for his final year of college.

“I graduated on a Friday and started the following Monday and have been here ever since,” Mauger says. He went on to purchase the company in the mid-90s when it was actually $1 million insolvent. But for the past 11 years, NCC has posted a profit with 23% year-over-year growth.

“The key to our success is our people, our focus and our ability to know how to run custom specific projects,” Mauger says. It made sense that after witnessing this continual growth Mauger would find a way to spread the success to the good people around him whom he felt were responsible for the prosperity.

Over the years, Mauger always considered himself a “project guy” as he likes to solve the challenges that his customers face. But at this point in his career he’s all but run out of projects, having delegated those responsibilities to other capable hands. As sole owner, Mauger realized that he was in a position where he could change people’s lives for the better.

“I’ve been thinking about this for years,” he says about the ownership plan. Mauger first heard of the idea five years ago at an after-hours class and fell in love with idea. He started to read more about it and began to meet with many people about ESOPs. He finally pulled the trigger on a formal feasibility analysis in late 2016. “It took three months to know it was the right thing to do and five months to structure and execute the deal,” he says.

There were lots of challenges in the process and required Mauger coordinating actions, lawyers, five consultants, three bankers and four more financial advisers. While simple to employees, the transaction itself was complicated and required big decisions.

Navigating change

At this point, not much has changed in terms of NCC’s day-to-day operations, but Mauger knows that the road ahead won’t be simple. To help, he will continue in his current position for the foreseeable future, especially as Mauger sees areas such as 3D printing, artificial intelligence, machine learning, Industry 4.0 and overall software improvements being disruptive to its operations.

Fortunately, Mauger has seen that employees are already thinking like owners. “People are more apt to make decisions for the good of the company as the basis of their decision than previously,” he says. “Though many already thought that way.”

Mauger is hopeful that other business leaders take notice of what NCC has done as he believes that emotion, culture and giving employees opportunities are the x-factors that make a company great. “There are lots of good and even some great companies out there, but there are not that many that are truly special,” he says.

NCC’s future now is tied to all of its owners. “We have complete control to determine our own destiny and decide how we want our company to look, feel, operate and develop,” Mauger says. “Together, we can do so much better as a fully committed, well-aligned team. The ESOP supports this cause. If we can all power forward in the same exact direction, all helping each other, like a perfectly-executed football play, we can do anything.”

About the author

Christopher James Palafox is the digital managing editor for Control Design and Pharmaceutical Manufacturing. He has experience editing and writing for multiple industries, including construction, design, architecture, business and information technology. Email him at [email protected].

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