We reach deep into our archives back to Episode 2 and bring you our first podcast interview with Matt Hancock.
Matt Hancock, MBA, is a Principal at Praxis Consulting Group, where he assists clients in developing and implementing high-engagement workforce strategies. Matt brings fifteen years of domestic and global experience in education, employee ownership and change management to the team. His key competencies include leadership development, building high performance ownership cultures, process improvement, vision, strategy and governance
You can find the full, original version of this episodes in our archives at Episode 2: ESOPs and Company Culture.
Episode 102 Transcript
Bitsy McCann: 00:03 Welcome to The EO Podcast where we amplify and celebrate all forms of employee ownership.
Bret Keisling: 00:13 Hello my friends. Thanks for listening. My name is Bret Keisling and as it says on my business cards, I'm a passionate advocate for employee ownership. In today's episode, we're going to look all the way back in our archives to episode number two. It's a conversation we had with Matt Hancock of Praxis. If you attend conferences, if you are regulars in employee ownership, particularly the ESOP field, you'll know Praxis and you'll know Matt. His colleagues are passionate advocates in their own right. They're smart, talented people. Matt also has a great story and you're going to hear about it in the podcast, personal story that informs his work in employee ownership and Matt will always have a special place in our hearts because going back to Episode Two, when we launched the podcast, we had no idea where it was going to go, how long it would last. We didn't know that at the date of this recording, we'd be over a hundred episodes of the main podcast, almost a hundred episodes of the mini-cast with over 40,000 listens. So I laughed when I reviewed the episode and heard me welcoming Matt to the "latest episode."
Bret Keisling: 01:20 There's one other thing that I want to point out. We make reference at the beginning to Matt, myself and Ed Wilusz of Value Management presenting on the effects of culture and the bottom line. We continued with that presentation for the fall of 2017 the spring of 2018 and in fact recorded that presentation at NCEO spring 2018 and it's presented as Episode 30 of The ESOP Podcast. So if you're interested in Matt presenting on a podcast, Episode 30 can be found in our archives. So without further ado, here's my conversation with Matt Hancock.
Bret Keisling: 02:01 Hi everyone. This is Bret Keisling of Capital Trustees with the latest episode of The ESOP Podcast. I'm joined today by a well-respected figure in the ESOP industry and a friend of Matt Hancock of Praxis. Matt, how are you today?
Matt Hancock: 02:16 I'm doing great.
Bret Keisling: 02:18 Good. Why don't you start off, we're going to talk about ESOPs and culture and some of the things that are very important to you and your firm in the ESOP world. But let's start talking a little bit about you, Matt. Tell me a little bit about yourself.
Matt Hancock: 02:31 A little about me. Well before I get - jump into that, thank you for the opportunity to be on The ESOP Podcast and it is good to be doing this with a friend. We just came off of a successful experimental workshop that I think the experiment worked.
Bret Keisling: 02:44 Now that you brought that up, we'll discuss it for a moment. Matt. We're actually recording this at The ESOP Associations Multi-state Conference in Scranton, Pennsylvania. It's the third week of September as we're recording this today and you and I, with a gentleman named Ed Wilusz of Value Management just presented what we think is a new topic and it's looking at culture and value, the effect of culture on the bottom line from a technical perspective. And what made that new, what's our approach that makes it a little bit new in the ESOP world?
Matt Hancock: 03:14 You know, I think we've got, I mean we're used to, we go to these conferences, we think in terms of tracks, right? There's the technical and the culture track and you know, usually in the technical, that's where you talk about things like performance and valuation and value and the benefit level. And then in the culture we're talking about feeling good about the ESOP or generating enthusiasm and engagement. And the opportunity that I think we sort of seized was to bring those two together and say we should be talking about culture and performance and value and people in the same conversation. Like in an ESOP company, a lot of our clients will talk about in one setting, maybe they have a shareholders meeting or it's the management meeting they're talking about the performance of the company. And there's an ESOP committee that's tasked with talking about "the ESOP." And you know, sometimes never the twain shall meet? So you've got one track when the company where we're talking about the ESOP and the other where we're talking about performance and I think our hypothesis is if we bring them together, it's going to make a better company, better workplace and stronger retirements down the road because our performance drives share value.
Bret Keisling: 04:35 And one of the things that you and I agree in our fellow presenter agreed and there's some traction that we're going to see is we have all of the anecdotal evidence that employee ownership adds to happier employees. We certainly understand there's data, the shows that in a downturn and a recession that ESOP companies are less likely to lay off employees that so there is life satisfaction, job satisfaction. So I think this will be an issue that comes about. So let's now go back to where we were Matt, talk a little bit about you and how you found yourself in the ESOP community. You obviously grew up and at a very young age, knew that you wanted to be working for ESOP related companies.
Matt Hancock: 05:14 Very young age. My first word was actually ESOP!
Bret Keisling: 05:17 Was it really! [Laughter.] I believe we have our first in the history of The ESOP Podcast, we are going to have to get a shenanigans button cause I call shenanigans! [Laughter.] Unless your first word came at the age of 28 at which point I apologize and we're glad that you're there Matt. So no, but obviously so tell us a little bit how you got on the path that brought you to where you are.
Matt Hancock: 05:35 Well, I think long story short, in college I got involved in political activism and I was not happy with a lot of things I was seeing in the world. And so the vehicle, like so much of sort of, you know, activism on college campuses -protest what you don't like. And after I graduated college, I had moved to Chicago for my first job out of college and somebody that I ran into actually down the hall from the office who was doing some really interesting work with both labor unions and manufacturing associations. So people who don't typically agree politically, unions and the National Association of Manufacturers, were collaborating on things like workforce development, attracting and retaining, manufacturing you know, connecting to R&D to small and medium manufacturers, employee ownership as a succession strategy - right? - for small and medium sized manufacturers. And the person that I had connected with and I was telling him about my activism and he said, well, I know what you're against, but what are you for?
Matt Hancock: 06:45 And he kind of turned the conversation to is the should we be protesting corporations or should we be trying to change the behavior of corporations? Should we be thinking about involving employees in ownership of corporations? And could that be a positive, proactive way of changing the world? So that was kind of the moment that the light switch went on for me around employee ownership. I had a completely unrelated parallel passion for Italy and speaking Italian and knew I wanted to live there at least for a few years. And it just so happens the easiest way to be a legal immigrant in Italy is to go become a student. And you can get a visa very easily. So I picked Bologna, Italy for completely selfish reasons. I had been there once. It was a beautiful city. I knew it had a good reputation for its university. And I saw in the basement of an Italian pub, a Led Zeppelin cover band while I was there and I thought, this can't be a bad place to live!
Bret Keisling: 07:45 [Laughter.] That's great. Now let me ask the employee on companies that you might have come across in Italy, it's not the same structure in the United States, correct?
Matt Hancock: 07:53 Yeah. No. So it turns out, I mean I, those were literally the reasons that I picked Bologna. And it turns out that Bologna is the captial of a region called Emilia-Romagna, the sort of the central Northern part of Italy. And we think of Italy as being sort of a basket. I think actually if you Google Italy and basket case, you'll get a ton of articles in The Economist and the New York Times, the Wall Street Journal. But there's this part of the country which is known for low unemployment, high wages, high innovation, strong and growing manufacturing economy. And it turns out that in that region of three and a half million people give or take, there are 6 to 7,000 employee owned businesses, many of them in sort of capital intensive, high tech manufacturing.
Matt Hancock: 08:43 You alluded to sort of a different structure. The ESOP is a pretty unique American invention. In Italy and the rest of Europe they've got a model called the co op, cooperative. We might be more familiar in the United States with you know, agricultural co-ops like Land O'Lakes. So they've got the, they're using this co op model as the vehicle for employee ownership. And the thing that's remarkable and I think that that is worth paying attention to about these firms is that they've been around for 50, 75, a hundred years. And so they figured out how to build a culture, how to do the leadership thing, how to be competitive, you know, over decades and in some cases nearly a century, you know, today in a very, very difficult, you know, competitive environment while maintaining that employee ownership structure.
Bret Keisling: 09:35 And part of the culture which is so critically important in the United States. It's often looked at, ESOPs are often looked initially at, as some sort of an exit planning succession vehicle and the culture of the company comes, if it comes at all, is looked at after the fact.
Matt Hancock: 09:53 Yeah.
Bret Keisling: 09:53 One of the things that came up in the presentation that we did at the Scranton conference was as a trustee, Capital Trustees, myself, we get involved in transactions and we work with the best advisors in these ESOP industry nationwide, be the lawyers, valuators company lawyers, or trustee lawyers, third party administrators. The role, third party administrators, aren't often part of the transaction except to tee up the services that are needed down the road. And so we finish the transaction. We close, we'll say five o'clock on a Wednesday afternoon and then 9:00 AM Thursday morning. Your team shows up to work on communications, right?
Matt Hancock: 10:36 Oh, yes all the time.
Bret Keisling: 10:38 [Laughter.] No. And the problem is that there really generally isn't any focus during the transaction to what happens afterwards, correct?
Matt Hancock: 10:45 Yeah.
Bret Keisling: 10:45 So, why is that a problem that we're not teeing it up and the transactions that, the importance of culture and that sort of thing?
Matt Hancock: 10:53 Yeah, I mean, I think, I think I'd go back to beginning feasibility you know, for the, is this a candidate for an ESOP? And I think one of the things that we know is if it's going to be, if it's going to have legs beyond, you know, the initial, you know, a couple of years, if there's a desire to see this sustain itself. Do you have number one, a succession plan in place? Is there talent management in place? Because once that founder begins to transition out or that group of selling shareholders, it's a bet at that point on that existing management team or the management team that's succeeding them. And the shift for them oftentimes is going from founder centric to we as a team are collectively responsible for the success of this new thing, which is now employee owned. It's not individual shareholder owned.
Matt Hancock: 11:51 I think the other thing that would be nice to be thinking about before that transaction closes is where do you, the founder or whoever's going to be stewarding this company into the future, where do you see the ESOP? Is it a new retirement plan that we're introducing? And if so, we can hand that out when we do our normal benefits presentation. Is it a icing on the cake? Where then there's a lot of companies that, you know, we in the community here, the ESOP community, talk about ownership culture a lot, and a lot of companies, even though they're not sharing ownership, have that ownership culture feel already in place: transparency, high trust, lots of collaboration community, good communication. Or is the ESOP an opportunity to begin changing the culture in the corporation? And if that's the case, we know from the evidence that you've talked about at the beginning that there's an opportunity to not just make employees happier and create a better workplace, but to improve performance compared to our competitors.
Matt Hancock: 13:04 And if, if this is an opportunity for change in the organization, it means that there's you know, essentially there's some, there's money on the table when it comes to performance. And so thinking about what's your vision as a leader, as, as leadership, for the role that the ESOP is going to play, because that then tells you a lot about how you need to be approaching communicating this to your employees. The worst thing is probably to you know, get up there and make a big deal out of, you know, congratulations, you're all owners and then say, go back to work. You've created expectations that, that you know, that, well I'm going to be able to act differently and have access to different information or have more autonomy as an owner. And so we haven't defined what ownership means. And that that could actually cause resentment within the organization and you could lead to, you know, to worse performance.
Matt Hancock: 13:57 So I think the point I'm trying to drive at is: do an assessment early on. What do we see this ESOP representing for us? Is it a benefit? Is it the icing on the cake for the culture that we've always had? Or is this an opportunity now to begin changing our culture in ways that will make it a better place to work, but also make our company perform better? Because it's that performance that makes us a valuable retirement benefit and it makes it sustainable.
Bret Keisling: 14:23 And it's only a valuable retirement benefit if the company survives long enough for people to retire.
Matt Hancock: 14:28 Exactly.
Bret Keisling: 14:28 And, Matt, one of the things that struck me, and maybe I'm over simplifying it, but the ESOP transaction, again, often as a vehicle for succession planning, and there's nothing wrong with that, absolutely normal to have that.
Matt Hancock: 14:40 Absolutely, sure.
Bret Keisling: 14:40 But it seems to me that if the transaction is succession planning for the usual founder or one of the selling shareholders, a robust culture and communications development program is actually the part that adds to company sustainability. So the question becomes, and oftentimes owners will sell with a desire to perpetuate their legacy.
Matt Hancock: 15:08 Yep.
Bret Keisling: 15:09 But they're making a lot harder than themselves if they don't address the culture aspect of it.
Matt Hancock: 15:13 Yeah. And I think it's beneficial to say, Hey, can we take a moment to get off site or you know, take a step back from the day to day and check in with the selling shareholder. What was the deeper values base that made you decide to do this? Yes, it's a succession plan, but this is usually not the easiest way to sell your shares of stock. And it's usually not the way to get the most, you know, top dollar. So grounds the communication strategy in that, you know, selling shareholder that founder's vision and also bring together the key leaders in the company to help them sort of voice where they see this going and then, and then aligning a communication strategy but not in addition, I guess to a communication strategy I think it's important for the leadership to think from a behavioral perspective, what do we as leaders need to do differently going forward and what do we want to see our employee owners doing differently going forward as a result of being employee owners? And so the communications and leadership need to support ultimately those ownership behaviors that the leadership identifies.
Bret Keisling: 16:27 Matt sometime not too long from now, I'd like to have your back and talk about specific culture ideas and or communication ideas. And we just frankly don't have enough time today to get into the specifics of it. But broadly from an attitude perspective or from a policy perspective, what would you want the average ESOP to articulate as a policy? Or, in other words, what from the company's mentality, if you will, would you be looking for that would perpetuate the proper culture and communications down the road?
Matt Hancock: 17:07 I think from the perspective of leadership, I think the mindset has to be that given the opportunity, given the right information, given the right skills, our people are capable of some pretty remarkable things performance wise. What I'd like to see from employee owners is asking not just what do I need to do today in my department or team or my task, but who am I impacting in the company and what is the customer that right? Because none of this works if we don't keep the customer happy. If they don't keep coming back and they don't keep telling their friends, hey, this company's got something going on, you're going want them to do your business with them. So does every employee have a line of sight into what makes our customers really happy? And every employee is able to and does something above and beyond their sort of functional tasks that that leads to us creating more value for our customers than our competitors can.
Bret Keisling: 18:12 And the funny thing, Matt, and with this we'll have to wrap up today, but we look at culture and communication and as we're discussing it, we're discussing it that as the, end to the means itself. But with your last comment, the fact of the matter is if you don't have the right product mix, if you don't have the right support team, if you don't have the right pricing structure, culture and company is as we often say, and I believe you do as well, an ESOP won't make a bad company a good company but can make a good company a great company. So you want to make sure the company is doing the right things from the business side but maybe doing them in a mindful way. Would you agree?
Matt Hancock: 18:51 Absolutely.
Bret Keisling: 18:52 All right. Matt, I'd like to thank you very much for joining us today. Matt Hancock of Praxis, and Praxis is a company with a national reputation that does ESOP communication, culture consulting and other things as well. And Matt is one of the recognized leaders there. So Matt, thank you very much for joining us today.
Matt Hancock: 19:11 My pleasure, thank you.
Bret Keisling: 19:13 Okay, my friends that we'll wrap up today's episode of the podcast. I hope you enjoyed our look back with Matt Hancock. As I said at the top, I have a lot of respect, a lot of affection for Matt. All of his colleagues at Praxis, and if you're looking for culture governance, any ways to help your employee owned company or ESOP run better, Praxis is certainly a great folks to call. With that, I hope you'll join us Friday for The ESOP Mini-cast. Have a great week!
Bitsy McCann: 19:41 We'd love to hear from you! To contact us, find us on Facebook at KEISOP, LLC and on Twitter @ESOPPodcast. To reach Bret, with one "T", email Bret@KEISOP.com, on LinkedIn at Bret Keisling, and most actively on Twitter at @EO_Bret. Again, that's one "T". This podcast has been produced by The KEISOP Group, technical assistance provided by Third Circle, Inc. and BitsyPlus Design. Original music composed by Max Keisling, archival podcast material edited and produced by Brian Keisling, and I'm Bitsy McCann.
Standard Disclaimer: The views expressed herein are my own and don't represent those of my own firms or the organizations to which I belong. Nothing in the podcast should be construed as guidance or advice of any kind in any field and the fact that I mentioned an organizational website or an advocate or a company on a podcast does not reflect an endorsement, but if you've heard your name or your group's name mentioned on this podcast, I'd love to have you come on and talk about it yourself.