In 2017, a dream came true when Kevin Mauger, CEO of NCC Automated Systems made a surprise announcement to the NCC team giving almost half of his company to the employees. Today he shares their story.
Episode with guest: Kevin Mauger
CEO of NCC Automated Systems
(This episode was recorded in June of 2020.)
Key Episode Take-Aways:
1. Share the numbers during good times AND bad times. (click to jump to this topic below) First of all, our values are, it takes a village; we're here for each other; life is short; we choose to have a positive attitude; have fun. We're warriors; we like to fight until we win. We're brave; we take on new things and own it. We embrace responsibility, because we're all owners.
2. From an employee's perspective, ownership is always a winner. (click to jump to this topic below) There's nothing possible you can say about employee ownership that is bad from an employee perspective. Because as you work at a company, you gain shares; the shares have value. And there's a lot to be gained from that. But for an owner, there is definitely an extra level of complication.
3. It's not a conference, it's a catalyst for change. (click to jump to this topic below) "If you like sports and competition, and you want to roll it into a business, come to this." And I'm like, "What is this?" So I went to it, and it was a general introduction about how to turn a business into essentially something where there's scoring, and there's competition, and one that brings out the winners amongst us because winners like to win, right?
4. How you can educate employees about the business. (click to jump to this topic below) There's a basic intro course that is taught by our facilitator, to come in and have some workshops around that. And it's basic vocabulary and some examples and some tests, and it's just an intro. But above and beyond that, our stake in the outcome plan, which is our incentive plan, is literally a simplified income statement.
Continue scrolling to read the full episode transcription.
Steve Baker 0:26
Welcome, welcome. Welcome to the "Change the Game" podcast, where we are seeking out those inspirational stories of how entrepreneurs and people are changing the game, how they're playing the game differently and doing business differently. What we think is we're finding those folks who are doing stuff that's a little bit different, that treats people like people, and that we believe that business has that potential to make a positive difference in the world. So everybody listening out there, let's think about it. Can we make it capitalism at its best?
Right now we can save the American Dream by closing that gap between the haves and the have-nots. And together, we're aiming to transform 10 million lives in 10 years, though The Great Game of Business® community, by the way, exists for people to learn, share and celebrate the game- changing principles and practices that Jack Stack inspired us all with in those classic books like "The Great Game of Business," "A Stake in the Outcome," and most recently, "Change the Game." I'm Steve Baker, the Vice President of the Great Game of Business. And here with me, as usual, is our awesome president of the Great Game and co-author of our new book, "Get in the Game," available where fine books are sold. Rich Armstrong, how’re you doing?
Rich Armstrong 1:40
Good, Steve, good. How are you?
Steve Baker 1:42
Very good, very good. Today, we've got a really cool guest with us. The theme is, who says business isn't personal? Our inspirational quote for this week--I know I lean on him a lot, Mark Twain, but he's another Missouri plow boy--this one I love because it kind of goes with what Kevin is going to be talking about today. "To get the full value of joy, you must have someone to divide it with." I really like that. You don't know what it's fully worth until you divide it with someone. So that's awesome.
So let's welcome Kevin Mauger. Kevin graduated from the University of Delaware in '94--he's a young guy--with a business degree and started working for NCC Automated Systems. Within 12 years he bought the company, and with the help of his team it has roughly grown about 600 percent. That's pretty amazing. In 2017, one of his dreams came true and he made a surprise announcement to the company and gave 42 percent of his company to the employees through an ESOP, an employee stock-ownership program.
Kevin's vision for NCC is to support the entrepreneurial spirit of his team and his purpose is to create the perfect environment to do that. And personally, Kevin, you say your life centers around spending time with your family. I think that's amazing, and figuring out a way to go deep sea fishing sounds cool. And supporting his beloved Philadelphia Eagles. Kevin Mauger, welcome.
Rich Armstrong 3:12
Kevin Mauger 3:15
Hi, thank you. I'm sure my family is rolling their eyes at that intro, most of it anyway, but I appreciate it. Thanks a lot.
Steve Baker 3:22
Well, I hope they're listening, because right now I'd like to say you're not only a handsome man but also a powerful entrepreneur, just to embarrass them more. So, let's start out. A lot of the folks listening don't know you yet. They will. But tell us about NCC. What is it? What do you do? Your people? The work? The structure? The business?
Kevin Mauger 3:45
All right. Well, I think you've already hit on one thing: we're employee-owned. It's one of the most important things to us in the business. So we have 76 employee owners; only one of them is a Cowboys fan. [Laughter.]
What we do is we provide flexible engineered conveyor and integration solutions for the food, ophthalmic, and assembly automation industries. Ophthalmic is eyeglass lenses, so we automate the production of eyeglass lenses. So everybody says, "Okay. What does that actually mean?" Right? Everybody says, "Oh, that's cool. What is it?" [Laughter.]
And so what we do is we help our customers automate high-production manufacturing facilities by connecting and maximizing their machines with conveyors and integration thereof.
Steve Baker 4:39
I got a chance to watch a video of the work that you've done, or some of the work that you've done, with Hershey. And seeing you know, a million Hershey bars fly by so fast was just like a dream come true. I want to be at the end of that thing, just [mimics eating] yak-yak-yak-yak-yak. So make sure to check out the website. But Kevin, tell us how you actually came to work at NCC?
Kevin Mauger 5:12
Okay, so when I was a junior in college, my girlfriend, who's now my wife of 27 years, suddenly became pregnant. I was on a self-proclaimed five-year track studying engineering at the University of Delaware, and I had to figure out how to get out in four, so I changed my major. And I realized, hey, I've got to make some money next summer. So I started a business in the neighborhood. And we called it KMOB college contracting. And I literally, I think on my Texas Instruments computer, printed out flyers. I put them in my paper bag, I started walking around the neighborhood looking for people to hire me to do whatever, whatever that was.
So you know, I advertised that I could mow lawns and paint fences and seal driveways and whatever. And I came across this lady who was like, 12 months pregnant. She was really pregnant. And she said, "Oh, my God, my husband--all he does is work. And we're having a wedding at our house this weekend. Is there any way you can get some annuals in here, mulch, do whatever?" So she hired me and I worked there every day that week. Turns out her husband and her had founded what was then Northeast Conveyor Corporation.
They ended up hiring me every single time I finished the job the entire summer. So it was my only job. I just kept going there day after day after day. I built a relationship with them and they hired me right after school. So I graduated on a Friday. I came here the following Monday. And I've been here ever since.
Steve Baker 7:00
Wow, what a great story. I love it. I love it. I also like that you're married 27 years; you know, that's illegal in 11 states. [Laughter.] So your goal in life is to create as much positive impact as possible. In fact, on your site--I did a little research here--it says, "We're building a lasting legacy for our vendors, our customers and our teams. Positive energy delivers growth and opportunity for all.” Now somebody listening--in fact, a number of people listening--think you're probably a bunch of damn hippies. So what's the deal?
Kevin Mauger 7:36
That's really funny. I never thought of it like that. Now, I'm wondering if maybe the hippies were right.
Steve Baker 7:42
We like hippies.
Kevin Mauger 7:44
Yeah, you know, I actually saw something on Facebook not too long ago that said, “Marijuana is legal; haircuts are not. It took 50 years but the hippies have finally won.” [Laughter.] So I guess my deal is simply supporting the hippies. I guess that's probably the best way of saying it. But the real deal is that life is short and positive energy makes everything better. And I think that everybody in this world wants to make a difference. And this is how I think I can do it.
Steve Baker 8:10
That's awesome. Love it. Changing the world through business, man. That's great.
Rich Armstrong 8:15
Kevin, you've really inspired me in terms of the values that you hold for your organization. One of the things I really like is looking at the values that you portray at your business. Can you talk a little bit about them and why they're important to you?
1. Be true to your values.
Kevin Mauger 8:32
Yeah, I think, first of all, our values are, it takes a village; we're here for each other; life is short; we choose to have a positive attitude; have fun. We're warriors; we like to fight until we win. We're brave; we take on new things and own it. We embrace responsibility, because we're all owners. Right? So how do you develop those? What's the evolution of those?
And I think values exist in a person, they exist in a group, they exist in society, and the more aligned they are, the more clear they are. So I think developing values is kind of figuring out who you are. And in a company, it's who are you as a company? And then naturally, if everybody starts thinking about the values the same way, you begin to become aligned and attract people with the same values.
Rich Armstrong 9:18
Did you involve your employees at all in terms of developing these values?
Kevin Mauger 9:24
We developed them, but we were really just putting words to what was already happening. And it's been an evolution. I mean, we've had different values over the years. You know, everybody has a lot of basic values; I wanted to stay away from what we call the price-of-admission values--like honesty, okay?
I think that's assumed, right? I think that's just the price of admission. So when we set out to develop our values and put them into words, we wanted things that would be a little bit outside the norm, that would really define a specific type of person that would fit [as much] with our culture as possible.
Rich Armstrong 10:03
Interesting. Has it ever been tested? Have you had to fire, or set anybody straight in terms of the values of the company?
Kevin Mauger 10:13
We only had one good example of a firing. There was this guy named Steve Baker. [Laughter.] I'm just kidding. So you know, here's what I'll say: we keep our values In everyday presence at our company. They're posted on the walls, there are banners in the shop; when somebody does something, we try to relate it to those values just to make it make it clear how they apply. And we really look for those values when we're hiring. Because we know that that really comes first. So we say we hire, fire and reward based on our values.
Steve Baker 10:53
Mm-hmm. I like that. So I was lucky enough to catch a podcast where you were interviewed recently, where you talked about--in addition to, it takes a village, life is short, we are warriors, we are brave, own it--you layered a few things on top of those in the early days of the pandemic. Can you talk about those three things?
Kevin Mauger 11:17
Yeah. You know, the early days of the pandemic, I think any business owner was saying, "Oh, my God, what do I do?" I mean, nobody prepared for this. Nobody taught you how to deal with things like this. There's probably many more people that were more prepared than us. I'm sure that's the case. But we felt ourselves faced with decisions that we've never had to face before, that seemingly were potentially life and death situations. If you made a decision that, you know, we're still going to travel, and this ended up being a very deadly disease that was contracted by one of our employees, frankly, that's a life and death decision. So we were kind of going through making decisions.
And then we said, "Hey, in the past, we've defined what our principles are and what our values are very clearly because it helps us make decisions, helps remind us, why are we making these decisions? What are our guiding principles?" So we decided to really just state them down, and there were three of them. And what we realized at that time was we were already making decisions this way. It was just a matter of putting it into print. Right? And they're different; when you're in this situation, you're not thinking about profits; you're thinking about the people, right? So we had three--two that dealt with people and one that was opportunistic. The first one was well-being.
The most important thing that we wanted to come out of this pandemic successfully with [was] well being. The second was empathy. Everybody's going through a really hard time right now--not just our employees, but our vendors, our customers. And everybody's in a really tough spot, so people were kind of on edge. So we wanted to make sure we had empathy and keep the big picture in place, because times are weird right now. And the third is to just come out on top. What are the opportunities that are in this? How do we look at this and figure out how to come out better at the end?
Steve Baker 13:19
I think it's great that you kind of made it as an addition. You were already doing the behaviors, but you made it kind of a written addition; it makes it real. And the fact is, we do need to have empathy. That is what makes it human and personal rather than just a cold set of numbers. It reminds me of an earlier interview that we did with Liz Wilder where she talked about how the last crisis, in 2008-2009, was about livelihoods. And today it's about lives and livelihoods. That's a big take-home.
Kevin, you've stated that your vision is to be in 10 years a $100 million organization by means of two unique approaches to business: employee ownership and open-book management. Here's the weird part: in a recent interview with Darren Dahl, you said that these haven't necessarily reduced your workload or stress. Now this is counter to what we hear from a lot of people in the community. Usually they say it's the most freeing thing ever. And you're like, "Nah, that hasn't really reduce...." Can you talk about that a little bit, please?
Kevin Mauger 14:23
Yeah, yeah. And I do it to myself, by stating publicly that we're going to become a $100 million company and if we don't, anything less than that is a failure. Right? Probably not the case, but that's how I look at it. You know, first of all, I think stress is relative. There's no absolute scale for stress, and we all tend to rise or fall to the occasion. But I mean, that's a whole other story. I'll use a crying toddler as my example there.
What I meant by that was by putting some foundational pieces in place to put people in a better position to make the best decisions for the company, it has allowed me to work in ways of improving the company and growing the company outside of the core business or the norm. So I've really just reapplied my stress, or I probably should say, I've reapplied my efforts.
Steve Baker 15:20
Gotcha. Shifted your energy.
Kevin Mauger 15:22
That's all it really means. Yeah.
Steve Baker 15:23
Yeah, that's good. Well, you know, sometimes, when you hear stuff that catches you, you want to talk about it. So let me challenge you even further. So being open book does take a certain mindset, a value set, etcetera. You've got all that going on. And now you say, “Hey, let's complicate this more; let's go employee ownership and make it even harder.” Meaning of course, you know, administration cost. I mean, ESOP, there are simpler things to do, one of which would be to load up all your money, like, you know, a lot of people do and just enrich the one rather than the many. So why did you go employee ownership?
Kevin Mauger 16:01
Yeah, I mean, I like to complicate my life. I think that's probably the basic answer. [Laughter.] But you know, employee ownership is definitely not for everybody. It just really depends what your end goal is, right? So it depends what's important to you, it depends where you want to go. And for me, it was perfectly aligned with my values. So it's worth that price of admission.
2. From an employee's perspective, ownership is always a winner.
I don't want to make employee-ownership sound unattractive; first of all, it's a no-brainer for employees. Right? There's nothing possible you can say about employee ownership that is bad from an employee perspective. Because as you work at a company, you gain shares; the shares have value. And there's a lot to be gained from that. But for an owner, there is definitely an extra level of complication. It's a complicated transaction, right?
It's a transaction you've never gone through before. You're learning about it; it's very complicated. And you'll never go through it again. So it's like drinking through a firehose during that process. But it's so worth it. To me, giving our employees a stake in the outcome is an incredibly rewarding feeling. And it's very powerful; it reinforces engagement at work. It kind of puts your money where your mouth is, right?
Steve Baker 17:21
Yeah. yeah. For sure.
Kevin Mauger 17:22
And it creates extra wealth--not necessarily for me, and likely less for me, quite frankly, but it can change lives. It's very important. I mean, it's not unreasonable that people could retire from our company as millionaires. There are lots of stories about how that has happened.There are stories of people who are clerks packing groceries, right? And they were with the company through an early stage ESOP, and the company grew and grew and grew, and they're retiring as millionaires. And it's no guarantee by any stretch, but the key is that the value of the company is up to us, the future is up to us.
And as an employee at a company, you have the ability to affect the value of the company. So the open-book system of Great Game has helped me show the employees how that all works, and how they can affect our profitability. So it's not just an incentive; it's very engaging along the way, which makes it then a better place to work and a better place to work attracts better people. So it's kind of this--
Steve Baker 18:30
Virtuous cycle kind of thing.
Rich Armstrong 18:31
And I've heard you talk about this, Kevin, and I think you really do believe that it's not just as an incentive, it's the idea that, hey, if I can connect my employees to the success of the organization, they're going to help us develop an organization I could not have done by myself.
Kevin Mauger 18:49
You know, for me, it was like, all right, well, we're a successful company. I'm whatever I was at the time, 44 years old. So we could just continue to go like this, completely comfortable in my life. I'd achieved everything I thought I wanted to achieve. So the choice is, okay, keep it where it is. Or maybe do something great. So that was a choice that we made. And it was a very conscious decision and a hard decision. And it's challenging--which, by the way, is what I think most people want. Challenge.
Rich Armstrong 19:26
I think the first time we met, Kevin, was maybe two, three years ago at the employee ownership conference. And what I saw in you is that you certainly did your due diligence to figure out if the Great Game of Business was the right fit for your company. And one of those moves that you made was to go see a practitioner in action. I think it was someone in Washington, D.C.. What were some of your takeaways from that and why was that part of that due diligence process?
Kevin Mauger 19:53
Yeah, you know, I think everybody thinks that their business is unique and it won't work for my business, the thing is you’re probably going to find one or two operating systems or business systems, maybe sales philosophies or whatever. So I think everybody has this question of, how is this going to work for me? And we're a project-based business; we do custom projects, every project is some form of a snowflake. So we wanted to understand how in a world of unpredictability like ours, and you know, guesstimates and everything from costing to scheduling to durations of projects, we wanted to see how that applied to the Great Game methodology, because the Great Game methodology, all of the examples are around Springfield or manufacturing corporations, which is a much different business than ours. So we said, "Hey, we want to see a project-based business."
And Liz Wilder invited us down to see her business. They do construction projects, among other things, but that's a big part of their business. And we saw how they did it. But not only did we see how they did it, we saw the enthusiasm and the fun and the excitement and the engagement of the whole team. So it was just really cool to see and, and it helped us be able to make the decision.
Rich Armstrong 21:14
Very cool. Was there anything else in terms of that process that really gave you the confidence to move forward with Great Game?
3. It's not a conference, it's a catalyst for change.
Kevin Mauger 21:24
I knew this was right for us from the first half-hour seminar that I sat down in, because it just really spoke to me. I was down at an SEO conference, and they're incredibly well done. And there's a lot of really important, but, you know, frankly, somewhat dull topics to me at those conferences. You know, there's tax stuff--no offense to anybody in the tax world--and legal stuff--no offense to anybody in the legal world.
But what excites me is cultural things, change, competition. And this is one of these conferences, where there's six different sessions going on at each half-hour time slot, or whatever it was. And you're looking at this book, and you know, it's all of these boring topics, and you've already gone to one of these and one's, like, "If you like sports and competition, and you want to roll it into a business, come to this." And I'm like, "What is this?" So I went to it, and it was a general introduction about how to turn a business into essentially something where there's scoring, and there's competition, and one that brings out the winners amongst us because winners like to win, right? And does it in an open-book, honest, transparent manner. And I thought, My goodness, this is great.
Because you can't possibly achieve a goal that you don't know what it is. Right? So if you watch the guys doing the vertical jump contest, at the combine, after the first jump, the next one's always higher, right? Always. It's like 98 percent of the time, it's higher, because they see what they're striving for. So I really like the idea of being able to put these goals out and these targets so that people can understand what they're shooting for.
Steve Baker 23:15
So I love that you discovered the Game in a conference setting and then you went to see it happen. You're still pretty early in your ESOP and in your Great Game journey. Do you ever invite people in to sit in on your huddles or come visit?
Kevin Mauger 23:33
Yeah, I've invited a couple. Nobody's taken us up on it yet. Everybody's welcome. We're still evolving every day. But we've developed a lot; there's a lot to see. And it's different. I mean, it's a completely different way around the business. So anybody's welcome anytime.
Steve Baker 23:51
That's great. And that's how the community behaves, as a very open sharing kind of thing. We certainly appreciate it. In fact, I want to come out and see what's going on. I love your values, and how you've got them posted on the walls and everything. It's just awesome.
I want to shift gears a little bit just to talk about something that is on my mind a lot. Because not everybody listening is that super-competitive, I'll get anything done… you know what I mean? And so you described a life where you said, "I gotta do something," you went out and did it, and it was anything you could do.
And you made it happen, right? And so in that interview I mentioned earlier, you said that you've gone from--now I'm talking about not you but the whole company--has gone from a "Well, we hope things work out" to an ownership mentality. So talk about that transformation from your team's perspective. I know you can handle it, but I think everyone listening would probably say, "How do I get those folks who have been taken care of their whole life--you know, don't worry about the numbers; we've got it--to this shift to, ‘Well now you're an owner.’"
Kevin Mauger 24:59
Yeah. that's a really good topic. I mean, I think that everybody wants to contribute. So they want to know how they [can] contribute. I think that's the base of the answer to that question. And then I think once they know how, they'll seek to improve it--at least the employees that you want working for you, right? There's probably others that don't, and that might not be a good fit.
But you know that--here's a great example. We're a project-based company, so every time we go into a project, we're estimating what our costs are, from a ground-up basis. And then we sell at cost plus, so if we think something's gonna cost $50, we're gonna sell it for $51. We have really low margins, in case any customers are listening. So that estimate, right--and by the way, it's more like in the hundreds of thousands or maybe millions of dollars, right? And it's separated into a bunch of cost codes. There's like, 25 cost codes, everything from engineering all the way through installation, materials, welding, what have you. And we detail out as best we can.
And so if you go back before Great Game, you had somebody who understood the estimate, who did the estimate, right? So that was one. Depending on the project manager we had on the project, and we have several, they may or may not have been looking at the budget. And then you'd be very lucky, very lucky, if anybody else was looking at their piece of the budget to figure out what they had to spend. Was it accurate? Was it not? Am I gonna beat it? Am I gonna lose it? So it was basically, we're gonna estimate it and hope it works out.
And that's frankly, what it was. And it did. I mean, for the most part, it did; there's plenty of times when it didn't. But no matter what, it wasn't getting better, right? There wasn't a lot of learning, because there wasn't a lot of discussion.
So now, if you fast forward and you look at today, every single person in our company, every single week, is looking at their piece of the project and forecasting how they think they're going to do against the budget. So that gives us good anticipation of how our company's doing and is going to do. It gives them the realization of what their goals are. And it gives great transparency, if there are issues, and there's plenty. So it brings up those really good discussions. And if we're all owners, and we're looking to make this company better and more successful, that's gold. I mean, it's really gold. So it's been very good for us.
Steve Baker 27:36
Rich Armstrong 27:36
It's good. It makes me think, you had posted something on LinkedIn--I don't know, several weeks back--that was really interesting to me. The post read, and I quote, "We are loyal to our people, the Great Game of Business, and the plan to promote a competitive, game-like environment in business, all in the effort to hit the numbers with a layer of full transparency and accountability." You went on to say, "All that being said, it is not really a numbers thing at all. It's a human thing." And I'm just curious; could you talk a little bit about what you meant by it's a human thing?
Kevin Mauger 28:15
I've alluded to it the whole conversation, right? It's about getting people engaged in the process. And, you know, as our business has grown, I mean, frankly, things get more complicated. You know, the bigger you get, the more complicated things get. So part of my philosophy here is, you can either try to come up with a lot of rules, processes, measurements, KPIs or other complexities, and hope that one, people understand them, follow them.
And they're right. Or you can do minimal of that, teach people how we make money, and let them figure it out how to make more. And then frankly, that's what's happened. So I think at the root of it is, if you put people in an engaging setting, and give them the tools to succeed and the authority and autonomy and the flexibility, they're going to come through for you. And our team is just ridiculous in that regard. You take it into completely new levels.
Rich Armstrong 29:22
That's awesome. That's awesome.
Steve Baker 29:24
That's so cool. You know, like Jack says, numbers are just stories about people. So you're just making it human.
Kevin Mauger 29:29
Yeah, that's a good one.
Steve Baker 29:30
I love it. We're getting some questions from the group out here. We got some people cheering you on. "Well said Kevin," that's a good one. So that's not even a question. That's just a pat on the back, virtually. I hope it feels good.
Rich Armstrong 29:44
Yeah, I think it's something, you know, with all this employee ownership stock talk, I think there's certainly some people out in the audience kind of wondering what that is all about and some of the challenges and opportunities you have with it. This one was saying if at the front end of establishing an ESOP, stock moves are financed by a loan needed to purchase the stock, does that become a problem for companies that have inconsistent, cyclical type cash flow, like [in the] oil and gas industry? And so Kev, I don't know if you can address that, and maybe I can add a little bit to that. But any thoughts on that? Did that go through your mind a bit in terms of your business?
Kevin Mauger 30:25
I mean, it could be. Certainly there is going to be an obligation to the debt service from the purchase of the transaction. So just like any other loan, you need to be able to support that loan.
Rich Armstrong 30:37
Yeah, I think that's it. It's definitely something that, in terms of the employee-ownership community, what are some businesses that really are positioned well for employee ownership? It's ones that have some reliable growth, a bit of reliable growth, but consistent cash flow. But I think it's a big one just how you manage that cash flow. You know, there's the oil and gas industry of that cyclical nature and I can think of some companies that we work with that are in the oil and gas business, that... it's just how do you manage that cash flow in good times and bad times, the service of the debt, like you talked about? So I think it can work; it's just a matter of how you manage it.
Kevin Mauger 31:18
Yeah, and I'll add that there are a lot of different ways to do these transactions. So it's really important to have an advisor who has done this before. I guess technically, anyone with a law degree can do it. But there's a lot of room for problems if it's not done by somebody, and basically you want to find somebody that that's all they do. When you go to their website, that should be the top of the website: that they're ESOP people. And your bank too, right? You're gonna have to find a bank that's comfortable with this type of situation as well.
Steve Baker 31:53
Yep, there's a lot of good resources with the ESOP Association, and of course, the NCEO at nceo.org. Lots of big brains. And you can always ask us at Great Game as well. So here's one from Steve--not me, Steve, but another Steve: If less than 50 percent of the stock is shared with the ESOP and the owner retains 51 percent, do the employees still feel they lack the final say on strategic or operational issues?
Kevin Mauger 32:20
Yeah. So that's an interesting question. There's a couple layers in there. Certainly, they could. And frankly, they could feel that way at 100 percent, too, because an ESOP, depending who you're talking to, is essentially a trust to a third party. And I'm only experienced in a minority on the ESOP, right?
So I'm still a majority owner, I don't have a board that's necessarily influencing or with fiduciary responsibility; I'm still the owner, and still have basically rights to make virtually all the decisions by myself. So there's a trustee that represents the trust. And the members of the trust are the employees. So they don't have voting rights for most things. I think that technically they do have voting rights for certain things, like mergers or acquisitions. But frankly, since it's still 42 percent, I still have the majority. So it kinda doesn't matter. When that changes later down the Game, employees will have more say on only the biggest topics and it wouldn't include operational topics.
Rich Armstrong 33:31
Yep. Yeah. I think that's a good point, Kevin. And I think a lot of people don't realize, you know, in terms of SRC's employee ownership, that we were thinking nearly 25 years, we were basically at about 35 percent of the company was owned by the ESOP. Obviously there's other parts of the organization that would have some ownership, but I think it comes right back to the culture; it's how you run it.
There are many companies that are practicing the Great Game of Business that haven't taken this step in terms of providing equity, and are still getting the benefits of an ownership mentality, but ultimately, it may make sense for your company to move to an employee ownership, but it's not necessarily needed to create that same kind of culture that we're getting.
Kevin Mauger 34:23
Yeah, I think that's really true.
Rich Armstrong 34:26
You know, some kind of reward and stake in the outcome, but it may not have to be equity.
Steve Baker 34:31
Yeah. We know handing people stock isn't magically going to make people care, that's for sure. So you're heading in the right direction, both of you, to make sure you got the culture first. And then talk about equity.
Kevin Mauger 34:45
Rich Armstrong 34:47
There was another question here. Steve; somebody was wanting to know how you may have positioned this idea of an employee-owned company with your customers. Have you got their feedback? How would you look at that?
Kevin Mauger 35:03
I wouldn't say it's at the forefront of every conversation. We do say it. And when we say it, that doesn't mean anything to them. Right? But the story behind it does. And I think if you say it, if somebody says, "Okay, well, what's that mean to me?" Right?
So what that means to you is that every single person you're working with, in our company, has a vested interest in your success, and wants you to come back as a customer in the future. So it's a pretty powerful thing, once people realize it at a customer level. But I'll say, for sure, we have not done a fantastic job of expressing to our customers how that really helps them.
Steve Baker 35:54
Kevin Mauger 35:57
We talk about it because it's kind of a fun story. People like it. They like to like things that are cool, that are fun, that are positive. And I think that's helped our reputation in the industry to a certain degree. But above and beyond that, it's really helped us go, you know, I always say the extra inch instead of the extra mile, just because I think it's more attainable. So lots of extra inches along the way. And what does that result in? Basically a better product, a better system, on-time delivery. But it's a piece of the pie, and it's somewhat abstract if you're a customer.
Steve Baker 36:34
Right. You do a great job, by the way, of the messaging throughout all the stuff that you're putting out there--the videos, the website, podcasts, and everything about employee ownership is a big part of what you do, and that you're not afraid to share your values with customers, because I think that really speaks to the heart of the business.
So, Ann Claire's got a question that I'm actually--this is great, because I'm passionate about this. I talk about it a lot at conferences. Can you talk about the relationship between short-term incentives, like a stake in the outcome bonus, and long-term incentives like ESOPs, because an ESOP account isn't gonna pay off anytime soon?
Kevin Mauger 37:14
Yeah, that's a really good point. I mean, it's a long-term stake in the outcome that frankly, makes the most sense if you're going to be here forever. So it takes a strong belief. It's like anything else: people don't count on it, it's something that might push you one way or the other; if you're evaluating companies, it could be an extra bonus, right? But it's not as incentivizing as something that's going to affect you this year, or this quarter.
So we have a short-term incentive plan as well. And basically, we have a number we need to hit, and that number is based upon our obligations to grow the company's value. And what we've told the valuation firm what we're committing to, and our commitment to increase the stock value over time. So once we've hit that number, then we have a game-sharing program, which is essentially we're going to split up the game: a third, a third, a third. It's a third of the company for reinvestment, a third to taxes, and a third back to the employees. So basically, every dollar above our goal number is given back as much as is appropriate.
Steve Baker 38:23
Nice. That's a real good connection, especially to your long-term vision. You want to get to $100 million, you can't do it alone. You got to have people going, "Oh, the things I do today matter 10 years from now? Okay, gotcha." And then I love that extra-inch thing you talked about because that's how business is won, right? Inch by inch, millimeter by millimeter. I love that.
Kevin Mauger 38:42
I stole it from somebody. I don't know who.
Rich Armstrong 38:44
You talked about your stake in the outcome program. What advice would you give somebody that's maybe in the audience right now thinking about implementing the Game? You went through that implementation process. Any advice you would give them on implementation?
Kevin Mauger 39:01
Yeah, I guess there'd be two things that I would say. It's not something you mess around with. As much as I didn't want to spend the money, spend the money and do it right. Something this transformational, you can't mess up. You have to do it right, because if you do [mess up], you're going to lose people. I mean, we've had lots of challenges along the way, no doubt. But boy, if we had whatever, 15 or 20 percent more challenges, we would be losing people from it. So I think spend the money on an implementer, find one that you really like. We used Dave Scholten and he was awesome.
He's a lot of fun, supersmart. And the second thing is something I learned from him and he knows exactly what I'm going to say. And it's basically, while you're learning, forget about being accurate and perfect. Just let's go. Let's start moving forward. Let's get progress. The accuracy will come. We're all engineers or engineering-y type people here, so we're always looking to be perfect. But my guess is anybody who's playing a game wants things to be accurate. So that probably resonates at lots of companies.
Steve Baker 40:14
Good advice, man, for sure. We've got some questions that we had already kind of prepared--and then there's more coming in--about the pandemic. So I thought I'd just kind of roll some of those together, if that's okay. What happened to NCC during this crisis? What's happening? Did revenues fall off a cliff? Did you have to lay off anybody?
Kevin Mauger 40:37
No, we didn't have to lay anybody off. Before I talk about the numbers, the first thing is, I think it's really strengthened us as a company, because when you go through hard times together, you do tend to get stronger. And it's actually also had a pretty significant impact on me, because I feel like it's my job to cheer and uplift the company and do as much as I can to bring as much enthusiasm and charge to the workplace. That's part of what anybody in my position does.
And there were definitely times during this when I was just really stressed out about what to do, and the words of encouragement from our team, and the way that they've handled things and done things is remarkable. I mean, it was unbelievable how powerful some of these messages and acts of heroism were during the process. So--
Steve Baker 41:40
No, no, along those lines, one of the other questions was concerning operational decisions in a crisis, like we're going through now in the pandemic. Do the individual department managers make the decision? Or do you make the decision for the managers?
Kevin Mauger 41:54
I mean, it depends on the decision. But generally, I'm not going to be involved in operational decisions, unless somebody is looking to bounce something off me and debate it or wants advice. But we've done unbelievable. We're at full capacity, and then some. We're working overtime, we split our shifts, and we had two bad shifts, right? It was like 5am to 2 and then like, 2:30 to 10, or whatever it was. We didn't want everybody there at once in case somebody got sick, it would shut us down pretty quickly.
So you know, they did it without any complaints. And we created something called warrior pay. So we actually paid them more during that time frame. Right? People traveling, we paid them a little bit more--one of our values, of course. So we did well; we've even gotten some COVID related work. We're doing a project right now that would normally take a month to quote and maybe 16 weeks to build. We quoted it in two days, got a PL in four, and we're gonna do it in like seven weeks.
Steve Baker 43:05
That's actually a tremendous softball setup for the next question that we had, and then, Rich, I'll let you ask a few. So you didn't have to lay anybody off. You've adjusted times and shifts, and people have been just amazing to you, from what I'm gathering here. So let's look at the positive side: has the pandemic given you any opportunities?
Kevin Mauger 43:33
Yeah, I mean, it's given us some opportunities for work for sure. We've even gotten some sole source work, where a customer said, "Hey, listen, things are nuts right now. But we trust that you're going to get this done no matter what." We're talking million-dollar orders. So that's pretty meaningful. I mean, that's the million dollar system; we're a $25, $30 million company, so it's a big piece.
We're hiring. It's a time when not everybody's in a great spot, so it's a good opportunity to find some good talent. We're hiring for several positions right now. We also know what's going to happen: when things start to loosen up, it's gonna be like the dam breaks, right? And everybody's gonna want everything all of a sudden.
Steve Baker 44:24
So you're seeing pent up demand.
Kevin Mauger 44:28
Yeah, yeah. I think it's really gonna break all at once. I mean, we're already ahead of target, you know, revenue, EBIDTA, everything; everything's above target. So we're trying to prepare, we're trying to get some early contracts to get ahead of the game on engineering. We bought a new CNC so we're doing as much as we can.
Rich Armstrong 44:50
Good, good. Hey, Steve, there's a question kind of circling back about implementation, kind of a follow-up question regarding the challenges with implementation. I know Kevin said that he decided to use a coach. What the question is is basically he's seen some companies that have tried to self-implement this and had some horrible results just because of the engagement you have to really drive.
But the real core of this question is, from Kevin's experience, what's the key to really getting employees to want to learn this level of detail about the business? And you get away from that initial mindset that I don't need to learn this stuff, or this is not my job?
Kevin Mauger 45:33
Yeah. I mean, there's always some of that, right? There's people even now in our business that are saying, "Hey, you know, I'm in a lot of meetings, and I want to help this company make money, I want to be in less meetings, so I can make the company more money." And at the heart of that, they're coming from the right place. You know, it's kind of like working out, right? You got to feed this every day for a very long time to see a real difference in culture and engagement. And, you know, to try to answer that question, how do you get people interested in it? It's the way you present it and the way that it's done.
And do they have a stake in the outcome? And is it attainable? Is it real? Is it something they can get? Is it something they can influence? It's just like anything else: it's got to be done right and it's not going to be easy, and it's going to take a long time, and you're gonna have to adjust and fix and correct. But I think at the end of anything hard, it starts with, you got to really believe in where you're going. And you got to share that belief. And if you have enough success, and you're not wishy-washy, you're not flipping around and changing initiatives and goals and targets, and by the way, things are working out over time, people are gonna trust you.
Rich Armstrong 46:53
Do not underestimate what people can do and want to do, right? I think they really want to learn the business. It reminds me of one client I was working with at one time. After our introduction presentation, a gentleman came to me who did work there for 25, 30 years and said, "Look, there's a reason why I do what I do. I don't want to think about this kind of stuff.
You know, I want to go home and just enjoy this. I don't want that." And he goes, "So am I going to be forced into this?" And I said, "No, just just play your part, play your role, take advantage and gauge where you think is most helpful." And six months later, the owner reached out to me and said, this is one of the most energetic employees that he had. I mean, this guy jumped right in the middle of it, took leadership, he just wanted that opportunity. And so I think it's just, don't underestimate what you got inside your organization.
Steve Baker 47:51
Yeah, for sure.
Kevin Mauger 47:51
It doesn't mean it's easy.
Rich Armstrong 47:55
Not easy, no.
Steve Baker 47:58
We've got one asking, "Share the steps you took to educate employees about reading financials and connecting their activities financially to the outcomes of the business? How would you answer that?
4. How you can educate employees about the business.
Kevin Mauger 48:09
There's a basic intro course that is taught by our facilitator, to come in and have some workshops around that. And it's basic vocabulary and some examples and some tests, and it's just an intro. But above and beyond that, our stake in the outcome plan, which is our incentive plan, is literally a simplified income statement. So we share that with our employees every single month. And we talk through it, and we talk through what happens if and what happens there. And is this good? Is this bad?
And we try to educate them around the topic of what they mean, and the topic that’s discussed all the time is the answer. And it's not complicated. So people get it pretty quickly. I mean, there's plenty of things in financials that are really hard to understand. And frankly, not all necessary to understand. So we're not bringing everything like that into the equation. But if something is important, we'll bring it up. We'll explain it. We'll talk about it all the time.
Steve Baker 49:24
So you use a combination of formal financial literacy training--that's the courses so to speak--and then the informal is the weekly huddle and the daily activities that you're measuring recording. That's cool. That's how I learn stuff; I learned Excel by using it, not by going to an Excel class, right?
Kevin Mauger 49:42
Steve Baker 49:43
By the way, I'm shitty at Excel. [Laughter.]
Rich Armstrong 49:48
Kevin, you're killing it here because here's a comment: "Kevin's insights are very inspiring. Why is this not broadcast on MSNBC?" [Laughter.} Steve, that's a question for you. Why isn't this?
Steve Baker 50:00
I got this one. So there's two reasons. Number one is, it's MSNBC. Number two is that this is what keeps Jack Stack awake at night. He comes in every day going, this works. This is the answer to all of our issues, the government ain't gonna solve it, education can't solve it. The Economist can't solve it. We need to create jobs, we need to create wealth and share the wealth with those who created it. Why doesn't everybody do it? Frankly, speaking, I think you're looking at one of them in Kevin Mauger. This isn't for everybody. Most people, I hate to say it, and entrepreneurs that I've met through the years, are out to enrich the one or the few. And you're looking at a guy who realizes that the real answer is to enrich the many. And that just doesn't mean financially. But I'm so glad that you asked the question. And I hope I answered it appropriately. We are so passionate about this and it's so great to have other people. That's what the community is all about. We're getting down to the wire here. We just have time for a couple more questions. There was a technical question from Steve asking about how your vesting, and determination is affected by death, disability, retirement, termination for cause. Just briefly talk about that, Kevin.
Kevin Mauger 51:15
Yeah, the short answer is, you're governed by the rules of ARISA because it is a retirement plan in the eyes of the government. But you do have some flexibility on the types of things that you do. There's a lot of legal questions in there. Vesting is basically very similar to a 401k. And as you may or may not know, within 401ks, there are different vesting schedules that you can set up when you're setting up the 401k. And as an example, you have the same basic concept in setting up the trust. So ours is 100 percent after six years, is the short answer.
Steve Baker 51:49
As is ours at SRC. So why don't we wrap it up with a couple of questions? Like, what's the biggest challenge right now?
Kevin Mauger 52:01
Well my knee really hurts. [Laughter.] That's a big challenge for me now. I don't know what I did. But it's killing me.
Steve Baker 52:08
It doesn't get any more human than that.
Kevin Mauger 52:10
Yeah. But aside from that, I think we're really close to just exploding. And my biggest challenge is making sure all the right people are in the right seats. So we can move forward as fast as we want.
Steve Baker 52:29
Good challenge to have. Good luck with the knee, too.
Rich Armstrong 52:36
Kevin, what's next for you personally?
Kevin Mauger 52:43
That's easy. I mean, my next adventure is getting us $200 million.
Steve Baker 52:49
Love it. Good answer. Good answer.
Kevin Mauger 52:52
I mean, it's easy to answer. Not necessarily to do.
Steve Baker 52:56
It's focus, though; it's focus that we can all rally around. I love that as a great big, hairy, audacious, critical number. So let's wrap up by asking, what advice would you give people? What should they do in the next 90 days, the end of the year, maybe even next year? What action can they take?
Kevin Mauger 53:18
I think the biggest thing that I always see in all types of environments is people are always trying to figure out the how, before they completely figure out, maybe the why, and maybe the what. So, to me, the why comes first. Once you understand that, then if you can figure out what you're trying to achieve, I actually think the how is easy, right? I mean, it's not really easy, but I think it's more tangible and a lot of people can help and you can always change it. You're never going to get it perfect, so just go. But I think in short, one of the best things I ever heard from somebody in a business coaching perspective was figure out where you're trying to go and then figure out how to get there. Don't try to put one before the other.
Steve Baker 54:05
Great advice. Start with that, or, as we say, begin with the why before the how. So that's step two in the process. Thank you very much. Kevin, it's been awesome to have you on and boy, that hour went quickly. I wrote some notes down because I just wanted to share kind of my synopsis and please, Rich, chime in if I missed one. But my personal big takeaways are, the perfect is the enemy of the good. Don't let the planning get in the way of the getting to work. I heard you say make the investment and I gotta be honest with you, that's something that I even struggle with. It's like, do you dink around on the sides or do you just say this is what we need to do and go for it, spend the money if it's worth it? And then finally, my big one is, make it human. Don't forget, numbers are just stories about people. Did I miss anything? Your knee hurts. [Laughter.] I know that. We got to watch out for that. That may be what's next. Thank you so much. We really appreciate it. it's good to reconnect and to have a little deeper discussion. And thank you for sharing with the community. And as you heard, Kevin's inviting you, if you're near Philadelphia, you know he's in the suburbs, be sure to look him up. We'd be glad to connect you.
So let's keep the conversation going. Send us your questions, your best practices, ideas, your challenges, your victories, your sore knees, send it all, man, let's keep this go. And remember, you're the backbone of this whole thing. And you are not alone. Let's stand together and collaborate. We've got to do it to make sure that we invest in each other and get out in front of it so that we can share and grow this community. Let's change the game. See you next week.
Rich Armstrong 55:49
Thank you. Thank you, Kevin.
Kevin Mauger 55:51
Here, here.Thank you guys.