Wednesday, November 3, 2004

Webb enters 4th year as employee owned

Rocky road greets 2001 transition

Express Staff Writer

In December 2001, Doug Webb sold the local business he spent more than 30 years building to his employees and assumed a new role as the company?s chief executive officer. The ongoing experiment didn?t immediately produce the desired results, but Webb maintains the move has formed the cornerstone of the company?s continued success.

?I had to give up control to make it work,? Webb said a month after he turned ownership of Webb Landscape & Garden Centers over to his staff. ?Still, I am CEO, but I am elected to that position, and I can be fired.?

Now almost three years after the transaction, Webb is still employed by his company, and business is good. But it hasn?t been all roses.

?The honeymoon period was very short,? Webb said. ?We had a failure, essentially. What was considered an entitlement?bonuses?wasn?t paid.?

In the first year after the business was in employee hands, Webb Landscape did not make money. Anticipated profit sharing did not occur, and bonuses were not dolled out. Roughly half the company?s managers left. There was stress in the office and stress in the community.

One of the company?s long-time managers went to a competing business, taking two crews of employees and a number of clients with him.

?It was just plain awful for a while,? said Steve Mills, Webb Landscape?s chief financial officer and head of the maintenance division. ?You know what it is? People don?t like change.?

But that?s not quite so, said Morgan Thomas, who quit working at Webb last November. He said the politics of who was appointed to the board of directors and why are what eroded employee confidence in the system.

?It wasn?t working,? he said. ?The general employees were upset. I didn?t think the board of directors did a good job. Doug did a better job. It ran good then. People were relatively happy.?

Under the employee ownership scenario, called an employee stock ownership plan and trust (ESOP), a company sets up a trust, and the trust holds all the shares of the business. The business buys the shares from the trust over time and allocates the shares to employees? accounts.

When an employee retires or resigns when fully vested in the company, the employee sells the shares back to the trust. Also, when the company makes money, the profits are shared among all employees.

The typical top-down management scheme employed at businesses throughout the United States was abandoned for a bottom-up plan. An ?ownership circle? of employees offers input to a 12-member management group, which advises a three-member board of trustees. As CEO, Webb is still a very active employee, but the boards make the company?s big decisions.

?Nobody?s accountable to Doug Webb anymore,? he said. ?The success of this business does not make me money. I haven?t made a decision since the ESOP.?

But that is precisely one of the problems with the new scenario, Thomas said.

?To me, there were two people who never should have been on the board of directors,? he said. ?Other people who are still there are scared for their jobs, and they?re not going to speak up and say anything. But I will.?

Webb?s current managers believe, however, that the worst of the transition is over. ?No pain, no gain,? Mills said. ?Don?t just think it went from daffodils to roses. But we believe it significantly improved the level of service, and it?s nothing more than people having a little pride in ownership.?

Webb employees are still learning as they go, but increasing numbers of company employees are starting to understand the nuts and bolts of the ESOP, the managers agreed.

?To me, it?s a redistribution of wealth,? Mills said. ?It?s maintaining capitalism in a democracy. That?s unique. It?s kind of got a lofty ring to it. The question a lot of people have is: Does it work? For us, it does work, but it doesn?t happen overnight.?

The most fruitful success was that employees were empowered, Mills said. They know what the company is doing and why, and they have a means to effect change.

?It?s a lot less confrontational,? said Management Consultant Jima Rice, who worked with Webb on the ESOP conversion. ?Employees know the numbers, so they?re not surprised if things aren?t going well and some people need to be let go.?

Also, because employees have an ownership stake, they have a reason to work to improve business.

?We?re just starting to see it,? said Cliff Cunha, a Webb project manager and board of trustees member. ?We?re on the cusp of improving our services a lot because of this employee ownership.?

Research has, in fact, shown that giving employees a stake in their companies can help improve a company?s bottom line. What?s more, Webb Landscape is no longer federally taxable. The tax savings, in theory, supply the money that gives the trust?and employee ownership?added value.

Shares in the trust are allocated to employee accounts, and all employees over 18 who work more than 1,000 hours in a year participate in the plan. Allocations, in Webb?s case, are made on a formula of relative pay.

Where Webb Landscape went wrong was in failing to anticipate some of the problems, Mills said.

?There is no doubt in my mind that the ESOP saved this company from a potential huge failure,? Cunha said, pointing to the fact that Doug Webb can not run the business himself forever. ?For him, the way to success was to let it all go. I think Doug is a visionary.?

Webb Landscape started in 1972 as a one-lawnmower, one-pickup truck operation, but the company grew to more than 170 employees at peak season. It?s been scaled back in recent years and has about 130 employees.

The business was significantly expanded in 1980 with the addition of the Bellevue Nursery, located on Glendale Road, 2 miles south of Bellevue. A mere 8 acres in the beginning, the nursery now encompasses more than 30 acres of trees, shrubs and perennials, as well as three greenhouses and an extensive stock of stone and pavers.

?This sale is tremendously exciting for me, for my family and for Webb. The business has grown over the years through the inspired work and dedication of all Webb employees,? Webb wrote in a 2001 employee memo. ?It has a bright, long-term future ahead of it. I can think of nothing more satisfying than passing ownership to those who have made the business a great success.?

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