O'Neal Employees have Investment in Success
Most own stock in firm; leaders say that's key to getting good people, projectsThe following article was featured in the September 12, 2010 edition of the Greenville News and Greenville Online.
By Angelia Davis - Staff Writer
Employees at O'Neal Inc., a Greenville-based integrated design and construction firm, are allowed to think and act like owners.
That's because most of them are.
Nearly 80 percent of the employees at O'Neal own stock in the company, according to Judy Castleberry, the company's chief financial officer.
It is among 11,500 U.S. companies that participate in an Employee Stock Ownership Program (ESOP).
It's a business model that company leaders believe has helped propel O'Neal's 35 years of success in attracting and maintaining quality employees and delivering capital projects worldwide, with clients in the class with Michelin, BMW, and Fiberweb.
"I've found that when the employees own the stock in the company or have ownership, they're much more loyal to both the company and also to their clients," said Paul O'Neal, the retired founder of the O'Neal firm and the current chairman of its board of directors. "Having a piece of the action really works," he said.
O'Neal today generates about $100 million in revenue and operates with 200 employees in offices in Greenville, Raleigh and Atlanta, according to Brian Gallagher, O'Neal's director of marketing.
When the company was formed by O'Neal and his wife, Judy, in 1975, the couple ran it themselves from a basement office. He first started selling stock to employees in 1985. The first round of sales went to key people in the company, O'Neal said. The practice, he said, helped him gain an edge over competitors by attracting quality employees.
"Most of our competition was very large companies, and most of them were companies owned by one or two people," he said. "I saw many businesses fail or close their doors over the years because the guy that founded the company owned all the stock.
"When he got ready to retire, he sold the company and left, and invariably those companies ended up going out of business or being absorbed by very large companies." O'Neal said as his company grew, the idea of expanding the sale of stock to other employees came to him.
"I still had a good bit of the stock, and I wanted to retire early, at age 55," O'Neal said. "I could do one or two things — I could find a way to sell it to the employees or I could sell it to somebody else." O'Neal said he opted to approach a company that establishes ESOP programs. "They came and met with myself and other officers of the company and laid out a plan that we went ahead and implemented," he said. The model, O'Neal said, has worked very well. "It's enabled me to get out without having to sell the company and let whatever may happen to the employees," he said.
Kevin Bean became the company's president and chief executive officer when O'Neal retired. He said the ESOP plan was formalized in the late 1990s, adding to it a lot of structure. Now, although O'Neal is employee-owned and private, it's unique in that it's run and has much of the same functions as a public company, Bean said.
Bean said the company has a separate, independent evaluation firm and a trustee of its ESOP. "Pretty much, I have a public company in terms of compliance," he said. "We trade stock. We value stock, and the financials are reviewed by three different organizations.
"What it means for the employee is we'll set a profit goal for the year and say, we can make over $2 million or whatever. Then we're going to take that and distribute that across the whole company," he said. Because of the ESOP, O'Neal has had structural engineers who've been with the company for 30 years retire with more than $1 million, Bean said.
"I’m the sandwich generation. You've got those guys who think it's the best thing that's ever happened and are very grateful. In between, you've got the instant gratification — why should I wait? Just pay me the top dollar," he said.
"The interesting thing is the generation entering the market. They really think that it's unique. They've never heard anything like it," Bean said. "You’ve got 30-somethings saying, 'You mean I don't have to put all my money into retirement, and you're going to do profit sharing, and you're going to share with me the financials?' That was huge."
Bean said employees get to grill him on simple things like, "Do we have our lease costs where they need to be? You have too much corporate overhead" he said. "But I prefer it that way versus them not having that information."
O'Neal said the most recent economic downturn was the worst, deepest, and longest he's seen in his company's 35-year history. Though the company is feeling the recession, he said, work is still coming, and it's mostly from clients O'Neal has worked for 20 to 25 years.
"We've always said we will know a project is successful if the client gives us another project. In other words, let’s make him happy enough that the next time he does something, he’ll come looking for O’Neal,” O’Neal said. “When you have employee ownership and that type of attitude, it really hits home. People know if the company does well they’re going to do well because they own it.”
Bean watched as a lot of companies decided the downturn was the time to start sharing financial information with employees. “I couldn’t think of a worse time to have to do that,” he said.
O’Neal employees get an update once a month on the company’s financials, including its profits, what the prospects look like, and a forecast for the year. Even during the downturn, “everybody in the company knew what we were doing, and they were critical,” Bean said. “A lot of people went on reduced hours. A lot of people walked in my office and said they’d reduce their salaries.
“Obviously, our stock went down about 30 percent during that hit, but my 401(k) went down about 38 percent. That’s what employees look at. It’s not funny money. It’s real,” Bean said.