Latest / Construction ESOP Collective / The Power of Employee Ownership in Construction | Bill Duguay

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The Power of Employee Ownership in Construction | Bill Duguay · Construction ESOP Collective

• speaker-0: Why? Do they value the leadership team? They want to reward the people that actually built the business. And I'm gonna also throw this out there, have they built a business that can run without them? And I feel this is one of the things that is under recognized ⁓ in what I do with the OS and the board work is many businesses rely on the founder, their ego, their emotions, their knowledge, their network, their resources, their entry into different rooms that might not exist in the leadership team? And how do we undo those things so that the business, the ultimate gift, not just the eSOP, is that ESOP can thrive without them. speaker-1: Welcome to the Construction Esop Collective. I'm Chuck Mazzanti, Senior Vice President at Christianson Group Insurance, and this is the show where we explore the wins, challenges, and real-world lessons of employee ownership in construction. Each episode brings insights from CFOs, former owners, and employee owners who are building something bigger together. Let's get into it. Today's episode features Bill DuGay, former CEO of JD Abrams and now an EOS implementer. So he's lived the transition from leading a construction company through an ESOT to helping other companies build the operating discipline to sustain it. We dig into what actually changes once employees become owners, from board leadership and safety culture to to the communication habits that make or break the whole thing. If you're a contractor thinking about succession or wondering what life looks like on the other side of an ASOP transition, Bill's been through it and he sure doesn't sugarcoat it. Let's get into it. Bill, welcome to the construction Aesop Collective. I'm thrilled to have you on. speaker-0: Chuck, really appreciate your offering to spend some time today with me and having me pr you know, join you in a conversation. Thank you. speaker-1: Yeah, yeah, it's our our relationship is kind of a short one thus far. I think we've known each other for maybe better part of a month and a half via LinkedIn. ⁓ so you're you're kind of a prime example of the the power of what LinkedIn could be from relationship building. speaker-0: You know, it truly is amazing. ⁓ you know, just a minute ago we were talking about COVID and how COVID changed relationships and our willingness to be more virtual and realizing that we could be anywhere. And there's wonderful people that w might not have crossed paths with in the past and LinkedIn and moving more virtual certainly opened my eyes and I feel a lot of other folks' eyes that it's a wonderful community to be part of. And LinkedIn is certainly helping open more doors and have even deeper conversations like ours. And I appreciate that. speaker-1: Yeah, likewise. ⁓ well I'd like to give our audience kind of a ten thousand foot view of ⁓ you know who Bill is, ⁓ your your process through construction and kind of where you're at today. speaker-0: Fantastic. ⁓ I'll keep it short. My ex first entry to ex construction was working for my dad, who was a town employee. And so as soon as he got off of work and I got out of school, we were doing home remodels in the wintertime, fitting out basements and converting garages and in the summertime doing all kinds of landscaping work. And so my first exposure was sweeping, picking up and scraightening nails back in the day when sixteen duplexes were expensive and you actually reused them. And ⁓ toting cement, mix and mortar and just doing all that kind of stuff. And just that work ethic at an early age really set me on a career through engineering school, which I was fortunate to pay for myself without any debt. Pretty unusual today. And just started off working. My first job was actually with the Connecticut DOT and you know, terrible thing happened in Connecticut back then. ⁓ states weren't investing in infrastructure. is a blast from the past. The Minus River Bridge fell down on nine ninety five and multiple folks lost their lives driving off of that. And brought focus to infrastructure. And so my first job getting out of college was working for the Connecticut DOT as a entry level engineer. And from there just worked my way up ⁓ from smaller family owned businesses, ⁓ s set aside minority owned businesses up to pretty large family owned businesses and found myself working for a large civil contractor in Texas, JD Abrams, and started as a area manager, handling the Southeast and into Louisiana and continued to gain exposure in the organization through vice president and ultimately president and CEO. And got to work on a lot of cool jobs in a lot of different states. ⁓ you know A willingness to move can open up so many opportunities and I'm blessed with my wife that she's loves adventure and we've been able to move multiple times over the course of my career, just see wonderful things, different cultures, different peoples and build a bunch of really cool stuff. speaker-1: That's awesome. Of of that, what would you say if you had to pick your maybe not favorite, but top, one of the top jobs you were a part of? speaker-0: That's kind of like picking your favorite child. I don't know. You know, as you get farther and farther away from the job itself and the grind of, you know, pouring concrete and doing all those things, the memories tend to shift on the people, the relationships, the challenges that were you went through as a team, ⁓ you know, whether the added sickness or in wealth or health, ⁓ those teams speaker-1: That's tough. speaker-0: have gone through that as well. Certainly in the traveling years, many of the folks other folks on the jobs traveled as well. And ⁓ you know, I think out of those it's those relationships. Certainly th there's plenty of cool jobs. You might have saw my post last week about working on the big egg dig and rollerblading in the Ted Williams tunnel with my then girlfriend, now wife. ⁓ you know, the technical challenges, the people relationships, the environmental challenges. Just I don't know if I have a favorite. They were all what I needed. And even more. speaker-1: Yeah, all pieces to the overall puzzle. That's awesome. ⁓ and so I I would like to kind of focus a little bit of time on the the heavy civil contractor that you were a part of. It it's my understanding that you were there prior to them going to ESOP and then they went through the the ESOP transition. Is that correct? speaker-0: It is, yes. You're talking about Abrams in Austin and ⁓ second generation family owned business and the second generation had always had a vested interest in the people that helped them build the business and had started being approached by multinationals who were looking to invest in the in the states and you know s and security of that and larger firms or even smaller firms looking to to buy. And to their testament of their values and their belief in the team, they said, No, we're gonna convert to an Aesop. And so I think I was here six or seven years before they decided to convert to a hundred percent Aesop. And probably took a year and a half of a lot of behind the scenes work, some of which I was part of, some of I wasn't and ⁓ you know, it was just an amazing experience, one the the faith of the sellers and the family and the leadership team and mechanics of the transaction liquidity event, which is pretty complicated and first time going through it I was like a little overwhelmed quite frankly. ⁓ even many years later with lots more experience in it, it's still a complicated deal. And you know, for any seller, founder to approach that and stick with it is a testament in their belief and the people who helped them build the organization. speaker-1: Sure. No, I appreciate you sharing that. And and specifically, what was the biggest surprise to you personally? I'm I mean, maybe you were a Aesop junkie before, but most people I talked to, even my personal experience on being part of a Aesop owned company prior to joining, I knew of it, but I didn't really know much. So what was kind of the biggest surprise to you? speaker-0: ⁓ my goodness, there's probably a bunch. ⁓ you know, similar to what you're talking about, I had a concept in my mind of what it was, how it operated, but really had no insight to the mechanics or the complexity of how an eSOP operates, what goes into a transaction, the life cycle of an eSOP as it grows and matures, and the employee owner's role in the ESOP, you know, I I might have been over there, ⁓ we're gonna have a say in a company, or you know, we're gonna be more involved in strategy, or you know, it's and some of that is true in concept, but not true in operations, just the mechanics of how an eSOP works. ⁓ you know, I didn't really have an understanding of how the debt cycle works and you know, the debt load that the company's taking on and what that might look like. So th it's a complicated deal and until you're really into it, I'm not sure how well you can understand it reading about it, going to conferences about it, that first hand lived experience is like, ⁓ my goodness, it's there's a lot going on. speaker-1: A hundred percent. Were were you privy or in the in the conversations with the surety? I mean, being a heavy civil contractor, I I would have to assume a lot if not all your work was bonded. And that's that's one when I'm talking to contractors, that's one of the biggest risks and and the biggest concerns of going Aesop is it flips the balance sheet and there's so much minutia there that if the agent doesn't understand it, if the surety doesn't understand it and it's not communicated correctly and early, it could really be disruptive to contractors that are dependent on on the surety. So I'm curious, were you a part of that? And is there anything you want to share in in regard to that? speaker-0: Yeah, so you're absolutely right. The surety agreement is can be a stickler. And for anybody who's doing bonded work and having payment performance bonds or bid bonds to start those conversations pretty much lockstep with any of the other conversations you might be have with your ESOP professionals to understand their take on the risk and the performer agreements Many times it comes down to one or two lines of who has primacy of debt service. Is it vendors, subcontractors, whoever the bond holder is, or is it the trust? And so they want to make sure that their other things are have primacy of payout and that the trust is last. And so you just gotta work through that language with them to understand primacy of payment, ⁓ because they're there to protect the owner's interest, whoever the the buyer of your services is and not the trust in their perspective. So yeah, I think today there's more and more sureties who have eSop clients who are more familiar with the risk profile and what that means. And I think always in the background, there's well how leveraged is the ESOP? At what point of maturity is it? How are they handling repurchase obligations and and that type of stuff? And just running a great business that in the end lowers risk to the surety, which is really what they're trying to get a profile of. And if you're highly indebted and and leveraged, they're gonna they might have a different view that you're more at risk. speaker-1: Sure. No, I appreciate you sharing that, Bill. ⁓ and there's, I mean, a half a dozen at least advisors on on these ESOP transactions. And are you gonna go internal or external on the trustee and who's your attorney? And you have this new fiduciary risk. ⁓ was there any advisor, not not to name them specifically, but you know, sometimes you could get inundated with with these people and it's just another friction point because you You're still running a a you know, a a a hundred plus million dollar civil contractor. That doesn't stop. The backlog's still there. You got your whip going. So I'm just curious, was there one that kind of stuck out and you're like, Yeah, that that Aesop ⁓ lawyer was just a lifesaver? ⁓ or or it was just kind of all in concert together. speaker-0: ⁓ you know, this is a great I appreciate you asking this. This is a great question. You're absolutely right. There's a lot of fingers in this pie of the transaction. You got the the lawyer, the trustee, whoever that might be, finding a TPA, you know, somebody that set up the plan, the valuation folks, ⁓ all the tax planners on the seller side who, you know, wanna manage and predict the tax liability from the sell side and you know negotiating the terms and the lengths and all that. Every one of them is important and pick your team well. You're going to the Super Bowl of transactions and so really pick your team well and it's okay to interview several ⁓ to really get the team right. I feel that one thing that was missing and maybe still today is who's the whisperer in the CEO seller leadership team ear of not giving insight to the transaction itself or the or the value process of stuff, but helping them start to normalize what are they getting into? You know, truly understanding the debt service, truly understanding that the seller technically doesn't own the company anymore, and what's that gonna look like? And you know, helping them round out the story that it's not just a legal transaction or final finance transaction. And I get it, it is. But they're gonna have to operationalize and execute post the liquidity event and helping them prepare for that. speaker-1: Sure. No, it's a good point. And I think later on in this episode, ⁓ hopefully you'll share some wisdom of, you know, being on the the board side, right? And and being a good shepherd of of ESOP companies and and and that sort of thing. On the employee side, right? All of a sudden you flip and and you go from f I don't know how many you had in the field, five, seven hundred guys and gals, and now it's hey, you guys are employee owners that What what was kind of the feedback from from the field and how long did it take to to see the buy in? speaker-0: Yeah. The first is excitement. Ooh, we're employee owners because you know, it's bright and shiny and we don't really understand what it is, but it sounds bright and shiny for an employee owner. So it's gotta be good because we didn't have that before. The hard part comes on how do we communicate it. It's a complicated deal. And most folks and most organizations are not finance people and you know, hit ⁓ with facts and figures and finances is just talking a different language. So you gotta break it down in a way that people can understand and buy in. Because the first couple years, before you get a statement, it's like funny money. Like I don't know what's in it for me. I don't see anything different. I don't feel anything different. Nothing showed up in my paycheck different. And so we're trying to bring tangible value to something that feels intangible. And there's steps I feel every company can go through is well you gotta tell ⁓ And here's something that with the work I do with clients today is adult learners need to be told at least seven times before they hear it for the first time. And if you're a leader, well by time two or three you're probably wore out telling people and you're like, why do I gotta tell a grown person this seven times? And well that's reality and go do it and everybody'll be better for it. So it's consistent messaging, what it means, how it affects them, their role in influencing it, engaging them in daily behaviors and outcomes that at some point are gonna create amazing wealth for them. So I think that's the hard part the first couple of years before either somebody gets paid out a de minimis payment, they left the organization and they got a check for five, ten grand, whatever it is, and they're like, ⁓ yeah, there's real money here. Or after a couple of years and they see, well I started off with a hundred bucks in my account and all of a sudden it's a thousand and I didn't have to do anything but show up and do what was asked of me and starts to become real and tangible. And now there's resources out there, ESOP one and some other ones that start helping them project, hey, if you stay here for twenty years and here's what potentially could be your cut of this pie. And it can be transformative wealth for many people in construction and the trades to just show up, contribute, be part of it, help the company thrive and you'll thrive as well. I think that's the big part is getting in front of your people from the leadership team. ⁓ you know, if if a functioning eSOP committee, and that means different things for every organization, to, you know, make sure people throughout the organization have a voice, get different insight to what's going on, how it operates. And in many ways be that bridge between leadership and the front line through those respected leaders that every organization has. speaker-1: Sure. No, that makes sense. ⁓ and and now some years later, what is there one thing that you would maybe if you could teleport back to that first year or two into the ESOP that maybe you would have done differently to help expedite or communicate the importance of of these employees now being employee owners and and the true wealth that it can give them and their families if if they stick with it. It's not a get rich quick scheme, obviously it's no it's longevity and it's a retirement benefit. So curious with your wisdom today if if you would have done anything differently. speaker-0: Yeah. So I think there is some key things and I'm speaking in generalities here. Sure. There's different kinds of businesses that transition to ESOP. Some of them I'm going to call lifestyle businesses. Where they might have been closely held in the family and they're kinda doing okay. They're kinda bumping along and all of a sudden, hey, what am I going to do next? Or there's some kind of life event coming up or succession planning and Well, let's do the C SOP thing and nothing really changes. Well, there wasn't really a plan before because it was a lifestyle business. What I'm calling a lifestyle business is, you know, there's low effort, but it's generating returns and driving cash flow. But we're just kind of showing up doing our job every day, and it seems like it works out. There's a lot of businesses like that, and they're successful and good for them. There's other businesses that have clear defined plans. what they want to achieve near term, midterm, and longer term. And they align decisions, resources, people around achieving those goals. And what I've seen is if you're the first one to have the control in place to really buy into a plan, a future when there hasn't been one before, might be kind of tough. Because well, it was the seller's deal and we just showed up and he was happy with us and we made money and everything was good. Well, that's not how ESOPs work. Well, I guess they can, but they won't truly drive generational wealth, or may not drive generational wealth for employee owners, because they're just showing up kind of doing their thing. If I was able to teleport back, or if anybody thinking this were thinking future is Build some kind of structure in place that there are organizational goals that are communicated throughout the organization that people can get aligned and behind to the point where they know their role, they know why it matters, they know how they can contribute, and when those things are in place, it just everything falls into place, it's a whole lot easier and off you go. It's amazing. speaker-1: Yep. Yeah, it's it's super interesting. I mean, there's companies like, you know, Bob Whalen with HB Global, ⁓ these these crazy stories of just, hey, when we were trucking along, like you said, it was great business in its own right, you know, maybe 10, 20, 30 million bucks in revenue and ⁓ a hundred people in the field, and then they go ESOP and and this is another initially maybe perceived headache to to manage. But then you look 10, 12, 15 years later, and in their case, I think they're gosh, up to like 1700 employees and made 20 acquisitions. And it it's just super interesting to me to see people take the power of the ESOP to help them scale their business to the next level. And in doing so, I I wouldn't say the unintended, but the intended consequences, the benefit that brings to the employee owners could truly be be life changing. ⁓ speaker-0: It's it is life changing not just for the employee owners, but potentially for the communities the organizations operate in because the wealth stayed there and multiplied in the community instead of living with ⁓ a handful of people. And you know, I get it. We need entrepreneurs to start businesses, get ⁓ off the ground and thrive. And at some point of converting to employee ownership makes sense for the sellers, founder sellers, to help just like you're saying, get focused, have a plan. Be intentional with it and look what they did. It's it's amazing. And not only that, I think it's repeatable. speaker-1: Success leaves clues and and that's kind of the point of this podcast, right? Is is having people like you that you're you've seen it from literally not being an Aesop to the transition and planning of getting ready to because you don't just flip a switch, right? It's a it's a lot of planning, meeting with bankers, getting everything situated, making sure the the founding sellers get taken care of. speaker-0: There you go. speaker-1: 'Cause it's in their right to get the liquidity event to set their families up. ⁓ of course. You can't expect it to just be at a charity case. You know, it's gotta measure up close to what PE is gonna offer a strategic buyer or publicly traded firm, what have you. speaker-0: Absolutely. It's gotta transactions gotta be for a reasonable market price. And yeah, can't no fingers on the scale. speaker-1: Yeah, a hundred percent. And so one of the things I see the challenges, ⁓ especially with just privately held construction firms. ⁓ usually it's, you know, maybe the grandfathers started it, now it's second generation, or maybe, you know, it's first generation, they've been going along for twenty years. The decision, the true top decision makers is kind of a small pool. And now they go with the ESOP transaction and there's all this nuance and And you've been on the board, you help manage boards now, you sit on other boards. So I'd love for you to talk about the importance and the the thought behind choosing the board members for a newly transacted ESOP because I think that could either be the rocket fuel for them or it it could be the unintended drag if if you don't take it seriously. speaker-0: ⁓ my goodness. This is a key point. And I would ask to c reconsider part of what you said. What I heard you say was post-transaction to be thinking about the board. My suggestion would be if you're thinking about a transaction, be thinking about your board. What I've seen time and time again, what you described, second generation, third generation family ownership, who's on the board? Many times it's Leaders of management, might be your banker, might be your lawyer, your golf buddy, might not be formalized yet. I might still be kind of an advisory board where we run through it. And then it's like, hey, we got a steak dinner planned for twelve o'clock. So we gotta wrap this thing up. And they don't have structure, they're not challenging the CEO. And it's kind of a check the box. And you know, if that works, whatever works for you. I'm not a lawyer. Do what works for you. What I'm asking is that if you're going to have this kind of liquidity event coming up, which is a big deal, and is overseen by the DOL, who, by the way, is can be ⁓ very friendly or can be not very friendly, depending on how well you execute this, to be thinking about that at the same time. Who should be on our board? How do we professionalize it, get the skills that we need on the board to help us through this, that maybe they lived it, maybe they operate it. Maybe they're in that ecosphere of this kind of deal making, even if they're not working for us, and start thinking about how do we professionalize the board, skill sets, you know, doing skill matrixes, whatever. And having that as an another resource for the CEO, founder, seller, and the leadership team through a pretty I don't want to say tumultuous, because it just kind of bumps along and is done and the the Those folks go leave and now you're like, no what? But to be that bridge between the before the the day of and start moving to execution phase and operationalizing in ESOP and then to continue to develop the board skills and competencies as the business needs them. speaker-1: No, but No, that makes sense. And in your opinion, because there's so many life cycles to an ESOP, right? You get a new one, the balance sheet's flipped, you're trying to pay the debt down as quickly as possible. Now, depending on the the structure, partial ESOP, 100%, S Cort, you know, there's some tax savings, some real tax savings. So now you want to deploy that. ⁓ but then the the repurchase obligations. Right, are starting the mount as you become a a mature ASOP and that that could be a a a real liability if it's not managed correctly, especially in a a cyclical business like construction can be, right? If if the ROL ROs come up right when there's a downturn, that that could put a a serious strain on the business. So I'm I'm curious, what is your professional opinion of ⁓ stress testing the board members? through that journey of the ESOP to maybe say, okay, we're we we wanna go on a MA spree with this tax free cash. Maybe we have to add another board seat with expertise in in the MA space, or maybe we have to trim somebody off the board. What what's your opinion on that? speaker-0: Yeah, this is a like there's no one size fits all here. And here's why. I believe, my professional opinion, not a legal opinion, is that every board or every ESOP regardless of size is gonna go through a kind of predictable maturation stage. You know, first off, ⁓ we're at ESOP, nothing's really different, but ⁓ the end of the month, ⁓ by the way, we got a debt service. And then, you know, we start thinking about warrants or SARS, if those were part of the transaction and the primary debt. ⁓ many of those deals are are constructed that they're non-performing debt where you know just interest is paid for some period of time and then they're fully performing where principal starts to get paid. ⁓ you know, they give you a ramp of debt service. Everyone's different. And they all have different tails on debt service. So I feel that You're absolutely right. You know, we have ⁓ not much change today, other at the end of the month we get debt service. But as warrants come off, SARS start to grow, debt starts to go down, true value starts to be built into the ESOP and we're getting rid of the de minimis stuff or you know, folks over you know, I'm gonna say less than ten years where people could start to diversify. There's a pretty predictable sequence of maturation through that. And then Once it's ten years old and people can start to diversify. Well now there's a demand on cash potentially. And at that point, certainly the RPO should be happening and predicting what the impact of cash and liquidity is and and see that out. And then when you layer on strategy, use of equity, use of capital, ⁓ whether it's MA or managing the debt service differently, that's a different skill set. So I feel that the board I'm gonna say little bit differently, the board should reflect what the business and the CEO and leadership needs for their next chapter. So if it's paying down debt service, moving towards that maturation curve, or if they are to the point where they're thinking of MA of some sort, which is real popular today in ESOPs and probably going to continue to pick up steam, to be thinking about, well, culture fit, operational fit, you know, how we look at debt, how do we look at risk? And how do we leverage all the things that are going well with the parent company as we start to think about bolting on other operational entities so that it doesn't get diluted, it gets promoted. But at the same time, we gotta be thinking about, which is new for many leadership teams, I'm gonna say just about all of them, how do we understand the valuation process, what goes into it, how do we operationalize it and make decisions after each and every day. on how do we use equity or debt or other resources to continue to grow and protect the valuation, which is becomes a pretty important nuance in that early maturation stage if the company's doing well generating free cash flow where we have options to spend that. And I'm not a fan of just having it sitting in the bank and having our current ratios be like a three or four to one. No I don't think that's necessarily good for a lot of companies to just have it parked and not deployed somehow. speaker-1: A hundred percent. Yeah, it's a balancing act. Perfect. Safety in construction is is huge. I was actually ⁓ listening to a couple different podcasts you were on, and ⁓ unless I heard it incorrectly, I think you had a serious scare in in a life-changing event with your your dad on a job site, right? He got electrocuted ⁓ due to maybe improper lockout tag out ⁓ type stuff and and so I'm a little bit biased because I'm so passionate about ASOPs in the construction space, but I'd be willing to put my money on when when all the things are are going well, Aesop owned contractors outperform their peers in almost every metric. And and I think safety needs to be one of the top, if not the top. KPI for for a construction firm because if you do safety correctly, that's kind of the the pace car for everything else to fall in line. So did you see a material difference in the field once employee owners started to to buy in? Was it was there ⁓ kind of a moment that you saw where hey there it helped us stress safety even even further or maintain the the safety culture? Was there any tangible difference as it relates to safety within the ESOP? speaker-0: Yeah, I I believe there is and here's a caveat. Sometimes with safety we think about safety performance. We have like the finance side of our brains thinking EMR and principal and you know lost runs and that kind of stuff. And then we have the other the human side thinking about are are people truly going home safe and sound to their families and loved ones each and every day? Are we doing those things that can control external risk on the ⁓ to the organization, you know, from a GL or auto perspective. So I feel that message, if we have this side, the finance side, coming into it, we can almost dehumanize our efforts to support our people to go home and create systems and processes. And I'm a huge fan of HOP today on how do we truly support our folks to go home safe and sound, which We can understand as leaders there's financial implications to that, but how do we humanize that? If we go with the finance side and try to apply it an academic approach to safety, it's gonna fail or it's gonna struggle. Because it's not an academic problem, it's a human problem. It's a human systems problem. thing for us. So absolutely yes. The more engaged people are in an ESOP around their outcomes and feel in control of their outcomes and aligned towards organizational goals, absolutely that should be showing up in safety, should be showing up in quality, it should be showing up in waste, it should be showing up in however you measure excellence. And I'm going to push back truck. You said how I heard it was should KPIs around safety be showing up. And I'm gonna say they absolutely should be. They should be on the leaderboard. And why I say that, when it shows up on the leaderboard, it is who we are, what we do, and not just something we track. speaker-1: A hundred percent. Yeah, no, I I don't know if I misspoke, but I I a hundred percent believe that as as a KPI it should be the top. Without safety you you don't have a company. speaker-0: What are doing? Yeah. And it'd be interesting to see the metric you're talking about, if Aesops outperform in a general population from a safety perspective or loss run perspective. And I don't know how you'd normalize that against industries or size or maturity. But then we're both fans of captive, how would you layer a captive on top of that? Aesops and a captive. And I gotta think they're probably top of class. speaker-1: ⁓ I I mean it's conversations I'm having currently. and I don't wanna make this too much about insurance, but it is a big line item, especially for bigger, heavier hazard contractors and and it goes back to what I said earlier in the podcast, which is I think most people in business know or have heard ESOP, you know, employee ownership. But aside from that, there's so many misconceptions, and so I'm fighting With underwriters kind of constantly saying, Hey, if you if you're underwriting an ESOP owned contract, or whether it's in a group captive, setting up a single parent captive, doing a large deductible or a retro program or guaranteed cost, if the ESOP is doing all the right things and turnovers lower, and the employees understand that. If there's a drag on the the PL because of insurance costs being higher than the competition, which is a roding margin at at the the bid level, right? Because your your costs are higher. ⁓ if you're doing all the right things, that only helps the insurance carrier get more comfortable, turnovers less. They're not gonna put in the fraudulent Monday morning claim from the, you know, playing football with the the boys on Sunday. Because I know that hurts the share price. They're they're only shooting themselves in the foot. ⁓ and then yes, go into what I would call the Super Bowl of insurance, going in the sophisticated group captive or single parent. I mean, the the purpose of that is it unplugs you out of the general population, right? Even if you have no losses, insurance is just pooling premium to pay for other people's losses. So there's enough dollars. Well, one of the benefits to the captive. Is your being underwritten on your own merit from an actuarial standpoint? And to give the the numbers people more security with the underpinnings of the ⁓ just how the the company is run. ⁓ it makes them get a little bit more aggressive and then the numbers bear out. You get return and and dividends and investment income and so forth. So I I would love to come up with a master study bill and maybe 10 years from now. I'll I'll have it, but it it's it's a bit of a horse to aggregate all that data. Yeah. speaker-0: You know, I see it. You're talking about ⁓ but we really didn't hit on many cap is the the deductible, the retained layers getting up there, you know, three, four hundred grand. And well that's a lot of expense to measure. You have a half a dozen incidents a year to hit that number. It's really showing up in your balance sheet. I feel the big part of that is when you go through those types of programs, it truly gives you ownership of your results. And so when you go back to how do we operationalize, how do we communicate whether it's safety, quality, poor performance, the ESOP, there's more intent to the why. And those shared risk pools are b big motivators to get your house in order. speaker-1: It it's a different feeling when you're sitting at a a board meeting in a captive and and you're the one driving the losses and and causing rift shifting and sharing versus being able to hide in in a general guaranteed cost program. So it's there's a peer group element as you I mean you you were a part of what I would say is the pinnacle of all group captives for for contractors with the the ACIG. speaker-0: Just an amazing experience working with the folks at ACIG and the other member contractors. It was just every time I was in that room just felt stretched. You know, what I thought was I knew, like getting out of there there's more to learn and it was just a community of like minded folks, just a incredible experience. speaker-1: A hundred percent. Well, I I'd like to transition now. So you've you know, I think we have a a pretty good understanding of Bill within the construction industry, but now you've been out of it for a bit, ⁓ and and and you're leading, you know, EOS, which I've seen in construction both eSops and otherwise is is kind of the the premier training. ⁓ So I'd love to hear about what you're doing with EOS and then if there's any intersection that you've seen where it kind of makes a lot of sense for ESOP own contractors because maybe they're a little bit more used to being structured and so now bringing ⁓ an additional layer of structure and measurement with the EOS, maybe it makes a lot of sense. speaker-0: Yeah, thank you. ⁓ what got me interested in EOS is I was making a transition from running work, even big work, to leadership position and now focusing on running a business and I'm an engineer, I'm licensed in multiple states, got I don't know, baskets full of certifications and stuff, but none of that really got me ready to run a business. And so I was taking I was living in Austin. taking classes at McComb School of Business at their executive ed center and heard about EOS and it just resonated with me on ⁓ yeah I guess I'm a road hand at heart. I needed systems and process that were simple and clear. I could go start doing this tomorrow. Started right before COVID needed to come back to Massachusetts for family and just leaned into it full time. And where I see EOS working, EOS is the entrepreneur operating system is just So I have ESOPs, nonesops, I have construction, I have non construction on both sides. It's when you hear about EOS, I'm gonna tell you my version of it. One, how do we make the business easier to run and to manage? And I feel that applies regardless of your ESOP, nonesop, construction, non construction. Two, how do we make it a better experience for the people actually doing the work and for our customers and clients? And three, which for me is key and why it resonates with contractors, how do we execute with predictability and repeatability in a way that grows enterprise value? And that's my goal for my EOS EOS clients is to help them do those three things. So in EOS language we call it vision traction healthy. That's my perspective. ⁓ and why does it resonate with contractors? Well, contractors are used to having a plan, having a schedule. Meeting schedules, meeting budgets. So they're already in this framework of a system. And what we're trying to do is systemize the business, similarly to we might systemize a job, you know, clear and grub, st staking grade, subgrade, road base, whatever that is, we can lay that up for jobs or vertical stuff pretty easy because we're hardwired to do that, not as hardwired to do it for our business. And that's where I come in to just help them. Get a grip on the business, build out that plan, where are we going? How are we going to get there? And operationalize it with a functional, healthy team. speaker-1: And what kind of what does the process look like as far as I'm assuming there's quite a bit of fact finding that that you go through. ⁓ then there's an implementation plan, then you have to execute and and kind of reconcile, see what's going well, what what has ⁓ room for improvement. So can you walk us through kind of what what the life cycle of of a EOS kind of training would look like practically? speaker-0: Yeah. And so I use implementation more than training, but in the end that's what I'm there to teach them, train them to use a system. It goes quicker than you might think. And I'm a contractor, so it's like jump in and let's get dirty on day one. You know, no beating around the bush here. Just you're here, you're on the clock, I'm on the clock, let's go. So we start with a ninety minute meeting. I just lay out EOS, what the process looks like. Ask ⁓ real questions and See if it's a good fit, because I'm not a good fit for everybody and not everybody's ready to run their business on a system. And if they say yes, we just get in a room for a full day five or six times a year and just dive in. And my goal is in two years or so they're off on their own flying free. Some clients make it quicker, some clients I'm still with ⁓ after years just because they appreciate having a different voice in a room to drive accountability, manage the energy, hold up a mirror for them and just run the meeting. And it's just a wonderful thing. speaker-1: Got it. Awesome. ⁓ and then when when we first had our call last week, you also mentioned that that you may be embarking on a training program for boards, board of directors. So I'd I'd love to hear what you're cooking on on that side. speaker-0: Yeah, thank you. So just like we were talking earlier on getting the board in line with what the CEO and leadership needs, ⁓ I've been on enough boards or around enough boards or talked with other board members enough to know that many boards are not operating at the level that the CEO and her business needs to prepare to write and execute their next chapter. So been fortunate to have been involved in N CEO and PDA and And NCAD and all these acronyms and the ESOP Association, where there's a lot of governance stuff out there and very similar to EOS. Well, how do we operationalize the board? Do we have agendas? Do we have role clarity? Do we have feedback loops? Does everybody leave with clear commitment and buy-in and clarity around what's next? And to bring the board performance to a new level that Truly is built for the next chapter of the business and capable of giving the CEO feedback and guidance and accountability in an ESOP that the shareholders need. So work it through how to do that. So we've got it just about done. I'll have it running by this summer to work with boards of ESOPs or non-ESOPs to just help them professionalize the operation aspect of the board. So I'm not a lawyer, I'm not gonna give them that kind of guidance, but they have documents, you know, articles of incorporation, you know, if if there's a board charter as to just how do we actually do that stuff in a way that we own our seat, we're doing the work that needs to be done to own our seat if we're honored to serve on a board and truly being a resource, coming prepared, being a resource, challenging the CEO or the board chair To drive value creation, protect value creation, and always be thinking about writing our next chapter. And it's a process going through ⁓ when you think about who's on boards, there's professional board sitters ⁓ that you know might be at this stage in their career, they're on half a dozen or more boards, and and there's resume clickers that are on a board to bump their resume, and nothing against those. I'm leaning towards what does the board truly need to look like and how do they need to operate to support the next chapter of the business and just cut into it. speaker-1: No, that's awesome. I think there there's not a ton of resources out there. There's literature, there's books, and that that's fine. But I think someone with your expertise and and life experience to be able to share that with these boards to help them, you know, improve on, you know, what could be done better and operate at a higher level is is needed. So I'm I'm excited to see that. ⁓ What would be one thing that that you would say is is a misnomer as it pertains to construction Aesops, to the general public, or some of these owners out there that are eyeing retirement in the next five or ten years and they they don't have a succession plan in place? You know, why why should they? Aesops, not for everyone, and I I'm not gonna say it is, but I will say if you're gonna look to sell your baby. of you know multi-generation business and you're only gonna do it one time hopefully I I think you should vet every single option out there before you decide. And so what what would you say is the biggest misnomer that you kind of want to write the record and and let people know? speaker-0: That'll run by itself. And it doesn't. It's a big lift. And there's a lot of moving parts and pieces. So you're absolutely right. I feel every founder, seller, potential seller should evaluate their options, you know, managing their tax liability and their and their debt and future income and all those types of things for their family, and many of them have trusts set up that might need funding and all kinds of other financial instruments that will be pulled into the transaction, the liquidity event. But also be thinking about The why? Do they value the leadership team? They want to reward the people that actually built the business. And I'm gonna also throw this out there. Have they built a business that can run without them? And I feel this is one of the things that is under recognized ⁓ in what I do with EOS and the board work is many businesses rely on the founder, their ego, their emotions, their knowledge, their network, their resources, their entry into different rooms that might not exist in the leadership team and how do we undo those things so that the business the ultimate gift not just the eSop is that ESOP can thrive without them. speaker-1: It's a great point. Get getting the next generation of leaders to to keep carrying the torch forward and and keep that Aesop alive for generations to come. speaker-0: Yeah, and I think that's the nuance. It's a wonderful tool. when you do those things. And yeah, I I feel that anybody who's in that position where they're not another level of family to hand a business down or there's want to go to another level of sophistication, whatever that might be, to go have a conversation with the ESOP expert. And I don't know that I'm one of those, even though I'm around them every day, but you just walk through what would it mean? What's it look like? How you even start? Which is can be kind of confusing as well. And how do you build a team once you start getting some comfort? Yeah, that's a good idea for you and your family and the other shareholders or sellers. speaker-1: Sure. No, it makes sense, Bill. Well, ⁓ I think we can wrap it there. I really appreciate you coming on. I always enjoy talking to you. How how does the audience get a hold of you if they maybe are interested in seeing if you would want to serve on their board or they want their board to get better educated and maybe participate in your training program or want to ⁓ engage you on the the EOS system. speaker-0: Yeah, thanks for asking. LinkedIn is a great tool. We talked about that earlier. It's just open so many doors. ⁓ I'm not on there all the time, but I'm hopefully visible enough. Or just drop me a line and you can find me online pretty easy in the search, just build gay and I should pop up. And you know, just like our conversations, who knows where it's gonna go? Let's have a conversation. If I if I can help, that's wonderful. If I can't, I'm gonna point you to somebody who I feel would be a great resource for you. speaker-1: Yeah, I I mean you're a genuine dude. It it's seriously a breath of fresh air. When you engage someone on LinkedIn and I'm sure you've been a part of it, you you have these virtual coffees and then it's like, you know, what can you do for me? And it's just a little bit disingenuous. and and you've been the opposite of that, obviously. ⁓ so I'm I'm excited to see everything that that you're gonna be doing. ⁓ I'm excited to follow your LinkedIn. You're doing the storytelling stuff, which is awesome. So if you're not following Bill on LinkedIn, you better 'cause ⁓ he's gonna be educating us all with some some cool stories of thirty years in the field. So speaker-0: Some of ⁓ were even suitable for work. speaker-1: We'll have a LinkedIn during the day and then a LinkedIn after hours. So it it'll encompass everything. Well, Bill, thank you so much for being on the pod. Hopefully we could get you back. ⁓ and and super excited to see what you what you got cooking next. speaker-0: Yeah, Chuck, I always appreciate our conversations and walk away better for ⁓ I appreciate you. speaker-1: Yeah, I appreciate you. We'll talk to you later. Alright. Bye-bye. We'll see ya. Bye. Thanks for listening to the Construction Aesop Collective. If this was useful, follow the show and share it with a colleague. Join the conversation with me, Chuck Mazzanti, on LinkedIn and find all episodes at constructionesopcollective.com. Until next time. speaker-0: Thank you so much speaker-1: Keep building ownership one conversation at a time.