Why Progressive Created an ESOP Structure
An employee stock ownership plan, also known as an ESOP, gives workers ownership interest in the company in the form of stock. And for Progressive, which specializes in enhancing commercial environments for multi-site U.S. brands in restaurant, retail, entertainment, hospitality, senior living, and other key verticals, an ESOP is much more than an employee benefit plan. It creates a model that provides clients with more engaged service and a better-quality product.
Chain Store Age spoke with Nino Cervi, vice president and partner of Progressive, about how an ESOP transformed the company for both its employees and its clients.
Why did you consider an ESOP at Progressive?
We first began looking at ESOPs in 2018. It’s a model that aligned strongly with the core values we founded the business on, and we knew an ESOP would strengthen those values and move them forward into the future. When we dug into what an ESOP would look like at Progressive, it was clearly a win-win for employees, shareholders, and customers. It enables us to reinvest in the company by investing in our employees, and that ultimately creates a better product and experience for our clients.
“It enables us to reinvest in the company by investing in our employees.”
Why did you consider an ESOP at Progressive?
We first began looking at ESOPs in 2018. It’s a model that aligned strongly with the core values we founded the business on, and we knew an ESOP would strengthen those values and move them forward into the future. When we dug into what an ESOP would look like at Progressive, it was clearly a win-win for employees, shareholders, and customers. It enables us to reinvest in the company by investing in our employees, and that ultimately creates a better product and experience for our clients.
“It is not easy to become an ESOP. Less than 2% of private companies choose to do so.”
What was the biggest challenge in implementing an ESOP?
The immediate challenge was to educate our employees so that they understood the benefit of creating transformative, cultural changes throughout the business. An ESOP was a new idea to most, though some were familiar with it. We asked our employees what they had heard about ESOPs, positive and negative, and we heard all positives from everyone who had experience with them. Lastly, we discussed the financial ramifications. An ESOP is many things, but it’s also a great retirement plan that our employees have real control over increasing its value.
It is not easy to become an ESOP. Less than 2% of private companies choose to do so. It’s hard. The company needs to be diverse, fiscally sound, and have strong leadership and a proven record of forecasting and achieving future sales and profitability. It’s grueling in the beginning, but it has been well worth the effort
“The benefit that clients will almost immediately see is a more engaged staff focused on customer satisfaction at every touchpoint.”
What does an ESOP mean for your customers?
Our clients will not see a significant change in day-to-day operations. There’s nothing that our clients need to do, and nothing will change on their end. Rather, the benefit that clients will almost immediately see is a more engaged staff focused on customer satisfaction at every touchpoint. The ESOP gives us the ability to strengthen our customer-centric legacy, and stakeholders, employees, and customers will all feel this positive impact.
Additionally, an ESOP will help us attract top talent, increase employee retention, and boost productivity. We believe that attracting the highest caliber personnel in the industry, coupled with a lower turnover rate, is a significant benefit for our clients. And without the threat of an abrupt change in ownership and management, we can cultivate long-term relationships with suppliers and distributors, and that benefits our clients as well.
ESOPs motivate businesses like ours to strengthen our relationships with clients, invest in our employees and company, and secure stability by building something better for all of our collective futures.
“An ESOP-structured company operates 20% more efficiently.”
How does an ESOP increase productivity?
During our research, the data showed that an ESOP-structured company operates 20% more efficiently and ultimately produces greater value compared to a non-ESOP company. To be sure, this takes place over time and doesn’t happen overnight. Every dollar the employee saves makes the company more valuable. So ultimately the owner-employees control their destiny and the valuation of the company. In an ESOP, the employees are not just a shareholder—they are the owners.
“Happy customers make profitable companies.”
Now that you’ve transitioned to be an ESOP, what does the future look like for Progressive?
Incredibly bright. The bottom line is that an ESOP empowers our people. Their excitement, hard work, and commitment to providing our clients with strong relationships and the best possible product directly increases their own bottom line. Happy customers make profitable companies. The better we do for our clients, the more profitable we become, the more valuable the company is, and the more integral the employee ownership is to its continued success.