With many health care companies facing hiring and retention challenges, the idea of creating an employee stock ownership plan (ESOP) has proven to be an effective management and ownership method that prioritizes employees and provides quality care to residents.

One such company is Bridges Health, headquartered in Oklahoma City, Okla., where Brett Coble, CEO, said his operational ESOP exists today because the family-owned business grew over time to build a legacy where people and generosity were always at the forefront of the family's mind.

Those key values are why Bridges Health's ESOP is unique in Oklahoma as the only 100 percent employee-owned company in the skilled nursing and long term care sector.

There are approximately 6,500 ESOPs in the United States with approximately 13.9 million participants collectively, according to 2020 data from the National Center for Employee Ownership. ESOPs represent a variety of industries including finance, retail, construction, and technology services. About 2 percent of those are in the health care sector.

“Our mission of serving others with compassion and dignity strongly aligns with the idea of employee ownership," Coble said. “Being an employee-owned company certainly benefits employees, but it's much more than just a financial benefit. Locations that are part of the Bridges Health ESOP have implemented programs to further develop a workplace culture of ownership."

Michael Moore, CEO of North American Health Services (NAHS), transitioned to an ESOP in 2018. Its owner at that time saw an opportunity to turn the company over to the employees in what could be viewed as a type of ownership succession plan, Moore said.

“He felt this was a way to give back to the employees and provide them with an opportunity to contribute to their future," Moore said. “I think he made the right choice."

ESOPs Create Pride a​​nd Ownership

Moore said there's a direct connection between employee engagement and those who have a sense of belonging and value. “Every business wants an employee base that performs with a sense of pride and ownership and an ESOP allows just that," said Moore.

“By practicing what we preach, we prioritize our employee-owners through inclusion and involvement," Moore continued. “We rely on their input and lean on their expertise to help us shape policy and procedure with an emphasis on continuous improvement. Our employee-owners are the greatest process improvement resource we have. The more we rely on them, the more they contribute to making us better."

The Bridges Health ESOP has an Employee Communications Committee comprised of employees who work at various locations in diverse roles. The Committee creates monthly activities to promote and educate their peers and local community service providers about the ESOP.

Making Your Company the Best Place​ to Work

ESOPs can help companies recruit and retain staff, Moore said, “but only if your employees feel like owners. The most important emphasis for an ESOP is company culture. If we're not sincerely prioritizing making our company the best place to work, it won't matter what our share value is or how much our employees are paid."

“Committing to continuous improvement as an operator and an employer is the surest way to creating and nurturing an exceptional work environment in which employees feel seen, heard, and valued," said Moore. “Our culture is our reputation, and we have to be honest about how that impacts retention and recruitment, and we have to be willing to do the work that makes us better."

At Bridges Health, the ESOP is introduced early to applicants through social media channels to help candidates better understand what it means to be part of a 100 percent employee-owned company.

“As an applicant, when you have the potential opportunity to work with individuals who are learning about how to be employee-owners, that's attractive and unique," Coble said. “It has the potential to transform the work environments."

Like other ESOPs, the Bridges Health ESOP has a vesting schedule that encourages employee retention. “When employees see their first statement, there's a certain level of interest and curiosity particularly in the early stages of vesting," Coble said. “There's excitement about receiving a statement each year."

At NAHS, the structure depends on how long an employee has been with the company. Employees aged 21 or older who work at least 1,000 hours per year are eligible to participate in the ESOP. Employees begin vesting after one year, which increases each year thereafter until they are fully vested after 6 years.

Coble said that many ESOPs utilize formulas to determine the calculation of shares employees receive after they enter the ESOP and meet certain eligibility requirements such as hours of service and years of service. The value of those shares is determined annually by an independent valuation firm.

Sharing Company Profitab​​ility

Coble said employee ownership requires a consistent communication strategy to ensure employees understand the value of what it means to be a 100 percent employee-owned company.

The Bridges Health ESOP prioritized creating communication tools for employees to think about what it means to be part of a 100 percent employee-owned company that provides a service to people.

Moore said that buy-in and consistent commitment to behaving like an ESOP is a primary challenge.

“The idea of sharing company profitability can be uncomfortable for some and the process of setting up an ESOP structure is labor intensive," he added. “However, like any other meaningful endeavor, the investment of time and effort required is ultimately worth it."

There are several professional service groups exclusively operating in the ESOP development space, and Coble said they can assist in evaluating whether a particular business could be a good candidate to become an ESOP.

The ESOP formations at Bridges Health and NAHS were set up through investment banker Laca Wong-Hammond, a managing director for Lument. There are also several advocacy organizations that provide education surrounding a variety of ESOP topics from employee ownership culture to technical questions.

Employee-Centric Benefits of an E​SOP

Operating as an ESOP requires due diligence and an examination of how much you want to invest in the ESOP, according to Moore. Considerations need to be made about whether the company wants to be 100 percent employee-owned or 70 percent, for example.

“Regardless of which approach anyone chooses, the conceptual benefits of an ESOP are hard to argue with," Moore said. “Investing in a business model that is employee-centric while sharing the benefits of company growth with the very employees that created that growth seems suitable for any business.

Paul Bergeron“Most of the time, when publicly traded companies share their growth with shareholders, it is more transactional," said Moore. “Whereas for ESOP shareholders, it's very personal. They are employee-owners who invest physically, mentally, and emotionally in the growth and progress of the company. I would rather be accountable to our employee shareholders who contribute to our success than to those who don't."

Paul Bergeron is a freelance writer based in Herndon, Va. ​