Andy Farquharson: Hello everyone and welcome back to another episode of the alternative exit. So my guest today has proven that employee ownership isn't just a succession strategy. It's actually an operating model that can deliver real results. So Kevin Clegg is the CEO Clegg Auto, which is a group of four auto repair shops in Utah that became the first ever employee ownership trust in the U.S. ⁓ in their first year as an EOT, ⁓ It wasn't just about transitioning towards that employee ownership structure, but profits more than doubled and employee profit sharing grew tenfold. So Kevin, welcome to the alternative exit.
Kevin Clegg: Thank you. Glad to be here.
Andy Farquharson: Yeah, mate, it's the quick, I've heard a lot about the Clegg story, but in doing research for this, it's, there's a few things that sort of really dawn on me, obviously, that the amazing growth, growth and success story has been amazing, but also was sort some of the conditions that you put onto the business before you came back sort of way back when in 2020. So, like you talked about sort of when you came back, one of the conditions was that when you're coming back to the business, and if it came to an exit, you'd have to sell to the employees. So what had you seen in the corporate world that made you so certain that this was the right path that you needed to go?
Kevin Clegg: Yeah, I'd spent well over a decade in fortune 500 type companies and kind of watched kind of the craziness of transactions that take place. And too often, the kind of what's right for the shareholder became the most important thing. And in a business like that's one component you need shareholder, you need somebody that puts up dollars to make something work. but you also have customers that are receiving of products or services and you've got employees that are creating all of it. And so when equations are weighted to one side, it just doesn't feel right. And you watch that transaction happen and you're like, wait a second, like that was all about making dollars for people, but who's gonna keep doing the work afterwards? And how is that great service going to be perpetuated those customers? And the balance was just off. And so I didn't have any real experience of watching employee ownership any way, or form happen prior to. ⁓ that, but going into reparting with ⁓ brother in the business, I just knew that as we took risks financially, that so is everybody else in the business at a different scale, but they're coming every day committing their livelihoods to ⁓ us to this thing that we're trying to create together. And there should be some sort of exit that's beneficial for everyone ⁓ ⁓ just the people who started the thing.
Andy Farquharson: Yeah. Yeah, yeah, absolutely. think just hearing you talk about that Fortune 500 experience, mean, highlights so much of what you hear about transactions. And it's always that top line number, right? It's always, hey, look, we're buying this company for X and like, ⁓ they able to exit for Y. But it's never about what's actually going to happen to ensure that that great product or service continues or that those great employees are going to be. driving that. They're always focused on the number. What do you think that obsession is with that initial transaction rather than the long term joy of
Kevin Clegg: I don't know. That's a good question. I ⁓ easy to lose sight of the other parts of the equation, right? Like if there's this on, want to maximize my investment, I want to return and who doesn't, right? ⁓ So I know that it's probably more of just human nature if I want to maximize something, but the balancing of the other pieces ⁓ and how you... How do you come up with something that's taking an equate into that equation, like the other components? I don't know why it gets lost, but it does. been the side of like take out something that's like a publicly traded company and you get to like my brother and I like literally had to swipe a credit card or, you know, put our houses up in order to make a payroll or to start the company or like things like that happen. over and over again as people start companies. And those are real risks and they're pretty significant. And you could easily justify that since I did all those things, I need a real financial return and that's more important than anything else. You can see how that can happen, but don't know. I think along the way, we just have to remember all the other pieces and recognize like how are we... thinking more whole holistically as we do business and remembering the other components. And the more we do that, better, I think business is like, if you think about the perspective of like, most of the times ⁓ go to one end ⁓ the other in our extremes, and then we have to come back to middle, or ⁓ some of change or revolution takes place. Right. ⁓ I think that better business is thinking about those extremes ⁓ and to find the middle.
Andy Farquharson: Yeah. Yeah. So we talked today about the fact that there was this, challenge, like people are going to one end of the spectrum of the other, focusing on whether it's the financial outcomes or the people and the customers that made it. But I guess what you've shown is that it doesn't need to be mutually exclusive.
Kevin Clegg: No, no, like I think that both are possible. And I think to generally speaking as a, as a world, think there's been a, this, ⁓ this push to profits as an extreme and, and, and maybe even to this idea of I do it on my own, right. And protect my own and protect, you know, like, ⁓ not, and I, and I think that a shift
Andy Farquharson: Yeah.
Kevin Clegg: back to center of something that says profits and people is doable. Something that says, let's collaborate more as a society. Let's the bridge and collaborate and talk to that person instead of shouting to them across the bridge. let's figure out if there's like somewhat more of an abundant mindset might help to. to fix the problem that exists in the world today that most employees are disengaged. Like almost every survey that you see out there tells you that that's the case. Well, perhaps maybe some of our structures, some of our processes, some of the ways that we do business is causing that to be the case, because something is. And maybe a shift back to center could be the thing that increases the care factor for more people, increases the idea that business about.
Andy Farquharson: Okay. Good
Kevin Clegg: more than just one thing. It's about figuring out that balance and figuring out how to engage and get the most out of the people that are doing the work and the way that they connect with customers and finding more purpose in all of it, more connection in all of it.
Andy Farquharson: Okay, well, here it is. We are.
Kevin Clegg: Hey, Andy, I can't hear anything you're saying. It's super garbled. almost like a bandwidth issue, like it's not picking up for some reason.
Andy Farquharson: Interesting.
Kevin Clegg: I just heard that. Everything else was like a part of a word and then a...
Andy Farquharson: Okay, how about now? Is that better?
Kevin Clegg: Yes, that's better.
Andy Farquharson: Okay, well, let's see. Let's see how we go with that again. is anyway, I was saying I absolutely love that talk track. I love sort of hearing the different ways in which you are thinking about the engagement of employees and how that can ⁓ not just the workplace, but also have that broader impact on society and democracy to be able to. like disengaged, like sorry, disagree agreeably in a workplace and learn to have that conversation. I when you're, guess, ⁓ you see that? Like when you got, when you guys transitioned Clegg to employee-owned, like, did you see that transition?
Kevin Clegg: Yeah, I mean, I would say that the way that we ran the business prior was very much one of connecting with all of the employees in the company. very kind like a bigger family, right? So like, ⁓ I would say that we were already operating in that vein, but ⁓ that, but was like,
Andy Farquharson: Okay.
Kevin Clegg: The hardest part of the transition to employee ownership wasn't like coming up with the structure and like transacting it. The hardest part still was and is the culture afterwards I didn't sign up to be an owner and suddenly now you're telling me that I'm an owner, but I didn't choose it. didn't put dollars in. What do you actually mean? Like, what is this thing that we're this purpose trust and we don't have shares, but we're you're asking us to think differently and to act differently and to
Andy Farquharson: Yeah.
Kevin Clegg: show up as an owner, what do you mean by that? And so we've spent a lot of time working through what does that look like and how do we help people on that track?
Andy Farquharson: Yeah. Well, I think we'll follow up a little bit later and talking through, guess, some of those sort of elements, because I think that's something that I get a lot of questions about. just going back to that engagement piece, like sort of people being disengaged from work. it seems like you're talking about you were driving that higher engagement without ownership. mean, how important is ownership compared to that cultural change try to create that engagement for people?
Kevin Clegg: I think it's, I think if you look at, I think ownership is maybe just one of the, one of the things, right? Like honestly, like companies could, could create what we've created without having employee ownership per se. and, and I think employee ownership and the way that we set out up in a perpetual purpose trust.
Andy Farquharson: Yeah.
Kevin Clegg: is more about sustaining it for the long term. It's more about the ongoing succession that you don't have to deal with this like, ⁓ no, what happens next? When the next owner is ready to retire or sell or something happens, like there's some decisions made about what that looks like. the, the, how ⁓ do I each person and ensure that, There's a reason like, know why I'm here at this company. know, and beyond that, like I know the things that matter most to me in my life. Right. And, and I know why I chose this career track and I know why I'm with this company as, as each person better understands that and you consciously have discussions about it. Like engagement happens. Right. And, and if companies took more time to do that ongoing. no matter their structure, be better workplaces. There'd be better places commerce. Like if there was this conscious decision that a business should care about that and should care about engaging their employees in those conversations.
Andy Farquharson: Yeah. Yeah. I think that's a common thread that I've heard in quite a lot of these ⁓ interviews as part of the podcast is that like this type of leadership does not require that ownership, but when you do combine it, does sort of, it creates a, it creates another platform that sort of help people understand that make them more connected to the outside.
Kevin Clegg: Yeah. mean, like we didn't have full transparency in our financials prior and afterwards we did. Right. So just the, everything outside of somebody's own individual wage is now like completely open and transparent. So every expense, every cost is there. And that wasn't before. ⁓ but it seems natural. Like if, if we're all owners in this, then
Andy Farquharson: Mm-hmm. Okay. Yeah.
Kevin Clegg: the financial part of ownership matters and we should share everything openly and make sure that there's opportunities for people to their opinion about where we spend dollars and where dollars go and that of thing. And that's a really powerful tool. And it's a scary tool if in full open financial disclosure, an owner is taking 95 % of the dollars and you know how much those dollars are.
Andy Farquharson: Thank ⁓
Kevin Clegg: And you're looking at it as an employee going like, I mean, I'm at her too. Like, I think I'm valuable. Like, is that really the way this works is if you can find a way to start it, you keep all the dollars for yourself or like, is there is like, anyway, I think some owners are
Andy Farquharson: Yeah. You got me?
Kevin Clegg: Yes, I do. And I can hear you.
Andy Farquharson: So financial transparency is obviously scary for a lot of owners, but I think that's only sort of one of those elements which are really important as part of that transition towards employee ownership. I I'd love it if you could just take us on a little bit of a journey of what it looked like once when you introduced employee ownership to your workers and how you took them to a place where they felt comfortable as owners.
Kevin Clegg: Yeah, I, if I'm being honest, I mean, we're three and a half years in, and I think it's, it's still happening. I don't, I don't this idea that you just flip a switch and, and, and I'm an owner isn't real. And I, and I think even, uh, even some owners don't act like owners. Like, I guess if you're looking at the sense of like, uh, if you're looking at, uh, an owner, meaning something to where, uh, you're balancing the needs of self and others appropriately, right? Like, so, um,
Andy Farquharson: Yeah. Yeah Thank
Kevin Clegg: When, when we transitioned, we with everybody like, Hey, at this point, there's going to be profit sharing and there's going to be a profit waterfall. And profit waterfall means that we have to be financially responsible that you don't like a, owner that's operating the, ⁓ the, business a financially responsible way doesn't just take the profits and spend them, but many do right. Like, and then they go out of business. Right. So
Andy Farquharson: Mm-hmm.
Kevin Clegg: Here's the precautions or things that we're going to do in our waterfall to ensure that we have a financially healthy company for the long haul. Right. And then it's like, meet our financial obligations. So any of the debts that we had through this transition to employee ownership, we meet those first and foremost. And then we reinvest back in the business X percentage. And if it requires more than that's less out of our pockets, but that's not, that's not like, that, ⁓ no, that sucks. It's like, ⁓ good, like we're investing in the long haul. This is going to be great, great company for, for us and for the people after us, right? Like we have to be financial responsible on that front. And, and we make sure that we put aside dollars for rainy day, right? We build up a nice cash reserve and we don't hand out all the profits at the end of the quarter. We hold some and make sure that we're watching through it through the course of a year of like, what's going on? What are the headwinds we're facing? Like, should we really be distributing all these profits and
Andy Farquharson: Congrats. Yeah.
Kevin Clegg: And we do some for charitable causes to remember that it's not just about us, that there's other people around us and we should be not just thinking about what's good for us as owners, but what about our community? What about others in the world? Like, is there other people that we can be thinking about as we're trying to balance kind of the financials of the company? So we had discussions about that and we still do ongoing every quarter. We'd have a profit waterfall conversation and and share with people where the dollars are and where they're going and business outcomes and what's coming in front of us and, and what's left at the end of the day for distribution. And, and we like, that's never going to end. Like those conversations are going to keep happening. And, and there's always going to be some people who feel a little disgruntled at times, like our business generated a lot of profits compared to the other ones. Why do we have to, share as much as we're sharing, or do we really have to give disparity? Like, I think that we also have to embrace the reality of that human nature is real. and maybe leaning to a little bit, right? And we're still trying to figure out what that means, but like, we shouldn't be surprised when people act that way. We should anticipate it and just keep open conversations going and know that we're gonna keep swinging a little bit, With to get back to center on how we do things like this.
Andy Farquharson: Mm-hmm. Yeah, what else? And like, you talked about some of those challenges, but does that, is that happening in those meetings when you're talking about that? I mean, are you having a real conversation around like, this is what we're going to distribute this year and or this quarter. And have you had situations where you've had the conversation and you guys have changed what that is based off sort of a consensus from within the group?
Kevin Clegg: like in the, in the moment. No. I you get a little bit more, of like rumbling that's happening before or after, right? Like where there's like, gosh, man, we, we sure, we sure generated a lot of the profits this year compared to other people. It's like, ⁓ okay. You're feeling like maybe how we're doing this isn't fair. Like, let's talk about that. Right. Let's, let's talk about what does fair mean and like why. Why would one business who generates more share with others, right? that like, there's not necessarily a right or wrong to how you share, right? But like, it's just what was set up. So like, we might be frustrated with it, but like, like, ⁓ are the alternatives? Like giving people a chance to kind of just think through their emotions and why they're feeling the way they're feeling. And I don't think that those happen as often in the group meetings, at least for our group. It hasn't that the voice was heard as much in the, in those quarterly sessions, as much as just like the followup afterwards, or you're walking around one-to-one and just like, ⁓ yeah, any thoughts, any feelings, how did it go? Like, and, and a little more openness for the one-on-one chats, as opposed to like big group meeting chats. And I'm hoping that we, as a company that we progress down a path where, where some of those things happen in, the larger chats than, not necessarily in the one-offs because people are feeling more more comfortable to voice their opinion in front of others, right?
Andy Farquharson: for lot of people to be able to have an opinion about profit distribution and sort of company performance, we're looking at financials, it probably takes like, it takes a, they need to learn a new language. It takes more education and understanding. How did you guys approach that at Clegg across those four different sides?
Kevin Clegg: Yeah. ⁓ I think initially when we first started, ⁓ we probably gave people more than they, than they bargained for. yeah. Like starting to talk about all the different line items, right. And, and you see people's eyes glazing over after about 10 minutes, maybe even five minutes of just like, I don't know what you're talking about anymore. Right. Or I don't get how I can influence that. And so, ⁓ the week.
Andy Farquharson: Like, so more education and progress, yeah. Thank Yeah. Yeah.
Kevin Clegg: we got to a place where it's, less discussion about every line item and more about here's to line items and anything you want to talk about, can. Let's, ⁓ what are the ones we can impact the most from a day-to-day standpoint and, and ultimately as part of kind of, we do several courses. We have an own my life, own my career and own my company, like courses that we, that we work through with. ⁓ with everybody and in the on my company course, there's a section that that gets that for me personally in my job. How do I impact cashflow the most in positive and negative ways? And I think that's where it becomes a little more real for how how they how that a profit and a loss statement matters to them because now they're seeing in their own job like what what that looks like and what that feels like and and a chance to kind of say, yeah, I can see where I'm impacting it.
Andy Farquharson: Okay. Yep.
Kevin Clegg: up or down based off of my own personal decisions or behaviors inside the business.
Andy Farquharson: Yeah, okay. So like you take into the point of like giving each employee their own contribution margin or a pathway to understand like how you can like you as an individual, like this is how you should read the balance like the income statement for you for your company, for your role. So yeah, okay. And you talked a little bit earlier about they're obviously participating in the conversation around distribution. mean, what are some other ways in which you have
Kevin Clegg: Yeah. Yeah. Yeah.
Andy Farquharson: enabled your employees and owners to contribute to decisions that being taken on behalf of the company.
Kevin Clegg: Yeah. ⁓ what I've found from, from early on is like, if my job is a mechanic and what I love about being mechanic is you bring me a problem and I get to figure out what it is and I get to fix it and make it right. And that's what I love. Right. ⁓ and if you approach me and say, should we add another five days of paid time off? I don't know, but sure. Like if it, if it gives me something more yet, but like,
Andy Farquharson: you
Kevin Clegg: What are the pros and cons? I'm not thinking about that all day long necessarily. Right. And so as, as we've approached this idea of, people having a voice, in the nature of the job you do and your expertise, that's where the, maximization of your voice should be felt and heard. And as it gets further away from your area of expertise, then you get a chance to react to what somebody else proposes with questions or concerns.
Andy Farquharson: Yeah. Okay.
Kevin Clegg: but let those people make decisions of what they think is best based off of their role or expertise. And then I get a chance to like question it or accept it and that goes smoother, it goes faster and it just makes more sense. So this idea that while making the decisions on everything is crazy, right? Like we're not. So like when we looked at, we didn't have a paternity policy, we had a maternity policy where there was some paid time off. And we kind of looked at each other and said, maybe we should have one. And instead of just asking all the employees, like, should we have one? And then going like, I guess so. And, and we say, like, how many days do you think it should be? And they're like, I don't know, like a day, five, like, like we went out and looked at the marketplace. We looked at other companies like us. We looked at people not like us. And we kind of said, like, most people don't have one in our space, but, why can't we like, like, shouldn't a dad be able to connect with their kids and get paid for. for time off and not have it be a burden like for some time for connection, just like a mom, like let's do something. So we researched, did something, proposed it and said, here's what we did, here's the research we did, this is why we chose this. And we tried to just come up with the best judgments around this and we think it's a good idea. Now's your chance to react to it. And if you like it, we're gonna make it official. And if you don't, now hold your peace, right? Like this is it, right?
Andy Farquharson: Yeah.
Kevin Clegg: And we've used that model generally for how we do things in the company for whatever area of expertise you might be in, whether you're in accounting or HR or wherever is make call, do your diligence, explain to people why you made the decision you made, and then give people chance to react to it. And it seems to ⁓ be a good model so far. So we're not voting on it. It's not a one person, one vote, like a cooperative. ⁓
Andy Farquharson: Yeah, awesome, did it.
Kevin Clegg: It's a chance for a reaction and, and, uh, inputs and, and, hopefully we're the people in that are in those functional areas are making good decisions. Um, and, um, and, uh, if there's questions or concerns, we've, we've got space for people to hear back about it and we'd go back to the drawing board if we had to and, and do it again. Right.
Andy Farquharson: So was it difficult sometimes to get these people in these functional areas? Like where they've got this area of expertise to then potentially take on a new skill of going and researching solutions and putting together a business case of what this may look like and then building conversations in the team. Was there some hesitancy from some areas of the business for that? And how did you guys help them?
Kevin Clegg: We're still small. so, we're, we're 60 ish employees and, so, like the, number of people that are in areas of functional expertise, like, ⁓ there's not many of them. And, and I still play a, ⁓ a pretty prominent role in, ⁓ supporting of them in that. Right. So we've got one person wearing hats of marketing and HR and benefits and various things. And so.
Andy Farquharson: you
Kevin Clegg: As research gets done, I'm looking at it, weighing in and providing some inputs and so forth. so there's of call it the small leadership team that's working with the shared services groups that support the four ⁓ businesses. It's We're small. as we got bigger, there would be opportunities for more of that more people to come in and kind of own more of those pieces. ⁓
Andy Farquharson: Yep. Yep. That makes a lot of sense. The results that I've read about in year one, after your transition where like profits more than doubled, mean, that happened without raising prices. What was it that drove that? Do you think if you put that down to the change to the EOT structure?
Kevin Clegg: Um, a piece, a piece of it for sure. Uh, after your first quarter, uh, which wasn't like, the first full year in employee ownership, uh, uh, that would have been, um, 2023, um, was the year that we saw those results in 20, the end of 2022. Cause we transitioned mid year. Like there was profit sharing after the first quarter and it was larger than anything that anyone's seen before. And it was like immediately like.
Andy Farquharson: Okay.
Kevin Clegg: Holy cow, like you transition this thing and like there's like instant dollars available. like, like there's light bulbs going on of like, this wasn't just talk and this wasn't just like, whatever, like, like our behaviors, the things that we do matter. And when we're more profitable, I get some of this and I see it, it's real and it's tangible. So there was an immediate like kind of light bulb effect of like, okay, this is for real. And we structured the deal.
Andy Farquharson: Wow. Yeah.
Kevin Clegg: So that the former owners weren't getting all the profits until they were paid off. We structured it so that everybody got something from day one. ⁓ and owners would get paid out over time. And so think it's, ⁓ would recommend that people transitioning all do that. Like it's why not? Like that's part, that's how you create something that says everybody matters because what ⁓ actions are, what determine what you really intended. Right? So if all the former owners got all the dollars first.
Andy Farquharson: Yep.
Kevin Clegg: then they matter more and they need to get their piece before anyone else does. And it's kind of like, why? Like, couldn't you structure it to where both are winning along the way, right? So, yeah, that helps ⁓ lot. ⁓
Andy Farquharson: I can imagine, yeah, putting a big chunk of change into people's bank accounts, really helps them feel it.
Kevin Clegg: Yeah. And then, and then like, we had two businesses, our body shop and, and, and one of our locations that were, the two newer businesses that were still like, kind of like on the cusp of profitable, right. And when suddenly I get to share in those profits, the acceleration to profitability, I think we were on a, ⁓ were on a trajectory that was pretty low. And all of a sudden it went like this where we're just like, let's go. Right. And so, so you, you saw behaviors and engagement that caused us to quickly go to profitable instead of something that probably would have taken us, many, many more years. ⁓ it would have taken us three or four years to get to the levels that we got to the very next year, because it was suddenly transparent in the financials, the dollars that would come in could be shared and And, and also there's a level of each of the shops, see each other's behaviors. And I don't want to be holding the others back. So like, like I want to make sure that we're doing our part. Yeah. It's there. Right. Like, and, we are, you know, each business wants to do their part of do their share towards contributing to the, to the profits of the whole. Right. So
Andy Farquharson: Yep. positive peer pressure. just so great to hear that that impact happening so quickly. I could you share some examples of like what some actions that you saw some of your team doing on the workshop floor? Was sort of reducing wastage ⁓ or of just sort of focusing on like getting, don't know, getting like finishing sort of jobs on time? What did that look like?
Kevin Clegg: Yeah, could point to just kind of specific ⁓ in time. Like the fourth quarter of the year for us is usually the slowest. were sitting, I think it was in an October timeframe and business was really slow and we hold half of our profit sharing for employee distribution, employee owner distribution, till the end of the year. So we pay out half of it in the quarter that transacted.
Andy Farquharson: Mm-hmm. Got it. Yeah.
Kevin Clegg: And then we hold it because that's a good business decision to not pay out all your, your, your profits intended for ownership immediately. Right. And we're looking in October that if we don't turn things around, there's going to be no profit sharing of that half. Like it's literally trending that badly. And we just did, had a quick little rally of the troops and said, guys, like our profit sharing pool is in jeopardy. Like if we don't do something about it and something looks like just maximizing every, phone call, every customer experience, like, like making sure that if someone calls in that we're getting a chance to quote that business and to look at that car. Cause if it doesn't come in the door, we have no chance. So let's get them in the door. Let's get a chance and let's, let's make sure that we're doing everything we possibly can. And ⁓ that month, right. itself. And,
Andy Farquharson: you
Kevin Clegg: we still had that big profit sharing payout in December. And I think that has everything to do with they're on the receiving end of something. have access to financials for everybody and just saying like, hey, like this is what's going on. Like let's do something about this. And ⁓ that means every, like there's more smiles at the counter as people are coming through the door. There's a change in the vocabulary used. ⁓ the techs more on their game to get that car finished and out so they're ready for the next job so that we get a chance for one more car a day, right? So all those little behaviors matter and you see that.
Andy Farquharson: That's awesome. I love hearing that. That's very cool. So Kevin, you've talked about a vision of next generation holding company, is sort of acquiring these businesses from these like from the Silver Tsunami of retiring owners, putting into a trust. and like, it back. and then sort of creating more, yeah, a hold co, like a conglomerate of these companies. I mean, what do you think it takes to bring that vision into practice?
Kevin Clegg: Yeah. ⁓ and you had mentioned earlier with first EOT in the U S first holding holding company EOT there, there was, there was a handful of before us, just as an EOT. the, mind, like, is something's broken. ⁓ I look at in the, in, workers in the world and it's, and it tells us it's broken. Right. So you've got to change.
Andy Farquharson: if you hold them together.
Kevin Clegg: the way you're doing things to get a different result. And I just, and I think it's, we're far past the time in doing that. So I'd love to see like, there's some sort of movement, right? Collective movement that starts to engage many people, not just a handful of people. And so the idea was if we set up this hold co, ⁓ we could grow inside of our space, ⁓ the automotive services space, but we could also invite others to come join us maybe in home services or other service sectors. And maybe at some point it moves into products. product-based sectors, like, not figure out if we can, like, what would this would look like at scale and, and, and, and be the part of creating something that looks and feels like a movement. I'm, ⁓ actually from having had the experience of actually acquiring our first company post transaction. And for many reasons, it not going very well. and just having experienced it really Raleigh, the, the, need to have to shut that down. ⁓ like, is there, is a real reminder that business is hard, like forget whether it's employee owned or not, like, ⁓ running businesses is hard. And this idea that you can acquire a small company across the country and help them ⁓ convert employee ownership and they're going to make it and it's going to be easy. Isn't real. Right.
Andy Farquharson: Yeah.
Kevin Clegg: And so I think the, vision of where this is shifting to that I think could be a reality is something that's going to look more like perhaps a cooperative, a business cooperative, not an employee cooperative. But what if I could get 10, 15, 20, 30 other auto companies to come together? And what if we created at the center, this, business cooperative that's owned by all of us. And that business cooperative is providing employee ownership services that would like, because like creating that culture and the transparency and maybe even having some finance or accounting or marketing or hiring services, because all these small shops will like, let's face it, a small shop, it's difficult to do all those things. Right. But if we created a business cooperative, we're, moving more to center saying, we're not doing this on our own. approaching this abundance mindset. We're going to agree to kind of create the structure that perpetuates.
Andy Farquharson: Yeah.
Kevin Clegg: employee ownership and engagement as much as possible. and we, and we don't have to own all the locations everywhere. We're just like, let each group have their own ownership structures, as long as it's still employee owned that preserves employee ownership ongoing. They could adopt our purposes or they could create their own, but generally speaking, we're aligned on similar purposes in order to be a part of the cooperative. You, start that and model that. And then we invite other industries to do the same. Maybe we push back to more towards center on a more cooperative world with many people coming together in this, in a structure like this and connect these all together in some way. I think we could create a movement. I think we could create something to where this becomes more mainstream. And we're kicking off a little working group. to, with a number of, of individuals of interest across the country to, to say, what, what would this look like? What are the pitfalls of it? Who could we learn from, from groups that have done something like this before to see if we couldn't get, get a first one, like kind of propped up and, and running, and then keep going from there. And that's, that's the current state of things is, is it's where we're at and what we're thinking probably might be more viable than the idea of a singular hold code. you know, diverse and trying to acquire and own, you know, tens or hundreds or thousands of companies in and of itself.
Andy Farquharson: Yeah. Well, I think that we do see some examples of some, ⁓ hold codes trying to do this with employee ownership, which is great. And sort of putting that a big part of that, that piece around sort of that broader cooperative movement that's very inspiring and super exciting. look, I'd love to maybe have you come back on and ⁓ about that a little bit more. And also that it's something that like, ⁓ guess I'm over here in the Nordics and ⁓ see a lot, there's a really strong corporate culture here. ⁓
Kevin Clegg: Mm-hmm.
Andy Farquharson: both in Finland, but it's sort of big in Denmark and in Norway and also in Sweden, a lot of it's focused around certain elements, like the agri-style cooperatives, and then there's these consumer-based cooperatives, but not so much around worker cooperatives. So in these other cooperatives, the money is still sort going towards the shareholders and not distributing the wealth. And I think this is where this worker style cooperative conglomerate super exciting as a way to solve engagement and the equality piece.
Kevin Clegg: Yeah. And I think, ⁓ I'm not as enamored to be honest with you with the idea of a worker cooperative with the one person, one vote as a, as an initial structure. It's, it's an actual business cooperative, like you are referencing where, ⁓ where, where the individual businesses have the vote in managing the cooperative, but inside of one of them, the expectation is, is to join this specific business cooperative. Your company has to be employee owned.
Andy Farquharson: Yeah, yeah, yeah. need to be employed.
Kevin Clegg: or on the path to it with certain parameters, right? That's the part that getting a group together to kick around of like, what does that mean? What does that look like? Cause I don't think, I think it's aspirational that you can get all of, all of the workers to be thinking about their needs and other people's needs and the, and the weight of a vote and what that means and doing what's right for myself now and for the next generation when human nature kicks in and makes that really difficult and challenging. And so I, Aspiration, I'd love ⁓ think that worker cooperatives will be wildly successful, but I think business cooperatives can be. And if they espouse inside of that business cooperative principles of employee ownership, I think that hybrid could be really powerful.
Andy Farquharson: Yeah, I'm 100 % agree with you there. I think that that is, it's that bridge between sort of these sort service and army businesses that are set as a structured, not structured, a cooperative and creating a vehicle which can use them for transition. So yeah, it's very excited to hear more about that, Kevin. one thing... One thing I like to finish on for each of these podcasts is a fast round of questions, where I'll just ask you three quick questions and you offer a response. How does that sound? All right, so who is a leader that you most admire in employee ownership?
Kevin Clegg: there's so few, individuals that are doing it yet. ⁓ the, the leader that I admire ⁓ the so far is someone who's on the journey to it. His name is Jim Holler ⁓ and, his company is Villicus, ⁓ federated and ⁓ he's a mission to, to acquire, the, ⁓ the ⁓ of and the entire supply chain for it to be employee owned. So that from field to table, that supply chain reverts back to the worker owning it, as opposed to what we have today with mass acceleration of a few individuals acquiring up all the land. And so I love what he's doing. I love where he's going and his life and who he is and how he has lived it and the causes that he cares about, like it's been super inspiring.
Andy Farquharson: Wow, that sounds super inspiring and I'll definitely be digging into Jim Hollow. So then the next one is, what is your favourite resource on employee ownership?
Kevin Clegg: ⁓ it's actually a gap that there's not a great resource on employee ownership. you've, you've got kind of like some factions of business cooperatives and, and, ⁓ ESOPs and there's various tools that are available for them. I'd love to see that the space comes together better to where there could be something that kind of, whether it's open source or it's, everybody contributes and what gets used, ⁓ there's some sort of kickback like. I'd love to see something like that get created so that there is a place that I could say like, this is the best place to go. It feels a little bit like everybody's navigating wild, wild west and figuring it out for themselves. And I don't think we've hit a place where I can say that there's a, a singular or powerful group that's consolidating best practices around employee ownership.
Andy Farquharson: Okay, makes sense. And I agree, there's lots of different sort of disparate resources out there, but very difficult to identify that one. And then lastly, the fast question, what would you say to a business owner who's sitting on a fence about a transition to an employee ownership model?
Kevin Clegg: there's nothing ⁓ than preserving what you've created and there's no better way to do it than in my opinion, than employee ownership. it's not, it's not easy, but it's totally worth it. And that idea that as you exit, you know that what you've created because you genuinely care about the people you've gone shoulder to shoulder with and the customers that you've cared about and served.
Andy Farquharson: It's awesome.
Kevin Clegg: Like, and that thing that you've started could be preserved and protected and that you can share, this, this wonderful thing that you've done with, with them ongoing. Like, how can it be better than that? Like you, you exit, ⁓ and either stay with it for awhile and keep working because let's face it, most people don't want to, don't feel so great once they've exited and now they're wondering what I do with my life. Right. But like, keep working if you can keep perpetuating that. And this structure, it doesn't get much better as hard as it might be. Like it feels great to know that you've created something that can perpetuate goodness for, employees what they love and customers who just want great service.
Andy Farquharson: Kevin, what a great way to end the pod. And thank you so much for the conversation today and for putting up some of those technical difficulties. Much appreciated. But if people want to go follow your story about this business cooperative or your next steps, ⁓ can people go to learn more about you?
Kevin Clegg: That's a great question. I don't know that I've done a great job of, actively perpetuating that, but I think you could hit our website. That's a clean.com that's, probably the easiest way to kind of find us. And you could reach, you could reach me through that or find me on, on, LinkedIn. I'm happy to just chat with people one-on-one. I think it's as, ⁓ on here, like way of.
Andy Farquharson: Thank you. ⁓
Kevin Clegg: of helping people get connected.
Andy Farquharson: Awesome. Kevin, thank you so much for your time. Thank you for the leadership in making this transition happen for the Orion Company and ⁓ inspirational next part of the journey. So thank you very much for joining the Alternative Exit.
Kevin Clegg: Thank you, Andy. Appreciate the time with you.
Kevin Clegg: Thank you. Glad to be here.
Andy Farquharson: Yeah, mate, it's the quick, I've heard a lot about the Clegg story, but in doing research for this, it's, there's a few things that sort of really dawn on me, obviously, that the amazing growth, growth and success story has been amazing, but also was sort some of the conditions that you put onto the business before you came back sort of way back when in 2020. So, like you talked about sort of when you came back, one of the conditions was that when you're coming back to the business, and if it came to an exit, you'd have to sell to the employees. So what had you seen in the corporate world that made you so certain that this was the right path that you needed to go?
Kevin Clegg: Yeah, I'd spent well over a decade in fortune 500 type companies and kind of watched kind of the craziness of transactions that take place. And too often, the kind of what's right for the shareholder became the most important thing. And in a business like that's one component you need shareholder, you need somebody that puts up dollars to make something work. but you also have customers that are receiving of products or services and you've got employees that are creating all of it. And so when equations are weighted to one side, it just doesn't feel right. And you watch that transaction happen and you're like, wait a second, like that was all about making dollars for people, but who's gonna keep doing the work afterwards? And how is that great service going to be perpetuated those customers? And the balance was just off. And so I didn't have any real experience of watching employee ownership any way, or form happen prior to. ⁓ that, but going into reparting with ⁓ brother in the business, I just knew that as we took risks financially, that so is everybody else in the business at a different scale, but they're coming every day committing their livelihoods to ⁓ us to this thing that we're trying to create together. And there should be some sort of exit that's beneficial for everyone ⁓ ⁓ just the people who started the thing.
Andy Farquharson: Yeah. Yeah, yeah, absolutely. think just hearing you talk about that Fortune 500 experience, mean, highlights so much of what you hear about transactions. And it's always that top line number, right? It's always, hey, look, we're buying this company for X and like, ⁓ they able to exit for Y. But it's never about what's actually going to happen to ensure that that great product or service continues or that those great employees are going to be. driving that. They're always focused on the number. What do you think that obsession is with that initial transaction rather than the long term joy of
Kevin Clegg: I don't know. That's a good question. I ⁓ easy to lose sight of the other parts of the equation, right? Like if there's this on, want to maximize my investment, I want to return and who doesn't, right? ⁓ So I know that it's probably more of just human nature if I want to maximize something, but the balancing of the other pieces ⁓ and how you... How do you come up with something that's taking an equate into that equation, like the other components? I don't know why it gets lost, but it does. been the side of like take out something that's like a publicly traded company and you get to like my brother and I like literally had to swipe a credit card or, you know, put our houses up in order to make a payroll or to start the company or like things like that happen. over and over again as people start companies. And those are real risks and they're pretty significant. And you could easily justify that since I did all those things, I need a real financial return and that's more important than anything else. You can see how that can happen, but don't know. I think along the way, we just have to remember all the other pieces and recognize like how are we... thinking more whole holistically as we do business and remembering the other components. And the more we do that, better, I think business is like, if you think about the perspective of like, most of the times ⁓ go to one end ⁓ the other in our extremes, and then we have to come back to middle, or ⁓ some of change or revolution takes place. Right. ⁓ I think that better business is thinking about those extremes ⁓ and to find the middle.
Andy Farquharson: Yeah. Yeah. So we talked today about the fact that there was this, challenge, like people are going to one end of the spectrum of the other, focusing on whether it's the financial outcomes or the people and the customers that made it. But I guess what you've shown is that it doesn't need to be mutually exclusive.
Kevin Clegg: No, no, like I think that both are possible. And I think to generally speaking as a, as a world, think there's been a, this, ⁓ this push to profits as an extreme and, and, and maybe even to this idea of I do it on my own, right. And protect my own and protect, you know, like, ⁓ not, and I, and I think that a shift
Andy Farquharson: Yeah.
Kevin Clegg: back to center of something that says profits and people is doable. Something that says, let's collaborate more as a society. Let's the bridge and collaborate and talk to that person instead of shouting to them across the bridge. let's figure out if there's like somewhat more of an abundant mindset might help to. to fix the problem that exists in the world today that most employees are disengaged. Like almost every survey that you see out there tells you that that's the case. Well, perhaps maybe some of our structures, some of our processes, some of the ways that we do business is causing that to be the case, because something is. And maybe a shift back to center could be the thing that increases the care factor for more people, increases the idea that business about.
Andy Farquharson: Okay. Good
Kevin Clegg: more than just one thing. It's about figuring out that balance and figuring out how to engage and get the most out of the people that are doing the work and the way that they connect with customers and finding more purpose in all of it, more connection in all of it.
Andy Farquharson: Okay, well, here it is. We are.
Kevin Clegg: Hey, Andy, I can't hear anything you're saying. It's super garbled. almost like a bandwidth issue, like it's not picking up for some reason.
Andy Farquharson: Interesting.
Kevin Clegg: I just heard that. Everything else was like a part of a word and then a...
Andy Farquharson: Okay, how about now? Is that better?
Kevin Clegg: Yes, that's better.
Andy Farquharson: Okay, well, let's see. Let's see how we go with that again. is anyway, I was saying I absolutely love that talk track. I love sort of hearing the different ways in which you are thinking about the engagement of employees and how that can ⁓ not just the workplace, but also have that broader impact on society and democracy to be able to. like disengaged, like sorry, disagree agreeably in a workplace and learn to have that conversation. I when you're, guess, ⁓ you see that? Like when you got, when you guys transitioned Clegg to employee-owned, like, did you see that transition?
Kevin Clegg: Yeah, I mean, I would say that the way that we ran the business prior was very much one of connecting with all of the employees in the company. very kind like a bigger family, right? So like, ⁓ I would say that we were already operating in that vein, but ⁓ that, but was like,
Andy Farquharson: Okay.
Kevin Clegg: The hardest part of the transition to employee ownership wasn't like coming up with the structure and like transacting it. The hardest part still was and is the culture afterwards I didn't sign up to be an owner and suddenly now you're telling me that I'm an owner, but I didn't choose it. didn't put dollars in. What do you actually mean? Like, what is this thing that we're this purpose trust and we don't have shares, but we're you're asking us to think differently and to act differently and to
Andy Farquharson: Yeah.
Kevin Clegg: show up as an owner, what do you mean by that? And so we've spent a lot of time working through what does that look like and how do we help people on that track?
Andy Farquharson: Yeah. Well, I think we'll follow up a little bit later and talking through, guess, some of those sort of elements, because I think that's something that I get a lot of questions about. just going back to that engagement piece, like sort of people being disengaged from work. it seems like you're talking about you were driving that higher engagement without ownership. mean, how important is ownership compared to that cultural change try to create that engagement for people?
Kevin Clegg: I think it's, I think if you look at, I think ownership is maybe just one of the, one of the things, right? Like honestly, like companies could, could create what we've created without having employee ownership per se. and, and I think employee ownership and the way that we set out up in a perpetual purpose trust.
Andy Farquharson: Yeah.
Kevin Clegg: is more about sustaining it for the long term. It's more about the ongoing succession that you don't have to deal with this like, ⁓ no, what happens next? When the next owner is ready to retire or sell or something happens, like there's some decisions made about what that looks like. the, the, how ⁓ do I each person and ensure that, There's a reason like, know why I'm here at this company. know, and beyond that, like I know the things that matter most to me in my life. Right. And, and I know why I chose this career track and I know why I'm with this company as, as each person better understands that and you consciously have discussions about it. Like engagement happens. Right. And, and if companies took more time to do that ongoing. no matter their structure, be better workplaces. There'd be better places commerce. Like if there was this conscious decision that a business should care about that and should care about engaging their employees in those conversations.
Andy Farquharson: Yeah. Yeah. I think that's a common thread that I've heard in quite a lot of these ⁓ interviews as part of the podcast is that like this type of leadership does not require that ownership, but when you do combine it, does sort of, it creates a, it creates another platform that sort of help people understand that make them more connected to the outside.
Kevin Clegg: Yeah. mean, like we didn't have full transparency in our financials prior and afterwards we did. Right. So just the, everything outside of somebody's own individual wage is now like completely open and transparent. So every expense, every cost is there. And that wasn't before. ⁓ but it seems natural. Like if, if we're all owners in this, then
Andy Farquharson: Mm-hmm. Okay. Yeah.
Kevin Clegg: the financial part of ownership matters and we should share everything openly and make sure that there's opportunities for people to their opinion about where we spend dollars and where dollars go and that of thing. And that's a really powerful tool. And it's a scary tool if in full open financial disclosure, an owner is taking 95 % of the dollars and you know how much those dollars are.
Andy Farquharson: Thank ⁓
Kevin Clegg: And you're looking at it as an employee going like, I mean, I'm at her too. Like, I think I'm valuable. Like, is that really the way this works is if you can find a way to start it, you keep all the dollars for yourself or like, is there is like, anyway, I think some owners are
Andy Farquharson: Yeah. You got me?
Kevin Clegg: Yes, I do. And I can hear you.
Andy Farquharson: So financial transparency is obviously scary for a lot of owners, but I think that's only sort of one of those elements which are really important as part of that transition towards employee ownership. I I'd love it if you could just take us on a little bit of a journey of what it looked like once when you introduced employee ownership to your workers and how you took them to a place where they felt comfortable as owners.
Kevin Clegg: Yeah, I, if I'm being honest, I mean, we're three and a half years in, and I think it's, it's still happening. I don't, I don't this idea that you just flip a switch and, and, and I'm an owner isn't real. And I, and I think even, uh, even some owners don't act like owners. Like, I guess if you're looking at the sense of like, uh, if you're looking at, uh, an owner, meaning something to where, uh, you're balancing the needs of self and others appropriately, right? Like, so, um,
Andy Farquharson: Yeah. Yeah Thank
Kevin Clegg: When, when we transitioned, we with everybody like, Hey, at this point, there's going to be profit sharing and there's going to be a profit waterfall. And profit waterfall means that we have to be financially responsible that you don't like a, owner that's operating the, ⁓ the, business a financially responsible way doesn't just take the profits and spend them, but many do right. Like, and then they go out of business. Right. So
Andy Farquharson: Mm-hmm.
Kevin Clegg: Here's the precautions or things that we're going to do in our waterfall to ensure that we have a financially healthy company for the long haul. Right. And then it's like, meet our financial obligations. So any of the debts that we had through this transition to employee ownership, we meet those first and foremost. And then we reinvest back in the business X percentage. And if it requires more than that's less out of our pockets, but that's not, that's not like, that, ⁓ no, that sucks. It's like, ⁓ good, like we're investing in the long haul. This is going to be great, great company for, for us and for the people after us, right? Like we have to be financial responsible on that front. And, and we make sure that we put aside dollars for rainy day, right? We build up a nice cash reserve and we don't hand out all the profits at the end of the quarter. We hold some and make sure that we're watching through it through the course of a year of like, what's going on? What are the headwinds we're facing? Like, should we really be distributing all these profits and
Andy Farquharson: Congrats. Yeah.
Kevin Clegg: And we do some for charitable causes to remember that it's not just about us, that there's other people around us and we should be not just thinking about what's good for us as owners, but what about our community? What about others in the world? Like, is there other people that we can be thinking about as we're trying to balance kind of the financials of the company? So we had discussions about that and we still do ongoing every quarter. We'd have a profit waterfall conversation and and share with people where the dollars are and where they're going and business outcomes and what's coming in front of us and, and what's left at the end of the day for distribution. And, and we like, that's never going to end. Like those conversations are going to keep happening. And, and there's always going to be some people who feel a little disgruntled at times, like our business generated a lot of profits compared to the other ones. Why do we have to, share as much as we're sharing, or do we really have to give disparity? Like, I think that we also have to embrace the reality of that human nature is real. and maybe leaning to a little bit, right? And we're still trying to figure out what that means, but like, we shouldn't be surprised when people act that way. We should anticipate it and just keep open conversations going and know that we're gonna keep swinging a little bit, With to get back to center on how we do things like this.
Andy Farquharson: Mm-hmm. Yeah, what else? And like, you talked about some of those challenges, but does that, is that happening in those meetings when you're talking about that? I mean, are you having a real conversation around like, this is what we're going to distribute this year and or this quarter. And have you had situations where you've had the conversation and you guys have changed what that is based off sort of a consensus from within the group?
Kevin Clegg: like in the, in the moment. No. I you get a little bit more, of like rumbling that's happening before or after, right? Like where there's like, gosh, man, we, we sure, we sure generated a lot of the profits this year compared to other people. It's like, ⁓ okay. You're feeling like maybe how we're doing this isn't fair. Like, let's talk about that. Right. Let's, let's talk about what does fair mean and like why. Why would one business who generates more share with others, right? that like, there's not necessarily a right or wrong to how you share, right? But like, it's just what was set up. So like, we might be frustrated with it, but like, like, ⁓ are the alternatives? Like giving people a chance to kind of just think through their emotions and why they're feeling the way they're feeling. And I don't think that those happen as often in the group meetings, at least for our group. It hasn't that the voice was heard as much in the, in those quarterly sessions, as much as just like the followup afterwards, or you're walking around one-to-one and just like, ⁓ yeah, any thoughts, any feelings, how did it go? Like, and, and a little more openness for the one-on-one chats, as opposed to like big group meeting chats. And I'm hoping that we, as a company that we progress down a path where, where some of those things happen in, the larger chats than, not necessarily in the one-offs because people are feeling more more comfortable to voice their opinion in front of others, right?
Andy Farquharson: for lot of people to be able to have an opinion about profit distribution and sort of company performance, we're looking at financials, it probably takes like, it takes a, they need to learn a new language. It takes more education and understanding. How did you guys approach that at Clegg across those four different sides?
Kevin Clegg: Yeah. ⁓ I think initially when we first started, ⁓ we probably gave people more than they, than they bargained for. yeah. Like starting to talk about all the different line items, right. And, and you see people's eyes glazing over after about 10 minutes, maybe even five minutes of just like, I don't know what you're talking about anymore. Right. Or I don't get how I can influence that. And so, ⁓ the week.
Andy Farquharson: Like, so more education and progress, yeah. Thank Yeah. Yeah.
Kevin Clegg: we got to a place where it's, less discussion about every line item and more about here's to line items and anything you want to talk about, can. Let's, ⁓ what are the ones we can impact the most from a day-to-day standpoint and, and ultimately as part of kind of, we do several courses. We have an own my life, own my career and own my company, like courses that we, that we work through with. ⁓ with everybody and in the on my company course, there's a section that that gets that for me personally in my job. How do I impact cashflow the most in positive and negative ways? And I think that's where it becomes a little more real for how how they how that a profit and a loss statement matters to them because now they're seeing in their own job like what what that looks like and what that feels like and and a chance to kind of say, yeah, I can see where I'm impacting it.
Andy Farquharson: Okay. Yep.
Kevin Clegg: up or down based off of my own personal decisions or behaviors inside the business.
Andy Farquharson: Yeah, okay. So like you take into the point of like giving each employee their own contribution margin or a pathway to understand like how you can like you as an individual, like this is how you should read the balance like the income statement for you for your company, for your role. So yeah, okay. And you talked a little bit earlier about they're obviously participating in the conversation around distribution. mean, what are some other ways in which you have
Kevin Clegg: Yeah. Yeah. Yeah.
Andy Farquharson: enabled your employees and owners to contribute to decisions that being taken on behalf of the company.
Kevin Clegg: Yeah. ⁓ what I've found from, from early on is like, if my job is a mechanic and what I love about being mechanic is you bring me a problem and I get to figure out what it is and I get to fix it and make it right. And that's what I love. Right. ⁓ and if you approach me and say, should we add another five days of paid time off? I don't know, but sure. Like if it, if it gives me something more yet, but like,
Andy Farquharson: you
Kevin Clegg: What are the pros and cons? I'm not thinking about that all day long necessarily. Right. And so as, as we've approached this idea of, people having a voice, in the nature of the job you do and your expertise, that's where the, maximization of your voice should be felt and heard. And as it gets further away from your area of expertise, then you get a chance to react to what somebody else proposes with questions or concerns.
Andy Farquharson: Yeah. Okay.
Kevin Clegg: but let those people make decisions of what they think is best based off of their role or expertise. And then I get a chance to like question it or accept it and that goes smoother, it goes faster and it just makes more sense. So this idea that while making the decisions on everything is crazy, right? Like we're not. So like when we looked at, we didn't have a paternity policy, we had a maternity policy where there was some paid time off. And we kind of looked at each other and said, maybe we should have one. And instead of just asking all the employees, like, should we have one? And then going like, I guess so. And, and we say, like, how many days do you think it should be? And they're like, I don't know, like a day, five, like, like we went out and looked at the marketplace. We looked at other companies like us. We looked at people not like us. And we kind of said, like, most people don't have one in our space, but, why can't we like, like, shouldn't a dad be able to connect with their kids and get paid for. for time off and not have it be a burden like for some time for connection, just like a mom, like let's do something. So we researched, did something, proposed it and said, here's what we did, here's the research we did, this is why we chose this. And we tried to just come up with the best judgments around this and we think it's a good idea. Now's your chance to react to it. And if you like it, we're gonna make it official. And if you don't, now hold your peace, right? Like this is it, right?
Andy Farquharson: Yeah.
Kevin Clegg: And we've used that model generally for how we do things in the company for whatever area of expertise you might be in, whether you're in accounting or HR or wherever is make call, do your diligence, explain to people why you made the decision you made, and then give people chance to react to it. And it seems to ⁓ be a good model so far. So we're not voting on it. It's not a one person, one vote, like a cooperative. ⁓
Andy Farquharson: Yeah, awesome, did it.
Kevin Clegg: It's a chance for a reaction and, and, uh, inputs and, and, hopefully we're the people in that are in those functional areas are making good decisions. Um, and, um, and, uh, if there's questions or concerns, we've, we've got space for people to hear back about it and we'd go back to the drawing board if we had to and, and do it again. Right.
Andy Farquharson: So was it difficult sometimes to get these people in these functional areas? Like where they've got this area of expertise to then potentially take on a new skill of going and researching solutions and putting together a business case of what this may look like and then building conversations in the team. Was there some hesitancy from some areas of the business for that? And how did you guys help them?
Kevin Clegg: We're still small. so, we're, we're 60 ish employees and, so, like the, number of people that are in areas of functional expertise, like, ⁓ there's not many of them. And, and I still play a, ⁓ a pretty prominent role in, ⁓ supporting of them in that. Right. So we've got one person wearing hats of marketing and HR and benefits and various things. And so.
Andy Farquharson: you
Kevin Clegg: As research gets done, I'm looking at it, weighing in and providing some inputs and so forth. so there's of call it the small leadership team that's working with the shared services groups that support the four ⁓ businesses. It's We're small. as we got bigger, there would be opportunities for more of that more people to come in and kind of own more of those pieces. ⁓
Andy Farquharson: Yep. Yep. That makes a lot of sense. The results that I've read about in year one, after your transition where like profits more than doubled, mean, that happened without raising prices. What was it that drove that? Do you think if you put that down to the change to the EOT structure?
Kevin Clegg: Um, a piece, a piece of it for sure. Uh, after your first quarter, uh, which wasn't like, the first full year in employee ownership, uh, uh, that would have been, um, 2023, um, was the year that we saw those results in 20, the end of 2022. Cause we transitioned mid year. Like there was profit sharing after the first quarter and it was larger than anything that anyone's seen before. And it was like immediately like.
Andy Farquharson: Okay.
Kevin Clegg: Holy cow, like you transition this thing and like there's like instant dollars available. like, like there's light bulbs going on of like, this wasn't just talk and this wasn't just like, whatever, like, like our behaviors, the things that we do matter. And when we're more profitable, I get some of this and I see it, it's real and it's tangible. So there was an immediate like kind of light bulb effect of like, okay, this is for real. And we structured the deal.
Andy Farquharson: Wow. Yeah.
Kevin Clegg: So that the former owners weren't getting all the profits until they were paid off. We structured it so that everybody got something from day one. ⁓ and owners would get paid out over time. And so think it's, ⁓ would recommend that people transitioning all do that. Like it's why not? Like that's part, that's how you create something that says everybody matters because what ⁓ actions are, what determine what you really intended. Right? So if all the former owners got all the dollars first.
Andy Farquharson: Yep.
Kevin Clegg: then they matter more and they need to get their piece before anyone else does. And it's kind of like, why? Like, couldn't you structure it to where both are winning along the way, right? So, yeah, that helps ⁓ lot. ⁓
Andy Farquharson: I can imagine, yeah, putting a big chunk of change into people's bank accounts, really helps them feel it.
Kevin Clegg: Yeah. And then, and then like, we had two businesses, our body shop and, and, and one of our locations that were, the two newer businesses that were still like, kind of like on the cusp of profitable, right. And when suddenly I get to share in those profits, the acceleration to profitability, I think we were on a, ⁓ were on a trajectory that was pretty low. And all of a sudden it went like this where we're just like, let's go. Right. And so, so you, you saw behaviors and engagement that caused us to quickly go to profitable instead of something that probably would have taken us, many, many more years. ⁓ it would have taken us three or four years to get to the levels that we got to the very next year, because it was suddenly transparent in the financials, the dollars that would come in could be shared and And, and also there's a level of each of the shops, see each other's behaviors. And I don't want to be holding the others back. So like, like I want to make sure that we're doing our part. Yeah. It's there. Right. Like, and, we are, you know, each business wants to do their part of do their share towards contributing to the, to the profits of the whole. Right. So
Andy Farquharson: Yep. positive peer pressure. just so great to hear that that impact happening so quickly. I could you share some examples of like what some actions that you saw some of your team doing on the workshop floor? Was sort of reducing wastage ⁓ or of just sort of focusing on like getting, don't know, getting like finishing sort of jobs on time? What did that look like?
Kevin Clegg: Yeah, could point to just kind of specific ⁓ in time. Like the fourth quarter of the year for us is usually the slowest. were sitting, I think it was in an October timeframe and business was really slow and we hold half of our profit sharing for employee distribution, employee owner distribution, till the end of the year. So we pay out half of it in the quarter that transacted.
Andy Farquharson: Mm-hmm. Got it. Yeah.
Kevin Clegg: And then we hold it because that's a good business decision to not pay out all your, your, your profits intended for ownership immediately. Right. And we're looking in October that if we don't turn things around, there's going to be no profit sharing of that half. Like it's literally trending that badly. And we just did, had a quick little rally of the troops and said, guys, like our profit sharing pool is in jeopardy. Like if we don't do something about it and something looks like just maximizing every, phone call, every customer experience, like, like making sure that if someone calls in that we're getting a chance to quote that business and to look at that car. Cause if it doesn't come in the door, we have no chance. So let's get them in the door. Let's get a chance and let's, let's make sure that we're doing everything we possibly can. And ⁓ that month, right. itself. And,
Andy Farquharson: you
Kevin Clegg: we still had that big profit sharing payout in December. And I think that has everything to do with they're on the receiving end of something. have access to financials for everybody and just saying like, hey, like this is what's going on. Like let's do something about this. And ⁓ that means every, like there's more smiles at the counter as people are coming through the door. There's a change in the vocabulary used. ⁓ the techs more on their game to get that car finished and out so they're ready for the next job so that we get a chance for one more car a day, right? So all those little behaviors matter and you see that.
Andy Farquharson: That's awesome. I love hearing that. That's very cool. So Kevin, you've talked about a vision of next generation holding company, is sort of acquiring these businesses from these like from the Silver Tsunami of retiring owners, putting into a trust. and like, it back. and then sort of creating more, yeah, a hold co, like a conglomerate of these companies. I mean, what do you think it takes to bring that vision into practice?
Kevin Clegg: Yeah. ⁓ and you had mentioned earlier with first EOT in the U S first holding holding company EOT there, there was, there was a handful of before us, just as an EOT. the, mind, like, is something's broken. ⁓ I look at in the, in, workers in the world and it's, and it tells us it's broken. Right. So you've got to change.
Andy Farquharson: if you hold them together.
Kevin Clegg: the way you're doing things to get a different result. And I just, and I think it's, we're far past the time in doing that. So I'd love to see like, there's some sort of movement, right? Collective movement that starts to engage many people, not just a handful of people. And so the idea was if we set up this hold co, ⁓ we could grow inside of our space, ⁓ the automotive services space, but we could also invite others to come join us maybe in home services or other service sectors. And maybe at some point it moves into products. product-based sectors, like, not figure out if we can, like, what would this would look like at scale and, and, and, and be the part of creating something that looks and feels like a movement. I'm, ⁓ actually from having had the experience of actually acquiring our first company post transaction. And for many reasons, it not going very well. and just having experienced it really Raleigh, the, the, need to have to shut that down. ⁓ like, is there, is a real reminder that business is hard, like forget whether it's employee owned or not, like, ⁓ running businesses is hard. And this idea that you can acquire a small company across the country and help them ⁓ convert employee ownership and they're going to make it and it's going to be easy. Isn't real. Right.
Andy Farquharson: Yeah.
Kevin Clegg: And so I think the, vision of where this is shifting to that I think could be a reality is something that's going to look more like perhaps a cooperative, a business cooperative, not an employee cooperative. But what if I could get 10, 15, 20, 30 other auto companies to come together? And what if we created at the center, this, business cooperative that's owned by all of us. And that business cooperative is providing employee ownership services that would like, because like creating that culture and the transparency and maybe even having some finance or accounting or marketing or hiring services, because all these small shops will like, let's face it, a small shop, it's difficult to do all those things. Right. But if we created a business cooperative, we're, moving more to center saying, we're not doing this on our own. approaching this abundance mindset. We're going to agree to kind of create the structure that perpetuates.
Andy Farquharson: Yeah.
Kevin Clegg: employee ownership and engagement as much as possible. and we, and we don't have to own all the locations everywhere. We're just like, let each group have their own ownership structures, as long as it's still employee owned that preserves employee ownership ongoing. They could adopt our purposes or they could create their own, but generally speaking, we're aligned on similar purposes in order to be a part of the cooperative. You, start that and model that. And then we invite other industries to do the same. Maybe we push back to more towards center on a more cooperative world with many people coming together in this, in a structure like this and connect these all together in some way. I think we could create a movement. I think we could create something to where this becomes more mainstream. And we're kicking off a little working group. to, with a number of, of individuals of interest across the country to, to say, what, what would this look like? What are the pitfalls of it? Who could we learn from, from groups that have done something like this before to see if we couldn't get, get a first one, like kind of propped up and, and running, and then keep going from there. And that's, that's the current state of things is, is it's where we're at and what we're thinking probably might be more viable than the idea of a singular hold code. you know, diverse and trying to acquire and own, you know, tens or hundreds or thousands of companies in and of itself.
Andy Farquharson: Yeah. Well, I think that we do see some examples of some, ⁓ hold codes trying to do this with employee ownership, which is great. And sort of putting that a big part of that, that piece around sort of that broader cooperative movement that's very inspiring and super exciting. look, I'd love to maybe have you come back on and ⁓ about that a little bit more. And also that it's something that like, ⁓ guess I'm over here in the Nordics and ⁓ see a lot, there's a really strong corporate culture here. ⁓
Kevin Clegg: Mm-hmm.
Andy Farquharson: both in Finland, but it's sort of big in Denmark and in Norway and also in Sweden, a lot of it's focused around certain elements, like the agri-style cooperatives, and then there's these consumer-based cooperatives, but not so much around worker cooperatives. So in these other cooperatives, the money is still sort going towards the shareholders and not distributing the wealth. And I think this is where this worker style cooperative conglomerate super exciting as a way to solve engagement and the equality piece.
Kevin Clegg: Yeah. And I think, ⁓ I'm not as enamored to be honest with you with the idea of a worker cooperative with the one person, one vote as a, as an initial structure. It's, it's an actual business cooperative, like you are referencing where, ⁓ where, where the individual businesses have the vote in managing the cooperative, but inside of one of them, the expectation is, is to join this specific business cooperative. Your company has to be employee owned.
Andy Farquharson: Yeah, yeah, yeah. need to be employed.
Kevin Clegg: or on the path to it with certain parameters, right? That's the part that getting a group together to kick around of like, what does that mean? What does that look like? Cause I don't think, I think it's aspirational that you can get all of, all of the workers to be thinking about their needs and other people's needs and the, and the weight of a vote and what that means and doing what's right for myself now and for the next generation when human nature kicks in and makes that really difficult and challenging. And so I, Aspiration, I'd love ⁓ think that worker cooperatives will be wildly successful, but I think business cooperatives can be. And if they espouse inside of that business cooperative principles of employee ownership, I think that hybrid could be really powerful.
Andy Farquharson: Yeah, I'm 100 % agree with you there. I think that that is, it's that bridge between sort of these sort service and army businesses that are set as a structured, not structured, a cooperative and creating a vehicle which can use them for transition. So yeah, it's very excited to hear more about that, Kevin. one thing... One thing I like to finish on for each of these podcasts is a fast round of questions, where I'll just ask you three quick questions and you offer a response. How does that sound? All right, so who is a leader that you most admire in employee ownership?
Kevin Clegg: there's so few, individuals that are doing it yet. ⁓ the, the leader that I admire ⁓ the so far is someone who's on the journey to it. His name is Jim Holler ⁓ and, his company is Villicus, ⁓ federated and ⁓ he's a mission to, to acquire, the, ⁓ the ⁓ of and the entire supply chain for it to be employee owned. So that from field to table, that supply chain reverts back to the worker owning it, as opposed to what we have today with mass acceleration of a few individuals acquiring up all the land. And so I love what he's doing. I love where he's going and his life and who he is and how he has lived it and the causes that he cares about, like it's been super inspiring.
Andy Farquharson: Wow, that sounds super inspiring and I'll definitely be digging into Jim Hollow. So then the next one is, what is your favourite resource on employee ownership?
Kevin Clegg: ⁓ it's actually a gap that there's not a great resource on employee ownership. you've, you've got kind of like some factions of business cooperatives and, and, ⁓ ESOPs and there's various tools that are available for them. I'd love to see that the space comes together better to where there could be something that kind of, whether it's open source or it's, everybody contributes and what gets used, ⁓ there's some sort of kickback like. I'd love to see something like that get created so that there is a place that I could say like, this is the best place to go. It feels a little bit like everybody's navigating wild, wild west and figuring it out for themselves. And I don't think we've hit a place where I can say that there's a, a singular or powerful group that's consolidating best practices around employee ownership.
Andy Farquharson: Okay, makes sense. And I agree, there's lots of different sort of disparate resources out there, but very difficult to identify that one. And then lastly, the fast question, what would you say to a business owner who's sitting on a fence about a transition to an employee ownership model?
Kevin Clegg: there's nothing ⁓ than preserving what you've created and there's no better way to do it than in my opinion, than employee ownership. it's not, it's not easy, but it's totally worth it. And that idea that as you exit, you know that what you've created because you genuinely care about the people you've gone shoulder to shoulder with and the customers that you've cared about and served.
Andy Farquharson: It's awesome.
Kevin Clegg: Like, and that thing that you've started could be preserved and protected and that you can share, this, this wonderful thing that you've done with, with them ongoing. Like, how can it be better than that? Like you, you exit, ⁓ and either stay with it for awhile and keep working because let's face it, most people don't want to, don't feel so great once they've exited and now they're wondering what I do with my life. Right. But like, keep working if you can keep perpetuating that. And this structure, it doesn't get much better as hard as it might be. Like it feels great to know that you've created something that can perpetuate goodness for, employees what they love and customers who just want great service.
Andy Farquharson: Kevin, what a great way to end the pod. And thank you so much for the conversation today and for putting up some of those technical difficulties. Much appreciated. But if people want to go follow your story about this business cooperative or your next steps, ⁓ can people go to learn more about you?
Kevin Clegg: That's a great question. I don't know that I've done a great job of, actively perpetuating that, but I think you could hit our website. That's a clean.com that's, probably the easiest way to kind of find us. And you could reach, you could reach me through that or find me on, on, LinkedIn. I'm happy to just chat with people one-on-one. I think it's as, ⁓ on here, like way of.
Andy Farquharson: Thank you. ⁓
Kevin Clegg: of helping people get connected.
Andy Farquharson: Awesome. Kevin, thank you so much for your time. Thank you for the leadership in making this transition happen for the Orion Company and ⁓ inspirational next part of the journey. So thank you very much for joining the Alternative Exit.
Kevin Clegg: Thank you, Andy. Appreciate the time with you.
