Andy Farquharson: Hello everybody and welcome back to the alternative exit. Today's guest is Bob Whalen. Now he is the CEO of HB Global. So this is a Pennsylvania based whole code, like behind a bunch of brands like HB McClure, IT Landers, William R Nash and a bunch of other companies across the East Coast. Now Bob's story is different to most other people we've had on the pod and really unique and such a great perspective for the audience that we've got. Cause look back into the 2008, uh, Bob purchased HB McClure, which was a 94 year old third generation family business. And within two years, he'd actually transitioned the company ⁓ to be an Aesop, 100 % Aesop in 2010. And so since then, the company has been on a tear. It's almost 10x their revenue, competed close to 20 acquisitions, and created almost over 110 million of value sitting inside the employee owners Aesop. So Bob's had a huge impact. Now, if that wasn't credibility enough, he's also gone away and authored a newly minted book called Beyond Your Ownership and how employee ownership can align your purpose, people and profit. So, Bob, welcome to the alternative exit.
Bob Whalen: Well, thank you and excited to be here.
Andy Farquharson: Yeah, mate, it's super excited to have this conversation and sort of delve into a lot of elements, I think. But look, I wanted to start off, you walked into a 94 year old, third generation family business, and then you quickly made that transition to turn that into an ESOP. mean, what did you see sort of in the transaction, in the company, in the team that made you think the ESOP was going to be the right answer?
Bob Whalen: Well, you know, I think it's really important to be authentic, you know, relative to this transition. And like it was not what I was thinking, you know, when I was coming in, you know, much like a lot of young entrepreneurs, you know, I was really focused on the things that I wanted to accomplish. And, you know, I did an executive MBA between 2000, 2004 and really came out of that with an opportunity. I wanted an opportunity. run and operate a business ⁓ myself. And it was really based ⁓ my thesis was, if you ran it like a sports team, you got everybody running in the same direction that you could produce outsized results. And so that's really what I was doing coming in. Well, of course, ⁓ I bought a minority interest in H.B. McClure, how to deal with the former owner, ⁓ buy the rest of the company out over time. And I come in in 2008. and we're in recession and don't know it. And, you know, it's just the train wreck that I'm, you know, because of how our business operates, you can see the train wreck that's coming, you know, that's going to happen to you. And so I went looking for ways to make the deal cheaper while still trying to, you know, live up to what Bob McClure and I had agreed to. And so to make a deal cheaper, one of the things you do is to make it tax more efficient. ⁓ I went looking for that. came out of the employee benefits arena, so I was aware of ESOPs. But one of the first things you come to is an ESOP will be much more tax efficient than any other structure of corporation. And lo and behold, it perfectly aligned with what I was trying to do for the company. And what I really wanted as opposed to owning the financial future of the company, I wanted an opportunity.
Andy Farquharson: Mm-hmm.
Bob Whalen: ⁓ to lead this business, to operate this business, and it led to that. And over time, it has evolved to be my passion, what I'm about professionally. I'm really quick to say, it's not my life's purpose. It fits into it. My family is the highest thing on my priority list, but it's really important to me, and it's just become... you know, a huge part of, you know, what I'm trying to do in business from a purpose standpoint. And it's been quite a run so far and we got a long run to go hopefully.
Andy Farquharson: Yeah. Yeah, it's been a phenomenal run ⁓ to say the least. I think just we've had a couple of guests on the show. So you think about like Michael Morosi from Southeast Acquisition and Eric Strickland from ⁓ 3LS. And I think what that really what your story ⁓ I love, it highlights is how the power of ESOP, how that can really help the entrepreneurship through acquisition story, how that can sort of help people to find new ways to enter into this world of ownership and especially during this sort Silver Tsunami where we've got sort of everyone's we've got a lot of businesses who are looking for new owners and new ownership groups. So yeah I love that story about sort of just a creative deal making has led you on this path. ⁓
Bob Whalen: And we really co-study along with what's going on in the ESOP world with what's going on in the ETA world too. I mean, we're very, you know, connected. One of the ways we're scaling what we do within HB Global is really to think about it from an ETA standpoint, from an individual standpoint. You know, we're not doing a fund where we're funding ETA, but we've identified people within our organization and within our contacts where we're essentially doing that.
Andy Farquharson: Amen. Okay. Yep.
Bob Whalen: You know, we just acquired a business where the operator of that business is looking, you know, to potentially do something, you know, new and additional on to what he's doing. And so we're looking at opportunities for that. So really, we've spent a ton of time, you know, studying ETA as well, you know, and think it's a really important lessons, ⁓ you know, that can be gleaned from that. ⁓ tons of valuable literature ⁓ from the ETA world. I'm a big follower of what Harvard's doing from that perspective. ⁓ one of the things that we've always believed in very strongly that they try to encourage their ETA folks to do is to be patient, sit and don't do anything when you first get a hold of a business, because you don't know. And almost everybody ignores that advice. It's a big part of what we do.
Andy Farquharson: Hahaha.
Bob Whalen: from an acquisition standpoint, it's like, you know, we do due diligence and we think we know a lot about the business, but you know, just, you know, a small percentage of what you need to know about a business, just, you know, get a hold of the business and just watch and learn and, and, and glean what you front. So there's so many connections between ETA and what we're doing as a holding company ⁓ for an ESA.
Andy Farquharson: Yeah, the sound of sort of creating these like effectively internal entrepreneurs and residents like that you've got sort of within your within your Holocaust and finding new homes to them and if you're able to grow, sounds super exciting and really, really interesting. But I want to sort of take a bit of a transition and think a little bit more to your leadership philosophy. I mean, you did talk you talked about sort of wanting to create more of a sports team. rather than a family. You didn't say rather than a family, but a lot of people talk about businesses as family. as a sports team, feel is a great and much better analogy. I how do you think about the difference between that sports team sort of being a focus versus just sort of a financial structure of an ESO?
Bob Whalen: Yeah, it's so, you know, I've played sports, I've coached sports through my kids, I love sports, you know, and over time you've just watched the teams that have performed best. And what you found when you look at the teams that performed best, certainly talent's a big part of it, you know, and we want to have, you know, talented business professionals within our company. ⁓ But it's really putting the team first and get everybody to understand what the objectives of the team are and then really doing your job. Bill Belichick talked about doing your job ⁓ and we all have one. And I think an important component and what really ties ESOPs to that is then we all share what we create. So instead of everybody working for me, You know, which is basically when you own 100 % of a business and you're a business owner, what you're basically asking is all these people to do what's in the best interest of the business for my success. And we kind of flip that on their, on its head and basically say, we want everybody to succeed. That's part of our team. That if you're part of our team, you're going to share. And what we create, we do that in the short term through bonuses. We do it in the long term through ESOP. And of course that ESOP, you know, value. And, you know, people have heard me say, it's my Christmas every year when our ESOP values come out. I get a spreadsheet with every single person's value. ⁓ And that really, why that's so exciting to me, because it's a reflection of what we've produced together as a team. I was always, and I've watched this, and I had a child that was a really high performing athlete that did great things.
Andy Farquharson: Yeah.
Bob Whalen: when he was at his best is when he was focused on the team. When he had to go and perform like in a showcase that was all about him, his performance wasn't as good. And so, you know, that's what we really believe that that is how most people are. And the more that we can get you focused on what's important to the team, then we all benefit from that. And, you know, it's paying fruit.
Andy Farquharson: I
Bob Whalen: ⁓ it's exciting to watch. You know it's exciting when you have a thesis and it actually plays out you know so ⁓ that's what we're trying to do.
Andy Farquharson: Absolutely. How do you, how have you been bringing this to life within your different companies? mean, you're like, yeah.
Bob Whalen: Well, yeah, I how we bring it to life is we believe culture is incredibly important. I mean, culture to us is, you know, everything. You know, we just did an internal podcast yesterday and we talked about, you know, collaboration being a superpower. I mean, really for a business, a superpower, you know, is is the culture. the main pieces ⁓ developing our culture have been around very consistently communicating ⁓ mission, ⁓ vision, and our core values. ⁓ that is ⁓ commercialized across our company. We say it over and over again and we talk about it. ⁓ that's just a start. You know, that's how you kind of articulate what you're about. That's how you give a language to your employees. ⁓ But a culture is really about the behavior. And one thing we recognize, you know, that cultural communication that we do, that's what we aspire to be. It's not what we actually are. And so we're on this journey to align our actual behaviors with what we articulate our culture to be. And as the CEO, I think it's most important that I don't do things, behaviors that are outside of that culture that work with me. because employees are looking for you to fall down. They're looking for, you know, for me to do things that are in my best interest, but not in the best interest of the team. And so it's just really important. You know, that's really important that we align those things. We're incredibly focused and I probably spend 50 % of my time one way or another, you know, focus on the culture of this business and getting people aligned with that and getting people Because I think, you know, it's really being long-term focused. You know, some of the things you do for a team don't pay off this second. They pay off down the road. And that's what, you know, we believe our track record now of 15 years of doing this, you know, really provides a track record that we can rely on and say, look, this really works. If we really do this, we can really make it work. And there's so many aspects to that. You know, that's why I, you know, I've been asked, you know, why do you give away your secret sauce? Because just like, you know, a Toyota system, there's so much to it and you've got to do it all. And if it's not all aligned and if you don't behave that way, it's not replicable. And so you've got to really do it every day.
Andy Farquharson: Yeah, it's also, it's also not easy. Yeah, like, I sort of giggle a little bit. It's sort of like, Hey, yeah, don't give away the secret sauce. You don't know. It's fine. If you want to go do the hard work and execute it and live it every single day, all the better for you. Right. It's yeah, I always sort of giggle at that. Like people just go, no, like you can, there's no, it's, it all comes down to what you do with that information. Right. So, like,
Bob Whalen: Yeah, and it's part of our culture. We're not a zero sum game. We don't view it in a zero sum way. I believe that I've actually done better because we've done the ESOP personally, because there's 2,000 of us working together to make this happen and we're creating great things. And if there was anybody that would be upset about doing an ESOP,
Andy Farquharson: Yeah.
Bob Whalen: because of all the value that's been created, not in my pocket to somebody else, it would be me. And I couldn't be more thrilled to see what's going on with our people. And yes, maybe I could have created more money, but this is aligned my behavior. gives me a passion. This team I'm passionate about. I love seeing all of our people succeed. And so it's just a thrill to me. And it's those things that I take the most pride in. you know, not the fun stuff that I get to do personally, although that's important too, you know, and I love doing it.
Andy Farquharson: Yeah. So you talk there about having confidence that you've brought up over these 15 years that you know that these investments that you're making in culture are going to have a payoff, are going to have a positive payoff. When we see companies who are about to make that transition towards an ease up or considering employee ownership, they want to, some of the few people who want to think beyond the transaction and want to invest in the culture chain. but they don't know how. They underestimate, a lot of people underestimate the time, effort and investment required to make that cultural change. How do you, if you sort of combine the clock back to 15 years ago, mean, how did you thinking about, how did you get confidence to make those initial investments? Because a lot of it's mainly in people's time, right? Like you're pulling people away from their work to really drive this culture home. So yeah, how did you think about that back in the day?
Bob Whalen: Well, it really goes back to my formidable years in business where I started. I started a company, Continental Medical Systems. Right when I came in, we brought in a new senior vice president of human resources, Frank Fritch, who's become a very big mentor of mine. And that's what he brought to the company. And we were very focused on it and we aligned our culture and it was really important of our behaviors. Fast forward, the two of us go to work for another company. integrated health services that said we want to be the employer of choice. But not one behavior that I ever saw them do was aligned with actually doing that. They said that, but they didn't do it. And so I saw the dichotomy of these two things, you know, and I was bound and it fits my personality. You know, I want to be what I say I am. You know, I don't want there to be any kinks in the armor. And I just came away from that, seeing the value of how that plays in a team, how important it is when you say something that you actually do it, and then vice versa if you're the opposite of that, the effect that it has on your company. And so that's really where it started. It played right into the philosophy of what I was trying to do around team. And then I just blindly ran down that road. It was just... You know, and I do think about it a little bit differently. You know, you know, people will say like your mission and your vision, your core values is what your company is. I don't believe that, you know, for me coming in from the outside, you know, those things when they started were what we aspire to be, not what we truly were that day. In fact, we had core values that didn't really fit my personality when I first started. And I found that doesn't work because That is one thing I've come to believe over the 15 years that's different, is the CEO really needs to own what the culture of the business is. Everything you do has got to be built around, and if the CEO doesn't buy into that stuff, it absolutely will not work. And I'm very people focused, I'm very interested in what goes on from the people that participate in our team. So it made all the sense in the world to me that that's the area of focus we would have as a business. It's not the only way to run the business. don't even, you know, I would say like Amazon is very focused on the customer and they have changed the world. ⁓ you know, we are focused on our employees and I think we are giving, you know, just incredible customer service because we have employees that are engaged and treated well. and feel good about who they work for and have a lot of pride in it. And so we do it through that mechanism. You know, there's multiple ways to do it, but I, you know, back again to discipline about aligning your actions to how you go about it. And there's a whole bunch of different ways to go about it.
Andy Farquharson: Yeah, like I do love that. mean, the aid sort of the element of just, like it was just blind belief. You just got to go and run with it. And trust, it's not, it's obviously, it's not just, you're not taking that just from your business experience as well. Like there's your sporting background, probably from sort of playing, participating and watching as well. Like there's so many different parallels where we, guess we've seen those examples.
Bob Whalen: Yeah, but I think it's really interesting that you pick, you know, it's, didn't like sit down and consciously say where, we're going to, it was just, it was ingrained in me, you know, it's, it's like, you know, every experience came through that frame and I just blindly just, you know, ran down that road and see its importance and see our alignment to the, to that is important. We talk about using it as a language when things you know, aren't the way you think they should be as an individual employee gives you a language to talk about that. can say, hey, look, I think this was a trust deteriorating, you know, action, you know, we go, you know, we and I view that it's our job to explain that too. You know, and there are difficult decisions and there are things that may not be in the best interest of that individual employee, but are, you know, in the interest of the whole. And those are, those are still incredibly difficult. ⁓ But it gives you a language to talk about those things and how you're going to do it.
Andy Farquharson: So when you're going into, you're looking, I mean, you guys are being reasonably acquisitive, you're buying companies, when you're looking at them, what are some things that you sort of, you look out for to see whether or not it's going to be a cultural fit or is that something that you do look at?
Bob Whalen: No, we absolutely do. I think the nice thing about our process and what we articulate, you know, ⁓ we realize we're a niche, ⁓ acquisitive company, you know, so we, you know, we're not trying to do every deal that's out there. You know, there's a very, ⁓ it's a niche, ⁓ company that we're trying to acquire. And so we articulate what we're about and what we're trying to do. ⁓ we also are looking for that alignment ⁓ the companies. And I'll tell you, of all of those deals, almost all of them, they could have gotten a higher price by selling to somebody else. But they do a deal with us because we're going to get that owner the liquidity that they're looking for out of their exit. But at the same time, take care of the employees that got them there. and they kind of have to buy into that that's part of it. You know, like if, if in the unusual case that we're the high price, well then, you know, maybe that could be a miss. But for most companies, there's an opportunity for them to sell to somebody for higher price. So they're making a conscious decision that they want to get their liquidity and also take care of their employees. That is an alignment tool to about 75%. Then we're using the due diligence process to make sure that that really does align. You will see behaviors over time and that's part of what due diligence is about looking at specific risk, but it's an opportunity for you to pick up on what truly is inside of that person. Do we ever get 100 % there? And absolutely not. ⁓ And so that leaves the post-transaction period where we're in it for the long run.
Andy Farquharson: Yeah.
Bob Whalen: You know, we may not that a culture may start at 75 % or 80 or 85 % of where we are, but we're going to take those actions to align, you know, that subsidiary company with our culture over time. And we really believe that we'll get there eventually. And again, you know, it's, you know, one of our core values is grit. And one of the components of grit is perseverance. You know, it's like we're willing to do this over a very long time and they may not be that today, but someday we're going to get them there and we're going to by us doing the right things all the time. And, you know, I think that that's, you know, how we view it.
Andy Farquharson: Yeah. Yeah, awesome. So let's just sort have a look a little bit further. I'd like to go a little bit to understand some more. What are the actual things that you do as the whole code to bring the culture to life, to bring these mission and values to life on a daily basis?
Bob Whalen: ⁓ So again, a big part of it is we consistently communicate our mission, vision, and core values is that foundational piece of what our culture is or what we aspire it to be. Part of that.
Andy Farquharson: Okay. Do people get sick of seeing it? ⁓
Bob Whalen: They do, they absolutely do. just like, know, and how I would put it is Coca-Cola does a ton of stuff, you know, and you say, why are they spending so much money on that? Well, you know, it's reinforcing a comp, you know, a big language of mine is around compounding and compounding is not just financial, you know, it's really anything that continues to get better over time. And that's how we think of what we do there. So that is the foundational piece. All big meetings.
Andy Farquharson: Yeah.
Bob Whalen: You know, we're talking about it. ⁓ And part of that is our core values have specific behaviors, you know, as part of those core values that we talk about, ⁓ you know, that's part of it. you know, with trust, do the right thing. You know, it's, you know, not, you know, a difficult thing. You know, we know 90 % of the time, 95 % of the time what the right thing is, let's just do it. You know, so we talk about specific behaviors. This year we've done something You know, new, I'm a big, you know, you can tie a lot of my philosophical stuff to Warren Buffett and what he's done. And we've added principles and the point of principles is to give nuance to things that are important to us in our culture that we're trying to do. And so that's new and we'll do podcasts on that. We'll do written, ⁓ stuff out to all employees where we do that. We'll talk about it in manager meetings that we have. You know, we'll have just a ton of ⁓ communication we do around it. But we spend way more on branding internally to our employee base than we do branding our company to external.
Andy Farquharson: See, that's just not an investment you see many companies making.
Bob Whalen: It's, you know, but it's the truth, you know, it's the truth. ⁓ know, branding is not a huge part of our individual businesses out there. You know, our individual businesses may have 10, 15, 20 customers that are the primary. And so they do that through face to face and they're, you know, it's more of a sales process than it is a branding process. We brand through our great work over time.
Andy Farquharson: Yeah, I love it.
Bob Whalen: But internally, we look at what we're doing is branding and getting everybody on the same page. And, you know, it's I grew up as a wrestler. And what most people don't realize about wrestling is the tediousness of drilling a skill. Like literally, you drill a skill. over and over and over again. And it starts with the very basics. Even the Olympians will work on their stance. They'll think about their defense. There's all kinds of stuff that goes into it. And a business is no different. You know, it's about the basics all the time, doing it consistently. You know, watch a golfer on TV, you know, on the weekend. And every one of those golfers is most focused on their alignment because that's something that they could They're pre shot routine. These are all things that you get from sport, it's business is a sport. know, one of the things here, the great game of business, you know, here in the United States that, you know, has a lot of traction out there within the ESOP community is all about, you know, treating it like a sport and how it is. And there's so many things that come across and that's what we try to do.
Andy Farquharson: Awesome. Well, while we're on the great gamer business, mean, how do you, outside of the annual valuation, how do you enable your team and your workers to keep score?
Bob Whalen: So first of all, ⁓ and we've really used two consulting firms. The great game of business is one, but Grid Consulting as well, which is a big friend to the ESOP community, ⁓ is ⁓ we've used tools that they have. There's a board game that Grid has that we're going through, and we do it as part of our leader development program, but we're also gonna make it available to all of our businesses. to utilize to teach them the skills ⁓ of business. But I think for us, the biggest thing is we make it transparent, you know, and we teach business, you know, and, ⁓ you know, business is a skill set, you know, in and of itself. There's so many aspects to it, you know, how your price, how your market, you know, aligning what you do, what's important, you know, I talked about
Andy Farquharson: Okay. Mm-hmm.
Bob Whalen: you know, ⁓ Amazon before some of the, know, there's lessons that we can learn from Amazon that are valuable to us. There's others that are not, you know, that don't tie at all to what we're trying to be or how we're trying to do, you know, and it's picking those things out, ⁓ you know, and really being, you know, on one standpoint, you know, realizing the complexity of business, but making it as simple as possible. You know, that's what the one number is about.
Andy Farquharson: Yeah.
Bob Whalen: You know, you make it a too. If you can just get one number that you're focused on, you know, and our bit, the folks that are running our business, they know our number one number is return on capital. You know, so the capital we deploy in that business, we got to get a return on that capital. That is our one number one. You know, we will increase our stock price over time if we get a return on our capital. And so, you know, that is the starting place for creating the bonus pool.
Andy Farquharson: Okay.
Bob Whalen: you create a return on your capital, you're creating a bonus pool for your employee base. And it's that simple. Now we have some other things we look at too. We're an ESOP, we allocate ownership through employees. So we look at return on labor. So the return on labor drives how we allocate the ownership in our company. So we wanna be efficient at that. ⁓ And so we measure that as well. And so there's a whole bunch of different things we do. And that's why... It's so cumulative, it compounds over time, you know, and it's this, you know, you're constantly fighting that how do we keep it as simple so we can communicate to everybody, but at the same time realize it's complex, there's complexity that goes into it, and it's just not as simple as one number in every situation.
Andy Farquharson: Yeah, there is complexity, as I said, in most businesses, but I do love how you're sort of really sort of bringing it down to make it simple and also helping people to understand that, understand business. mean, do new hires go through just a sort of like a strong education program that you take them through?
Bob Whalen: We do. ⁓ So, you know, we have an orientation, ⁓ you know, that's a big part of what we do where we introduce them to what we're about. They get all of this, the mission vision, you know, again, you know, it's culturally focused. ⁓ A large part of our business is in construction. So, of course, safety is a big part of what we do during that process, ⁓ You know, I like to say, you know, if you don't go home at the end of the day the way you came. you know, what good is any of this? know, none of this is worthwhile, you know, if we don't do it safely. So, you know, that obvious, the business that we're in, that's an incredibly, you know, important start. And that's just the starting point of just continually ⁓ communicating. And, you know, we think it's important to make the tools available to our employees to understand what's creating value for the company.
Andy Farquharson: Mm-hmm.
Bob Whalen: ⁓ know, because that's, you know, that's how they're going to get the retirement. When you boil it all down and ESOP is a retirement plan. And so for us to be successful, we got to create value, ⁓ you know, for our employees through the company. And so we work to, you know, create an understanding of what drives that.
Andy Farquharson: So one thing I often hear from these, owners is that my workers, like they're in construction, like they're just sort of working on the factory floor. They're not going to understand or value ownership. You're you're bucking that. What do you think is the, like, what do you think, what do you think is the issue with that owner's perspective? Like, do you think they're just underselling the workers or they're sort of a... and their ability to understand the business or that it's not recognizing that this is just a training and enablement issue.
Bob Whalen: Well, I think one of the biggest issues first and foremost is that the employees themselves don't appreciate what they bring to the table. And so one of the things we talk about here is actually getting our employee base to understand how important they are to our communities. And so the example I like to use, There is very few people in the world that can actually fix an air conditioning system. Very few. And, you know, an attorney in the United States, they come out of law school with no experience, don't know how to do anything, and we pay $300 an hour for those. Why would, as a technician, that you have a unique skill that hardly anybody knows, would you think you're not worth a lot of money? But in lots of cases, it's our own technicians that, you know, are the biggest impediment to people understanding the value that we bring. Now, I will say there's maybe never been a better time in the U.S. for ⁓ technical blue collar employees than what we're coming into right now with the data center world. And it's just, you know, all of a sudden the world is waking up that this is a really important skill set that we, you know, not take in.
Andy Farquharson: Totally, yeah.
Bob Whalen: of over the last 30 or 50 years. ⁓ so I think we're in really good position, ⁓ know, for our employees to benefit from that. But I just think that that's a really important thing. It starts with the employee valuing themselves and what they bring to the picture. And every single person in our company, they wouldn't be part of our company if they weren't important to us executing our mission. ⁓ so
Andy Farquharson: Yeah. Love that stop.
Bob Whalen: And we share all of that with everybody. It's an important part. And I think that that's where it starts. It starts with you believing in here ⁓ that you're worth what we're paying you, what we're charging for you, all of those things. And then I think it all comes out of that.
Andy Farquharson: Mate, I love that. What a great starting point. So you're an MBA student, you're an MBA graduate, came out, some look to acquire a business, and then you've seen huge success in terms of aligning incentives via an ESOP. Why don't you think more people are coming out of business school with this kind of awareness that ESOP's a tool?
Bob Whalen: Well, because I don't think it's taught, you know, and so I would say, you know, one of the secondary reasons that, ⁓ you know, I wrote the book is because I think there needs to be some texts that we can share within the educational system, you know, as well. And, you know, and it may not be a whole class. don't, you know, you don't need a whole class on ESOPs, you know, for, ⁓ the leaders of tomorrow, to be educated on it.
Andy Farquharson: Yeah.
Bob Whalen: You know, but there's opportunity within a bunch of classes, you know, to have one day about ESOPS, you know, in this picture and how this structure could be back. You know, it's an incredible tax savings. for no other reason, you know, you can look at it, you know, from that perspective, this generation, you know, widely is more connected to purpose than past generations. They, they talk about it, you know, all the time coming out of data. So let's get the stuff in front of them.
Andy Farquharson: Amen.
Bob Whalen: you know, where they can really make an impact, you know, on their communities while they're doing business. You know, it's, it's, it's a really important, ⁓ you know, part of it, I think is, is to start there is to create awareness, ⁓ you know, within, you know, the MBA population about this tool that's out there. And then when we do that, you know, we will have entrepreneurs that figure out how to deploy it, you know, in a smart way. And that's some of the great things that you're highlighting with. with some of the people you've had on your shows and, and, you know, I listened to your show cause I, I'm, you know, I've never had an original thought in my life. So this is where I get all my ideas. And so the more of, you know, the smart business people that we can add to the ESOP community, the more likely we're going to make it mainstream. And, you know, while we're not growing the ESOP number of companies in the U S we're growing the value. We're growing the number of employees. You know, people are tackling it from all different sides of the spectrum, from the very largest businesses down to the small businesses and what's being done with collective, you know, there's all kinds of experiments going out there. But that's what a capitalistic system is about. You know, it's about being open, you know, to experimenting and trying and and and there being rewards for those that succeed. And so. trying to deploy that every day and we're testing a bunch of different stuff even within our company. ⁓ the more exposure, the more awareness we get, the more likely we're gonna create that great outcome for our communities in the future.
Andy Farquharson: Yeah, I mean, even sort of hearing you talk, like you talk about sort of the next generation as being sort of more purpose aligned. I mean, the passion that I hear in your voice, it sounds like you're 100 % purpose aligned. yeah, like, because you came in. Yeah.
Bob Whalen: It was by accident, but it's what happened to me over the last 15 years. Like I said, it was a financial solution that started, but it gave me my purpose. was like, Jim Collins has a, he just put a great book out about making a life. And it's really, you get this by just making steps and you never know where those steps are gonna lead you to. For me, it just made, it just pulled it all together. You know, so I could do what I love business, you know, and frankly, you know, mechanical contracting, HVAC plumbing, you know, is not, you know, something that, you know, I ever envisioned that I would be doing. But for me, it's more business. And so I deploy my time in that way, too. I let the technicians, you know, solve the technical problems. And I'm focused on the organization and how we can maximize what we do as an organization. But every business is different. You know, there's other mechanical contracting businesses out there that have an engineer that's running it. And he's really passionate about the solutions they do for that. And, you know, it's about one step forward. And, you know, one of my objectives is just to create awareness for people to let them know this tool, because, know, you can do business and, you know, do great things for other people. And it's a of fun and very rewarding. and I wake up every day excited to get after it.
Andy Farquharson: Yeah, that's awesome. And I think that's a great place for us to end this pod. But before I let you go, I do ask everyone a quick round of three questions. You ready? All right. Who's the leader that you most admire in employee ownership?
Bob Whalen: I'm ready. ⁓ you know, I, and I, and I have watched your podcast. so, Ed Renniger who runs SES, which is one of the service providers, ⁓ in the U S and, ⁓ you know, they can set up the plan for you. They, ⁓ help you along the way. What I love about it. And there's a of great service providers, you know, out there. ⁓ but Ed is not one size fits all.
Andy Farquharson: You're ready.
Bob Whalen: And it's an important component, I think, of ESOPs is the flexibility that you get in how you structure it. Like you said, we were 100 % ESOP when we started. In 2017, we tied our management team in with some actual ownership. The world is your oyster when it comes to the ESOP structure. And Ed is just... so knowledgeable and so intellectually flexible to help the companies that he's dealing with. So, you know, that's the leader I'd point to.
Andy Farquharson: Awesome. Okay, well, so you know what's coming next? What's your favorite resource on employee ownership?
Bob Whalen: Well, my favorite resource is, ⁓ you know, we have a number of different institutions. have one in Pennsylvania. know, we have the Pennsylvania, ⁓ you know, was just out at the, you know, the ESOP conference. ESCA is great. You know, all of these resources, you know, find your favorite, find your favorite connection. They're all wonderful and doing great work and couldn't be more thrilled with the support we have from our community. You know, take ESCA, for example. I'm not very interested in politics. I'm not very interested in what's going on at the government, but incredibly important that we have somebody that represents us within ⁓ that community to make sure that the needs of ⁓ S-corp ESOPs are being done. so ⁓ really just thankful for all the folks that support that.
Andy Farquharson: Okay. And then finally, what would you say to a business owner who's sitting on the fence about a transition to an employee owned model?
Bob Whalen: So, ⁓ you know, what I would say is really focus on what you're trying to achieve. You know, so many business owners sell for the highest dollar because that's what they've been told by society is most important. And, you know, I think all the data shows it, the dissatisfaction of an owner that sells their business post transaction. Really important to be thoughtful on what you want to achieve, you know the legacy of that business the people that work for that business You know is is the top dollar really that important to you and a lot of cases You know, and there's certain cases where they need it for the retirement. I appreciate that and You know, you have to do that. But for a lot of people, there's a lot of money involved and to just really be thoughtful about what you're trying to accomplish. know, and we view HB Global is a multi-generational compounding business. You know, we're going to compound wealth for the people that work for us, not just in this generation, but in future generations as well. And I would just encourage, you know, business owners that are going through a transaction. to really be thoughtful of that. Because it just, you just see so many turn out to be unhappy. And I just think there is another way.
Andy Farquharson: Awesome. What a great point to end on. look, Bob, thank you so much for your time. Where if people want to learn more about you, follow your story, where do you recommend they go?
Bob Whalen: they can, you know, I've got a LinkedIn page. And so that's where we're doing a lot of the publicity ⁓ for the book. They can follow HB Global. ⁓ put a lot of ⁓ things out there, ⁓ you know, other than ⁓ our website, you know, HB dash global dot com, ⁓ you know, is a place where they can see where we're going, what businesses we have in different markets ⁓ and all of that. And, ⁓ you know, ⁓ really excited to be an advocate of ESOP. So you know, happy to be a resource for anybody that's interested.
Andy Farquharson: Really cool. Bob, thank you so much for ⁓ your leadership in this space and really getting the voice, sharing your successes, sharing what's underneath the hood, what's driven that. I think that that's super important. And look, I'm incredibly grateful that you're sharing that. I'm sure the listeners are too. So Bob, thank you very much for joining us on the Alternative Exit. Cheers, mate.
Bob Whalen: Very appreciative for you doing this.
Bob Whalen: Well, thank you and excited to be here.
Andy Farquharson: Yeah, mate, it's super excited to have this conversation and sort of delve into a lot of elements, I think. But look, I wanted to start off, you walked into a 94 year old, third generation family business, and then you quickly made that transition to turn that into an ESOP. mean, what did you see sort of in the transaction, in the company, in the team that made you think the ESOP was going to be the right answer?
Bob Whalen: Well, you know, I think it's really important to be authentic, you know, relative to this transition. And like it was not what I was thinking, you know, when I was coming in, you know, much like a lot of young entrepreneurs, you know, I was really focused on the things that I wanted to accomplish. And, you know, I did an executive MBA between 2000, 2004 and really came out of that with an opportunity. I wanted an opportunity. run and operate a business ⁓ myself. And it was really based ⁓ my thesis was, if you ran it like a sports team, you got everybody running in the same direction that you could produce outsized results. And so that's really what I was doing coming in. Well, of course, ⁓ I bought a minority interest in H.B. McClure, how to deal with the former owner, ⁓ buy the rest of the company out over time. And I come in in 2008. and we're in recession and don't know it. And, you know, it's just the train wreck that I'm, you know, because of how our business operates, you can see the train wreck that's coming, you know, that's going to happen to you. And so I went looking for ways to make the deal cheaper while still trying to, you know, live up to what Bob McClure and I had agreed to. And so to make a deal cheaper, one of the things you do is to make it tax more efficient. ⁓ I went looking for that. came out of the employee benefits arena, so I was aware of ESOPs. But one of the first things you come to is an ESOP will be much more tax efficient than any other structure of corporation. And lo and behold, it perfectly aligned with what I was trying to do for the company. And what I really wanted as opposed to owning the financial future of the company, I wanted an opportunity.
Andy Farquharson: Mm-hmm.
Bob Whalen: ⁓ to lead this business, to operate this business, and it led to that. And over time, it has evolved to be my passion, what I'm about professionally. I'm really quick to say, it's not my life's purpose. It fits into it. My family is the highest thing on my priority list, but it's really important to me, and it's just become... you know, a huge part of, you know, what I'm trying to do in business from a purpose standpoint. And it's been quite a run so far and we got a long run to go hopefully.
Andy Farquharson: Yeah. Yeah, it's been a phenomenal run ⁓ to say the least. I think just we've had a couple of guests on the show. So you think about like Michael Morosi from Southeast Acquisition and Eric Strickland from ⁓ 3LS. And I think what that really what your story ⁓ I love, it highlights is how the power of ESOP, how that can really help the entrepreneurship through acquisition story, how that can sort of help people to find new ways to enter into this world of ownership and especially during this sort Silver Tsunami where we've got sort of everyone's we've got a lot of businesses who are looking for new owners and new ownership groups. So yeah I love that story about sort of just a creative deal making has led you on this path. ⁓
Bob Whalen: And we really co-study along with what's going on in the ESOP world with what's going on in the ETA world too. I mean, we're very, you know, connected. One of the ways we're scaling what we do within HB Global is really to think about it from an ETA standpoint, from an individual standpoint. You know, we're not doing a fund where we're funding ETA, but we've identified people within our organization and within our contacts where we're essentially doing that.
Andy Farquharson: Amen. Okay. Yep.
Bob Whalen: You know, we just acquired a business where the operator of that business is looking, you know, to potentially do something, you know, new and additional on to what he's doing. And so we're looking at opportunities for that. So really, we've spent a ton of time, you know, studying ETA as well, you know, and think it's a really important lessons, ⁓ you know, that can be gleaned from that. ⁓ tons of valuable literature ⁓ from the ETA world. I'm a big follower of what Harvard's doing from that perspective. ⁓ one of the things that we've always believed in very strongly that they try to encourage their ETA folks to do is to be patient, sit and don't do anything when you first get a hold of a business, because you don't know. And almost everybody ignores that advice. It's a big part of what we do.
Andy Farquharson: Hahaha.
Bob Whalen: from an acquisition standpoint, it's like, you know, we do due diligence and we think we know a lot about the business, but you know, just, you know, a small percentage of what you need to know about a business, just, you know, get a hold of the business and just watch and learn and, and, and glean what you front. So there's so many connections between ETA and what we're doing as a holding company ⁓ for an ESA.
Andy Farquharson: Yeah, the sound of sort of creating these like effectively internal entrepreneurs and residents like that you've got sort of within your within your Holocaust and finding new homes to them and if you're able to grow, sounds super exciting and really, really interesting. But I want to sort of take a bit of a transition and think a little bit more to your leadership philosophy. I mean, you did talk you talked about sort of wanting to create more of a sports team. rather than a family. You didn't say rather than a family, but a lot of people talk about businesses as family. as a sports team, feel is a great and much better analogy. I how do you think about the difference between that sports team sort of being a focus versus just sort of a financial structure of an ESO?
Bob Whalen: Yeah, it's so, you know, I've played sports, I've coached sports through my kids, I love sports, you know, and over time you've just watched the teams that have performed best. And what you found when you look at the teams that performed best, certainly talent's a big part of it, you know, and we want to have, you know, talented business professionals within our company. ⁓ But it's really putting the team first and get everybody to understand what the objectives of the team are and then really doing your job. Bill Belichick talked about doing your job ⁓ and we all have one. And I think an important component and what really ties ESOPs to that is then we all share what we create. So instead of everybody working for me, You know, which is basically when you own 100 % of a business and you're a business owner, what you're basically asking is all these people to do what's in the best interest of the business for my success. And we kind of flip that on their, on its head and basically say, we want everybody to succeed. That's part of our team. That if you're part of our team, you're going to share. And what we create, we do that in the short term through bonuses. We do it in the long term through ESOP. And of course that ESOP, you know, value. And, you know, people have heard me say, it's my Christmas every year when our ESOP values come out. I get a spreadsheet with every single person's value. ⁓ And that really, why that's so exciting to me, because it's a reflection of what we've produced together as a team. I was always, and I've watched this, and I had a child that was a really high performing athlete that did great things.
Andy Farquharson: Yeah.
Bob Whalen: when he was at his best is when he was focused on the team. When he had to go and perform like in a showcase that was all about him, his performance wasn't as good. And so, you know, that's what we really believe that that is how most people are. And the more that we can get you focused on what's important to the team, then we all benefit from that. And, you know, it's paying fruit.
Andy Farquharson: I
Bob Whalen: ⁓ it's exciting to watch. You know it's exciting when you have a thesis and it actually plays out you know so ⁓ that's what we're trying to do.
Andy Farquharson: Absolutely. How do you, how have you been bringing this to life within your different companies? mean, you're like, yeah.
Bob Whalen: Well, yeah, I how we bring it to life is we believe culture is incredibly important. I mean, culture to us is, you know, everything. You know, we just did an internal podcast yesterday and we talked about, you know, collaboration being a superpower. I mean, really for a business, a superpower, you know, is is the culture. the main pieces ⁓ developing our culture have been around very consistently communicating ⁓ mission, ⁓ vision, and our core values. ⁓ that is ⁓ commercialized across our company. We say it over and over again and we talk about it. ⁓ that's just a start. You know, that's how you kind of articulate what you're about. That's how you give a language to your employees. ⁓ But a culture is really about the behavior. And one thing we recognize, you know, that cultural communication that we do, that's what we aspire to be. It's not what we actually are. And so we're on this journey to align our actual behaviors with what we articulate our culture to be. And as the CEO, I think it's most important that I don't do things, behaviors that are outside of that culture that work with me. because employees are looking for you to fall down. They're looking for, you know, for me to do things that are in my best interest, but not in the best interest of the team. And so it's just really important. You know, that's really important that we align those things. We're incredibly focused and I probably spend 50 % of my time one way or another, you know, focus on the culture of this business and getting people aligned with that and getting people Because I think, you know, it's really being long-term focused. You know, some of the things you do for a team don't pay off this second. They pay off down the road. And that's what, you know, we believe our track record now of 15 years of doing this, you know, really provides a track record that we can rely on and say, look, this really works. If we really do this, we can really make it work. And there's so many aspects to that. You know, that's why I, you know, I've been asked, you know, why do you give away your secret sauce? Because just like, you know, a Toyota system, there's so much to it and you've got to do it all. And if it's not all aligned and if you don't behave that way, it's not replicable. And so you've got to really do it every day.
Andy Farquharson: Yeah, it's also, it's also not easy. Yeah, like, I sort of giggle a little bit. It's sort of like, Hey, yeah, don't give away the secret sauce. You don't know. It's fine. If you want to go do the hard work and execute it and live it every single day, all the better for you. Right. It's yeah, I always sort of giggle at that. Like people just go, no, like you can, there's no, it's, it all comes down to what you do with that information. Right. So, like,
Bob Whalen: Yeah, and it's part of our culture. We're not a zero sum game. We don't view it in a zero sum way. I believe that I've actually done better because we've done the ESOP personally, because there's 2,000 of us working together to make this happen and we're creating great things. And if there was anybody that would be upset about doing an ESOP,
Andy Farquharson: Yeah.
Bob Whalen: because of all the value that's been created, not in my pocket to somebody else, it would be me. And I couldn't be more thrilled to see what's going on with our people. And yes, maybe I could have created more money, but this is aligned my behavior. gives me a passion. This team I'm passionate about. I love seeing all of our people succeed. And so it's just a thrill to me. And it's those things that I take the most pride in. you know, not the fun stuff that I get to do personally, although that's important too, you know, and I love doing it.
Andy Farquharson: Yeah. So you talk there about having confidence that you've brought up over these 15 years that you know that these investments that you're making in culture are going to have a payoff, are going to have a positive payoff. When we see companies who are about to make that transition towards an ease up or considering employee ownership, they want to, some of the few people who want to think beyond the transaction and want to invest in the culture chain. but they don't know how. They underestimate, a lot of people underestimate the time, effort and investment required to make that cultural change. How do you, if you sort of combine the clock back to 15 years ago, mean, how did you thinking about, how did you get confidence to make those initial investments? Because a lot of it's mainly in people's time, right? Like you're pulling people away from their work to really drive this culture home. So yeah, how did you think about that back in the day?
Bob Whalen: Well, it really goes back to my formidable years in business where I started. I started a company, Continental Medical Systems. Right when I came in, we brought in a new senior vice president of human resources, Frank Fritch, who's become a very big mentor of mine. And that's what he brought to the company. And we were very focused on it and we aligned our culture and it was really important of our behaviors. Fast forward, the two of us go to work for another company. integrated health services that said we want to be the employer of choice. But not one behavior that I ever saw them do was aligned with actually doing that. They said that, but they didn't do it. And so I saw the dichotomy of these two things, you know, and I was bound and it fits my personality. You know, I want to be what I say I am. You know, I don't want there to be any kinks in the armor. And I just came away from that, seeing the value of how that plays in a team, how important it is when you say something that you actually do it, and then vice versa if you're the opposite of that, the effect that it has on your company. And so that's really where it started. It played right into the philosophy of what I was trying to do around team. And then I just blindly ran down that road. It was just... You know, and I do think about it a little bit differently. You know, you know, people will say like your mission and your vision, your core values is what your company is. I don't believe that, you know, for me coming in from the outside, you know, those things when they started were what we aspire to be, not what we truly were that day. In fact, we had core values that didn't really fit my personality when I first started. And I found that doesn't work because That is one thing I've come to believe over the 15 years that's different, is the CEO really needs to own what the culture of the business is. Everything you do has got to be built around, and if the CEO doesn't buy into that stuff, it absolutely will not work. And I'm very people focused, I'm very interested in what goes on from the people that participate in our team. So it made all the sense in the world to me that that's the area of focus we would have as a business. It's not the only way to run the business. don't even, you know, I would say like Amazon is very focused on the customer and they have changed the world. ⁓ you know, we are focused on our employees and I think we are giving, you know, just incredible customer service because we have employees that are engaged and treated well. and feel good about who they work for and have a lot of pride in it. And so we do it through that mechanism. You know, there's multiple ways to do it, but I, you know, back again to discipline about aligning your actions to how you go about it. And there's a whole bunch of different ways to go about it.
Andy Farquharson: Yeah, like I do love that. mean, the aid sort of the element of just, like it was just blind belief. You just got to go and run with it. And trust, it's not, it's obviously, it's not just, you're not taking that just from your business experience as well. Like there's your sporting background, probably from sort of playing, participating and watching as well. Like there's so many different parallels where we, guess we've seen those examples.
Bob Whalen: Yeah, but I think it's really interesting that you pick, you know, it's, didn't like sit down and consciously say where, we're going to, it was just, it was ingrained in me, you know, it's, it's like, you know, every experience came through that frame and I just blindly just, you know, ran down that road and see its importance and see our alignment to the, to that is important. We talk about using it as a language when things you know, aren't the way you think they should be as an individual employee gives you a language to talk about that. can say, hey, look, I think this was a trust deteriorating, you know, action, you know, we go, you know, we and I view that it's our job to explain that too. You know, and there are difficult decisions and there are things that may not be in the best interest of that individual employee, but are, you know, in the interest of the whole. And those are, those are still incredibly difficult. ⁓ But it gives you a language to talk about those things and how you're going to do it.
Andy Farquharson: So when you're going into, you're looking, I mean, you guys are being reasonably acquisitive, you're buying companies, when you're looking at them, what are some things that you sort of, you look out for to see whether or not it's going to be a cultural fit or is that something that you do look at?
Bob Whalen: No, we absolutely do. I think the nice thing about our process and what we articulate, you know, ⁓ we realize we're a niche, ⁓ acquisitive company, you know, so we, you know, we're not trying to do every deal that's out there. You know, there's a very, ⁓ it's a niche, ⁓ company that we're trying to acquire. And so we articulate what we're about and what we're trying to do. ⁓ we also are looking for that alignment ⁓ the companies. And I'll tell you, of all of those deals, almost all of them, they could have gotten a higher price by selling to somebody else. But they do a deal with us because we're going to get that owner the liquidity that they're looking for out of their exit. But at the same time, take care of the employees that got them there. and they kind of have to buy into that that's part of it. You know, like if, if in the unusual case that we're the high price, well then, you know, maybe that could be a miss. But for most companies, there's an opportunity for them to sell to somebody for higher price. So they're making a conscious decision that they want to get their liquidity and also take care of their employees. That is an alignment tool to about 75%. Then we're using the due diligence process to make sure that that really does align. You will see behaviors over time and that's part of what due diligence is about looking at specific risk, but it's an opportunity for you to pick up on what truly is inside of that person. Do we ever get 100 % there? And absolutely not. ⁓ And so that leaves the post-transaction period where we're in it for the long run.
Andy Farquharson: Yeah.
Bob Whalen: You know, we may not that a culture may start at 75 % or 80 or 85 % of where we are, but we're going to take those actions to align, you know, that subsidiary company with our culture over time. And we really believe that we'll get there eventually. And again, you know, it's, you know, one of our core values is grit. And one of the components of grit is perseverance. You know, it's like we're willing to do this over a very long time and they may not be that today, but someday we're going to get them there and we're going to by us doing the right things all the time. And, you know, I think that that's, you know, how we view it.
Andy Farquharson: Yeah. Yeah, awesome. So let's just sort have a look a little bit further. I'd like to go a little bit to understand some more. What are the actual things that you do as the whole code to bring the culture to life, to bring these mission and values to life on a daily basis?
Bob Whalen: ⁓ So again, a big part of it is we consistently communicate our mission, vision, and core values is that foundational piece of what our culture is or what we aspire it to be. Part of that.
Andy Farquharson: Okay. Do people get sick of seeing it? ⁓
Bob Whalen: They do, they absolutely do. just like, know, and how I would put it is Coca-Cola does a ton of stuff, you know, and you say, why are they spending so much money on that? Well, you know, it's reinforcing a comp, you know, a big language of mine is around compounding and compounding is not just financial, you know, it's really anything that continues to get better over time. And that's how we think of what we do there. So that is the foundational piece. All big meetings.
Andy Farquharson: Yeah.
Bob Whalen: You know, we're talking about it. ⁓ And part of that is our core values have specific behaviors, you know, as part of those core values that we talk about, ⁓ you know, that's part of it. you know, with trust, do the right thing. You know, it's, you know, not, you know, a difficult thing. You know, we know 90 % of the time, 95 % of the time what the right thing is, let's just do it. You know, so we talk about specific behaviors. This year we've done something You know, new, I'm a big, you know, you can tie a lot of my philosophical stuff to Warren Buffett and what he's done. And we've added principles and the point of principles is to give nuance to things that are important to us in our culture that we're trying to do. And so that's new and we'll do podcasts on that. We'll do written, ⁓ stuff out to all employees where we do that. We'll talk about it in manager meetings that we have. You know, we'll have just a ton of ⁓ communication we do around it. But we spend way more on branding internally to our employee base than we do branding our company to external.
Andy Farquharson: See, that's just not an investment you see many companies making.
Bob Whalen: It's, you know, but it's the truth, you know, it's the truth. ⁓ know, branding is not a huge part of our individual businesses out there. You know, our individual businesses may have 10, 15, 20 customers that are the primary. And so they do that through face to face and they're, you know, it's more of a sales process than it is a branding process. We brand through our great work over time.
Andy Farquharson: Yeah, I love it.
Bob Whalen: But internally, we look at what we're doing is branding and getting everybody on the same page. And, you know, it's I grew up as a wrestler. And what most people don't realize about wrestling is the tediousness of drilling a skill. Like literally, you drill a skill. over and over and over again. And it starts with the very basics. Even the Olympians will work on their stance. They'll think about their defense. There's all kinds of stuff that goes into it. And a business is no different. You know, it's about the basics all the time, doing it consistently. You know, watch a golfer on TV, you know, on the weekend. And every one of those golfers is most focused on their alignment because that's something that they could They're pre shot routine. These are all things that you get from sport, it's business is a sport. know, one of the things here, the great game of business, you know, here in the United States that, you know, has a lot of traction out there within the ESOP community is all about, you know, treating it like a sport and how it is. And there's so many things that come across and that's what we try to do.
Andy Farquharson: Awesome. Well, while we're on the great gamer business, mean, how do you, outside of the annual valuation, how do you enable your team and your workers to keep score?
Bob Whalen: So first of all, ⁓ and we've really used two consulting firms. The great game of business is one, but Grid Consulting as well, which is a big friend to the ESOP community, ⁓ is ⁓ we've used tools that they have. There's a board game that Grid has that we're going through, and we do it as part of our leader development program, but we're also gonna make it available to all of our businesses. to utilize to teach them the skills ⁓ of business. But I think for us, the biggest thing is we make it transparent, you know, and we teach business, you know, and, ⁓ you know, business is a skill set, you know, in and of itself. There's so many aspects to it, you know, how your price, how your market, you know, aligning what you do, what's important, you know, I talked about
Andy Farquharson: Okay. Mm-hmm.
Bob Whalen: you know, ⁓ Amazon before some of the, know, there's lessons that we can learn from Amazon that are valuable to us. There's others that are not, you know, that don't tie at all to what we're trying to be or how we're trying to do, you know, and it's picking those things out, ⁓ you know, and really being, you know, on one standpoint, you know, realizing the complexity of business, but making it as simple as possible. You know, that's what the one number is about.
Andy Farquharson: Yeah.
Bob Whalen: You know, you make it a too. If you can just get one number that you're focused on, you know, and our bit, the folks that are running our business, they know our number one number is return on capital. You know, so the capital we deploy in that business, we got to get a return on that capital. That is our one number one. You know, we will increase our stock price over time if we get a return on our capital. And so, you know, that is the starting place for creating the bonus pool.
Andy Farquharson: Okay.
Bob Whalen: you create a return on your capital, you're creating a bonus pool for your employee base. And it's that simple. Now we have some other things we look at too. We're an ESOP, we allocate ownership through employees. So we look at return on labor. So the return on labor drives how we allocate the ownership in our company. So we wanna be efficient at that. ⁓ And so we measure that as well. And so there's a whole bunch of different things we do. And that's why... It's so cumulative, it compounds over time, you know, and it's this, you know, you're constantly fighting that how do we keep it as simple so we can communicate to everybody, but at the same time realize it's complex, there's complexity that goes into it, and it's just not as simple as one number in every situation.
Andy Farquharson: Yeah, there is complexity, as I said, in most businesses, but I do love how you're sort of really sort of bringing it down to make it simple and also helping people to understand that, understand business. mean, do new hires go through just a sort of like a strong education program that you take them through?
Bob Whalen: We do. ⁓ So, you know, we have an orientation, ⁓ you know, that's a big part of what we do where we introduce them to what we're about. They get all of this, the mission vision, you know, again, you know, it's culturally focused. ⁓ A large part of our business is in construction. So, of course, safety is a big part of what we do during that process, ⁓ You know, I like to say, you know, if you don't go home at the end of the day the way you came. you know, what good is any of this? know, none of this is worthwhile, you know, if we don't do it safely. So, you know, that obvious, the business that we're in, that's an incredibly, you know, important start. And that's just the starting point of just continually ⁓ communicating. And, you know, we think it's important to make the tools available to our employees to understand what's creating value for the company.
Andy Farquharson: Mm-hmm.
Bob Whalen: ⁓ know, because that's, you know, that's how they're going to get the retirement. When you boil it all down and ESOP is a retirement plan. And so for us to be successful, we got to create value, ⁓ you know, for our employees through the company. And so we work to, you know, create an understanding of what drives that.
Andy Farquharson: So one thing I often hear from these, owners is that my workers, like they're in construction, like they're just sort of working on the factory floor. They're not going to understand or value ownership. You're you're bucking that. What do you think is the, like, what do you think, what do you think is the issue with that owner's perspective? Like, do you think they're just underselling the workers or they're sort of a... and their ability to understand the business or that it's not recognizing that this is just a training and enablement issue.
Bob Whalen: Well, I think one of the biggest issues first and foremost is that the employees themselves don't appreciate what they bring to the table. And so one of the things we talk about here is actually getting our employee base to understand how important they are to our communities. And so the example I like to use, There is very few people in the world that can actually fix an air conditioning system. Very few. And, you know, an attorney in the United States, they come out of law school with no experience, don't know how to do anything, and we pay $300 an hour for those. Why would, as a technician, that you have a unique skill that hardly anybody knows, would you think you're not worth a lot of money? But in lots of cases, it's our own technicians that, you know, are the biggest impediment to people understanding the value that we bring. Now, I will say there's maybe never been a better time in the U.S. for ⁓ technical blue collar employees than what we're coming into right now with the data center world. And it's just, you know, all of a sudden the world is waking up that this is a really important skill set that we, you know, not take in.
Andy Farquharson: Totally, yeah.
Bob Whalen: of over the last 30 or 50 years. ⁓ so I think we're in really good position, ⁓ know, for our employees to benefit from that. But I just think that that's a really important thing. It starts with the employee valuing themselves and what they bring to the picture. And every single person in our company, they wouldn't be part of our company if they weren't important to us executing our mission. ⁓ so
Andy Farquharson: Yeah. Love that stop.
Bob Whalen: And we share all of that with everybody. It's an important part. And I think that that's where it starts. It starts with you believing in here ⁓ that you're worth what we're paying you, what we're charging for you, all of those things. And then I think it all comes out of that.
Andy Farquharson: Mate, I love that. What a great starting point. So you're an MBA student, you're an MBA graduate, came out, some look to acquire a business, and then you've seen huge success in terms of aligning incentives via an ESOP. Why don't you think more people are coming out of business school with this kind of awareness that ESOP's a tool?
Bob Whalen: Well, because I don't think it's taught, you know, and so I would say, you know, one of the secondary reasons that, ⁓ you know, I wrote the book is because I think there needs to be some texts that we can share within the educational system, you know, as well. And, you know, and it may not be a whole class. don't, you know, you don't need a whole class on ESOPs, you know, for, ⁓ the leaders of tomorrow, to be educated on it.
Andy Farquharson: Yeah.
Bob Whalen: You know, but there's opportunity within a bunch of classes, you know, to have one day about ESOPS, you know, in this picture and how this structure could be back. You know, it's an incredible tax savings. for no other reason, you know, you can look at it, you know, from that perspective, this generation, you know, widely is more connected to purpose than past generations. They, they talk about it, you know, all the time coming out of data. So let's get the stuff in front of them.
Andy Farquharson: Amen.
Bob Whalen: you know, where they can really make an impact, you know, on their communities while they're doing business. You know, it's, it's, it's a really important, ⁓ you know, part of it, I think is, is to start there is to create awareness, ⁓ you know, within, you know, the MBA population about this tool that's out there. And then when we do that, you know, we will have entrepreneurs that figure out how to deploy it, you know, in a smart way. And that's some of the great things that you're highlighting with. with some of the people you've had on your shows and, and, you know, I listened to your show cause I, I'm, you know, I've never had an original thought in my life. So this is where I get all my ideas. And so the more of, you know, the smart business people that we can add to the ESOP community, the more likely we're going to make it mainstream. And, you know, while we're not growing the ESOP number of companies in the U S we're growing the value. We're growing the number of employees. You know, people are tackling it from all different sides of the spectrum, from the very largest businesses down to the small businesses and what's being done with collective, you know, there's all kinds of experiments going out there. But that's what a capitalistic system is about. You know, it's about being open, you know, to experimenting and trying and and and there being rewards for those that succeed. And so. trying to deploy that every day and we're testing a bunch of different stuff even within our company. ⁓ the more exposure, the more awareness we get, the more likely we're gonna create that great outcome for our communities in the future.
Andy Farquharson: Yeah, I mean, even sort of hearing you talk, like you talk about sort of the next generation as being sort of more purpose aligned. I mean, the passion that I hear in your voice, it sounds like you're 100 % purpose aligned. yeah, like, because you came in. Yeah.
Bob Whalen: It was by accident, but it's what happened to me over the last 15 years. Like I said, it was a financial solution that started, but it gave me my purpose. was like, Jim Collins has a, he just put a great book out about making a life. And it's really, you get this by just making steps and you never know where those steps are gonna lead you to. For me, it just made, it just pulled it all together. You know, so I could do what I love business, you know, and frankly, you know, mechanical contracting, HVAC plumbing, you know, is not, you know, something that, you know, I ever envisioned that I would be doing. But for me, it's more business. And so I deploy my time in that way, too. I let the technicians, you know, solve the technical problems. And I'm focused on the organization and how we can maximize what we do as an organization. But every business is different. You know, there's other mechanical contracting businesses out there that have an engineer that's running it. And he's really passionate about the solutions they do for that. And, you know, it's about one step forward. And, you know, one of my objectives is just to create awareness for people to let them know this tool, because, know, you can do business and, you know, do great things for other people. And it's a of fun and very rewarding. and I wake up every day excited to get after it.
Andy Farquharson: Yeah, that's awesome. And I think that's a great place for us to end this pod. But before I let you go, I do ask everyone a quick round of three questions. You ready? All right. Who's the leader that you most admire in employee ownership?
Bob Whalen: I'm ready. ⁓ you know, I, and I, and I have watched your podcast. so, Ed Renniger who runs SES, which is one of the service providers, ⁓ in the U S and, ⁓ you know, they can set up the plan for you. They, ⁓ help you along the way. What I love about it. And there's a of great service providers, you know, out there. ⁓ but Ed is not one size fits all.
Andy Farquharson: You're ready.
Bob Whalen: And it's an important component, I think, of ESOPs is the flexibility that you get in how you structure it. Like you said, we were 100 % ESOP when we started. In 2017, we tied our management team in with some actual ownership. The world is your oyster when it comes to the ESOP structure. And Ed is just... so knowledgeable and so intellectually flexible to help the companies that he's dealing with. So, you know, that's the leader I'd point to.
Andy Farquharson: Awesome. Okay, well, so you know what's coming next? What's your favorite resource on employee ownership?
Bob Whalen: Well, my favorite resource is, ⁓ you know, we have a number of different institutions. have one in Pennsylvania. know, we have the Pennsylvania, ⁓ you know, was just out at the, you know, the ESOP conference. ESCA is great. You know, all of these resources, you know, find your favorite, find your favorite connection. They're all wonderful and doing great work and couldn't be more thrilled with the support we have from our community. You know, take ESCA, for example. I'm not very interested in politics. I'm not very interested in what's going on at the government, but incredibly important that we have somebody that represents us within ⁓ that community to make sure that the needs of ⁓ S-corp ESOPs are being done. so ⁓ really just thankful for all the folks that support that.
Andy Farquharson: Okay. And then finally, what would you say to a business owner who's sitting on the fence about a transition to an employee owned model?
Bob Whalen: So, ⁓ you know, what I would say is really focus on what you're trying to achieve. You know, so many business owners sell for the highest dollar because that's what they've been told by society is most important. And, you know, I think all the data shows it, the dissatisfaction of an owner that sells their business post transaction. Really important to be thoughtful on what you want to achieve, you know the legacy of that business the people that work for that business You know is is the top dollar really that important to you and a lot of cases You know, and there's certain cases where they need it for the retirement. I appreciate that and You know, you have to do that. But for a lot of people, there's a lot of money involved and to just really be thoughtful about what you're trying to accomplish. know, and we view HB Global is a multi-generational compounding business. You know, we're going to compound wealth for the people that work for us, not just in this generation, but in future generations as well. And I would just encourage, you know, business owners that are going through a transaction. to really be thoughtful of that. Because it just, you just see so many turn out to be unhappy. And I just think there is another way.
Andy Farquharson: Awesome. What a great point to end on. look, Bob, thank you so much for your time. Where if people want to learn more about you, follow your story, where do you recommend they go?
Bob Whalen: they can, you know, I've got a LinkedIn page. And so that's where we're doing a lot of the publicity ⁓ for the book. They can follow HB Global. ⁓ put a lot of ⁓ things out there, ⁓ you know, other than ⁓ our website, you know, HB dash global dot com, ⁓ you know, is a place where they can see where we're going, what businesses we have in different markets ⁓ and all of that. And, ⁓ you know, ⁓ really excited to be an advocate of ESOP. So you know, happy to be a resource for anybody that's interested.
Andy Farquharson: Really cool. Bob, thank you so much for ⁓ your leadership in this space and really getting the voice, sharing your successes, sharing what's underneath the hood, what's driven that. I think that that's super important. And look, I'm incredibly grateful that you're sharing that. I'm sure the listeners are too. So Bob, thank you very much for joining us on the Alternative Exit. Cheers, mate.
Bob Whalen: Very appreciative for you doing this.
