"Power lines and trees don't always get along," says Weidner, CEO of Appraisal, Consulting, Research and Training, known as ACRT Inc.
The company, which specializes in utility training and urban forestry, arboricultural, environmental and horticultural sciences, provided assistance in the Joint U.S./Canada Power System Outage Investigation. The report was released in November.
ACRT is a 100 percent employee-owned company, or ESOP, but Weidner doesn't own a single share or participate in the ESOP plan. That's because he's the stepson of the company's founder, Dick Abbott, who in May of last year transitioned the company from a 30 percent ESOP to a 100 percent ESOP. And according to federal guidelines on family succession, Weidner is not eligible to participate.
But that hasn't stopped him from focusing on doing what's best for the company his stepfather founded in his 50s in 1985, at an age when many of his generation were thinking about retirement rather than entrepreneurship.
"It is still the management's role to take care of the company," Weidner says. "We are not looking for consensus on everything; you are never going to get everyone to agree with what's being done. I went from having one boss to having 256 bosses."
That one boss was Abbott, who spent several decades at Kent-based Davey Tree managing a department that performed work similar to that of ACRT.
"I enjoyed what I did," says Abbott. "They (Davey Tree) didn't see the business opportunity and decided to shut it down. So we (Abbott and his wife, Sue) mortgaged everything we owned and closed out an IRA. We had a certain amount of confidence we could make a go of it."
The Abbotts began modestly, launching ACRT as an arbor training firm with utility companies as its largest clients. Among other things, ACRT teaches people how to climb trees and work around utility lines. Weidner points to a rather thick manual on his desk and explains, "We actually wrote the book on how to do it."
When it came time to consider succession planning, Abbott opted to pursue cashing out 30 percent of his company with the employee-ownership option.
With an estimated 10,000 ESOP companies in the United States employing approximately 11.5 million workers, ESOPs are a common succession option. But the circumstances that led Abbott to move from 30 percent employee ownership to 100 percent employee ownership are unique.
So is how his employees rolled up their sleeves and tightened their belts in order to make it happen.
The case for an ESOP
The ESOP was created in 1974 as part of a federal law designed to encourage employee ownership by allowing certain financing and tax incentives. An ESOP is complicated and customized for each situation, but at its core, it is essentially a pension trust that receives shares from the company.
In most cases, an ESOP acts as a succession plan for a company's owner or owners. Through a series of loans and mirror loans, often using qualified retirement funds as collateral, employees are able to buy out the original owner and, in return, receive shares in the company.
The bank (or private investors) makes a loan to the company, often accompanied by a mirror loan that the company then extends to the ESOP. The company pays the original owners, and the stock is put into the ESOP.
Each year, the company pays back part of the principal on its ESOP loan, and stock is released to the company in amounts proportionate to the amount of the loan.
An ESOP can comprise any percentage of a company's overall ownership. For example, some companies only achieve 30 percent ESOP status; others finance 100 percent ESOP ownership.
The process is long, complicated and a lot of work for the original owner. But it produces a mutually beneficial result -- cash for the owner and ownership for the employees.
"No matter who owns the company, trying to achieve more employee involvement is 'in'," says John Logue, director of the Ohio Employee Ownership Center at Kent State University. "The thought is that the best ideas come from employee participation and communication."
"It was very important to the Abbotts to sell the company to the employees," says Weidner. "They wanted to make sure the company stayed whole. With the ESOP, there are enormous benefits and enormous risks. People want to take care of a company they own a part of. We've increased profitability and employee longevity."
Structuring the ESOP
Abbott and his management team began the ESOP process in 1998 by converting 30 percent of the company to employee ownership.
"The first 30 percent took several years to implement," says Diane Bartlett, ACRT's CFO and vice president of finance.
To speed the process, Abbott and his wife donated some of their shares to the ESOP trust.
Of the estimated 10,000 ESOP companies in the United States, ACRT stands out as the only one Bartlett knows of with a completely egalitarian, flat share structure.
"It is highly unusual," Bartlett says. "I've done research and I know of no other company that is structured this way."
Share distribution, she says, is usually tied in with compensation, wages or seniority, and is dependent on the number of years of service with a company.
"It is usually a mix," Bartlett says.
But at ACRT, every employee has an equal stake in the company.
"That was something that the employees determined themselves," Abbott says. "They looked at the various ways the ESOP could be structured, and the committee decided."
Bartlett's voice contains an air of excitement when she explains the fundamental advantages of the ESOP.
"I know of no other situation other than inheritance that works the same way," she says. "If you are a regular employee at a company, you have to work long and hard to just get something to buy a share. In an ESOP, you don't have to put up anything. It's not profit-sharing. The company is divvied up, and the profit passes through to you."
ACRT's conversion has proven successful. Since 1988, sales have grown by 5,000 percent, and the company experienced its most profitable year in 2001 when it converted to 100 percent ESOP ownership.
But it almost didn't come to pass.
In 2001, just as Abbott and his wife were finalizing conversion of the company's remaining 70 percent ownership to an ESOP, ACRT's largest customer, Pacific Gas & Electric, filed for Chapter 11 bankruptcy.
PG&E's bankruptcy status was confusing to ACRT's bank and vendors because they associated bankruptcy with not getting paid, and they believed ACRT was not going to get paid by its largest customer.
"The biggest hurdle was to explain that we were still doing work with them and still getting paid," says Bartlett.
Instead of delaying or even abandoning the ESOP conversion, Abbott and his management team stayed committed to the process and turned to the employees for help.
"We contacted our people and asked them to tighten their belts," says Bartlett. "And we went to our suppliers and asked for better terms."
The employees rose to the challenge. They suspended their vacations, increased billable hours and sought creative ways to decrease costs.
"The employees did it themselves," Abbott says. "They determined there were things they had to do ... they came up with the ideas and implemented them. If we had tried to implement them ... if we had said, 'We're going to defer your vacation and maximize your hours,' there would have been a rebellion. Being an ESOP made all the difference in the world."
Abbott and his team also analyzed the company's business processes to determine how to be more efficient. They tracked company costs, looked at invoices and scrutinized billing procedures.
"Everyone needs to revisit their processes," Weider says. "We live on myths. You have to revisit to find out your own myths."
One of the most significant changes that arose from the process was a decrease in supervisory costs. A new hierarchy, which better fit with the ESOP, was also created. And, as at other companies that employ an ESOP model, employee self-policing increased.
"What we see in these companies is a reduction in re-work and wasted effort," Logue says. "The employees produce a good product the first time ... and they need less hierarchy and supervision."
A closer look at ACRT reveals a certain synergy. The employees were only able to realize the goal of 100 percent ownership by first making the kind of sacrifices that only an owner would usually make with regard to the future of the company. In some ways, the whole process became a self-fulfilling prophecy.
"The bankers stood by us ... but they were watching," Bartlett says.
As a result of the moves, ACRT had a good year, paid off a lot of its debt and became 100 percent owned by its employees.
"Now, we have to answer to employees," Bartlett says. "I think many employees understand the whole picture, that it is long term. The potential is so tremendous, you can't get caught up in every little thing that comes down the pike ... and if you do your part, the company as a whole is going to move forward."
Communicating the ESOP message is always a challenge, says Weidner.
"We have a relatively young company, with the kind of work we do," he says. "So how do you explain the benefit of an ESOP or a qualified retirement plan to a 22-year-old?"
To do that, management set up an ESOP education committee, which holds regular meetings with employees on everything from ESOP basics to quarterly numbers.
"We thought it would be better coming from employees rather than management," Weidner says. "But we still don't have it all figured out. They say it will take three to five years for the employees to really feel the ESOP is important to them."
With 265 employees in 22 states, facilitating ESOP understanding is no small feat. The education process includes numerous ESOP conferences, ESOP seminars and ESOP meetings. There is an ESOP section in the monthly newsletter, and employees sit on the company's board of directors.
Sometimes, Bartlett says, employees think the situation at ACRT simply is too good to be true.
"There are some skeptics," she says. "It is like they have been handed this package and they keep waiting for it to blow up. They keep waiting for the other shoe to drop." HOW TO REACH: ACRT Inc., (800) 622-2562 or www.acrtinc.com; The Ohio Employee Ownership Center, (330) 672-3028 or www.kent.edu/oeoc