When Bill Voss was killed in an automobile accident three years ago, it shook the foundation of the Ohio City manufacturing firm he had worked most of his life to build.
Then, when his wife, Marianne, died a year later, there was sorrow among the employees and fear that the events marked the end of Voss Industries Inc.’s era as a closely held, solid family business.
“It was the unknown,” says Daniel W. Sedor Sr., who today serves as president of the company that manufactures clamps and couplings for various industries. “People that had certainly been with the company for 25 years or more were wondering what was going to happen. It’s only reasonable to ask those questions. You’ve either got to sell the company or at least consider how things are going to be different.”
At the time, employees owned 30 percent of the business through the employee stock ownership plan the Vosses had created. But there were very real concerns that the family heirs, who still controlled the majority ownership stake, would sell or dismantle the firm.
The panic was initially abated by the ability of Sedor and his management team to calm fears on the factory floor. Then, last April, Voss family members decided to turn over 75 percent of the 43-year-old family-owned business to their employees.
“It was always the desire of my parents for this business to be employee owned,” explains Marsha Voss, daughter of William and Marianne. “They cared about the employees and the products that bore their name. We wanted that legacy to continue.”
The act of handing control of the company over to 200 workers was a pivotal event, and one that ensured the West 25th Street business would stay in Cleveland and stay intact. But, Sedor says, the employee stock ownership plan option that is so often used for tax purposes also helped Voss Industries regain its footing after the death of its founders.
And, it motivated workers to envision a long and secure future.
“You’re sharing opportunity but not necessarily all the risk,” says Sedor, explaining the advantages of an ESOP. “It is very much boilerplate and if people are going to do that (for tax purposes), they’re going to do that and it’s understandable. But the real advantage is looking to see what it does to the whole society that lives within these four walls that we call Voss.”
Increase efficiency
For years, Voss Industries was saddled with an outdated manufacturing process that had some parts traveling 1.8 miles inside the company’s 230,000-square-foot building before being shipped.
“It was ridiculous,” says Sedor. “We were able to take that process with the 1.8 miles and bring it down to about 120 feet, and the advantages of that, everyone can see.”
Sedor attributes the ability to make such sweeping changes in the manufacturing process to the stake employees have in the company’s success under the ESOP plan. Voss’ management team transformed the outdated departmentalized manufacturing process into a new cellular system that had parts moving less and employees doing more through rigorous cross-training.
This ability to get 200 employees to not only buy into such sweeping internal changes but also help make them a reality is truly one of the real benefits of an ESOP, in Sedor’s eyes. Meanwhile, lead times have been dramatically reduced and product costs have dropped as much as 40 percent.
“You really use it as a vehicle to make yourself better,” explains Sedor. “The ESOP definitely played a large part in that transition. Anybody doing good business with the product we make would have had to make these changes.
“But to try to make them in a situation where it was a closely held company and the employees had no interest whatsoever in the ownership of the company would have certainly been more difficult.”
Strengthen the work force
The massive changes inside the company required employees to learn a more comprehensive set of skills rather than just be bound by a single task in an assembly line environment. The move to a cellular manufacturing process required cross training to implement and boosted the productivity, efficiency and overall value of those on the factory floor.
“It’s basically given us a higher level of a skilled work force because of the cross training here,” says Sedor. “It’s not a situation where key people aren’t there and work can’t get done because you’ve got more people to rely on to get the job done.”
Then there is the concept of employee retention. Although Sedor doesn’t think Voss Industries attracts workers solely because of the ESOP program, he believes it has played a factor in holding on to veteran staff members. Particularly for market segments in which skilled employees are jumping ship to chase more attractive deals from other companies, Sedor says, the added financial benefit of an ESOP comes into play.
“I think the greater cause to champion is keeping those that you have and giving opportunities internally for them to gain some type of recognition with what they’re doing,” he says. “They’re involved in the company and have success, and I think you get that even more with an ESOP.
“We try to promote from within, provide additional education opportunities and just keep it interesting.”
Build morale
When worry began to fester about the future of the company after the deaths of William and Marianne Voss, it was up to Sedor and his fellow managers to ease employee fears. Instead of letting the rumor mill run wild, those in the top offices discovered employees were willing to contribute more to keep Voss Industries going even though the company’s future was up in the air.
“Employees stepped forward to say, ‘Hey, what can we do to make this work?'” explains Sedor. “In the face of uncertainty, in terms of not knowing what the heirs may do, it showed an awful lot of strength on the part of the people who work here.”
It was not long after that that the plan for 75 percent employee ownership was announced and the level of communication inside the company, as well as the level of employee involvement and commitment to constant improvement, rose to a higher level than ever before. Quarterly meetings are scheduled to disseminate information, but much of the internal communication between management and employees is done via the traditional yet dependable bulletin board.
But as much as Voss’ management team openly shares information with employees, an equally important part of the relationship is listening to the concerns of the workers. When given a financial stake in the company, Sedor says employees will become more vocal and involved and create an environment in which decisions are made from the bottom up as much as they are from the top down.
“One of the things we’ve learned is to listen to the people on the floor, because those are the people that, quite frankly, without them, we’re nowhere,” explains Sedor. “They are the ones who are really going to predicate what our successes will be.” How to reach: Voss Industries Inc., (216) 771-7655
Jim Vickers ([email protected]) is an associate editor at SBN.
