One morning in January, Ric Selip asked his wife for his last goodbye kiss as the owner of Grand River Rubber & Plastics Co. Later that day, he signed purchase agreements and transition documents for his Ashtabula company.
Fortunately, Selip was (and is) confident about the move because the buyers are a pretty familiar group – his employees. The company is converting to an employee stock ownership plan (ESOP), a transition that will mean minimal operational or cultural changes and continued financial stability.
In the press release, Selip said he, co-owner/executive vice president Joe Misinec and senior vice president Donald Chaplin - who will all continue to manage the company during the transition - are “confident we have chosen the very best people - employees right here in Ashtabula County - to carry on the legacy, success and great work of this company.”
Smart Business spoke with Selip about the benefits of ESOP.
Tell us about the impetus behind turning Grand River into an ESOP.
My partner Joe Misinec and I have been running Grand River Rubber & Plastics for 35 years. While we looked at other options, the ESOP option offered us a smooth transition to the new leadership team. The improving economy of 2010 further proved it was time to put the leadership and direction of this great company in the hands of the next generation. We have always recognized that our people are our greatest asset. We have many long-term employees who have been with us every step of the way, and we wanted to share the future with all of them. There was no additional bank financing taken on to complete the transition. We will hold the note and be paid as cash flow allows. This was important in that we did not want to, in any way, put the company under any financial stress. This is how we have always run the company and will until we exit stage right, as they say.
How does this benefit you, as owners?
As owners, we were honored by the fact that the employees have chosen us to continue to run the company through the transition. By transitioning the company to the employees, it will not only allow the company to maintain a strong balance sheet, but allow us to secure our future personally. Until the ESOP loan is paid by the employees, we will still manage the company. Additionally, we do not have to be distracted by a strong culture change – a change that would undoubtedly come from an outside buyer.
What challenges did you face in both making this decision and executing it?
Statistics consistently show that employee-owned companies outperform non-employee owned companies. Our challenge was educating our workforce as to the benefits of ESOP. In early 2010 we brought a small group of employees to the Ohio Employees Ownership Center Conference. If we learned nothing else from that day, it was: “If you expect employees to act like owners, you need to start treating them like owners.” We embarked on a consistent program of employee education on the benefits and risks of this potential course.
What benefits does this create for the company?
The benefit for our company is a smooth transition without financial stress or the worry that might come from an outside purchaser. Our community, vendors, suppliers and customers can rest easy knowing a strategic plan is in place – a plan authored and executed by owners and executives they have always known.
How will your role change in the new organizational structure, and have you developed an exit strategy for your personal involvement?
Our goal is to continue to operate the company through the better part of this new decade. This will be an exciting time of teaching to lead and learning to trust in our employees. We firmly believe that this plan will be successful as the employees can move forward with their destiny in their own hands. Our plan is to stay though the transition and the completion of the ESOP loan.
How to reach: Grand River Rubber and Plastics, www.grandriverrubber.com
Dustin S. Klein and Brooke Bates contributed to this article.