Overcoming challenges through teamwork, transparency and a culture powered by employee ownership

The employee-owners at Columbia Forest Products have seen it all. Booms and busts, bull markets and bears, health scares, natural disasters and even illegally-operating offshore competition. And throughout every challenge, they have had each other’s backs, worked together, pulled through and risen to the occasion as a team.

Founded in 1957 in Klamath Falls, OR, and currently headquartered in Greensboro, NC, Columbia Forest Products is the leading manufacturer of hardwood plywood and hardwood veneer products in North America.

Their products are used to make high-quality cabinetry, furniture, architectural millwork and commercial fixtures. Their formaldehyde-free plywood resin, PureBond, was the first of its kind and earned an award for innovative green technology from the United States Environmental Protection Agency.

Few companies have been employee-owned as long as Columbia Forest Products, or have made their employee-owned status such an integral part of their daily life.

Columbia started its life as a worker cooperative (coop) and implemented an Employee Stock Ownership Plan (ESOP) almost as soon as it was legally possible to do so.

Now, for the vast majority of Columbia Forest Products’ 2,100 employee-owners, the company’s processes and policies, which were born out of an employee-ownership mentality, are simply the way things are done. Columbia’s culture of employee ownership is simply the company culture.

Employee-owned from the start

Columbia began under the name Klamath Hardwoods. From the very beginning, founder Andy Honzel, Sr. wanted each of the initial 43 employees to feel like it was their company, too.

“I really think that a lot of the foundations of who we are today started with just his value system, his outlook on life and his direction of what he perceived the business to be,” explained Jeff Wakefield, Columbia’s VP of Human Resources and Development. 

It wasn’t just lip service; Honzel and his co-investors set up the mill as a coop, where everyone had a financial stake and everyone would rise or fall together. In 1963, Columbia Plywood Corporation was formed to purchase Klamath Hardwoods. Honzel continued to use his leadership role to ensure that the employees had a say in the direction of the company as it grew.

“Even back at that point in time, there was a sense of ownership. It wasn’t simply the founder and a small group of investors driving things. There was a sense of wanting everyone who was involved in the operation to be able to have an impact and to be able to share in the success of that impact,” Wakefield said.

When the landmark ERISA legislation passed in 1974, effectively creating ESOPs in America, Honzel jumped at this new way to give employees a stake in the company’s success, while also providing the business with valuable tax benefits. The company, now called Columbia Forest Products, became partially ESOP-owned in 1976. In 1984, the ESOP purchased all the outstanding shares, making Columbia officially 100% employee-owned.

The tax savings, ownership mentality and resulting agility of being an ESOP company empowered Columbia to expand rapidly. Over the 1980s and 1990s, they built and acquired numerous plants, mills and facilities across multiple states and expanded their operations into Canada. 

All the while, Honzel maintained his dedication to ensuring the company belonged to its employees. Even after handing full ownership to the employees, Honzel stayed on as CEO until his retirement in 1991. Throughout that time, he actively worked to ensure that the company developed and maintained a healthy culture of employee ownership that continues to this day. 

A competitive advantage

When considering whether to explore employee ownership, many business owners focus on what things would look like during the initial transition period, or the period between the sale and the owner’s retirement. How would the employees respond to the changes? What would it take to implement and maintain a lasting culture of employee ownership? It can be difficult to look further into the future and to picture a time when those questions have already been answered.

Wakefield, a 25-plus-year Columbia veteran, has had the benefit of viewing the company’s employee ownership culture from multiple angles. He started at Columbia as Human Resources manager, then moved to the operations side as a plant superintendent, and later plant manager before stepping into his current role as VP of Human Resources and Development.

“We’re in a very mature industry, a very competitive industry on both the domestic and international level. Our employee-owners really are our competitive advantage,” he said.

“When I was a plant manager, people would come up to me and challenge me on the floor—‘Hey, remember this or that issue’—just trying to get ahead of my thinking. I love it. It’s that ownership mentality. Team members are able to contribute and constantly improve the way we do things.” 

Reacting together

Perhaps the most important factor that empowers Columbia’s employee-owners to affect change within the company is that the leadership across the company works to maintain as much transparency as possible.

“When you’re engaged as an owner, you want to know, what’s the reality of the situation we’re in? And then how do I act on that in order to impact where we’re going as an organization?” Wakefield said. 

Columbia provides employee-owners with access to all the data they need to make informed decisions and understand the direction of the company.

“We put a high value on sharing information, whether it’s from a safety perspective, quality perspective, productivity perspective, sales perspective or anything else,” Wakefield said. “We’ve got all our metrics, all of our customer feedback data, all of our financial information, cash flow, et cetera. It’s not restricted to the CEO, or a vice president or a plant manager. It’s all open to every employee—the good, the bad and the ugly.”

Having all that information helps the employee-owners understand the direction of the company, clarifies decision-making and fosters a feeling of teamwork. Employee-owners aren’t just reacting to what’s happening in their specific role, but to data coming in from every facet of the company, giving everyone a big-picture view. 

And if something needs to change? Columbia has an established framework in place for collaborative, team-based problem solving. Employee-owners know exactly what sort of steps will be taken to find a solution and what will be expected of them, don’t have to worry that speaking up could result in managerial interference or reprisal. 

“We can act in a way that’s aligned and move forward in a positive way,” Wakefield said. “I think that’s one of the key pieces of our culture, and a big piece of that is due to the fact that we are an ESOP.”

Overcoming big challenges with small decisions

No business is immune to the ups and downs of external market forces. But there are reasons why employee-owned companies tend to perform better during recessions, and Columbia’s collaborative culture is a prime example.

The hardwood industry took a substantial hit during the Great Recession. Construction and home renovation projects suddenly stopped as funding suddenly ran dry and people who might have otherwise invested in upgrading their dated kitchen cabinets or remodeling their dens had to hold on to their savings. Columbia made it through this difficult period by holding fast to their belief in transparency.

“In ’08 and ’09, one of the critical things was sharing information about our cash flow,” said Wakefield. “Where is our cash flow daily? Weekly? Monthly?

Helping people understand that reality enabled them to gauge the decisions they made day in and day out. Many of them might have seemed like small decisions individually, but they created a groundswell to where we were eventually able to become much more successful than we would have been otherwise at that time.”

Columbia saw a similar situation play out in 2020 during the COVID-19 pandemic. All of their facilities were deemed essential businesses, which allowed them to continue operating uninterrupted, aside from implementing social distancing measures. Even so, their industry still took a substantial blow in the first part of the year.

“I’m humbled by our team members as far as understanding what we were facing, how we were responding and being willing to do what was needed, so we could contract and then come back and return to a point where we’re in a position to succeed. They know it’s not just about me. This is about, ‘How do we help Columbia stay healthy? How do we help each other?’” Wakefield said.

Crises like the Great Recession or the COVID-19 pandemic can be crucibles for businesses. Many companies say they have a culture that values every voice, but that will be put to the test in a difficult economy. And Columbia has continually risen to the occasion.

“I see it in all of our interactions,” Wakefield said. “In times like these, the strength of our culture really shows up.”

To whom much is given, much is required

A common selling point for ESOPs is that they not only benefit the business and the employees, they also benefit the community around the business. It’s true—ESOPs protect the owner’s legacy by keeping the company intact, which protects the jobs they have created in the communities they serve. ESOPs also put more money in the hands of their employees, which increases their purchasing power, enables some employee-owners to buy homes who may not have been able to afford it otherwise and enables employee-owners to retire comfortably and pass their wealth on to the next generation.

Columbia Forest Products has taken things a step further. Not content to let the benefits of their ESOP filter out into the communities around their facilities in a general way over time, their employee-owners started The Columbia Foundation to directly help people in need, both within the company and beyond.

“The guide of The Columbia Foundation is from Luke 12:48, ‘To whom much is given, much is required.’ That’s very consistent with our ESOP mentality. We’re all in this together, we’re all each other’s neighbor,” Wakefield said. “We have Caring Teams at each site. These Caring Teams are co-owners, co-employees, who help understand and identify the needs that come up, and then apply to the foundation to help meet those needs, whether they’re physical, mental or spiritual.”

When the workers at a particular plant or mill notice a pervasive issue in the surrounding community, a local charity in need of support or an opportunity to do some good for the less fortunate, they can bring it to the attention of their onsite Caring Team to apply to the foundation for funds. For example, in December 2018, the Caring Team at Columbia’s Old Fort, NC plant arranged to donate 500 holiday gift bags to clients of McDowell County’s Adult Department of Social Services.

The Columbia Foundation also provides loans and grants to assist employee-owners and their families who find themselves in difficult financial situations. 

“We’ve had issues where somebody needed funds to repair a vehicle so they could get back and forth to work,” Wakefield explained. “Or where people have needed help with rent or utilities, or other payment issues because of sudden expenses like hospital bills or funerals. 

We’ve had families impacted by COVID. In those cases, their Caring Teams were able to assess their needs in an anonymous way and help those individuals out.”

When Andy Honzel, Sr. founded the company that would become Columbia Forest Products back in 1957, he wanted it to be a place where everyone had a voice, everyone had a stake and everyone could make a difference.

“I really think that a lot of who we are now started with his values,” Wakefield said. “The values of hard work, of having an impact beyond yourself, of having the whole organization aligned and of everyone understanding that, regardless of what position you held, it was significant.”

“You can leave a legacy that’s a wealth creation entity that can be distributed to your entire workforce and can engender ownership regardless of the scope of somebody’s responsibility,” said Wakefield. “What a wonderful thing to do.”

 20/20 vision for employee ownership

Hatco® Corporation is a world class designer and manufacturer of commercial equipment that offers innovative solutions to the foodservice industry. The company has grown steadily through the years by product-line expansion and great customer service.

The company was started by Gordon and LaReine Hatch in 1950, and it remains a family corporation—only now their family is considerably larger. Hatco has introduced many “firsts.”  In May 2007, a monumental event in the history of Hatco Corporation occurred. 

With the stroke of a pen (actually, several pens), the employees of Hatco assumed 100% ownership of the company. 

With locations in Milwaukee and Sturgeon Bay, Wisconsin, Hatco is an excellent example of a company committed to employee ownership. They do so many things to foster ownership behavior and encourage ownership thinking. They keep employees engaged through a variety of fun and educational events, and they also find ways to give back to their community.

Project Equity recently chatted with Dave Rolston, CEO of Hatco Corporation.  We talked about how they became employee-owned and how life is different as an employee-owned company especially in today’s environment since COVID-19. 

Tell us a little bit about your business. 

We are a manufacturer with about 600 employees. We manufacture commercial food service equipment. A lot of our business is for grab-and-go merchandising food warmers. Companies like Racetrack and Speedway and other convenience stores comprise a large percentage of our customer base. However, we also service restaurants and hospitals, as well as universities and big tech companies that have cafeterias for their employees.

Given the climate that we are in due to COVID-19, what adjustments have you made as a company? 

Being an employee-owned company through an ESOP made adjusting to these uncertain times very easy because we did not have a conflict between shareholders and the employees. Many companies will sacrifice employees to keep their shareholders happy, and we did not have to do that.

Our business dropped significantly in April. We went from a 40-hour-a-week factory to 24 hours a week, but we continued to pay our employees for a 40-hour week.  So, they were getting Mondays and Fridays off. They had an awesome summer because they were getting four-day weekends every week! We did get a PPP loan, so that helped to subsidize some of that, and we used it one hundred percent on our people. 

It really was not a hard decision, and we have sacrificed a fair amount of profit. We made the best decision for our employees. We were very transparent and explained to them that it is a “pay me now or pay me later” situation. We told them that every dollar we spend now that we could save by laying them off will reduce their share value in the future. So, our employees were fully aware that it came down to sacrificing a little bit of their future to stay employed now or get laid off and lose everything.  

The Hatco family is in this together, and we are sacrificing across the board. A lot of companies have done significant pay cuts, and we did not have to do that either. I have told our employees to not expect a bonus this year. We usually have fairly healthy bonuses at the end of the year. So that is one sacrifice that impacts all of us and our families. 

We have been able to bump our hours recently to 36 per week. Our employees were not crazy about losing their four-day weekends, but we are happy to be trending back toward “normal”. 

Do you think that making the required sacrifices was easier for your employees because they have some “skin in the game?”

Yes, I think it is, but with 600 people, you are never going to have everybody who truly feels engaged. I send out an email twice a week to all the employees to keep them updated on how things are progressing. I tell them what good things have happened and what bad things have happened. Also, I provide status reports on the PPP loan, and other COVID related issues. The email updates were sent daily at the beginning of the pandemic. Starting in April, I cut back to twice a week, and they can reply to me and give me feedback. I answer every email received. 

What was the catalyst for transitioning to an employee-owned company?

Our previous owner was a second-generation family owner. He did not have any children, and he always treated us like family. He thought of the employees as his family and becoming employee-owned is what he has always wanted to do.

I joined the company 10 years before the ESOP was formed and, from the beginning, he always said, “I am going to retire at 55 and sell the company to the employees.” 

If you started asking questions he would say, “I don’t know how we’re going to do it, but that’s what I want to do.”

He was consistent and steadfast. It was his vision, and he never deviated. In 2004, he sold 49% of the company to the ESOP and, in 2007, the ESOP purchased the remaining 51% and he officially retired. He is still our Chairman of the Board but does not have any ownership, and he just loves it. He is very proud of it.

He often meets with prospective ESOP sellers. They will find out about Hatco and call and come meet with him and pick his brain. The employee ownership transition worked out fabulously, so much better than anyone could have ever known.

What types of benefits do your employees have that a non-employee-owned company may not? 

Well, most of Hatco’s benefits are like other companies’, but richer. I did a little analysis for the employees a while back, and I calculated the cost to the company for the benefits that they receive. I wanted them to see the value of the non-wage benefits they receive. The point I was trying to make is, when they walk away from Hatco for 25 or 30 cents more an hour down the street, they are walking away from a lot. The benefits we offer increase their base wages by $13.66 per hour, including a very robust health care plan.   

The big benefit that most companies do not have is the ESOP. When it comes to the percentage of income that people get every year amounts to around 25% of additional income that goes into their ESOP share ownership.

What advice would you give to a business owner who is considering transitioning to an employee ownership model? 

I always ask how big they are because, if they are not a fairly big organization, it is a lot of administration and detail and risk to transition to an ESOP. And profitability matters because switching to an employee ownership model does not make up for lack of profitability unless you can leverage the engagement of the employees to make the business profitable.

I do not see the downside to an ESOP, honestly. There are ESOPs that fail because of market or competitive issues, but these circumstances are beyond the control of the owners. I love the ESOP model. I think it is a great way to spread wealth, promote fairness and equity in the workplace and drive engagement of the business. 

I cannot tell you how proud people are when they talk about being an owner in the business. Sometimes they will get into the minutiae. ‘Why don’t I get to have a say in this or that?’ And that is why being transparent is so important. We are transparent about expenditures, our top line, profitability, and our capital investments. 

Transparency takes a lot of work, but it is necessary because I must be trustworthy, and they must believe in what we are doing. It is my job to answer their questions as honestly as I can, so it takes a fair amount of effort, but at the end of the day, the employee engagement it fosters makes it worth it. 

Finally, do you think that Hatco has an advantage because it is employee-owned? 

Yes. I think there are advantages on several fronts. One is that it is pretty easy to whip up enthusiasm with potential customers.

Our customers like the fact that we are an employee-owned business. They want to give their business to us because they know it is helping our employees. It just feels good to them. And our customers directly experience the benefits of employee ownership: employee engagement helps make sure we get the right thing to the customer at the right time. Everyone benefits from Hatco being employee-owned.

Do you believe that the company’s structure as an ESOP has helped to bridge the wealth gap?

Absolutely. As the shares are released, we can see what they have in their accounts, and it is not unusual for them to have a substantial amount of stock value, so much so that they could retire at 60. I have had several employees tell me that they would have been working well into their seventies if it were not for the ESOP. From my vantage point, the proof is in the pudding.

Final Analysis

After speaking with Hatco’s CEO, Dave Rolston, it is obvious that their employees take great pride in the company.  Employee decisions seem to consistently reflect awareness of their ownership and stake in the success of the company. This has helped to promote a positive organizational culture for their company and one that Project Equity believes is core to the strength of employee-owned companies.

Hatco’s original owner was thinking about succession right from the start. This type of strategic vision and planning is critical as baby boomer business owners retire. 

Our local business landscapes are already going through a dramatic shift, as businesses change hands and many close due to lack of succession planning and the current economic crisis brought on by COVID-19. Employee ownership could be a great option for many of these businesses!