Fields of Opportunities

Sept. 1, 2005
Sowing a culture of ownership wasn't instinctive for Iowa's Van Meter Industrial. It took some work. Here's how they did it — and how the company has begun harvesting the rewards.

Drive into Iowa, and you're welcomed by a highway sign with the state's slogan, “Fields of Opportunities.”

“I feel the same way about Van Meter,” said Allen Bean, vice president of operations, as he addressed a ballroom filled with Van Meter Industrial's employee owners at a company-wide celebration in March. The dinner gala at Cedar Rapid's Marriott Hotel celebrated Van Meter's newly achieved status as a 100-percent employee-owned company and paid tribute to Jim Hoke, retired president, past owner and current chairman of the board. Up to this point in the evening, Bean had joked and kidded his way through the program as master of ceremonies, but now, Bean's demeanor turned serious.

“It is absolutely a field of opportunity,” he said. “If you've got the hard work in you; if you've got the ethics; if you've got the integrity, and you have the desire to change your life and make something happen in your career, this is the place to be.”

Bean knows. He started with Van Meter in 1986 as a warehouse worker in Des Moines, Iowa. It was the beginning of a time of expansion for Van Meter. The company then had 36 employees and three Iowa locations: its Cedar Rapids headquarters, its Waterloo branch, and the Des Moines branch it had opened that year after being awarded the area of primary responsibility (APR) for Rockwell Automation and Allen-Bradley product lines for that territory.

Bean remained in Des Moines for a decade, working his way from the warehouse to counter sales to inside sales. By 1996, when Van Meter merged with Industrial Engineering Equipment Co., Davenport, Iowa, Van Meter Industrial had grown to 280 employees and 14 locations. In 1997, Bean relocated to Davenport where he was responsible for opening and closing several stores and motor shops in Van Meter's eastern region. Three years ago, he moved to Cedar Rapids to head operations.

Anne Rathjen also believes Van Meter is the place to be. Thirty years ago, the 21-year-old community college student was floundering while trying to decide what she wanted to do with her life. Needing a job to pay rent, Rathjen lucked into a secretarial position at Van Meter's Waterloo location. Since then, she's moved into roles as purchasing agent, operations manager, and for the last 10 years, she's served as Van Meter's Eclipse software administrator. “There's never been a reason for me to want to leave Van Meter because they always gave me more opportunities,” said Rathjen. “If I got bored with one position, I had an opportunity to get into another.”

Todd Ettleman knows, too. As a young college grad in the early '90s, he faced a tight job market. Entry-level positions were truly entry level. When Ettleman landed a job working in the Carroll, Iowa, warehouse, his co-workers wanted to know why Van Meter would hire someone with a four-year degree for the warehouse. Ettleman replied, “Because I don't plan on working in the warehouse for a very long time.” He went from the warehouse to inside sales to counter sales; then from product sales representative to account manager to location leader. Last December, Ettleman became vice president for the central region business unit.

Ettleman, Rathjen and Bean are testimonies to the career growth possible within Van Meter Industrial. It's something they have in common with former owner Jim Hoke, who began his career with Van Meter as a warehouse worker while in high school. Hoke, too, worked his way up: counter sales, outside sales, branch manager, sales manager, vice president of sales. Then, in 1981, he bought the company.

Really, though, their stories aren't that different from those of many others at electrical distributor companies across the United States. Talk to the counter guys at countless electrical distributors, and you will find they probably moved into the position from the warehouse. Many won't remain at the counter long.

What sets Van Meter Industrial apart, says Barry Boyer, president and chief executive officer, is its people and its employee ownership.

“One of the things we focus on more than anything is putting the right people in the right places — who before where,” said Boyer. “If you put the right people in place, then you drive your environment toward creating a company where people want to come to work.

“That doesn't mean it's Disneyland, but if they feel good about where they work and they feel like they're challenged … that's the difference between being successful in business and not.”

Employee ownership can go a long way toward fueling the desire to come to work everyday. It can be the difference between employee empowerment and just punching a clock. Over the last two years, Van Meter has worked hard to cultivated a culture in which every employee not only understands that his or her job function affects the value of company stock and the value of his or her retirement, but also fosters empowerment.

“No owner has a job description,” said Mick Slinger, vice president of finance and chief financial officer. “Give them the power, and get out of the way. They'll make the right decisions.”

Cultivating a Culture of Ownership

Van Meter's Employee Stock Ownership Program (ESOP) got its start in 1993 when Industrial Engineering Equipment Co. (which later merged with Van Meter) implemented an ESOP as a vehicle for succession when one of its four owners was retiring. In early 1995, Van Meter began exploring starting an ESOP as an employee benefit program. Van Meter's current ESOP emerged when the two companies merged in 1996.

In 1997, Van Meter was 34 percent employee owned. By 2004, employee ownership had grown to 57 percent. This year, Van Meter Industrial became 100 percent employee owned after Jim Hoke sold his remaining shares.

Perhaps because the succession and transfer of ownership happened slowly over the course of several years, few at Van Meter fully grasped the power the ESOP could harness.

“We spent a lot of years just giving people stock certificates and not really educating them on what ownership means,” said Boyer.

That changed two years ago when Slinger read Jack Stack's “A Stake in the Outcome.” The book details how SRC Holding Corp. (formerly Springfield ReManufacturing Corp.), Springfield, Mo., built its culture of ownership. The book is a sequel to Stack's best seller “The Great Game of Business,” the name SRC coined for the management system it developed to teach its employees about business and turn them into owners.

“A Stake in the Outcome” inspired Slinger. One paragraph in particular from the book's epilogue moved him to the point of e-mailing the paragraph to Van Meter Industrial's leadership team in August 2003 with the quip, “If you read it … and don't get goose bumps, you're not human.”

Slinger saved that e-mail on his computer. Every so often he opens it and reads the paragraph as a reminder of the ownership philosophy Van Meter Industrial strives to instill in each of its employee owners.

During a phone interview, Slinger read the paragraph out loud — slowly — like a poet — with emphasis on key words:

“There are lessons here that go beyond business, however, because ownership is a state of mind. Ownership is hope. It's curiosity, openness, an eagerness to learn and grow. It's caring about yourself and the people around you. It's wanting to contribute, to make a difference. It's the courage and conviction to face the future. It's confidence, self-esteem, and pride. It's the ability to handle diversity. It's giving back to your community and appreciating the gifts that you've received.”

When Slinger read that paragraph for the first time two years ago, he was excited because he saw parallels with the culture Van Meter had already created, but he knew in his gut that Van Meter had missed a big opportunity by not educating its employees about ownership and its ESOP.

Borrowing from a program detailed in an article by The ESOP Association, Washington, D.C., Van Meter Industrial assembled an Employee Ownership Representative (EOR) Committee charged with the goal of making ownership at Van Meter Industrial meaningful to all employees.

Recognizing that ESOP communication and education would be best received coming from co-workers, Van Meter structured the committee so representatives are elected by their peers. The committee's 12 EORs each represent specific business units, regions or locations.

After the committee put together bylaws, it formulated a mission statement, “To maximize the value of our ownership in Van Meter Industrial,” and identified key components to accomplishing its mission:

  • Achieving financial literacy means helping each person in the company understand how he or she can affect Van Meter's stock value.

  • Communication is key. The committee is tasked with finding ways to promote dialogue within the company about the ESOP. They use newsletters, the company Intranet, in-person presentations, surveys and the ESOP statement.

  • Education allows members of the committee to “sharpen the saw” by attending national ESOP conferences to learn from other ESOP companies and keep abreast of pending legislation.

  • Recognition and celebration is also an important aspect for promoting an ownership culture. The March celebration marking Van Meter's status as 100-percent employee owned generated much enthusiasm and pride.

  • Training and development of an ownership mentality among all employee owners was at the top of the committee's list.

First, though, the committee members had to be educated on Van Meter's ESOP. “It was very painful,” said Slinger. “I'm sure every one of those elected people said, ‘What did I get into? This is more than I signed up for.’”

Each committee member read “A Stake in the Outcome,” and they worked with Slinger, Boyer and Amy Lehn, director of human resources, to learn the ins and outs of Van Meter's ESOP. (Slinger, Boyer and Lehn attend all ESOP committee meetings.) Simply put, Van Meter's ESOP is a retirement plan for its employee owners, and a vehicle for succession of company ownership. According to the ESOP Association, those are the two most common uses of ESOPs. About 80 percent of the 11,000 ESOPs in place in the United States were set up for those two reasons.

To set up an ESOP, a company forms a trust called an Employee Stock Ownership Trust (ESOT), to which employee-owners are beneficiaries. Individual accounts within the trust are maintained for each ESOP participant.

The committee learned how employees become eligible, how contributions are made, the vesting schedule, how stock value is determined and how benefits are paid when an employee retires or leaves the company. “It was important for them to understand,” said Slinger, “because they get bombarded with questions everyday.”

Each year, based on the company's performance, Van Meter's board of directors decides how much to contribute to the plan. Unlike a 401(k), all contributions to the ESOP come from the company. Employee owners don't make contributions; they receive a set percentage of their salaries. Share values are appraised annually by an outside concern.

Last year, Van Meter gave about 8 percent to ESOP recipients, so an employee with an annual salary of $30,000, received $2,400 in stock — or 168.42 shares of Van Meter stock, which appraised at $14.25 last year, a 10 percent share value increase over 2003.

Members of the ESOP committee, along with Slinger, Boyer and Lehn, brainstormed on ways to best communicate the power of Van Meter's ESOP to its employee owners. One of the first things the committee did was revise the annual ESOP statement to make it clearer because they believed the old version had extraneous information people didn't really need. What they want to know, said Slinger, is how much was in their account last year, how much they added to the account this year, and how much the stock shares went up.

The committee knew, too, it had to devise a message that would help employee owners understand Van Meter is their company — and that they have the autonomy to make decisions and suggestions to build a better Van Meter.

The committee came up with a clear financial message that has helped employee owners see how the decisions they make every day affects stock share values. Every $10,000 change made by increasing sales or decreasing costs means a 2-cent increase in stock payment.

“If you took all 300 Van Meter employees, and you had them each make that kind of improvement in the business, you could have a 40 percent increase in your stock,” said Boyer.

Ownership Mentality Paying Off

When the EOR committee took their message on the road, employee owners took it to heart.

“You catch examples on a daily basis of people making decisions on what's best for the company,” said Ettleman, who served as the founding ESOP committee president.

Some are big decisions; some are small, but they all add up.

Brian Becwar, distribution and logistics manager, realized the warehouse team could be much more efficient if Van Meter added a conveyor system. He pitched the idea to Bean and Boyer, and got the green light. The conveyor system cost more than $175,000, but the return on investment is great. Before the conveyor system went in, the record for lines picked per person in a day was 400; after the conveyor system, the record is 876. Before the conveyor system, on a typical day a person would pick 250 lines; now an individual can easily pick 400 lines in a day.

Michael Brown also found ways to make improvements in the warehouse. Although the three-year company veteran now does contractor deliveries, when he was in shipping in charge of UPS shipments, he noticed that Van Meter was shipping some customers multiple orders throughout a day. He realized that consolidating those items into one big box, instead of making five different UPS shipments in a day to one customer, would save the company money. Over the course of the year, he figured it would save the company about $20,000, which translated into 4 cents in ESOP stock share value.

“It happens every week now,” said Bean. “Little things. It's somebody coming into this room and saying, ‘Hey, these lights are on. There's nobody in here. I might as well shut them off because I pay for part of that light bill.’

“I don't care if you save $5 or put in a $175,000 conveyor system. It doesn't matter — you're empowered to do that. There's a different mind-set.”

Van Meter Industrial Quick Stats

Headquarters: Cedar Rapids, Iowa

Branch Locations: Burlington, Carroll, Davenport, Des Moines, Iowa City, Keokuk, Mason City, Muscatine, Ottumwa, Sioux City and Waterloo

Founded: 1928

2004 revenue: $131 million

Number of Employees: 300

Inventory: $13 million at the central distribution center; $17 million total

Customer Mix: 35 percent industrial, 35 percent OEM, and 25 percent to 30 percent electrical contractor

Ownership: 100-percent employee owned

Vision: “To be our customer's competitive advantage.

Purpose: “People united by common ownership, committed to profitable growth by providing knowledge, generating ideas, and implementing solutions for the business and communities we serve.”

Of Note: Van Meter Industrial and Werner Electric Supply of Wisconsin, Neenah, Wis., are joint-venture partners in a 50/50 ownership of Werner Electric Supply of Minnesota, Minneapolis. The three companies share best practices, some back-office functions and some staff.

Powerful Employee-Owner Ideas

Educating Van Meter Industrial employee owners on the company's ESOP and empowering them to make decisions and offer ideas pays off for Van Meter everyday.

  • Brian Becwar, distribution and logistics manager, realized the warehouse team could be much more efficient if Van Meter added a conveyor system. He designed the system and spearheaded its installation. Before the conveyor system went in, the record for lines picked per person in a day was 400; after the conveyor system, the record is 876.

  • Three-year Van Meter veteran Michael Brown found a way to save the company $20,000 in UPS shipping costs, which translates into a 4-cent increase in Van Meter ESOP stock share value. Every $10,000 decrease in costs or increase in sales translates to a 2-cent increase in stock payment.

  • A year and a half ago, on Marge Hunt's first day as a receptionist/administrative assistant at Van Meter's CDC, she knew the reception area needed more than a face-lift. “When you came in the front door, it was like a tunnel,” said Hunt. Today, when you walk into the CDC, you're welcomed by a friendly waiting area and greeted by Hunt.

  • Chris Kenney, contractor delivery and maintenance coordinator, decided to carry a cooler filled with ice-cold pop in the delivery truck about a year ago. Offering a customer a cold soda on a hot day can go a long way toward cementing relationships. “The small things can make a huge difference,” said Barry Boyer, president and chief executive officer.

It happens every week now,” said Allen Bean, vice president of operations. “I don't care if you save $5 or put in a $175,000 conveyor system. It doesn't matter — you're empowered to do that. There's a different mind-set.”

Empowered Employee Owners

Van Meter Industrial's ESOP gives its people “a sense of ownership and a sense that ‘I own a piece of this,’” said Bill Devereaux, president of R/B Sales Corp., Marion, Iowa. His rep firm has been doing business with Van Meter Industrial for 27 years.

That “I-own-a-piece-of-this” mentality can be as simple as a delivery driver offering a customer a cold pop on a hot day. Barry Boyer, Van Meter's president and CEO, witnessed that entrepreneurial spirit when he spent time making customer deliveries with Chris Kenney, contractor delivery and maintenance coordinator.

“We pull into a job site, and here's an electrician working on the job. You can tell that he's not having a good day,” said Boyer. Kenney offered the electrician an ice-cold pop from a cooler he had on the truck. “I'm thinking, ‘When did we start carrying pop in the truck?’” said Boyer.

When they finished the delivery, Boyer asked Kenney, who's been with Van Meter for two years, about the cooler. Boyer says Kenney responded, “Yeah, I started that about four months ago. Now, having that customer feel better about his day, doesn't that improve our share value?”

“The small things can make a huge difference,” said Boyer. Meanwhile, the big things make a difference, too, and huge ideas don't have to come from Van Meter bigwigs.

“One of Van Meter's inherent strengths as a company is management's willingness/desire to listen to what the employees have to say,” said Devereaux.

One example is Van Meter Industrial's new reception/waiting area at its central distribution center (CDC), which also houses billing, purchasing, the product-data department and marketing. When Marge Hunt started as the CDC's administrative assistant/receptionist as a temp in March 2004, she knew the reception area needed more than a face-lift. “When you came in the front door, it was like a tunnel,” said Hunt. “There was this little sliding window, and if I moved just right, people would know I was there. I knew then that this company needed a different office.”

But, as a temp, Hunt didn't feel it was her place to question the status quo. In October 2004 at a company breakfast where many employees sported T-shirts that read, “Ask me what my three-year plan is,” Hunt, still a temp, shared with a co-worker about her vision for a more inviting CDC reception area. Hunt didn't know that Allen Bean, vice president of operations, was standing behind her listening.

That afternoon, Bean called Hunt into his office and asked about her three-year plan. “I said, ‘I hope to be here in three years, being a temp.’ Then I caught on that he'd heard what I'd said, so I brought him out front and explained to him we needed a front office where the receptionist was right there when you walked in the door.”

Bean quickly recognized Hunt was right. Van Meter's CDC said goodbye to its tunnel hallway and fish-tank reception area. Today, when you walk into the CDC you're welcomed by a warm waiting area and greeted by Hunt's friendly salutation. By the way, Hunt became a permanent full-time employee in January, which makes her an eligible ESOP participant this year.