Tag: HB Global

Robert Whalen, president and CEO of HB Global, Harrisburg, said his company is has seen tremendous growth since becoming employee-owned 12 years ago. 

His company is one of the many that make Pennsylvania second in the nation for employee-owned companies, with Harrisburg and York cities ranking in the top 25. 

Certified Employee-Owned, an organization launched in 2017 to accelerate the creation of an employee-owned economy by providing certification for employee-owned businesses, said Harrisburg, which ranked third city in the nation, is home to 17 employee-owned companies, including HB Global, D&H Distributing, and Schaedler Yesco Distribution.  

With a population of 58,000, Harrisburg has one employee-owned company for every 3,400 residents, the company said. 

Kevin McPhillips, CEO of the Pennsylvania Center for Employee Ownership, said the picture is even brighter than that. Pennsylvania falls only behind California, which is 3.5 times larger, he said. 

McPhillips, who heads the volunteer organization to raise awareness about the benefits of employee ownership, said these companies change lives, offering people a real future. “When employees own stock, it makes the company more profitable,” he said.

Thomas Dudley, Certified Employee-Owned’s CEO, said, “We set out to create a list of the top cities for employee ownership because we want to shine a light on the cities that have fostered an environment where employee ownership thrives. We want to help people see which cities have clusters of employee-owned companies so that we can understand what’s driving their success.” 

While York ranked 24 on the list of cities in Certified Employee-Owned’s ranking, McPhillips said the picture is brighter than that. York County, he said, has some of the highest employee-owned companies per capita in the nation. “A lot of that is from the support of the York County Economic Alliance,” he said. 

Studies show that employees who have ownership in their company are eight to 12% more productive and they earn two to three times more retirement wealth, McPhillips said.  

Employee ownership changes the relationship between the company and employee, Dudley said. When every employee has an ownership stake, companies become rooted in place.  

“In 2010, we had a single location in Harrisburg. Now we have 10 divisions along the east coast, the Carribean and Phoenix, Arizona,” HB Global’s Whalen said. 

That computes to 20 times the revenue and 10 times the employees HB Global had when it changed to employee owned, Whalen said. 

“The ownership culture contributes to efficiency,” he said because employees take value in ownership.  

The company has grown through acquisitions and Whalen said all new employees are offered ownership on day one.  “We recognize length of service with their former owners and offer shares accordingly,” he said.  

“We believe employees should share in what we create,” Whalen said. “We believe over time they produce more, and we are a better company with better service because of it.” 

According to Certified Employee-Owned, the wealth these companies build flows through the local economy, the jobs they create are more stable, and they become more involved in service. 

 Because of these connections, employee ownership is a win for workers, businesses, and communities, the company said. Common examples include Employee Stock Ownership Plans (ESOPs), Worker Cooperatives, Employee Ownership Trusts (EOTs), and broad-based equity compensation plans such as stock options, Dudley said. 

McPhillips said an ESOP is a federal program where an owner can sell all or part of the company to employees. “The business takes a loan to pay the owner and then doesn’t pay taxes on the profits equal to the percentage of employees involved,” he said.  

“If you aren’t paying taxes, it creates cash flow which translates to organic growth,” McPhillips said. “The more cash, the more investment so the share value goes up and all employees have more investment.” 

While wages may not increase immediately, McPhillips said employee-owned workers average 30% more in pay as the business grows. More importantly, he said, they have a retirement they can count on. 

A relatively new model in the U.S. that has been used in the United Kingdom for some time, he said, is the Employee Ownership Trust. “The owner comes to an agreement with employees on the price of the business and the shares are then held in a trust,” he said. 

The trust protects the workers from a buyout and, at the same time, ensures profits are divided among the employees, he said. 

McPhillips said no matter what the model, employee-ownership brings a rationale to the workplace. “You spend all day at your job and now you are able to have a future,” he said. “The wealth gap is killing us; it affects all of us. This is not the answer to it all, but we have a low hanging fruit that is available, and we need people to know about it.” 

McPhillips added, “Pennsylvania is doing great. Companies are making the investment. The only reason there aren’t more employee-owned companies is people don’t know about it. That’s why we do what we do.”