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SEEING FARTHER, from page 7
to purchase stock outside of their ESOP stock ownership. About half of Prein&Newhof employees have used personal funds to purchase stock outside of the ESOP, including about two-thirds of eligible employees. TZL: Ownership transition can be tricky, to say the least. What’s the key to ensuring a smooth passing of the baton? What’s the biggest pitfall to avoid? TN: Prein&Newhof formed an ESOP in 1995 to transition the ownership of one of its co-founders, representing about 40 percent of total shares at that time. Since then, the ESOP has been an integral tool in managing through subsequent transitions, including a significant transition in the early 2010s. Our ESOP owns about half of our stock, with our employees individually owning the other half. Over time, share ownership which was concentrated in a few individuals has become very diverse. This reduces the financial burden associated with subsequent ownership transition. Failing to plan for transition is a big pitfall often seen in our industry. Our founders and next generation of leaders had the foresight to establish our ESOP and fund it adequately to transition smoothly through subsequent ownership changes. Forecasting future needs is an ongoing process which we take seriously. We consistently contribute money into our ESOP to maintain liquidity needed to meet our anticipated future ownership transition needs. “Prein&Newhof formed an ESOP in 1995 to transition the ownership of one of its co- founders, representing about 40 percent of total shares at that time. Since then, the ESOP has been an integral tool in managing through subsequent transitions, including a significant transition in the early 2010s.” TZL: A firm’s longevity is valuable. What are you doing to encourage your staff to stick around? TN: We have historically had very low turnover, which I believe speaks to the way we treat our co-workers and the rewarding work they do. We have a strong ownership culture, which we encourage through significant contributions to our ESOP, as well as making stock available for all employees to purchase, subject to some restrictions. Having a financial ownership stake encourages employees to think and act as owners. The work they do does not just benefit a small group of shareholders or some publicly traded entity, but it directly benefits each one of them. That is meaningful to our colleagues.
TZL: What type of leader do you consider yourself to be? TN: I prefer to lead by example and by reaching consensus. Being a non-engineer in an engineering firm which is blessed with many capable leaders makes the latter characteristic important. Every employee in our company is there for a particular reason, is important and necessary to our success, and should be treated that way. In my previous career, I worked for companies that were hierarchical and political. I strongly dislike that and attempt to treat my co-workers as peers. That is an important part of our culture and is a contributing factor to our long-term employee retention. “As a non-engineer, I can handle many of the non-technical aspects of running the company, freeing time for the billable professionals on our officer team to do what they do best.” TZL: What do you believe makes you one of the “most- trusted” engineering firms in Michigan? TN: Our company motto is “Seeing Farther.” By this, we mean stepping back and taking a big-picture view of things, looking beyond what is directly in front of us. We want to build long-term relationships with our clients in which we are a trusted advisor, we understand their infrastructure system better than they do and can bring more value to a relationship than simply designing a project. We have gone against our financial interests to recommend against clients taking on projects that would generate significant fees for us because it was not the best thing for them to do. We have a number of clients who have been with us for 40 to 50 years, which speaks to the trust that has been built and maintained. TZL: How often do you valuate your firm and what key metrics do you use in the process? Do you valuate using in-house staff or is it outsourced? TN: As an ESOP company, we have an external valuation performed annually. The valuation takes into consideration industry transactions, industry revenue and earnings multiples and earnings capitalization. Our valuation firm looks at long-term trends and doesn’t swing valuations sharply based on unusually high or low performance. TZL: Since being president, what’s one of the things you are most proud of that you’ve accomplished and why? TN: Being transparent with our financial reporting. We’ve been an ESOP company since 1995 and have very broad employee ownership outside of the ESOP. Enabling all employees to better understand our financial position and how their individual efforts impact our financial performance has been a focus. We do this with quarterly reporting and an in-depth annual performance update. In addition, our team leaders and board of directors receive detailed monthly financial reporting. This financial transparency has led many of our employees
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THE ZWEIG LETTER APRIL 5, 2021, ISSUE 1386
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