Firms Should Consider New Employees as Future Owners

By William J. Angelo

	Abrams

Anyone studying the list of Top 250 Design-Build firms published in this issue will note that like the construction industry as a whole, the design-build segment has many small businesses in its ranks. And small businesses generally are innovative, adaptable and out front in industry trends. So when one innovative design-build firm makes a seminal change in its hiring practices that is successful, the impact eventually may touch many firms.

"We no longer hire people for their skills," says John R. Abrams, president, South Mountain Co., West Tisbury, Mass. "We are hiring a future owner and that changes everything. We want brains and morals. We’ll teach them the skills, if need be."

Abrams speaks from experience. He sold his business in 1987 to his employees and himself and his sole proprietorship became an employee-owned cooperative corporation. The 30-year old firm now averages about $6 million in annual revenue mostly from designing and constructing a 70:30 mix of high-end and subsidized affordable housing on Martha’s Vineyard.

Most of the firms 30 employees are real owners. "Ownership has become available to all employees, enabling them to own and guide their workplace," says Abrams. "Now, responsibility, power and profits all belong to the group of employee owners." Abrams notes this is real ownership and not about a sense of ownership or a sense of control. He cites Corey Rosen of the National Center for Employee Ownership, Oakland, Calif. for the explanation that giving employees a "sense" of ownership is like giving them a "sense" of dinner.

According to Abrams, new hires can become a full partner in the booming design-build practice if they stay with the firm for five years. Many do, and that has driven a change in hiring practices over the past 18 years. "We no longer just hire carpenters, supervisors, architects, interior designers, woodworkers, or bookkeepers," says Abrams. "We need people with appropriate skills, but, more importantly, we need future owners."

For Abrams and his co-owners, personal characteristics trump skill sets. "We know how to do what we do, so if aptitude and inclination are there, we can teach new employees how to build, or design, or manage," he says. "But we can’t teach morality or generosity or compassion. We can’t teach a sense of humor or good judgment and we can’t teach people to be calm at a time of crisis–level-headednesss is not a skill. We can’t teach common sense. We can’t teach respect for other people and the environment. We can’t teach the desire to constantly learn and above all, we can’t teach people to have the kind of spirit that makes good owners–the capacity to separate the good of the whole from the good of the individual and make decisions based on the difference."

Abrams and his fellow owners search for those qualities in potential new hires because each person in a small business has an unusually high impact on the organization. Long-term thinking is more important than short term, so Abrams devotes more time and effort to each hire than most small company executives. It is a process fraught with subjectivity. "Sometimes we forget to search deeply when dazzled by someone’s skills or intelligence," he says. "But if the same person who has the dazzling skills has a character full of flaws, the dazzling skills will be of no use to us as a company."

The thriving firm is constantly bombarded with employment inquiries and the owners routinely tell jobseekers that they are not hiring. But they keep the applications. And when there is an opening, a five-member personnel committee meets to conduct a search that sometimes originates through the firm’s Website, southmountain.com. "We’ll talk to anybody, but we ask them to tell us in writing why our company interests them and what they have to offer," says Abrams. "Once we have a pool of applicants, we start interviews but we will also have potential applicants work with various teams. We want to thoroughly know our hires."

Only about five people are hired from every 100 letters-of-interest received. But the payoff could be workplace and financial satisfaction. "Our wages are competitive with the good companies in our field. But our benefits are more complete," says Abrams. "This includes 100% health and dental payments and an hours-worked profit-sharing plan to every employee and owner, which amounts to about 10% of wages. Plus additional equity for owners."

Employee-owners control the destiny of the firm by making all major policy decisions, including which markets to pursue. They also address company growth issues and major compensation benefits issues as well as manage equity investments totaling $1 million. To become an owner, an employee must have the five- year tenure and pay a fee, now approaching $11,800, which goes into the person’s equity account. The firm has produced a profit every year, generally 2 to 6%. When an owner leaves, payoff starts immediately.

This approach allows South Mountain to provide an island of stability and a challenging mix of work. It also allows owners to share the risks and rewards of design-building.