St. Anthony: Employee ownership can be a winning formula


CEO Bruce Christensen, left, with vice presidents Jill Whitnah and Tyler Simmons of employee-owned Christensen Group Insurance.

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Jill Whitnah, a 13-year employee and vice president at Christensen Group Insurance, isn’t just a salaried worker.

She’s also an owner of the Minnetonka-based, employee-owned company that’s grown from 50 to 120 employees. The company’s share value has risen more than 400 percent since CEO Bruce Christensen and his minority partners sold their interest to an employee stock ownership plan (ESOP) in 2005.

“We were told back then that, if you take good care of this house, you’ll own it free and clear,” Whitnah said last week. “They sure couldn’t confirm in the beginning what the employee-ownership value would be in the future, but it has worked out.’’

As owners, Whitnah said, that personal stake in the business permeates every decision. “We don’t want to spend money on any extra software licenses or anything else we don’t need,’’ she said, “And I think people often go the extra mile to benefit everyone.’’

The company provides ESOP training for newer employees and also regularly updates employees on company performance. And there’s “a celebration every year when we get our ESOP shares,’’ which are paid out of company profits.

Christensen Group and a New Ulm manufacturer, Windings Inc., are plum Minnesota examples of how ownership, and the financial benefits, can be shared with line employees. But to succeed, the business must have good cash flow from which to pay for the acquisition from owners who may be willing to sell over time — and often for less — than selling to a private equity firm, according to Neil Brozen, a certified public accountant who has worked with employee-owned companies for years.

“You want a quality company and a good management team,” said Brozen of BTC ESOP Services. “You need an owner who doesn’t necessarily just want to sell for the highest price so he can go to the beach. Someone who may want to stay involved, maybe keep the legacy and guard against a shutdown of the plant and lay off of employees, as a third-party buyer may do.”

Bruce Christensen, 57, bought the agency from his dad in 1985 when it had five employees. Christensen remembers paying about $500,000 and taking a 9 percent bank loan.

Twenty years later, Christensen and his minority partners were looking for ways to cash in some of their equity, but didn’t want to sell to a huge agency consolidator. Nobody within the company had the capacity to buy it outright. So, through advisers, they created and sold it to an ESOP. The process involves a number of legal requirements including an impartial valuation of the firm.

“We were willing to take a discount to the third-party market value,” said Christensen, who declined to name the price. “We could have sold for a 25 to 30 percent external-sale premium. But the total return can be better if you’re patient. And the ESOP allowed us to stay engaged. I was the youngest partner. I’m still the CEO. I’m just not the beneficial owner of the profits. And the ESOP has proved to be a phenomenal retirement asset for the employees. And we also have a separate 401(k) retirement plan.”

The company has prospered. And it has used the ESOP to acquire smaller agencies to round out its lines of business and make it a stronger competitor. For example, Christensen Group last year bought SMA Insurance of St. Cloud, a 14-person agency. The owners were able to sell to the ESOP and the St. Cloud agency still does business locally by the same name.

Lifetouch, the national school-photography business, is Minnesota’s largest employee-owned business, with 22,200 employees, according to the National Center for Employee Ownership (NCEO). Redpath, a St. Paul accounting firm, and Northeast State Bank of Minneapolis, where the owner is gradually selling to employees, are also local examples.

“We’re doing 25 new ESOPs a year out of my office,” said Brozen, who was visiting a Michigan ESOP client last week. “ESOP companies also can sell or fail. Banks like them because fewer fail than other companies.”

The NCEO says that through full and partial ESOPs and employee stock-purchase plans, about 28 million American workers participate in ownership, or about 8 percent of all corporate equity. Since 2000, there has been a decline in the number of ESOP plans, but an increase in the number of participants. In an ESOP, vested employees cash out when they retire or leave, although full payment often takes up to a year.

In June, researchers Douglas Kruse and Joseph Blasi of Rutgers University concluded that ESOP companies have higher sales per employee and stay in business longer than other companies.

In New Ulm, Minn., precision manufacturer Windings just celebrated its fifth anniversary as a 100 percent ESOP-owned company, 15 years after former owner Roger Ryberg started selling the company to employees.

Ryberg decided to get wealthy slowly and ensure that the firm would stay in New Ulm. Revenue has grown from $25 million to about $30 million over the last five years. Profits have been good enough for the company to distribute an amount equivalent to 10 percent-plus of employee wages into their ESOP accounts every year, in addition to a 401(k) contribution.

“We’ve also invested in our infrastructure and our team,” CEO Jerry Kauffman said. “The ESOP helps me attract talent. People who are intrinsically motivated want to be part of something bigger than themselves … to make the world a better place. And the ESOP offers something bigger in their work world. It gets us all in this together. And everybody likes to see their retirement account build.”

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