Employee Stock Ownership Plans

Tom ShepherdRecently, while staying in a major hotel chain, I decided to look at the various amenities in the room to see where they were manufactured. Surprisingly, everything from the soaps and the drinking cups, to the peppermints on the pillow, came from overseas. These overseas factories enjoy tremendous labor cost advantages, so one must ask: How do good old-fashioned American name brands compete with that?

Labor is only one component of overall delivered price.

In the late 1800s, Procter & Gamble (P&G) dramatically cut their overall manufacturing costs by cutting working hours (with no loss of pay), and adding the first profit-sharing plan of any large company in America. Although counterintuitive, by increasing labor costs, P&G was able to improve morale and create trust among its workers. This drove total manufacturing costs down and helped make them a world leader.

With stiff foreign competition and the worst economy in our lifetime, every company needs to capitalize on every opportunity, whether that means landing that new account, or cutting costs in your current operation.

Many management books stress methods that allow employees to take ownership of their jobs. One of the easiest ways to get people to think like an owner is to give them ownership through Employee Stock Ownership Plans (ESOPs). When employee/owners understand and believe that by improving their company’s prospects they are helping themselves; great things can, and do happen.

However, realizing the full benefits of being employee-owned goes beyond an ownership structure. For our employee/owners at Magnus Precision Manufacturing, it involves creating a culture of trust and living by our corporate ideology – allowing us to be competitive as a world-class manufacturer. Our corporate ideologies include:

• Do what you say you will do
• Deliver a quality product –
• on time and priced competitively
• Deal only with ethical people
• Be willing to take risks
• Take responsibility for our actions
• Build long-term
• relationships with partners
• Be fair – but firm
• Spread the wealth

Living by this ideology facilitates trust and cooperation in all facets of our organization, as well as with our valued suppliers and customers. Given the complex aircraft manifolds, precision orthopedic implants and sophisticated optical components that we machine, cooperation between management, engineering, manufacturing and marketing departments is critical to being successful. We believe that having employee/owners with “skin in the game” gives us the edge we need to compete with anyone, anywhere.


For further information regarding the ESOP program at Magnus Precision Manufacturing Inc., feel free to contact Tom Shepherd at tshepherd@magnuscnc.com. You can also visit Magnus’ website at magnuscnc.com.

Tom Shepherd is the president of Magnus Precision Manufacturing Inc., Phelps, NY, which performs high-end machining of a variety of materials for the aerospace, medical, optical and precision industrial markets. Magnus is a subsidiary of Floturn Inc., Cincinnati, OH, that is 100% owned by the employee/owners of Floturn and its subsidiary companies. Floturn became an ESOP in 1988 when the original 30 employees bought out the business, and has grown to more than 350 people including its four wholly-owned subsidiaries.