Episode Description
Can employee ownership be the secret ingredient for weathering the storms of business challenges?
Let’s find out.
In this episode, Chris Fredericks, CEO of Empowered Ventures, and Emily Bopp, chief of staff at Empowered Ventures, dive into questions about what happens if a company in the Empowered Ventures family is underperforming.
The candid conversations about leadership, accountability, and industry changes are designed to leave you inspired and assured that your role is pivotal to our collective success.
In this episode, you’ll learn:
•There is strength in employee ownership. We leverage employee ownership to excel in navigating storms like recessions or industry upheavals with greater stability.
•Real-world examples and strategies to tackle both short-term and long-term business challenges.
•How do we respond to underperformance? We’re all about accountability, strategic pivots, and keeping an eagle eye on long-term success without compromising our culture.
Jump into the conversation:
[01:36] The most interesting person to Emily
[06:22] External short term issues
[11:26] External long term event
[15:39] Underperforming businesses
[17:30] How EV supports leaders
How to Listen or Watch
Listen below or wherever you listen to podcasts.
Watch below or @Empowered_Ventures on YouTube.
Read the full transcript below the media links.
Episode Transcript
Emily Bopp: And I think it’s comforting that we do think about these things and we know what we would lean on to have that be an absolute last resort. I think of one of the only other things that you haven’t said, which is the power of employee ownership itself to help companies weather these kinds of things.
Chris Fredericks: Welcome to Empowered Owners, the podcast that takes you inside Empowered Ventures. I’m your host, Chris Fredericks. In each episode, I’ll have a discussion with one of our employees to discover and highlight their distinct personalities, perspectives, and skills while also keeping you in the loop with exclusive news, updates on company performance, and a glimpse into the future plans of Empowered Ventures. This is an opportunity for me to learn more about our amazing employee owners and an opportunity for you to hear regularly from me and others from within Empowered Ventures. On this episode of Empowered Owners, Chief of Staff Emily Bopp and I talk about how we will approach things if one of our companies is ever underperforming. While that isn’t an issue today, chances are some of our companies will go through challenging times at some point. We’re happy to share how we think about various scenarios, especially how our long term perspective helps us navigate short term challenges in a way that not all companies are able to do with that, let’s get to my conversation with Emily. Hi, Emily.
Emily Bopp: Hey, Chris. How’s it going?
Chris Fredericks: I’m doing well. How are you?
Emily Bopp: I am doing fantastic. It’s awesome to be back on another episode.
Chris Fredericks: Yeah, agreed. So sometimes you frequently spring interesting questions on me, both in the podcast and out. You’re really good at asking questions, but this time I thought I’d throw one your way. Who would you say is the most interesting person you’ve met and talked with?
Emily Bopp: The most interesting person I’ve met and talked with has to be Eva Kor. I was invited to a Marilyn Glick women’s series that happens here in Indianapolis, where they have in these interesting speakers. And I went with my friend and actually was there early during the cocktail time, and I’d done a little studying up on this Eva Kor who was going to be the speaker there that night. Okay, so Eva Kor was a Romanian Jew who was in Auschwitz as a child, and she is a twin. And I didn’t know, maybe some history buffs do know this, but there was a doctor at Auschwitz who was particularly interested in the twins because he could experiment on one and he had a control group in the other. Can you imagine? So, Dr. Mengela, I know it’s a downer, but this is history. This is what happened. So, Dr. Mengela was the one, and so they call them now, Mengela twins. So she survived Auschwitz. She and her sister survived. And how in the world she ended up in Indiana is a whole other story. But I knew a little bit of this background of her. So when I was there and able to literally go sit by her, hold her hand, drink some tea together and talk, it was the most amazing conversation. So she was eleven when she. So here’s what she would say. She says, I was liberated from Auschwitz when I was eleven in whatever it was, January 27, 1945. But I became free 40 years later when I forgave Dr. Mengela. And then she built this whole sort of program around forgiveness, specifically in areas of the world where there’d been deep humanitarian wrongs done. And she actually became controversial in the jewish community because they’re like, how could you forgive this thing? And so she was very careful to say, I’m doing it for me personally, I’m not doing this for a people group. I’m not pardoning him, but for me personally, I wasn’t free even though I was liberated, until I embraced forgiveness for this person. The most interesting person I’ve met in talked with Evacor, and sadly, she passed away. There’s a museum down in Terre Haute that she is called the candles museum, and it’s for the survivors of the Holocaust. Anyway, she passed away in 2019. And so I had seen her the one time, and then I took my kids. I was homeschooling at the time. I took my kids down to the museum and we met her again and saw her down there. So, Evacor, we have a little national treasure right here in Indiana, and her legacy lives on.
Chris Fredericks: Really touching and very inspirational.
Emily Bopp: Yeah, thank you. Well, the power of forgiveness is awesome, so thanks for asking. And I’m thinking about how we go from that regularly scheduled programming, as I say all the time. But we last time on our EV update were talking about how we help our companies succeed, and we were talking about buying businesses that are already succeeding, about helping leadership and supporting them, and about creating this intentional community. And so today we wanted to pick up that thread and say, okay, on the flip side, how do we help companies that are maybe struggling are underperforming? So let’s dive in there. And just to be clear, let’s say at the outset, none of our companies are in this situation.
Chris Fredericks: Today, we’re taking the view for a lot of these EV updates of what are the questions that might be on people’s minds about EV, our approach to things, things that could ultimately happen in the future. And so, yeah, this one has definitely come up at times with some folks in casual conversation around how this could play out. And it’s a real thing. Every business goes through periods of challenge. There’s ups and there’s downs, and we’ll talk a lot more about this. But our approach is definitely long term. It’s not to be super short term oriented, and that influences our approach in so many ways to supporting these companies and helping them succeed for the long term. That’s a big part of what we do, and being able to just manage and deal with the challenging times and support them through the challenging times. That’s what this topic is about today.
Emily Bopp: And I love that you were saying this is hypothetical, but this is what our evers might be wondering. And I think it is relevant because for the Evers, who really understand that ultimately their account value, what their account is worth, is made up of the collective performance of all of our companies. Okay, so, EV, what are you going to do if one of those is dragging down the hole? And as you and I were talking, there’s really four ways we can look at this. We could look at this. All right. A company is struggling because of some external reason and it’s short term, or they’re struggling because of some external reason and it’s a long term problem, or they’re struggling because of some internal problem and it’s short term. Or some internal problem, and it’s long term. So let’s dive into all of that and just explain how we think about it and what we would do. So starting with external short term. So it’s something that’s happening outside of the company that’s causing it to underperform. And short term, meaning how long?
Chris Fredericks: Short term to us, obviously, short term is days, months, quarters. We take it to probably even be a year or two. When we think about our companies and how we view how well our companies are doing, of course we care about monthly performance and quarterly performance, but within the scope of time that we’re concerned about, which is many years into the future, short term is a couple of years. I think we can look at things with some patience relative to maybe how some other businesses and groups think about time frames.
Emily Bopp: Yeah. So we’ve had a really great example of an external short term event that caused a lot of companies to underperform. And that was COVID.
Chris Fredericks: Yeah.
Emily Bopp: What would some other examples be of things that one of our companies might experience?
Chris Fredericks: Yeah. From external kind of short term, any kind of recession. A lot of people remember the 2008 2009 recession that was such a big deal. As a great example, it’s going to typically be something like that. It could be caused by any number of factors, but if it’s impacting the performance of our business on a short term basis, I guess another good example could be maybe a few key customers are struggling and therefore a particular business is struggling. That maybe all of our businesses are not struggling, but maybe that one is because of some key customers. So something like that could be considered.
Emily Bopp: What does EV do in that case?
Chris Fredericks: Generally, we’ll lean in, support our leaders the way we always do, which is in this relationship, very oriented way. We ask what we can do to help, if anything. But we try to be patient and encouraging, and we encourage our leaders to take actions with their team that they can to help the business be more profitable. Maybe, but we would encourage that to not be things that cut into muscle and bone of the business. We don’t want to put the long term at risk by trying to optimize too much for short term performance. So if the business has to go a little while and not be at peak financial performance for a short term period of time, we can be okay with that because we understand that can be part of what needs to happen to get through a tough time. But really, it’s just leaning in from a relationship perspective and making sure we understand and are as supportive as we can be through that tough time.
Emily Bopp: You mentioned something once that I thought was brilliant, that often in a fear response, leaders might not notice or see the opportunity that one of these short term, external driven events can pose. So, yeah, tell us how you think about that.
Chris Fredericks: I think, yeah, it’s so true. And it’s something, all of our companies have good examples of this already in their past, or maybe even currently in some cases. And that’s when things slow down, when you’re going through a tough time. And maybe there’s not as much work to do because you’re not stretched just to keep up with demand. That can be a terrific time to find ways to improve the business. It could be the perfect time to fix some broken processes or work with people on development plans that people that are aspirational and want to grow and develop into new roles or things, or make investments potentially. If there’s something really important the business has been waiting to do for the right time, it actually could be the perfect time to invest more into the business, be it a piece of machinery or automation or software, something that could really make the business stronger for the future. Sometimes that short term downturn or slower time is the perfect time to do that. It can be a little scary because now you’re investing time and money during a time that the performance isn’t super strong or as strong as it was, but it really can pay so many dividends on the other side when things bounce back.
Emily Bopp: Yeah, that’s fantastic. External event, that’s long term. So here we’re talking like it’s a global something.
Chris Fredericks: A global something or the other thing could be maybe in a big industry shift that makes some business models obsolete. The classic example is the buggy whip, right? You don’t want to be in the buggy whip business when Mr. Ford got his thing going. Yeah, that’s theoretically possible for our businesses. We don’t see that on the horizon at all for any of our businesses today. But it could be that at some point in the future, one of our businesses happens to be selling buggy whips and their industry changes in a way that we need to actually think about, and the leadership needs to think about how to navigate that.
Emily Bopp: And so what would we do? How would we help them?
Chris Fredericks: Yeah. And to your point, with the first example, too, if it’s kind of a broader kind of global thing or national thing that’s impacting all of our businesses, we really lean into our overall model to get us through a really hard, long period of time. And that’s this employee ownership, relatively conservative kind of financing. We don’t use a lot of debt. We do use debt, but we use it conservatively relative to how some other companies use debt. So we’re careful and we believe we would be able to ride that out as long as our products and everything, our services are still needed. And like we talked about in the last episode, we generally buy businesses that have durable products and services. And then to this other case in point, an example, if we happen to have a business that the product or service is not durable anymore, we would probably lean into working with management and the team to figure out if there’s a pivot, what could this business do with this expertise that has been built up and developed over time and pivot this business and find another way to add value to customers and maybe that’s embracing some new technology or something completely different in that part of the market that they happen to be capable of doing. We would definitely want to find that for that business. Having said that, too, there is the worst case scenario and probably important that our people know that we never want to sell any of our businesses, but this could be one in the future. At some point, if we have a business that’s just not the product line has changed or the market has changed, and we see it coming down the road, and we need to preserve value for our ESOP and for all of our employee owners, that could be one of the very few scenarios where we actually would have to consider selling a company, and we wouldn’t take that lightly. It’s definitely not what we want for any of our businesses, but it is one of the few scenarios that could take place, in theory, in the future at some point.
Emily Bopp: And I think it’s comforting that we do think about these things, and we know what we would lean on to have that be an absolute last resort. I think of one of the only other things that you haven’t said, which is the power of employee ownership itself to help companies weather these kinds of things. Some of the, I don’t know if they’re statistics, but compared to peers, how do employee owned companies get through these kinds of hard times?
Chris Fredericks: Yeah, I would say in our experience, and also there are some really good studies that have been done during recession periods that employee owned companies generally do much better than their peers, especially when it comes to metrics that really matter to people. Layoffs are way lower. On average, the businesses generally don’t go bankrupt nearly as often. Employee owned companies almost never go bankrupt relative to their peers. So there’s this, I think, collective employee ownership rallying together during a difficult time. That can sometimes be a really powerful experience for an employee owned company because it really shows the power of it. During the good times, everyone can do well, but it’s during the hard times that you really find what you’re made of, I think. And as an employee owned company, that it can really shine through during hard times. Actually, yeah.
Emily Bopp: Let’s switch gears to businesses underperforming, and it’s something going on inside the company itself. So we’ve got two scenarios there. We’ve got it’s a short term thing, or it’s more of a long term thing. All right, it’s a short term thing. What could that be? That could be like a catastrophic cyber breach, like the worst nightmare of every small business owner, that they really got hung out to dry. Or we hope and pray this never happens. But let’s say a key person or a leader gets diagnosed with some terminal illness, or something happens that just really rocks the company from the inside. What’s ev going to do?
Chris Fredericks: Probably we’ve talked about a lot of these things already, but just to touch on it again, we would lean in on the relationship piece, we would really go in and talk with our leaders and even maybe some of the employee owners and team members and just support them through a really difficult time. Generally, this is where the short term, long term orientation matters so much, is we are not going to want to make any big decisions based on short term challenges that have a long term impact. Even if it’s a mistake. The company makes a mistake and has a short term financial hiccup. Of course, nobody wants that. But if it happens and if we all agree like this, that’s not a reflection on the long term. That’s a mistake that can be righted in the short term. And it was made because we’re trying new things. We’re trying to invest or grow or innovate. That’s okay. That’s what the short term is for, is to try to grow and do different things and sometimes navigate unexpected challenges. And we’re just going to lean into the fact that the long term of this business is healthy and we believe in it.
Emily Bopp: And I think the takeaway there for our leaders is, and hopefully they already know this, but we’ve got your back. You’re not alone. Yes, and we’re going to help. Okay. So last but not least, the company is underperforming. It’s something going on inside the business and it’s been going on for a long time. This is something systemic. This is a long term trend that we’re seeing, and we’ve leaned into the relationship. We’re trying to help, but it just doesn’t get better.
Chris Fredericks: Yeah. And that could be, again, back to, it could be an industry change, but maybe the company isn’t navigating it. Well, like the internal, they’re not figuring it out and we think they should be able to, or maybe other reasons internally that have to do with, like you said, systemic. Or when it gets to this point, we’re probably thinking and asking ourselves if we’ve got the right approach in this business anymore and we’d be navigating it with the leadership and saying maybe even is the leader, the right leader anymore? And obviously this is us being really transparent, that we care about things so much and our employees and our companies so much that a leadership change is theoretically possible in one of our companies in the future. At some point, if we have a leader that’s just like any employee, we’re all accountable. I am to our board, we’re all accountable to perform as part of an employee owned company. And our leaders are all part of that, too. In theory, we could have to consider for a company in the future at some point, a leadership change, if there’s a long term kind of internal performance challenge. But we can’t emphasize it enough. We don’t take this lightly. That’s not something we ever want to do. I mentioned it. But just to reiterate, I have the same level of accountability to our board of directors at empowered Ventures. If ever our board of directors thinks empowered ventures is not succeeding adequately in a long term sense, I would be the one to be held accountable for that. And that’s how it should be. There’s a matter of expectation there that we’re all under, because this matters so much that we’re creating this value for all of our employee owners. And we have to maintain that level of accountability ultimately, for sure.
Emily Bopp: And to be clear, we don’t anticipate that this is something we would ever have to do. We’re certainly not looking at any of our current leaders thinking that, not even anywhere near like, we love our leaders and they’re doing an amazing job. In fact, they’re all just high, exceptional performing, amazing human beings that we love to know and work with. But for our ev years to know that, we would be naive if we didn’t wrestle with these questions and these thoughts and already know, sort of in a scenario planning kind of a way, what our thoughts are and what our approach would be. And as you said one time, it’s because we care so much about the success of this enterprise and about every person’s experience within it that we go to the lengths to answer these kinds of questions.
Chris Fredericks: Yeah, absolutely. So well put.
Emily Bopp: Thanks for diving into that with me again here today. Really enjoy just opening up for our EVers what we think about various things and want to reiterate that everybody who’s listening to this, if you have more questions like this, we want to let you in. Like, we are not withholding anything. We do like to be transparent and somewhat vulnerable and share what it is that you’re a part of and what we think and how we approach things. So send your questions to us [email protected], and we will address those on a future episode. But thanks, Chris. This has been really insightful.
Chris Fredericks: Thank you, Emily. It’s been awesome. I hope you found that conversation with Emily helpful and insightful. Thank you, Emily, for joining and share your genius for producing this episode. Please send us your questions, feedback, and ideas to make this show more impactful. To reach us, email [email protected]. Thanks for tuning in.
