B.C. engineering firms a hotbed of employee ownership
Business professors teaching the pros and cons of company ownership may want to start including some of B.C.’s largest engineering firms as examples of successful employee ownership models.
Among the top 11 on Business in Vancouver’s Biggest Engineering Firms in B.C. list (page 14), four are employee owned: McElhanney Ltd. (No. 5), Associated Engineering (BC) Ltd. (No. 7), Klohn Crippen Berger Ltd. (No. 9) and Hatch (No. 10).
Other firms on the list were also employee owned before they were acquired and underwent a corporate structure change.
So why is there a higher concentration of employee ownership among engineering firms compared with companies in other business sectors? One key reason is that the employee ownership structure helps attract and retain talent.
Engineering firms, in particular, rely on employees as their most valuable resource, according to Thomas Roback, managing director of Blue Ridge ESOP Associates, an administrative firm focusing on employee stock ownership plans (ESOPs). By offering enhanced benefits and ownership options, they can aggressively recruit talent.
Employee ownership models also help ensure the legacy of the firm, according to employment lawyer Corey Schechter. ESOPs and other types of employee ownership can allow engineers at a firm to transition out of their role and divest over time. It also limits the ability of a larger firm to buy a company for its brand or client list and then terminate the company’s employees.
ESOPs are not the only form of employee ownership. Associated Engineering, for example, offers share ownership to employees. Lianna Mah, the company’s vice-president of business development, said employee retention is just one of the benefits Associated Engineering gains from employee ownership. The company had clients in mind when it started providing employees with ownership options.
“The idea was that if employees had some ownership in the company, that sense of ownership would also extend to the projects they took on,” Mah said. “Clients would have even better service than they would get from another firm because the project team had an ownership stake in their company.”
Mah has experienced employee ownership benefits first-hand. She began working at Associated Engineering a few years after graduating and had not intended to build her career there. Her celebration of 30 years with the firm is a testament to the positive effect employee ownership has on turnover.
Employee ownership also gives employees a greater sense of responsibility for the company’s success, she said, by encouraging them to develop and support initiatives that will help the company prosper.
“We listen to staff’s ideas, which has created opportunity for growth and entrepreneurship. A lot of people have ideas on where they’d like to see the company grow. Our president and the leadership team listen to those ideas and, if they make sense, we grow in that direction.”
Mah added that employees’ concerns about climate change helped drive the company’s expansion into renewable energy and green building and infrastructure.
Employee ownership can also have a less tangible impact on a business than employee turnover or dollars and cents. Mah said that with an employee ownership model, employees have a greater say in how the company is run, its purpose, vision and mission. This not only limits turnover but also raises morale.
B.C.’s Klohn Crippen Berger was originally a 100% employee-owned engineering company, but after taking on a large investor in 2000, it is now 50% owned by employees and 50% owned by the investor. President and CEO Len Murray said a partial employee ownership model also has advantages.
“When we were entirely employee owned, I think it can go off the rails a little bit,” Murray said. “I think that was the main advantage of having this passive but knowledgeable investor who was always there to control some of the wilder instincts and ask some of the hard questions.”
Murray said employee ownership allows the company to take a longer-term view of its decisions and actions rather than being forced to immediately react to quarterly earnings swings in the way that public companies are.