““Building an Ownership Mentality Building an Ownership Mentality Among Employees”Among Employees”

Presenters:Presenters: Mike Foley, CEO, Reflexite Corporation Mike Foley, CEO, Reflexite CorporationBill Marshall, CEO, Phelps County BankBill Marshall, CEO, Phelps County Bank

Moderator:Moderator: Diane Stoneman, Director of Consulting & Training, Diane Stoneman, Director of Consulting & Training, Winning WorkplacesWinning Workplaces

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Alaska Wildland AdventuresBarclay Water ManagementCorporate Ink Cowden Associates Inc.Exactech, Inc.FRCH Design WorldwideGentle Giant Moving Co. Guerra DeBerry Coody HealthwiseNRG Systems, Inc.Phelps County BankPoint B Solutions Group, LLPReflexite CorporationRestek CorporationSummit Aviation

Top Small WorkplacesTop Small Workplaces 2007 Winners2007 Winners

2007 Top Small Workplace Winners2007 Top Small Workplace Winners

Key Theme: These leaders continually work Key Theme: These leaders continually work to sustain a culture of employee ownershipto sustain a culture of employee ownership

Of the 15 winners: 80% practice open book mgmtOf the 15 winners: 80% practice open book mgmt

Of 13 private firms: 7 allow employees to own stockOf 13 private firms: 7 allow employees to own stock

Employee OwnershipEmployee OwnershipWhat’s the Big Deal?

Everyone is aligned and committed to working toward common purpose

Employees have a stake in the outcome, thus greater accountability

Helps firm weather tough, lean times

Employee OwnershipEmployee OwnershipWhat Not to Do

Give employees a stake in the outcome BUT:Give employees a stake in the outcome BUT:

Do not teach them how the business makes $$Do not teach them how the business makes $$ Do not teach financial literacy Do not teach financial literacy Do not help them understand how their work Do not help them understand how their work impacts the business measuresimpacts the business measures Do not intentionally work to create a culture of Do not intentionally work to create a culture of engagement and participationengagement and participation

Today’s AgendaToday’s Agenda

Tale of two companiesTale of two companies Philosophies and practices Philosophies and practices Impact on business and workforceImpact on business and workforce Lessons learnedLessons learned Questions from audienceQuestions from audience

Featured FirmsFeatured Firms

Bill Marshall, CEOBill Marshall, CEOPhelps County BankPhelps County Bank

- Community Bank, Community Bank, Rolla, MORolla, MO

- 85 Employee Owners85 Employee Owners

Mike Foley, CEO Mike Foley, CEO Reflexite CorporationReflexite Corporation

-Manufactures Optical Manufactures Optical Components & FilmComponents & Film Avon, CTAvon, CT

- 515 Employee Owners515 Employee Owners

Reflexite OverviewReflexite OverviewCore Technologies• Optical

Engineering• Microreplication• Polymer

Processing

Fundamentals

• Technology• Ownership• Quality

Three Business Units• Reflective Products Business• Display Optics • Optical Solutions Business

Reflexite Global Locations May 2008, 515 employees Worldwide

ReflexiteThe Management of Light ®

Ownership FundamentalsOwnership FundamentalsHow Did We Do It?

Share ownership with all employees, worldwide:Share ownership with all employees, worldwide:• Average ESOP account = $120KAverage ESOP account = $120K• 10 of top 20 ESOP shareholders are non-exempt EO’s, w/ avg. account value over $500K10 of top 20 ESOP shareholders are non-exempt EO’s, w/ avg. account value over $500K• ““International ESOP” – phantom plan mirroring US ESOP planInternational ESOP” – phantom plan mirroring US ESOP plan• Employee Stock Purchase PlanEmployee Stock Purchase Plan

Participative ManagementParticipative Management • Open Book FinancialsOpen Book Financials

• Training on what the numbers mean Training on what the numbers mean • Monthly Updates at all sitesMonthly Updates at all sites• ““Reflexite Value Drivers”: link individual’s job to firm stock priceReflexite Value Drivers”: link individual’s job to firm stock price

• Pass through voting on key decisions - change of control, elect Board, etc.Pass through voting on key decisions - change of control, elect Board, etc.• Engagement in Critical IssuesEngagement in Critical Issues

• Business Decline SituationsBusiness Decline Situations• Managing ChangeManaging Change

Ownership FundamentalsOwnership FundamentalsHow Did We Do It?

Specialized Communication TechniquesSpecialized Communication Techniques

Share rewards - “feast or famine” incentive pay philosophyShare rewards - “feast or famine” incentive pay philosophy

• Short term Short term

• Every Reflexite Employee on a profit-based incentive pay planEvery Reflexite Employee on a profit-based incentive pay plan

• Paid monthly to all but upper level managementPaid monthly to all but upper level management

• Accelerators for mfg employees tied to continuous improvementAccelerators for mfg employees tied to continuous improvement

• scrap reductionscrap reduction• on-time deliveryon-time delivery• reducing customer returnsreducing customer returns

• Long TermLong Term

• ESOP allocation tied to annual performance of businessESOP allocation tied to annual performance of business

• Stock Option Programs focus on long term share valueStock Option Programs focus on long term share value

Ownership FundamentalsOwnership Fundamentals

Employee Opinion Surveys: confidential survey

Specialized Training – avg. 40 hrs/yr per employee

• ““Fundamentals of Success” - new Fundamentals of Success” - new employee orientationemployee orientation

• Rights, Risks and Responsibilities Rights, Risks and Responsibilities of Employee Ownershipof Employee Ownership

• Reflexite Basic TrainingReflexite Basic Training• Reflexite Quality SystemReflexite Quality System• Personal Financial ManagementPersonal Financial Management

• Effective Communication • Stress management• Computer Skills• Negotiation• Interviewing Skills• Team Leader Skills

How Did We Do It?

Why do we do it? Why do we do it?

Engagement Engagement Encourage employees to think and act like Encourage employees to think and act like

Owners Owners and they will amaze you and they will amaze you

Retention of Human TalentRetention of Human TalentMany companies say employees are their most Many companies say employees are their most

valuable asset, how many actually walk the talk?valuable asset, how many actually walk the talk?

Superior Financial ResultsSuperior Financial ResultsFind balance between short term profits and long Find balance between short term profits and long term share valueterm share value

Business Decline - Contingency PlanningBusiness Decline - Contingency Planning

Case Study: The Challenge

In a business downturn, how do you engage In a business downturn, how do you engage employee-owners in improving the result?employee-owners in improving the result?

SolutionSolution- “All work is a Process” – planning matrix - “All work is a Process” – planning matrix - Define symptoms and possible fixes- Define symptoms and possible fixes- Engage E-O’s in solution- Engage E-O’s in solution- Set Targets and Track Results- Set Targets and Track Results- Constantly Update People on status- Constantly Update People on status

The Asian Expansion The Asian Expansion

Case Study: The Challenge

Reflexite: 21 subsidiaries around world & continues to expandReflexite: 21 subsidiaries around world & continues to expand

In the last 2 years we opened:In the last 2 years we opened:Our third factory in ChinaOur third factory in ChinaOur first factory in KoreaOur first factory in KoreaOur first member company in IndiaOur first member company in IndiaOur first member company in AfricaOur first member company in Africa

You CAN’T over communicate. Human nature dislikes change. You CAN’T over communicate. Human nature dislikes change. People read the papers, what do you think they fear?People read the papers, what do you think they fear?

The Asian ExpansionThe Asian Expansion

Communicate, Communicate, Communicate

Answer question: “What does expansion mean to me?”Answer question: “What does expansion mean to me?” Encourage employees to “wear their owner hat”Encourage employees to “wear their owner hat” Address job security & Impact on employee’s walletAddress job security & Impact on employee’s wallet Build strategy based on self-awareness of situationBuild strategy based on self-awareness of situation

Reflexite strategy:Reflexite strategy:• Segment markets to avoid cannibalizationSegment markets to avoid cannibalization• Use local presence to open global marketsUse local presence to open global markets• Track the “Trade Balance”Track the “Trade Balance”• Keep moving US mfg towards high tech -Keep moving US mfg towards high tech - high high

margin productionmargin production• Manage attrition in US factoriesManage attrition in US factories• Execute!Execute!

Comment Element: CommunicationComment Element: CommunicationValuable Tools & Techniques

Open Book ManagementOpen Book Management Frequent, regularly scheduled meetingsFrequent, regularly scheduled meetings Monthly meetings at all sites by business leaderMonthly meetings at all sites by business leader Quarterly meetings in person at larger sites by CEOQuarterly meetings in person at larger sites by CEO Web SimulcastsWeb Simulcasts Communication delegation processCommunication delegation process Town Meeting Approach to Major DecisionsTown Meeting Approach to Major Decisions Clear the air to implementing change: “Answer all Questions”Clear the air to implementing change: “Answer all Questions” Truly Truly listen listen and you will be surprised what youand you will be surprised what you learnlearn

Phelps County BankPhelps County Bank

Single owner prior to 1980Single owner prior to 1980

Began ESOP in 1980Began ESOP in 1980

$7 million in assets at $7 million in assets at inception of ESOP inception of ESOP

1980 - 1993:1980 - 1993: g grew 5% ownership rew 5% ownership to 100%to 100%

Profits $200k in 1980Profits $200k in 1980

$217 million in Assets today$217 million in Assets today

Profits FYE 2007 $3.6 millionProfits FYE 2007 $3.6 million

Two Types of OwnershipTwo Types of OwnershipStock Ownership and Job Ownership

Stock Ownership: long Stock Ownership: long term financial security at term financial security at retirementretirement

Job Ownership: Job Ownership: employee success during employee success during working yearsworking years

Job OwnershipJob Ownership

24/8/8/824/8/8/8- 8 hours with family8 hours with family- 8 hours sleeping8 hours sleeping- 8 hours working8 hours working

50% of life spent at work50% of life spent at work Rewarding not just financial: Rewarding not just financial: educational, growth educational, growth opportunities, time for funopportunities, time for fun

Job OwnershipJob Ownership

Pay - equal to or above peersPay - equal to or above peers Advancement - 44 promotions in last 24 Advancement - 44 promotions in last 24 monthsmonths

Knowledge University Style CurriculumKnowledge University Style Curriculum3 majors, 3 minors, Electives, Labs3 majors, 3 minors, Electives, LabsBanking & Financial CreditsBanking & Financial CreditsMicrosoft Classes Microsoft Classes Sales TrainingSales TrainingPersonal Growth Personal Growth EconomicsEconomics

Job OwnershipJob Ownership

BenefitsBenefits

-15% annual Contribution to Pension-15% annual Contribution to Pension- Withdrawal plan from ESOP- Withdrawal plan from ESOP- Early Diversification from ESOP- Early Diversification from ESOP- Annual Incentive Plan - Annual Incentive Plan

Self Worth: Low turnover - avg. tenure 13 yearsSelf Worth: Low turnover - avg. tenure 13 years

Growth adds to personal growth & advancementGrowth adds to personal growth & advancement

Stock OwnershipStock Ownership

Sharing of CapitalSharing of Capital Involve employees: share Involve employees: share successes & failuressuccesses & failures Builds commitment to their Builds commitment to their important role important role Create team of experts Create team of experts Make ownership substantial Make ownership substantial today & tomorrowtoday & tomorrow

Stock OwnershipStock Ownership

Value of company $26 millionValue of company $26 million

Stock growth 225% in last 15 yearsStock growth 225% in last 15 years

Employees distribution: $20.5 mil. Employees distribution: $20.5 mil. in 16 years in 16 years

Account Size - 10 years $104k Account Size - 10 years $104k - 19 years $427K- 19 years $427K

Average Account Balance $336kAverage Account Balance $336k

Impact of Stock & Job OwnershipImpact of Stock & Job Ownership

Committed OwnersCommitted Owners Increased commitment adds Increased commitment adds to valueto value Low TurnoverLow Turnover Real Job SatisfactionReal Job Satisfaction Creation of Self Worth = Creation of Self Worth = personal & corporate net worthpersonal & corporate net worth

Lessons LearnedLessons Learned

Worry about the people who get it, NOT the ones Worry about the people who get it, NOT the ones who don’t.who don’t. Don’t spend time trusting your employees.Don’t spend time trusting your employees. Spend time getting employees to trust you!Spend time getting employees to trust you! Celebrate failures - Cherish mistakes.Celebrate failures - Cherish mistakes. Make sure everyone has same opportunities Make sure everyone has same opportunities available to you.available to you.

Don’t Manage, LeadDon’t Manage, Lead

Webster’s definition of Webster’s definition of ManageManage:: “ “To Direct, Control to make SubmissiveTo Direct, Control to make Submissive””

Employees know difference between leaders and Employees know difference between leaders and managersmanagers

Share everything!Share everything!

Teach, Teach, TeachTeach, Teach, Teach

Then--- remove the reinsThen--- remove the reins

Questions?Questions?

www.phelpscountybank.comwww.phelpscountybank.com

www.reflexite.comwww.reflexite.com

Upcoming 2008 WebinarsUpcoming 2008 Webinars Featuring 2007 Top Small Workplace Leaders

June 25 • Designing Strategy from the Bottom UpJune 25 • Designing Strategy from the Bottom UpAmy Bermar, Pres., Amy Bermar, Pres., Corporate InkCorporate Ink, Newton, MA, Newton, MAWilliam Petty, CEO, William Petty, CEO, ExactechExactech, Gainesville, FL, Gainesville, FL

July 29 • Fostering Trust Within the WorkplaceJuly 29 • Fostering Trust Within the WorkplacePaul Silvis, Founder, Paul Silvis, Founder, RestekRestek, Bellefonte, PA, Bellefonte, PAPaal Gisholt, CEO, Paal Gisholt, CEO, SmartPakSmartPak, Plymouth, MA, Plymouth, MA

Thank You!Thank You!

www.winningworkplaces.orgwww.winningworkplaces.org