Recently, I connected with Optimax CEO Rick Plympton to discuss his design of an innovative employee ownership trust transition plan for his company. Optimax ownership created a new nonprofit perpetual trust that owns the company. The trust’s purposes include ensuring the business will not be sold to another entity, will continue monthly profit sharing with employees, and will position the company for ongoing growth. This approach will provide for the eventual retirement of the owners while also buttressing the resiliency of the company and ensuring it continues to contribute to the region’s economic and social needs.
Rick is a leading business voice in Rochester, New York. Based on his efforts, he was selected as an Aspen Institute Job Quality Fellow. He has been a wonderful thought partner on strategies to build better jobs for America’s workers. This conversation is part of our Job Quality in Practice series, and we’re grateful to Prudential Financial for their support of this work.
Maureen Conway: Thanks for talking with us about Optimax. For background, could you share some basics about your firm?
Rick Plympton: Optimax was founded in 1991 based on innovative research that came out of the University of Rochester, funded by Kodak and Texas Instruments. The effort leveraged computer-controlled machining technology to manufacture precision optical components faster and more predictably. The result was a more reliable source of precision optics. Optimax formed as a new company to adopt this technology. Within a few years, Kodak made Optimax their key supplier for prototype optics. They were really wonderful to us. They funded 75% of our training cost for several years. And in that span, we ramped up from a startup of just a few people to about 100 employees.
Today, Optimax is just about 400 employees. We currently do about $50 million in annual revenue with 20% average revenue growth per year. And there’s still a lot of growth opportunity for us in the market. We have a strong research and development team that continues to innovate our manufacturing processes to satisfy emerging market needs. Our mission statement is “Enabling customer success and employee prosperity.”
Can you talk about creating good jobs at Optimax? We know you’ve thought carefully about job quality and keeping people engaged.
All Optimax employees have a learning plan. Each year, every employee also has a peer or 360-degree review. Each person receives feedback on 10 different metrics. Five metrics focus on their attitude or team performance. The other five have to do with their skillset or aptitude. There’s a section for praise. For example, what has this individual done really well? There are also areas for development. What could they work on to help strengthen the team or to improve their performance? This systematic approach has created an environment where, year after year, the team gets stronger and stronger. This is really a key part of our success. We also share the profit with our workforce. Each month, we figure out how much profit we’ve made, and 25 cents of every profit dollar goes to our workforce.
That’s great and there could be more to say about Optimax benefits. But let’s hear about the launch of the employee ownership trust and how you came to this approach to planning the future of Optimax.
About five years ago, my business partner and I started thinking about succession. Our plan is now underway. We converted Optimax from an S corporation to a C corporation. The “new” Optimax operates as a for-profit business that is owned by an employee ownership trust with a perpetual purpose statement. The trust has three main tenets. These are written into this purpose. They are: don’t sell the company; share profits with the employees; and ensure that the leadership is doing things to create innovation and more jobs over time. The new form helps ensure that we’re taking good care of our workforce and also continuing to grow the business to the benefit of our community and our future employees.
The idea came about after I met an attorney out of New York City, Chris Michael. Chris introduced me to the perpetual purpose trust idea. It does not require beneficiaries, but you write a perpetual purpose that defines how the organization is to be led. That approach hit on all the metrics of putting in place a structure that we believe could be successful for 100 years, not selling the company, and sharing the profits with employees. Trustees are responsible to ensure that the individuals in leadership roles at Optimax are indeed leading the company to create innovation and new jobs.
A block of Optimax voting shares have been gifted to the trust. The remainder of the voting shares are being sold back to Optimax and retired. That’s how we get our bite of the apple, so to speak. In the future, the trust owns all the voting equity of Optimax. Within Optimax, there are also long-term incentive programs. One is a phantom stock option program. Leadership can issue phantom stock options to selected individuals as a long-term incentive. Those vest over a five-year period. We also have Class B shares. That’s an even longer-term incentive that can be purchased by select individuals in leadership roles that would then be sold back to the company. The Class B shares have dividend rights but no voting rights.
When thinking about succession planning, I’m sure you and your business partner wanted to plan for a comfortable retirement for yourselves too. How did you sort through all the various considerations?
My business partner and I both grew up blue-collar and started careers on the production floor. Leaving a legacy and placing Optimax into a corporate structure to continue its growth for decades and decades is more important to us than getting the maximum number of dollars we could get out of the business.
The easiest thing for a small business owner to do is to clean up their financials and look for the highest bidder to buy the organization. The Rochester area has many small to mid-sized companies with incredible technology due to research and development at local companies, like Kodak, Bausch + Lomb, and Xerox. All too often these small businesses are acquired by a multinational or a foreign firm to take the technology they’re interested in. Every time that happens, we lose 100 or 300 good local jobs. When we put together our succession plan, we aimed to create a corporate structure that we believe will protect Optimax from being sold and allow for economic prosperity for at least 100 years.
I took a serious look at employee stock ownership plans (ESOPs). I’ve always been a fan of employees owning stock. But with ESOPs, the company gives employees a piece of paper with a promise to give them cash for that paper later. And again, in our region, we’ve seen that putting many of your financial eggs in the basket of the corporate coffers doesn’t always work out well. We have thousands of families not living the retirement that they thought they were going to have because the company fell on hard times. The employee ownership trust allows us to share profits with our workforce as we go on a monthly basis empowering our employees to live the lifestyle they choose and diversifying their investments as they wish.
You’ve carefully researched and developed the employee ownership trust for Optimax. What advice would you give to firm leaders who would like to leave their business in a way that it continues on, and is a legacy for their community?
Whether you’re going with an ESOP or employee ownership trust, you must have a culture where the workforce is very engaged in operating the business. If you have top-down, pyramid leadership and there’s only a handful of people at the top that make the decisions, things can implode when the people at the top step aside. In that case, you don’t have other individuals capable of stepping up and making those decisions. If you design the organization to have followers, you will have an organization full of followers. If you design your organization to have leaders, you can have leaders at all different levels. And as leaders at the top step aside, other leaders will be ready to step into their shoes. That’s what we’re trying to do at Optimax. That’s why we’re so big on self-management by personal accountability.
What’s next for you and the Optimax leadership team?
We’re right in this transition. We’re the first American manufacturing firm to take this path. It can be a little bumpy some days, like we’re going through the woods in the dark. But we’re finding our way and trying to make it work. One key is to not get too frustrated if things aren’t working. We talk it through and check and adjust. That’s part of our continuous improvement cycle: plan, do, check, and adjust. Even if everything is working wonderfully today, tomorrow the world’s going to change. In a few days, we’ll need to change it again. Having said that, I view employee ownership as an evolution in capitalism where the wealth generation of the firm is shared with the employees.
The perpetual trust and employee ownership trust form is a new option Optimax is pioneering in the US. As the company continues on its journey of high performance and impressive job quality, we will follow along in future postings in our series on exemplary employers.
Tweet Optimax works in precision optics. But they didn’t need a microscope 🔬 to see why #employeeownership was a smart decision. “We believe [our structure] could be successful for 100 years,” says CEO Rick Plympton.
Tweet “I view #employeeownership as an evolution in capitalism where the wealth generation of the firm is shared with the employees.” @AspenInstitute #JobQuality Fellow Rick Plympton (CEO, Optimax) speaking with @conway_maureen of @AspenWorkforce
Tweet #EmployeeOwnership “helps ensure that we’re taking good care of our workforce and also continuing to grow the business to the benefit of our community and our future employees.” #JobQuality Fellow Rick Plympton, CEO, Optimax
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