An employee-ownership culture drives high-performance in a critical industry
by Karen Kahn
When the calls came in from GM and Ford in March, Ken Baker wasn’t surprised. At NewAge Industries, where Baker is CEO, his team has been manufacturing hoses for ventilators for years. Now this Bucks County, PA, manufacturer is on the frontline of the U.S. response to the novel coronavirus, producing critical parts for tens of thousands of new ventilators needed by critical care hospitals.
NewAge also makes tubing for COVID-19 test kits, and assemblies for biotech firms that are working on vaccines. All of this work is “essential,” which means NewAge Industries’ 180,000-square-foot manufacturing plant has remained open as much of the economy has shut down around it. In fact, NewAge, which has about 200 employees (about 60 are now working from home) and generated sales of $79 million in 2019, has been hiring to fill newly scheduled overnight shifts. Demand for its products increased 50 percent year-over-year during the first quarter of 2020.
At NewAge, that kind of growth demands more from employees, many of whom are working overtime to help speed up production, but it also means more money in their pockets. In 2006, Baker began selling shares of the company to its employees through an ESOP trust; in 2019, the company became 100 percent employee owned. At next week’s quarterly meeting, there will be good news for employees who will see an increase in the value of their shares, and some extra cash in bonuses as well.
Having a workforce invested in the firm’s mission and its overall success has made it easier for NewAge Industries to balance their production needs with new health and safety practices.
In a phone interview, Baker said, employees have really stepped up to the plate in the last few months; as employee-owners, he says, they feel attached to the firm’s mission. “They are putting in extra effort to push out orders because they know our products are important to the health and welfare of Americans,” Baker explained. “We talk about that when we have meetings; it’s not abstract.”
Baker also knows the financial incentives make a difference; that’s why he was determined to buy out other Baker family interests in NewAge Industries and transfer ownership to employees. “It was the most effective way to develop a high-performance organization,” he says. And it’s paying off for the firm, which is widely recognized for its high-quality products, and for the employees, who have built significant nest eggs: one long-time employee is now a millionaire, says Baker, and several others will join that class soon. In a country where over 40 million households have no retirement savings at all, that’s impressive.
Having a workforce invested in the firm’s mission and its overall success has made it easier for NewAge Industries to balance their production needs with new health and safety practices. Early on as news of the coronavirus spread, says Baker, “many employees were fearful, particularly about bringing the virus home to their families.” They were able to come together and implement new policies and practices that increased everyone’s sense of safety, including wearing masks and social distancing, taking temperatures, and offering anyone who gets sick as much paid leave as is necessary to fully recover before returning to work.
These policies did not just come down from the top. The employee owners offered solutions when they saw potential hazards. For example, employees working in the plant were concerned about the truckers who in the past have been able to wander freely within the building. Truckers weren’t wearing masks and didn’t necessarily follow social-distancing guidelines. Following input from employees, new protocols were established: the truckers are now given masks and disinfectant when they arrive, and they are relegated to one area of the shipping department.
Baker says four employees have had COVID-19, but it has not spread in the plant. All four recovered and have returned to work. That’s good news for everyone, since it suggests protocols to stop the spread of COVID-19 have worked. But it also has required giving up some longtime traditions.
This year, for the first time, NewAge Industries employee owners won’t be attending the first-quarter company-wide meeting, where the share price that determines the value of their ESOP accounts is announced, at a favorite local restaurant. Instead, Baker will be holding six separate meetings with 18 people each, to maintain social distancing. The 60 folks offsite will Zoom in. It will be harder to share in the team spirit that has been so essential to the firm’s success in these dark times, but no doubt everyone will be celebrating the role a small Pennsylvania manufacturing plant has played in fighting a global pandemic.
Karen Kahn is a communications consultant and the editor of Employee Ownership News.