To create demand business schools need a new message
by Kim Blaugher
This article continues the conversation on teaching employee ownership at the nation’s business schools. Kim Blaugher is executive director of the Beyster Institute at the UC San Diego Rady School of Management. The Beyster Institute is one of the few business graduate school programs with specialized training in employee ownership.
To support business graduate students in deepening their understanding of employee ownership, the Beyster Institute offers paid internships in which students work with our consulting team on ESOP transactions. It’s a terrific learning experience. We thought there would be a lot of interest. Turns out, not so much. At a recent job fair, a total of seven expressed interest in participating in our program.
Our interns work with leading attorneys, CPAs, valuation experts, and others on complex financial, tax, legal, and accounting analysis and consulting. After completing their internships, the students are hired by leading ESOP consulting firms because, during their time at the Beyster Institute, they have gained valuable experience. The Beyster Institute should be inundated with resumes from graduate students. What is going on?
The Beyster Institute should be inundated with resumes from graduate students. What is going on?
Employee Ownership Should Appeal to Socially Conscious Students
Rady School of Management graduate students tend to be socially conscious, concerned with addressing problems of racial injustice, wealth inequality, and our deeply divided democracy. More widespread use of ESOPs offers a solution to many of these societal challenges. ESOP companies are inclusive communities, embracing diverse groups of individuals. When a company is being sold, an ESOP allows the company to remain in the local community instead of being bought by an outside strategic buyer or private equity firm. Local ownership ensures the company’s culture, heritage, and community involvement can continue and prosper. Increased prosperity and financial security among employees bolster democratic and participatory decision-making, allowing a diversity of beliefs and backgrounds to flourish.
So why aren’t these students flocking to employee ownership? For business students, the lure of working with an investment banking firm is very attractive both intellectually and financially. One of our recent intern hires reluctantly accepted the position. This individual is brilliant and had prior experience working with a leading CPA firm on mergers and acquisitions. They made it clear after joining the Beyster Institute, that following their internship, they would be seeking employment with an investment banking firm. They accepted the internship because it would provide them the opportunity to do some financial modeling. ESOPs may be good for society, but the lure of doing the real intellectual consulting would lead them down a different path.
A less confident (maybe less naive) executive director might have been deterred by the dismissal of ESOP consulting by the intern. My faith played out well. A year later, the Beyster Institute hired the intern as a full-time consultant. They will be a leader in the ESOP community, consulting on complex transactions that will reward them financially, intellectually and, most important, spiritually.
Crafting the Right Message
Consulting firms are desperate for experts in all aspects of employee ownership: transaction modeling, accounting, legal structures, valuation and, maybe most importantly, organizational behavior. The challenge is getting the right message to our graduate schools and students: The ESOP community offers both values-aligned work and the opportunity to engage in dynamic advising on very complex intellectual issues. With this message, we can attract the best minds from our academic institutions.
The ESOP community offers both values- aligned work and the opportunity to engage in dynamic advising on very complex intellectual issues.
Employee ownership will not prosper if our business schools do not teach employee ownership as a viable ownership alternative (and a better one!). That’s why the Beyster Institute is committed to expanding employee ownership in our academic institutions. When I graduated from college, I also wanted to do mergers and acquisition work. Despite knowing that the acquirer would likely seek to reduce costs by reducing wages, I thought it would be exciting to help business owners sell to private equity firms, go public, or sell to a strategic buyer.
I took a different path and have had a 30-year career supporting employee ownership. We need to enlighten our students about the thrill I and others have had working with so many wonderful owners and companies who became ESOP owned. In doing so, these firms improved their financial strength, expanded operations, improved their culture, became more involved in their communities, and increased wealth for their employees. The message for our graduate students should be: “Come work with employee ownership companies to help improve employees’ lives, our economy, and local communities. Do not live with regret after you help a company sell to a third-party buyer who then closes the plant and destroys a small town’s economy.”