Kline Electric goes 100% employee-owned
When Shane Kline started Kline Electric 13 years ago, he did it for several reasons. “I’d been working for another contractor. It was a good job, but I had some ideas about how I’d like to do things differently if I had my own company,” he explains.
Ahead of the curve
One of those goals was to stay innovative.
“It’s always been our objective to be ahead of the curve, whether it’s technology or communication or business practices,” Kline explains. That’s why he was so supportive of Zach Bolin’s software development project (featured in BUILD Des Moines October 2016).
But this past January, Kline Electric made a change that put the company so far ahead of the curve for the construction industry that some people thought Kline was headed around the bend.
“We were at the company Christmas party, and Shane announced to the whole company that starting January first, we’d all be owners,” says field electrician Cody Oberender.
Like most Kline employees, Oberender was stunned. “I really didn’t know what it was going to mean,” he says. “But the more we learned about it, the more exciting it was.”
Cameron Schmitz, who’s been with Kline since he started the company, was one of a small team of managers who knew about the change before the announcement. “To be honest, I had mixed feelings when Shane first told the team he was looking into doing this,” he says. “I was a little skeptical about how the employees would respond and how it would work.”
But Kline’s decision to be innovative paid off. Since educating the staff on the change, he’s seen an immediate effect on morale and performance.
A rewarding environment
Another reason Kline originally opted to start his own company was because he wanted to create an environment that rewarded employees for their work, not just the owners.
John Morris, who joined Kline Electric this past March to begin the apprenticeship program, says the employee-ownership plan was one more reason he’s excited about his future at the company. “It just shows how Shane is putting us before himself. We know that if the company does well, we all benefit.”
Oberender adds, “Shane has always cared about his employees, so that’s not new. But now it feels like you’re working for yourself. It changes how you approach your work.”
Schmitz agrees. “I am a diehard, loyal Kline employee,” he laughs. “I’ve been with Shane since the beginning. But I can see the excitement from the rest of the employees, too.”
The employee-owners all admit to being more conscientious than ever since the announcement.
“I was always careful about my work,” says Oberender. “But now I find myself really being more aware of the materials I’m using, my time, everything. Because I can really see that the profit the company makes is profit for me, too.”
Better financial security
Thirteen years ago Kline opened his own company so he could have more control over his own financial future. Last year he started looking even further down the road, not just for himself.
“I don’t have any kids who will be ready to take over when I’m at retirement age,” Kline says. “So how do I step out when the time comes? I could sell it, but what happens to the company and the employees if you do that? They’ve invested in this company, too.”
For almost a year, Kline worked closely with Principal Financial Group to put together the Kline Electric Employee Stock Option Plan (ESOP). “From the employees’ point of view, it was as easy as signing a piece of paper to choose a beneficiary. But it took me nearly a year on the back side to get this put together,” he says.
One reason it was so simple for his staff was that Kline wanted everyone to be a part of the deal from the beginning. “Everyone was automatically a part of this,” Kline explains. “Every full-time employee—and that’s everyone—is enrolled, so we’re 100% employee-owned.”
Going forward, new staff must complete a full year of employment before they are enrolled in the ESOP. The longer one is employed, the more his or her investment grows.
“I don’t know why I was skeptical when Shane first mentioned this,” Schmitz says now. “The transition went more smoothly than I anticipated. The potential for retirement made my family happy. It’s benefited everyone all the way around.”
Although Kline believed from the beginning that this decision would benefit every Kline Electric employee, he has discovered some additional advantages since the plan went into effect.
“There’s absolutely been a change in the culture here,” he says. “We’ve always had a great team, but there’s definitely more pride in their work because everyone realizes that what they do on the job really makes a difference.”
Schmitz says, “Kline Electric has always been a different beast. We don’t just work together. We do stuff outside of work. We get along well. But longevity is rare in the construction trades, and people who work in these areas don’t usually have the opportunity to build any type of nest egg.”
With the ESOP, all the Kline employee-owners say, that changes.
Morris says, “It’s like earning extra money every year I’m here. The longer I stay, the better my ESOP.”
Kline and Schmitz also believe this will be an advantage in attracting more quality employees like Morris.
“You have to market yourself differently as a company when talking with millennials. They tend to look more to the immediate benefit and not just the long-term. But the ESOP is both—they’re invested right away,” Kline says.
Schmitz agrees. “There’s huge incentive to join the Kline team and to stay,” he says.
Other business owners have approached Kline to ask about the program. He tells them all the same thing. “There are a lot of questions about employee-ownership. I haven’t given up ‘control’ of the company,” he says. But the team of employees that he always took into consideration when making decisions before is often a part of the decision-making process now.
“We started an employee review board. One of the things the board does is participate in the hiring process,” he explains. “Potential employees go through the normal interview process. If they seem like a good candidate, then they have to sit in front of the employee review board and go through another interview. The employees decide whether they get hired.”
One other factor that Kline says is a great advantage of the ESOP is the company’s tax situation. “Because we’re 100% employee-owned, we’re federal tax-free,” he says. “Any time another business owner asks me about the advantages of going employee-owned, I tell them that. It’s one of the biggest advantages for everyone.”
For Kline, and each of the employee-owners, the key to the program is education.
“There are a lot of misconceptions about what this means for the owner, for the employee,” Kline says. “But once you educate everyone on how it works, they’re impressed. And it changes their perspective completely.”
It’s certainly changed everything at Kline Electric.