Davey Tree Expert Co.’s Karl Warnke began as a landscaping laborer at the shrub, tree and lawn-care business.
In 2007, he culminated a 27-year corporate rise to CEO of Davey, one of the largest employee-owned companies in America.
Davey, headquartered in Kent, has more than 7,000 employees throughout North America, including about 500 in Northeast Ohio.
On April 24, Warnke will be the morning keynote speaker at the annual Ohio Employee Ownership Conference. The gathering will be at the Hilton Akron/Fairlawn, 3180 W. Market St., Fairlawn. (An accompanying story has conference details.)
The annual confab typically draws hundreds representing employee-owned companies, as well as private business owners looking into the trend.
Davey officials have credited employee ownership with playing a role in its growth.
Over the last 10 years, the company has acquired, through stock and asset purchases, at least 35 companies. Revenues of the acquired firms ranged from under $1 million to $50 million.
Davey’s revenues for 2013 were $713 million and net earnings were $22.8 million.
Warnke answered some questions about the concept of employee ownership of a business:
Q: What advice do you have for employee-owned companies or would-be employee-owned companies?
A: If your desire is to start up, convert to or expand an employee-owned company, you must demonstrate an unshakable commitment to this business model and the culture that is necessary to leverage the benefits of employee ownership. You must have the resolve and financial performance to do it right.
Q: What is the biggest challenge?
A: As with publicly traded companies, there is a very ongoing liability in the form of stock redemptions by employees. [Employees can redeem stock at any point in or after their career at Davey — while they’re active employees, when they retire, or when they’re terminated.]
There is no option but to consistently produce solid financial results to meet this obligation. Creating a sustainable employee ownership model that is right for your company and keeping employees engaged in this concept is a big challenge.
Q: What was the single biggest benefit of Davey Tree Expert Co. becoming an employee-owned company?
A: Employee ownership instilled a greater sense of business understanding and accountability, especially in the most critical management levels of the company. Significant equity ownership has a powerful effect on an individual’s sense of urgency and their tactical and strategic thinking.
Q: What is the biggest drawback?
A: There are additional administrative processes and time requirements to maintain a healthy employee ownership culture if you are transitioning from a privately held company. If you are publicly traded and desire to be privately held and employee owned, there may be some limitations to the capital markets. [This would include capital for ongoing business operations and for acquisitions.]
Q: The company has been on a big growth spurt. How does this benefit Davey overall and its employees?
A: Employee owners have a great sense of “company,” but also harbor strong entrepreneurial desires. Growth from acquisitions [known as inorganic] or growth through market expansion of existing operations [called organic] helps to provide opportunities for employees to experience greater personal development and see tangible proof that their company is progressive and thriving.
It’s about managing the perceptions of employee ownership, as well as adding value in the form of employee talent and future earnings. With acquisition comes more potential holders of stock and a potentially larger shareholder pool.
Q: Do you plan to keep acquiring companies?
A: Yes, as long as they are accretive transactions [adding to earnings per share] and we are reaching our objectives for “organic” growth within our existing business. We do not intend to be a “roll up” company that too often outgrows their ability to manage effectively or intends to sell the business.
q: What kind of local — Northeast Ohio — growth in employment do you envision?
A: Including both field and office personnel, we may add between 20 and 25 new employees [in 2014].
Katie Byard can be reached at 330-996-3781 or email@example.com.