Drew Mousetis understands the benefits of employee ownership.
As a lead consultant for employee-owned software company Cargas in Lancaster, he enjoyed a sense of financial security that allowed him and his wife to purchase a new home in Lancaster Coujnty where they are raising their four young children.
“You just can’t really put a value on that,” Mousetis said. “I mean, I could, but it’s incredible.”
Nonetheless, Mousetis left his job this year to lead the Tandem Center for Shared Business Success, a nonprofit conceived by Cargas founder Chip Cargas to spread the word about employee ownership – not just any kind of employee ownership, but the kind Cargas put into practice in 1998: A model known as direct employee ownership under which people are offered regular opportunities to purchase shares in the businesses where they work.
It is distinct from models such as the employee stock ownership plan, or ESOP, under which a trust buys stock in a business and then distributes shares over time to employees, who can cash in the shares when they retire. An ESOP is often a one-time event for a business owner, while direct employee ownership can unfold over years and decades.
“It gives the majority owners the flexibility to slowly transition both ownership and leadership to the next generations within those companies,” said Mousetis.
Is there a need for an entity focused primarily on direct employee ownership? Yes, according to Kevin McPhillips, executive director and CEO of the Pennsylvania Center for Employee Ownership and a Tandem board member.
“There’s a whole different audience for what we’re calling direct employee ownership,” McPhillips said.
ESOPs and related models, such as an employee ownership trust, are typically one-time events for business owners hoping for an exit, McPhillips said. Direct employee ownership is a process and can be rolled out by owners with no immediate plans to retire.
The cost is also much lower than other forms of employee ownership, McPhillips said, adding that ESOP costs, in particular, have risen over the last few years.
“The cost of entry for direct employee ownership is almost negligible compared to other forms of employee ownership,” McPhillips said.
Tandem – launched this year with $1 million in seed funding from the Chip and Rebecca Cargas Fund housed in the Lancaster County Community Foundation – aims to help business owners explore and implement direct employee ownership. Its partners include McPhillips’s group, the National Center on Employee Ownership and the Lancaster Chamber, in whose offices Tandem is currently housed. The nonprofit’s name was inspired by the combined power of the tandem bicycle, a two-person bike that requires teamwork and coordination.
Mousetis joined Tandem’s board and jumped at the opportunity to become its first executive director.
“It fit into the natural progression of where I’ve gone in my career,” said Mousetis, who is currently the nonprofit’s only employee, Cargas contributes some hours each well, as well, Mousetis added. He expects to add one or two more employees in the next year or two.
A native of Washington, Pennsylvania, Mousetis earned a bachelor’s degree in accounting from Penn State in 2012. He ended up in Lancaster as a client of The GateHouse, a local nonprofit focused on addiction recovery. He returned to public accounting but said he was called to serve The GateHouse, where he worked as finance and development director. While there, he earned an MBA at Elizabethtown College and eventually took a job with – and an ownership stake in – Cargas.
“I experienced firsthand those motivating benefits of being an owner, thinking and acting like an owner,” he said. “It wasn’t just a job to show up to. It was really our company.”
He is now looking forward to introducing others to the benefits, starting in Lancaster County and surrounding areas. Tandem charges fees on a sliding scale for its consulting services and already has four potential clients, including three from Lancaster County, Mousetis said. Others have expressed interest.
The following interview has been edited for length and clarity.
biznewsPA: How do you see the work of Tandem unfolding?
Mousetis: A two-pronged approach of education and consulting. The education involves presenting at conferences, hosting workshops, providing research and content on the website, getting the word out about direct employee ownership because that’s the unique value that we bring to the market. And then, consulting or technical assistance. Business owners and CEOs might buy into the principles of employee ownership, but they’re very busy. We want to walk alongside those business owners and CEOs and help them implement that and roll it out into their companies.
biznewsPA: How are you letting people know you exist?
Mousetis: We held a private preview party on May 7 where we invited local community leaders, business leaders and political leaders. There were about 70 to 80 in attendance. We encouraged people to go to our website and click ‘connect’ and fill out their information. When it’s pertinent, we will communicate with them. We have LinkedIn. And we’re partnering with Fig Industries for a brand and promotion campaign. We have plans that get the word out even further. I’m going to be speaking with and partnering with organizations like the High Center, the Lancaster Chamber and Assets, and looking to speak at National Center for Employee Ownership conferences.
biznewsPA: What motivates the companies that have sought out Tandem so far for help in establishing employee ownership?
Mousetis: They are motivated by, one, leaving a positive, lasting legacy; two, keeping those companies rooted in the community; three, attracting and retaining top talent; and then four, sharing success broadly. They want to motivate their employees and incentivize them, so that when they do good by helping others, they help themselves.
biznewsPA: What’s the perspective that you bring as a former employee-owner when businesses call you and say, ‘Hey, we’re interested in this process?’
Mousetis: How I showed up to work every day for four years at an employee-owned company and brought my best, wanting to generate as much shared success as I could. I really cared about our customers and served them with the utmost of my ability.
biznewsPA: How do you see that benefiting the broader community, since part of Tandem’s mission is strengthening communities?
Mousetis: When business owners think about selling their companies, they have a few different paths. With direct employee ownership, you have employees that work for these companies in their communities, and you’re transitioning ownership and leadership to those communities. The business is going to stay rooted in that community and continue to engage customers, pay employees and support local economies. A different path would be to sell to private equity, which many times is going to look to shave expenses, carve the business out and make it as profitable as it can to then sell the business. We see that there’s a contrast there. I envision getting back to a time where people work for jobs long-term, work really hard, and the company could then share success back with those employees.
biznewsPA: How would you convince a business owner – who sees that private equity may pay a lot of money all at once for a company – to take the longer path of transferring through direct employee ownership?
Mousetis: I think you want to share success with the people who helped you get to where you’ve gotten to. You want to leave a positive, lasting legacy and keep your business rooted in the community. And direct employee ownership is a way to slowly transition and achieve those goals. That’s where education comes into play. If you’re in it purely for the financial benefit, then the private equity route is hard to compete against. I hope that specifically in the Lancaster community – it’s a very generous, charitable community, a lot of business owners have a stewardship viewpoint – there’s opportunity to make inroads. And, of course, there’s going to be like-minded business owners nationally. It’s just a matter of getting connected with the right people out there.
