In May of 2018, I wrote an article called “A World Class Corporate Culture,” which was about a Pewaukee company, Harken Yacht Equipment. Harken is THE premier brand of sailing products in their market. But what sets Harken apart is their culture and their core values. These are embodied in their core values statement called “The Harken Weathermark”. It says:
- “Keep the wellbeing of your people first!”
- “Make the best products at a fair price.”
- “Service your customers beyond their expectations.”
- “Never lose your sense of right from wrong, the basic judgment taught by your mother and father.”
Harken was founded in 1968 by brothers Peter and Olaf Harken. Unfortunately, Olaf passed away in 2019. Today Harken is a global company, so the announcement in September that Harken had sold its business to the employees through an ESOP (Employee Stock Ownership Plan) Trust makes perfect sense. I am a big fan of ESOPs and there are many very successful ESOPs in Wisconsin today including Kwik Trip, Woodman’s, Owner’s Edge, and Kessler Diamonds among many others.
To get a little into the details, I am sharing my interview with Harken CEO Bill Goggins.
JH–How did you come to Harken originally?
Goggins: April Fools Day 1999! I was working at a marketing firm at the time and saw my boss job hunting online. I took that as a sign that it was time for me to look for my dream job. I am passionate about sailing and cold called Harken. I spoke to Art Mitchell, who is sometimes referred to as the 3rd Harken brother. We met the next day and hit it off immediately. I didn’t even have a resume! I was hired shortly after that, and my first order of business was to visit the plant in Italy.
JH–When did you become CEO?
Goggins: I was promoted to the US President in 2009. At that time our Global CEO was stationed in Italy. After he left, we formed a six-person corporate governance team with three leaders from Italy and three from the US. Once we started down the ESOP path, I was named Global in 2020. One of the factors that gives me confidence in our future success is that we have an outstanding leadership team. No egos in the boardroom.
JH–When a founder decides it’s time to sell their company, especially a successful company, they have lots of choices. Private Equity, strategic buyers, etc. So, How did the Harken family come to the decision to sell the business to the employees?
Goggins: Our advisor Art Mitchell had been encouraging us to develop a succession plan for several years. Of course, we had many, many suitors who were interested in purchasing Harken. But it never felt right to sell the company to a 3rd party. In addition to Art, it was really important that Harken had excellent trusted advisors including John Jensen, the CFO, who really understood the needs of the family. John developed a list of seven criteria that were important to the family.
Here’s the list, but keep in mind they are not in a priority order:
1. Outside investor influence
2. After-tax sale value
3. Influence on culture
4. Ongoing support of existing management team
5. Future role of the sellers
6. Ongoing support of the employees
7. Loss of control
While money is always a factor, it was NEVER the only factor and it wasn’t even the most important consideration. As the list was evolving and evaluated, the ESOP always met most of the family needs. It can be difficult to get a true understanding of the benefits of an ESOP since many investment bankers and attorneys do not really like ESOP’s nor understand them.
JH—For the founders, Peter and Olaf Harken, was it all about leaving a legacy?
Goggins: Yes and no. While legacy was important to Peter and Olaf, it was more the Harkens wanting a business that could last in perpetuity (in modern business jargon – “business sustainability”). And it was also about rewarding employees for getting Harken to its current level of success. As long as I have known the Harken brothers, caring for the employees here has always been their #1 Priority.
JH–What was the reaction of the employees when they learned they were becoming employee owners?
Goggins: Most were shocked… but, in a good way. It was truly amazing the news didn’t leak in advance. But most employees didn’t know what becoming an ESOP really meant, and they certainly didn’t fully understand the “What’s in it for me?” question. So, the education of the team here was and still is super critical. We have major initiatives coming up for our team’s ongoing education. We’ve already started by hosting a live, online panel discussion, also recorded for replay. Education and communication will be one of the keys to our success. Another key success factor is our strategic planning process. We’ve engaged in a formal planning process since 2015 and this drives high levels of accountability within our executive team. We meet quarterly, as well as annually; we set 3-year, 1-year and 90-day goals (what we call “Rocks”). We’ve also pushed this process down to the next levels of management. If we’re going to be successful, we must be accountable.
JH–You have a big team around the world. Because an ESOP is a U.S. entity, the non-U.S, employees cannot participate in the ESOP. What was the remaining global employees’ reaction to the sale to the U.S. employees?
Goggins: Their first reaction was truly relief. Everybody appreciated having a succession plan in place. Everyone believed this was a much better outcome for the team than a sale to a PE firm or another outside company. One strength of our culture is our “One Harken” mentality.
JH–Let’s talk about culture. In your view, what are the key culture characteristics for an ESOP to be successful?
Goggins: Number 1 is having leadership that is service oriented. Our workforce cares about quality and shares Harken’s core values. We have done and continue to do an excellent job of making hiring decisions based first on a culture fit, and only then on experience and education. We have a team who is committed to the Harken mission.
I also believe, in addition to great leadership, you need followership. This means teammates who are willing to be bold. We have always been good at long-term thinking and taking calculated risks. Peter and Olaf always had a willingness to invest in their business, especially in downturns.
JH—Does the ESOP give you any special competitive advantage?
Goggins: Yes, for sure! Many advantages actually, but I am really most excited about the possibility of future acquisitions. The ESOP creates an attractive option for other business sellers who share common values. The ESOP is an excellent qualifier for companies who are a good cultural fit. Harken wants companies we acquire to be “cut from our cloth.”
JH–As CEO, does the ESOP change anything for you personally?
Goggins: Not as much as you’d imagine. We have always strived to take care of each other as if we were family. Harken will always be Peter and Olaf’s, company, and now, it is in our care and custody. It is a huge honor and responsibility.
So, there it is — a brand new ESOP company. Great for Harken, great for Wisconsin, great for business! Congratulations Harken!
As a serial entrepreneur, business and community leader since 1983, John Howman has led a variety of businesses, from technology to consumer products companies. He leads two groups for Vistage, a professional development group for CEOs, presidents and business owners. He can be reached at JHowman@AlliedCG.com