The HARDI member spotlight serves as a regular feature through which the association management highlights standout individuals in the HVACR industry and their companies. For our March Member Spotlight, we spoke with Susan Kirkland, President of Packard. We highlight Susan for her dedication to making Packard a great place to work by helping to implement an Employee Stock Ownership Plan (ESOP).
I noticed you have spent almost 35 years with Packard. Tell us what that journey has looked like for you.
Most people do not graduate from school planning to go into the HVACR industry, but they should! This industry and more specifically Packard have allowed me challenges and opportunities I would not have had in most channels. There is no ceiling for females, in fact, I have found that it doesn’t matter who you are if you are willing to learn the industry, the products, and work with a strong work ethic.
Is there anything you wished you had done differently over this time?
I wish that we had taken the ESOP strategy seriously sooner. I think we traveled down a few rabbit holes trying to determine the right way to transition the company, to allow for a succession plan that was right for our culture.
What was one of the biggest challenges Packard has faced in your time within the organization? How did you tackle that obstacle?
Managing growth and change.
One thing I know for sure, our business looks different this year than it did last year, and it will not look the same next year. Change is guaranteed! We have learned that we can’t always manage the change or the rate of change, but we can equip people to expect change and to learn to be ready and adaptable to the inevitable change coming.
Our culture allows and encourages risk and vision, by allowing that kind of culture, you invite forward momentum…. Acceptance of change is not always easy in running a business, but if we invite the change, it always brings positive momentum ultimately.
Packard Inc. was the first master distributor in the HVACR industry to adopt an Employee Stock Ownership Plan (ESOP). How did you come to this decision?
We knew that it was time to take the first step in succession planning, we had been a privately held business since 1959, and we were growing extremely fast and it was time to secure the future of the company so that it would continue into the next generations.
We explored the world of private equity and a strategic merger opportunity over a 4-year period that was disruptive to our employees. We felt that the culture of our business and what was making it so successful, were our people and their commitment. Our CPA firm suggested we look into becoming an ESOP, they felt we were a perfect candidate, simply due to the tenure and company culture. On first pass it looked too good to be true. Our CFO and I spent about 8 months interviewing people and learning the ins and outs of this type of transaction and ultimately felt it was the perfect succession vehicle for Packard.
What are the pros and cons to adopting an ESOP?
An ESOP is a qualify retirement plan that has DOL oversight. One of the pros is that because is it is a qualified retirement plan, we pay not corporate income tax, and it has by-partisan support, so everyone loves that! When our employees receive their stock statements each year and they see they are gaining more stock and hopefully each year the stock price is increasing, their ESOP accounts are growing oftentimes faster than their 401K plans…of course that is only if the company is growing but statistics prove that ESOP companies grow faster than most.
The cons could be that it does require intense research in advance to determine if the transaction makes financial sense for you and to do that you often times need to hire experts in this field. There is a cost in hiring these professionals, but we have had no regrets in hiring the best. I would also say that it takes a lot of due diligence and time to transition so you need good accounting support.
When this program was rolled out almost three years ago, you said “My hope for this new employee-owned path is two-fold: to continue the legacy of service, selection and satisfaction that Tom has nurtured these past 45 years and to provide a concrete future for our hard-working employees and valued customers.” In what ways has this been accomplished over these last 3 years?
Our growth has continued over the past 3 years since we have transitioned, and I amazed at the visibility that the ESOP has given us.
Jim Mosman our VP of Business Development summed it up this way,
“People want to be associated with Packard whether it’s customers or most recently some great new supplier partners. (Everybody wants to eat at the cool kids table!). I think it’s longevity, the reputation/respect from the industry, the transition of people - Packard has hired some great, well respected people over the last several years, that demonstrates the ideology of change needed to grow with the industry while maintaining its core/roots that made it valuable in the first place.”
Our employees feel secure, and our recruiting efforts have been amazing. As we have hired new positions, we have found the younger generations want to be part of something fresh, they love having the opportunity to be an owner!
What advice do you have for other distributors who are considering an ESOP?
First understand your end game…are you looking for the biggest payout for your business or are you happy with a fair payout and protection for the employees and/or family that helped you grow your business, if the latter is what you are looking for, an ESOP – may be – perfect.
An ESOP transition is not right for everyone. When I asked several of our employee owners how they would answer this question, Kelly Goldsmith our VP of Asset Management said this,
“I think you already have to have a certain culture at the company to make it work and you have to have people on staff prepared to manage all of the new things that come with an ESOP. It isn’t an overnight decision, and everyone should do their own research and education before going that route. Other than that, it is all about who you partner with both before and after the transaction. We worked with and hired the best and from what I hear at conferences, that part was critical to setting us up for success. We were also blessed with a couple of companies in our industry who really helped us navigate everything. For those that want to go the ESOP route, and have done the due diligence to make sure it will work for them, I think it is incredibly rewarding and one of the best things you can do for the longevity of a company.”
As for Packard, we are who we are. We don’t try and be anyone that we aren’t, and we stick to our core values no matter what comes around.
As a kid, what did you want to be when you grew up?
Ok, you must understand I grew up in the days of “Laugh In” – I thought I could be the best Go-Go dancer ever! I still might be.
We think you could be too, Susan!
What do you think about ESOP's? Does your company have one or are you beginning to look into them? Tweet us @HARDInews to start the discussion!
You can check out our previous Member Spotlight posts here.
To nominate a member for a future Member Spotlight, contact Emily Frost at firstname.lastname@example.org.