June 06, 2019

When you can boast a 162-year legacy, 18 months is not too long to wait to bring an exciting program to fruition. For a year and a half, The Callaway Bank’s president and CEO, Kim Barnes, lead a team of people, including the board of directors, and diligently laid the groundwork for the opportunity for employees to grow with the bank and share in its success. The result is an employee stock ownership plan (ESOP) that aligns internal and external shareholder goals and serves clients to the best of our ability.

Why create an ESOP? In short, because it creates a commonality of purpose. Employees feel more vested in their careers, so there is greater motivation to do what’s in the best interest of the client, the bank and the community as a whole. The organization benefits by aligning the goals for the employees and the company. When employees see themselves as owners, they better understand how their actions drive customer satisfaction, which results in a more successful company. By being an owner, employees have a greater reason to be engaged and work together for the client’s benefit.

Commitment to Our Employees

How, exactly, did we fulfill this goal of becoming an employee and investor-owned entity? Essentially, we invested significant energy creating an ESOP and then connected it to our corporate 401(k) program, which is referred to as a KSOP.

Of course, the concept of offering employees a 401(k) is not new. However, many companies don’t also have an ESOP and fewer link it to their 401(k) plan. Our 401(k) options historically included a company match— even for part-time employees — and offered traditional stock market investment options. Today, this solid benefit has become more robust by offering employees a chance to invest a portion of their 401(k) contributions in company stock alongside the stock market investment choices. Employees benefit from the option to not only invest in their own financial future, but their company’s future, too.

Certainly, ownership opportunities have always been available to anyone interested in The Callaway Bank. In fact, our shareholders are mostly local members of the community, including some current and former employees. Yet Barnes and the board felt it was worthwhile to go a step further and give employees more opportunity to have a stake in ownership. To further show its commitment to the effort, the board made a jump start contribution to the 100+ employees at the time. Going forward, new team members can participate as well.

The Role of the ESOP in Modern Banking

ESOPs are not necessarily rare in banking, but more community banks offer them than big banks. Why? Community banks tend to make decisions for the betterment and long term well-being of their communities, which means embracing tools and strategies that support long-term success.

Our objective with The Callaway Bank ESOP is to position our financial institution to best meet the opportunities and challenges of today’s world. Not only have employee owned companies proven to be more resilient 1, but they also foster a culture of creative ownership. Individuals who believe in our company’s mission tend to gravitate toward working with us (and staying with us), which bodes well for employee retention, advancement, and engagement.

When employees are rewarded for staying with the company longer, it encourages them to go the extra mile to make their job more than “just a job.” They’re also surrounded by other team members who are just as passionate about their roles in the organization, providing a culture of ownership where everyone works together in the best interest of the community.

From our customers’ perspective, the ESOP will help The Callaway Bank perform at its best by bringing a commonality of purpose to the company and the employees — already, we’ve seen an increase in the level of motivation and creativity among employees as they embrace their stake as local owners.

In addition, having an ESOP reinforces the idea that The Callaway Bank takes community commitment seriously. For 162 years, we have valued our independent, local decision-making, and providing ownership to our employees proves and reinforces our commitment to longterm success for everyone in the equation.

For many generations, our outside supporters, customers, and team members have been our bedrock. The decision to move to an ESOP will only deepen our foundation, enabling us to focus our decisions on what makes sense for the neighbors who trust us with their financial aspirations. And who better to have a vested interest in these decisions than the people who call this community home?

Sources:
1 hbr.org, Profit Sharing Boosts Employee Productivity and Satisfaction.