25 millionaires created by local employee owned company

 

“Who’s going to be our next millionaire?” is the question CEO Tom Albero says captures
the hiring process for Alliance Material Handling Inc.

The Jessup-based fork lift, handling equipment and warehouse systems company is
owned by its 286 employees, 25 of whom now have at least $1 million vested in the
company’s employee stock ownership program, or ESOP. The program began as a
solution to two problems: ownership succession and technician retention. It managed to
solve both, Albero told the Baltimore Business Journal in an interview, and has also
changed the company and its employees while paying out more than $10 million to
employees along the way.

“Once you have 285 people with money in their retirement accounts, things change.
People start to make sure the lights are turned off before they leave for the night,”
he joked.

The ESOP is treated as a retirement account by the IRS, but it doesn’t require employee
salary contributions like a 401(k) or other investment matching programs. The dividends
are calculated by dividing each employee-owner’s W-2 earnings (salary or wages) by the company’s total W-2 earnings. When employees retire or leave the company, they are paid out of the ESOP fund for their shares.

“I used to say, ‘If we can get an employee to stay for three years, they’ll see why
they should stay.’ Now, I only need an employee to stay for one year to understand,”
Albero said.

 

The numbers tell the story. A first-year employee received an average dividend of $2,000 in 2004 when the ESOP launched after a management buyout fell through with the old owners. That sum grew as Alliance paid off the debt from the employees’ purchase the company. In 2023, a first-year employee received an average of $25,000 toward their retirement.

 

“In May, I get to be Santa Claus and meet all the employees and explain their ESOP
benefits to them. I get high fives, I get bear hugs, I get screaming,” Albero said.

As CEO, Albero owns less than 2.5% of the company’s total stock. The remaining 97.5% or so goes to employee-owners like George Whalan, Alliance’s director of used equipment who’s been with the company for 32 years, and Anthony Barrett, a service technician.

 

As CEO, Albero owns less than 2.5% of the company’s total stock. The remaining 97.5% or so goes to employee-owners like George Whalan, Alliance’s director of used equipment who’s been with the company for 32 years, and Anthony Barrett, a service technician who’s approaching 30 years at Alliance. Both have passed the $1 million ESOP mark and say the program has given them more options than they’d ever considered having.

 

Whalan said he was making $7 an hour when the company first handed him a broom
more than 30 years ago. Now, he’s ahead of many people his age for retirement.
“My wife and I truly can retire at 55,” he said. “It’s not a ‘retire and survive.’ It’s more
of a ‘We’re going to Mexico for a couple weeks, we’re going to buy a camper’ type
of retirement.”

Barrett said he originally thought of the fund as a supplement to his regular retirement
savings, but as the sum grew, it became a real motivator for him at work.

“The minute I get in the truck, all day long I’m thinking about how much the company
and the dividends are growing. It’s almost not real,” he said.

The growth of the ESOP program has come alongside major growth for the company, too.

When the program first launched, there were roughly 100 employees; now, there are 286, from $30 million to $200 million, Albero added.

In 2022, the company purchased an Ohio company, expanding its reach out of Maryland, Delaware, Virginia and Washington, D.C. Employee turnover has also slowed from 58% in 2016 to just 6% today, something Albero credits in large part to the ESOP.

During the Covid-19 pandemic, Albero said the model even helped keep employees on
board while other companies were laying people off because they’re not just workers,
but owners, too.

 

Ten of Alliance’s 25 millionaires are technicians, something that signifies the monetary
benefits of the ESOP up and down the chain of command, Albero said. In addition to
those 25, 76 more employees have crossed the $500,000 threshold.

In 2024, the company has already paid out $2.5 million, Albero said.

 

From the Baltimore Business Journal:
https://www.bizjournals.com/baltimore/news/2024/06/26/alliance-materialhandling-jessup-esop-millionaire.html