Minnesota firm found employee ownership helped it get through 2020 downturn

·4 min read

Maggie Corman, an associate producer at MetroConnections, stars as a stage manager for conferences and events the Bloomington firm has produced around the country and the globe since 1985.

Corman has an engaging, direct style that keeps things moving, on cue and upbeat.

The 2020 pandemic and recession cut MetroConnections live business by 85% and its revenue in half, following record 2019 revenue of $25 million.

The only route to survival was to turn into a virtual-meeting producer, said David Graves, the firm's chief executive and a 35-year veteran of the company.

There were layoffs. And the offices in Bloomington and Burnsville, in large part, were converted into production studios. Instead of five to 10 big conferences monthly, Metro was doing up to 10 online events a day.

"We put our hearts and souls into the business, including late nights and early mornings to accommodate international clients," Corman said. "It was rewarding. We applied our knowledge of the live business and adapted it to the virtual setting."

They attracted new customers who needed to communicate online with far-flung clients and employees in meetings and conferences. It was still able to make money because expenses associated with running in-person events, such as transportation and meals, also dropped sharply.

"We had to spin on a dime," Graves said. "We knew after 60 days we could make it."

The secret sauce: loyal, flexible employees and an employee stock ownership plan, or ESOP, launched last year.

"Our people are our product," chief marketing officer Tom McCulloch said.

Today, with most employees back at work and the pandemic easing, the company is growing again.

The owners, McCulloch, David Graves and brother Mike Graves, the chief operations officer, are in their 50s. And they had offers to sell MetroConnections from large national firms. That often leads to a big cash payday. But it also may mean that management is out the door within a year and uncertainty for workers.

The owners researched employee ownership and retained an investment banker to help establish the ESOP that they presented to employees in January 2020. The ESOP, which buys the company, was set up conservatively and the owners will finance the sale over a decade or more, paid back by future profits.

The three owners also wanted to keep working, at least for several years.

"We decided the ESOP model fit us perfectly," David Graves said.

The plan creates an employee-owned business for which they pay nothing. But they get paid "their equity" when they leave or retire, which can prove to be a six-figure supplemental retirement.

"I think becoming an ESOP was important to Tom, David and Mike," Corman said. "And just before COVID … it was another reason for our team to bond and come together. We not only survived, we thrived."

Because of the COVID-related financial challenges, the first-year payments from profits for the ESOP were suspended. Yet employees know as MetroConnections grows profitably it will add value. And they each will have a claim on the wealth they have contributed to the company.

Sue Crockett, executive director of the Minnesota Center for Employee Ownership (MNCEO), said a well-executed ESOP, in addition to good pay and benefits, is an important way to enrich workers and address the nation's growing disparity between the rich and the working class.

"ESOP companies did better during COVID-19 and the recession," Crockett said. "The employees stay engaged. The owners can usually make more selling to a private equity group or a strategic buyer. But they are often out within two years and often get seller's remorse. They hate what they see happening."

About a dozen ESOPs are formed each year in Minnesota.

"We have about 255 ESOP companies," Crockett said. "Minnesota always was a state of entrepreneurs and a lot of those businesses were created by people now in their 60s and 70s who want to pass on that culture and opportunity to their employees."

Crockett said her outfit is getting more and more inquiries about ESOP ownership.

And MetroConnections picked up at least one customer last year thanks to employee ownership: north Minneapolis-based Walman Optical, one of Minnesota's oldest and largest employee-owned companies.

"I remembered what a great job they had done with some virtual meetings for the ESOP Association, so we reached out to them first," said Missy Pieske, who has been a meeting planner at Walman for 30 years. "You enter into work with other ESOP companies with certain expectations about the culture and the dedication to customer service and quality of work. MetroConnections exceeded those expectations from the start."

Neal St. Anthony has been a Star Tribune business columnist and reporter since 1984. He can be contacted at nstanthony@startribune.com.