But the controversy attending those early moves was nothing compared with the conflicts that erupted over the ESOP itself. Companies converting to ESOPs often spend months preparing employees for the change. But in Featherstone's scramble to do the leveraged buyout, he had told the employees very little about what was going on. "We all heard the word ESOP, but nobody knew what it was all about," Cecil Martin recalls. "We all said, ESOP? What's an ESOP? They got some pamphlets out to us and said we'd all own a piece of the place. But a lot of people had trouble grasping the concept."
Featherstone was under no illusion that the ESOP would work instant wonders. After all, he had resorted to it out of desperation, not altruism. But he did think it would create at least some commitment. "I figured if people own a piece of the rock, they'd work a little better. I expected the transition to be very easy."
Will-Burt's employees have a strong work ethic grounded in the area's Mennonite and Amish roots. But they weren't exactly sophisticated in matters of finance. Ownership, in fact, was an alien and even evil concept to many of them -- as Featherstone quickly discovered. "They hated it," he says. "They were scared and didn't want anything to do with it. Most of their parents came out of the depression, and they had a tremendous fear of stocks. I had many of them tell me not to give them any stock. These were good, solid, wonderful people, but they wanted nothing to do with the world of finance."
The rumor mill kicked into overdrive. Will-Burt had never been unionized, but that didn't matter. There was labor-management animosity, and the workers harbored suspicions about Featherstone's motives. "There were lots of misconceptions," recalls welder Russ White. "Some guys said it was Harry's way to get control of the company for his own private gain." Others thought it was some kind of trick, a ruse, so that if the company fell apart, then they, the new owners, could be blamed.
But gradually the fog cleared. "As we had more meetings and got information, we learned that the ESOP was under strict government guidelines," says Martin. "We learned it wasn't just for Harry but all of us. That made everybody feel a little better. We also liked the fact that it might stave off some lawsuits."
Featherstone wasn't shy about explaining Will-Burt's grim situation. "I told everybody that we were flirting with bankruptcy," he says. "But I don't think they believed me. Most of them thought we were making a 30% profit when in fact we were making less than 5%. I had a big misperception to knock down."
Under ESOP law, Featherstone didn't have to open the company's books. But since the workers had equity, he thought, they should know the numbers. If they had the facts, they would better comprehend his decisions. So in mid-1986 he began posting profit-and-loss statements on bulletin boards. He stopped after outsiders started noticing them and, instead, passed the P&Ls out. Everyone got a copy.
That didn't work either. "People told me they couldn't read the thing, that it made no sense to them," Featherstone recalls. So he reduced the data to a few lines -- this is what the sales were, here is what it cost us, this is how much we made. That did work. But now that the employees could clearly see the costs, they didn't like what they saw. Why did you paint the office? they'd demand. Why did you buy that chair, and that piece of machinery?
That wasn't all. In late 1986, after countless meetings, the workers began to understand that they did, in fact, own the company. And as owners, they wanted benefits -- namely, some fat raises. Featherstone kept explaining that the company needed to invest what money it had to improve quality, to grow. They'd all be better off in the long run.
That didn't go over too well, either. "The guys wanted to hear about tomorrow, not the long run," says Bill Varney. "People eat in the short run." But money wasn't all they wanted. "When people hear employee owned, they think, hey, I'm a boss now," says Larry Murgatroyd, a gear machinist. "That means control." They wanted to elect the board of directors and the president and call the shots on all major decisions.
This wasn't everyone, but enough to make life miserable for the beleaguered Featherstone. "I tried to explain that this was a business, not Athenian democracy," he recalls. "You can't have 300 people making decisions -- it would be anarchy. People told me it would take 5 to 10 years to create a real sense of ownership here. I didn't believe them. But let me tell you, the first 2 years were pure hell. I got bitter complaints. Meanwhile, I was trying to fight these lawsuits. I had all these minuses. It was the biggest disaster I had ever been in in my life."
But it was not unmitigated. Will-Burt had some nice proprietary products. Sales were particularly robust in its pneumatically raised telescoping masts. The military bought them for communication at mobile missile sites. Television crews installed them in "eyewitness" news vans to beam signals. Will-Burt dominated that market. And sales remained strong in coal-fired heaters, one of the company's oldest lines.
The bulk of the business, however, 65% or so, remained in producing metal parts for Caterpillar, Parker-Hannifin, and other customers. They ranged from engine shields for trucks to stainless-steel meat-grinding tubs for supermarkets. And it was here that the company was burning up $800,000 a year just to rework rejected parts.
Will-Burt could no longer afford that -- not with the bank loan casting its shadow. And it couldn't afford to be just another metalworking shop. Competition was intensifying. Honda Motor and Japanese parts plants were entering the Midwest, raising quality standards. Will-Burt needed some edge, Featherstone knew, something to set it apart.
He decided to shoot for perfect quality and perfect on-time delivery. Perfect quality meant manufacturing parts exactly to blueprint -- zero defects. That sounded good. But pulling it off, Featherstone knew, would require the dedication and participation of each and every worker. Ownership alone would not generate the kind of commitment he needed. No, the employees would have to be given a more sharply defined role in the running of the business -- more power to make their own decisions. They'd have to work harder and smarter.
