Episode #19: Employee Ownership and the Future of Capitalism
A conscious 'Beer Meister' discusses pursuing his passion and building a conscious, employee-owned culture at Mass Bay Brewing (home of Harpoon, UFO & Clown Shoes craft beers). Join Dan Kenary CEO and Co-Founder as he also discusses greed and the need to save capitalism from itself. Not to mention our new favourite employee benefit: employee beer tours of Europe!
Listen to this episode on Apple Podcasts, Spotify, Stitcher, or wherever you get your podcasts.
References & Resources:
Conscious Capitalism main website - www.consciouscapitalism.org
Mackey, J., Sisodia, R. (2014). Conscious Capitalism: Liberating the Heroic Spirit of Business. Harvard Business Review Press.
Sisodia, R., Henry, T., Eckschmidt, T. (2018). Conscious Capitalism Field Guide. Harvard Business Review Press.
Timothy: Hello everybody, and welcome to episode number 19 of The Conscious Capitalists, with myself, Timothy Henry, and my partner in trying to make the world a better place through business, Raj Sisodia. Hi Raj.
Raj: Hi Timothy.
Timothy: I think we’ve had an interesting month of guests, haven’t we Raj? In one sense we’ve had this conscious used car salesman, you know, and then we had this conscious private equity guy. Well now we get – we saved the best for last because in the Christmas spirit, today we have a conscious beer meister. So perhaps introduce our special guest today, Raj.
Raj: Yeah, it is interesting, I think that in industries that are associated with sort of your opposite, and I won’t say that brewing is certainly, but the great – the opportunity to become a conscious business and to stand out by doing so is even greater I think in those sectors, and the need is greater as well, right? So I think there’s a message to that pattern there, but we’re really delighted to welcome today Dan Kenary who is the founder and CEO of the Mass Bay Brewing Company here in the Boston area. Best known for their brand Harpoon, which I love. It’s my beer of choice. That’s the only one I typically buy, and Dan has a really interesting story in terms of how he started the company. You know, it’s – I think he went to Harvard and studied history, and he’s a banker, he became a banker from Worcester, and suddenly made a shift and decided to get into craft brewing, so would love to learn about that and learn about his perspective on leadership and especially on employee ownership, so we’re going to get into all of that. So welcome Dan and thank you for joining us.
Dan: Thank you. Good morning to both of you, and I really applaud the work that you do to try and make, to bring business to people in a positive way that we can build together and build a better society. So congratulations to you both and thank you.
Timothy: Well it’s only because we have exemplars like yourself that we’re able to raise the flag for things like Conscious Capitalism. And maybe a good place to begin would just be tell us about the whole story of how you got into the craft business and a little bit about Mass Bay and Harpoon.
Dan: Well I’ll tell you that I was inspired by my backpacking trip through Western Europe after graduated from college in 1982 with that history degree, heading into banking. I was able to take the summer off and with a college friend, headed overseas and, you know, having been someone who loved beer from a young age, and the world in the U.S. back in the 70s and 80s was all light-yellow lagers coast to coast. It was absolutely dreadful, so boring, and I was like a kid in a candy store when I – I landed in Shannon and we worked our way all the way down to Corfu and back, and I fell in love particularly with Irish and English pubs and the various beers that you’d find traveling through different regions. The idea that my gosh, there’d be different beers in different regions and all these styles. It was phenomenal. Not only was the beer incredible, but the backstory, you know, the breweries were in the center of town, they were part of the community. They went back hundreds of years in many cases. You know, in the U.S. if you wanted to visit a brewery it was in an industrial park out on the interstate some place who was like a bloodless factory.
So I came back like this is incredible that you have all this choice and excitement, and then the largest consumer market in the world you have neither of those things. So, but I did dutifully report to my job at First National Bank of Chicago and I went to University of Chicago Business School at night for several years, and then 1985 moved back to Boston with the bank, but started talking with a college classmate of mine who had the exact same feelings that I did about the beer industry, and we turned a research report he was doing in his second year of business school on the microbrewing movement, which was getting started in the Pacific Northwest, we turned it into a business plan to actually open a brewery in Boston.
And off to the races, but it was a very interesting conversation with my two teetotaling parents when I went to them to say, “I’m leaving the bank to go start a brewery.” That was an interesting conversation.
Timothy: Short of them both beginning with B, I’m sure they didn’t necessarily make the connection right away, right?
Dan: Not at all. I guess this is just something you feel you have to do, it’s kind of one of those conversation.
Raj: And then you went to Chicago, I mean the mecca of free market capitalism and laissez-faire capitalism thinking, right?
Raj: Milton was still teaching there, right? He was still on the faculty there?
Dan: That’s right, and I’ve had two of my sons graduate from Booth (The University of Chicago Business School) in the last five years, and so I’ve maintained my ties and have actually gone back a number of times and spoken to students and other groups about conscious capital and the small C, not necessarily the organization, although I have mentioned that, but also just the idea of employee ownership and I think it’s an interesting evolution a lot of us are going through as we see kind of what the market has done and what the market hasn’t done.
Raj: Were they receptive to those ideas at Chicago?
Dan: They really are, and they are in particular, because I speak quite a bit, as you might imagine, about employee ownership, and they are – I just was on a panel with students and they said they actually have a class where they were talking about employee ownership, and I said, “That’s great. I’d love to find out m ore about that.”
Timothy: Yeah, I love the contrast of this question as if we should be talking about employee ownership like it’s an oddball, or conscious capitalism like it’s an oddball versus, you know what, this is just a better way to run a business. Let me tell you, it’s just a better way to run the business, and I’d love to have your reflections on what you see when you look at it through that lens of this is just better.
Dan: You know, it goes way back with me. I was raised by great people, but my dad was a stockbroker forever, right? And he ended up running his own company in Worcester, Massachusetts and then was bought by a bigger one, but my dad always, he was a huge believer in the free enterprise system, but he said, “You’ve got to recognize the biggest threat to the system is not,” and this is not to get political, he said, “It’s not really going to come from the left, it’s going to come from businesspeople, especially on Wall Street and others being too greedy, and they’re going to turn the rest of society off to business, and therefore, they’re going to vote for anti-business policies. They’re going to actually hurt the general economy.”
And I’ve just seen that happen again and again and again, and I think that the financial crisis of, gosh, what was it, 12 years ago now?
Dan: I remember a great column. I think I put it up on my wall for a while for the Wall Street Journal by someone who said that “Basically, without restraint, personal restraint, our system doesn’t work.”
Dan: And the sense that, you know, greed, and I’ve been talking a lot about greed in the last several years, it makes some people uncomfortable, but I’m like, if we’re not comfortable calling out greed and we want to preserve the system, who else is it? It’s going to be the enemies of the system, socialists for example, that want to tear it down and put caps on it as opposed to guys in a free-market democracy where the voters rule, as they should. If they see the system rigged against them or greedy people living to excess, what do you expect the outcome to be?
Dan: So the role model, what you’re doing, what conscious capitalism is doing, what the ESOP Association, what others are trying, I think it’s a little bit like what Roosevelt did in the New Deal. He saved the system from itself. And I think to some extent we’re faced with some of those challenges again today.
Raj: You know, I’m reminded of Viktor Frankl who said that we have a Statute of Liberty on the east coast, but we need a statute of responsibility on the west coast perhaps just to balance that because freedom without responsibility can lead to all of those kinds of excesses. Your father was very prescient in making that observation. That’s exactly how it is played out.
Dan: Well it’s always been interesting to me too that we’re very comfortable calling out laziness or sloth or, you know, welfare cheats, et cetera, but we’re not comfortable calling out greed on the other end of the spectrum to just say for the betterment of society, how much is enough? And then, it really gets to personal responsibility, Raj, as you said, on a lot of different levels. That’s bettering yourself, educating, working hard, et cetera, but it’s also, “Gee, I don’t have to have all of this for myself. I can share this in a way that benefits my employees or benefits the broader community.” And I think there are a lot of businesspeople out there who actually live that way, but a lot of the models that we see that are covered in the newspaper, et cetera, it’s quite to the contrary, and we all end up paying the price for that.
Timothy: Well I think that’s so true. I think that one of the things that we keep arguing about is the narrative about business needs to shift because too much of the narrative, and you know, I joked about this a couple weeks ago, was that in the same day, The Financial Times publishes this stakeholder-centric model that says the future of capitalism’s around stakeholders, and on the same day The Wall Street Journal publishes the completely opposite saying stakeholder approach is complete nonsense, we’ve really got to go back to the Milton Friedman shareholder model, and it’s like, guys, you know, this is a narrative that needs to move on. And I’m curious, because when we talk to leaders like yourself, you went on a journey that had your eyes open to that as a possibility, and I’m just curious, when you look back at your life and you sort of say, “What is it in my background that made me who I am that this was something that would have appealed to me and that I would actually go and do something in the world around it”?
Dan: Again, I think it goes back, Tim, to the way I was raised, and I was, you know, having started a company when I was 25, you know, in 1986 before kind of entrepreneurship took off, one thing that appealed to me was I was never comfortable with the disconnect in values between the way I tried to live my personal life and then my professional life. And I think that was one of the things that really appealed to me about starting my own company. It’s like, okay, we can have our own business, and therefore, we can make the business reflect our values. And the old golden rule of doing others as you’d have them do undo to you, I mean it’s just kind of a simple stuff, and I think culturally it’s one of the reasons we’ve had the success we’ve had is because we’ve always treated our people that way and it’s like, “Well how would – why would – you wouldn’t do that to somebody else because you would not want that done to you.” It’s simple.
And I’ve just observed, because a lot of, you know, any of – I graduated from college in 1982. If you remember, you jump at the DOW, in August of that year, the DOW was in the 800s. Any of my classmates that went into financial services who had a pulse basically, you know, could have retired 15 years later, and a lot of them did. You just kind of watch this evolve in other areas, and you kind of just saw it and I just, again, I had a father in the business and, you know, his line, one of his lines was, you know, “My job is to really protect my clients from those a**holes,” pardon my language, “on Wall Street.” Because he’s like they’re peddling all this crap and they’re going to stick it to the retail people because that’s just the model. So my father was a dyed in the wool republican, but he just, he saw the system, but saw how it could be corrupted. So, you just kind of watch that unfold, and I was a history major and I remember, you know, you studied the Gilded Age. I’m in New England, you drive down to Newport, you see the cottages, and you realize like, my god, we’re living through a second Gilded Age, you know. I mean I used to love going to Nantucket on day trips and that place is just incredible. And nothing wrong with any of that.
Dan: But you’ve just observed it at the same time that, you know, you travel to brewers conferences in Portland Oregon, and you have thousands of people like living outside under the freeway bridges and stuff.
Dan: And you realize like this is, and then you read articles about like, you know, hookworm in Alabama or just economic situations in Lawrence, Massachusetts, and we’re not going to solve all the problems, but you’re like, “Something just doesn’t add up here. Something just does not add up here.” On a small way, if I can take our little business and kind of plant a flag in the ground, I mean for, you know, engagement and sharing the wealth, I’m going to do it. And I have to say, I’m kind of disappointed in my industry, craft beer, because, you know, we had a real sense of camaraderie and togetherness, and there have been a handful, a handful of ESOPs, and there are over 8,000 breweries now. It’s like okay guys, there was a lot of Kumbaya talk over the years, you know, about how we’re part of the community and all this stuff, but I’m not seeing a lot of sharing the wealth here and actually broadening the inclusion because it’s – so this is where, and you know, I’ve became Chairman of the Associated Industries of Massachusetts (AIM) which is the largest business association in Massachusetts, and I got them to start talking about employee ownership to say this can really, as a business organization, this is a great thing for us to be talking about at a time when the polls and things are turning against, you know, support for the system.
So I kind of took on a little bit of a mission, if you will, at this stage in my career, and I’m kind of jazzed up about it.
Timothy: Well it raises an interesting question about, and I’d love your perspective, from the AIMim perspective, what was the resistance?
Dan: There wasn’t any. I’ll tell you, which was great, and I think there’s a bit of self-interest there, right, because the association is like perceived as, okay, they’re the, and this is not necessarily true, but the old white guys on the right, you know, preserving the status quo and their self-interest to, “Gee, employee ownership, that sounds like scary left stuff. Is that communes and co-ops and what do you mean by that?” But it’s like, no, it’s all pro-business, and if we can broaden it to include people who might view business as, well you’re on the other side of these issues reflexively, it’s like, not necessarily. We want a fair business climate here, but we may embrace a lot of the issues that you – so AIM responded very favorably to it and has helped me actually promote seminars and legislation we’re working on up in Beacon Hill (State legislature of Massachusetts) to try to get the state behind promoting employee ownership because we think that we have a serious marketing problem specifically with ESOPs.
Timothy: Well playing off that, I think that I’d love to hear your thoughts. I mean part of that marketing problem, I think, revolves around capital and access to capital, doesn’t it, in a sense?
Dan: You hear a number of different, you know, complaints or criticism. There have been some bad ESOPs done and that have gotten in the press, so people are like, “Well gee, they’re bad, they’re structurally wrong.” I always say to people, “If you put an ESOP on top of a lousy company, it’s still a lousy company.” I mean, you know, an ESOP is not a magic wand or light switch where all of a sudden, wow, we’re all engaged owners, we’re going to go out and conquer the world. It takes a lot of work and education. But, and people think that they’re cumbersome, they’re expensive, you can’t get your capital out there. Lots of, you know, challenges with them, and there certainly are some challenges with them.
Dan: But my partner got a ton of money out when he cashed out six years ago, and there were tax benefits to him doing so, and there are tax benefits to running an ESOP.
Dan: There are restrictions on it and structures and stuff you have to follow, but a lot of those issues that people check, you know, raise as problems, we do have answers for most of them. Again, it’s not for everybody, but we think with all the baby boomers getting older and, you know, selling their businesses that the case we’re trying to make in Massachusetts and elsewhere is my gosh, think about if these businesses were owned by their employees, they’re not picking up and going to China or Mexico.
Timothy: Right. Right.
Dan: They’re going to stay locally owned, locally run and running their facilities. So it could be a win-win-win if done well.
Timothy: Last point on this and then we can move onto something else, but this idea of growth capital and accessing growth capital as an ESOP because now you’re having to go and look and sort of say, “How do I raise more money to fund that growth in the ESOP model?” How does that play out if you’re a fast-growing company and you’ve got at least a third, for all the tax reasons, of your business employee owned?
Dan: It really should not present particular challenges. We were leveraged ESOP, so we had to borrow money to complete our transaction. We had five banks in our banking group who supported us in doing that, and so if the underlying fundamentals of the business remain solid, then access to capital really shouldn’t be a problem. Now you can imagine we’re in a business that is pretty directly hit by COVID. As a leveraged ESOP, we’ve had out challenges this year, but we were – it’s not because we’re an ESOP, it’s because we’re leveraged, okay, and I would make arguments all day long that us being an ESOP with the culture we have has allowed us to kind of meet the challenge of COVID head on and end the year stronger than when we went into it, which is pretty remarkable, and I think that’s entirely due to the culture that we have that has been affirmed, if you will, by employee ownership.
Raj: And a somewhat related question. So if you’re a public company and you want to give the employees more ownership, I remember Whole Foods was known for giving stock options to non-executives, so I think at that time, the typical was that the top five executives had 75% of the stock options, and I think for Whole Foods it was 93% of the stock options went to non-executives, below the top 25%, right? So almost everybody from a cashier to a…
Dan: That’s great.
Raj: …leader would get that, and that’s another way, probably not to the same extent or the degree, of employee ownership, but it still aligns the stakeholders together.
Dan: Absolutely. Absolutely. And it’s – there are lots of different ways to do it. ESOP is not the only one. It can be an attractive one because of the tax benefits, and the way that it’s structured, you really – everyone is included, which is good because you eliminate some of that, depends on how generous the executive committee’s feeling that day. But again, there’s certainly cases, and Publix is the largest ESOP in the country, 160,000 I think employees, but the Whole Foods model, again, that was founded and run by an enlightened generous person, right? And, but there are lots of them, but unfortunately we need more.
Raj: Yeah, I didn’t know that about Publix. I mean I’ve been reading about them recently about, you know, that’s a great stakeholder-oriented company. I mean they are…
Dan: The largest ESOP in the country, yeah, absolutely.
Raj: They check all the other boxes in terms of customer delight. You know, returns, employee engagement, all of them.
Dan: They do, yeah. It’s off the charts. Like the turnover rate’s really low. Customers absolutely love the place. It’s a little bit like Market Basket here in New England, which is not an ESOP, but is clearly, I mean we all lived through that, and I read the book about it. I was fascinated with that whole story. But I think they’re viewed by their customers the way that Publix is to some extent.
Timothy: Yeah. So I’m interested in your idea about greed. You said you’re out there, you know, calling a spade a spade. Let’s talk greed. So Dan, let’s talk greed.
Dan: Oh gosh, I know. It almost makes me cringe a little. My wife says, “Honey, you got to just kind of tone that down.” I’m not that outspoken about it. I do it gently and respectfully because I want to call out our better selves. I’m really not saying that someone’s a bad person. I don’t ever want to get to that point. We’ve had too much of that in our society, right? It’s almost just appealing to our better angels and saying greed is out there. I mean I think you look at public company boards. You look at what CEOs make, and I remember a friend, great Vermont hiking friends and she grew up outside of Detroit around all the auto company executives who said, “They used to live in our neighborhood, and they drove carpool.” I mean it was like, but now they’re all flying private and driven… I mean because it used to be, you know, it was a ten to one ratio between the average employee and their company, and now it’s 200.
And why is that? And why is that? You have these boards, we’re going to do – because I’ve seen this happen, we’re going to do a comp survey. They did one, “Well we got to have our guy, our gal in the top” and it just, it becomes this upward spiral.
Dan: And there’s a crude term that, you know, that you use to refer to something like this, the old circle blank.
Dan: And it just goes upward and upward leaving everybody else kind of just in the dust. And you’ve seen this world emerge with the top X percent where there’s very little interaction with the rest of society, and it’s just not a healthy situation. So I like to say to people if you care about business, if you care about our society and you care, and you respect our democracy, then if you’re being greedy, you’re undermining all three of those things. And you can stay in your bubble and not think it matters and maybe in your case, it may matter less than others, but when people see these numbers and the way that folks, it kind of becomes a racket, where I’ll scratch your back, you scratch my back, and how do you think that that helps business? You know, millionaires taxes is going to be on the ballot again in Massachusetts. What do you think is going to happen? And tax rates are going to go up and they probably should go up, and it’s going to hurt the person like, you know, trying to start their business.
Dan: That’s the thing, the people that have been greedy along the way that have made their $50 or $100 to $150 or $200 million got it squired away safely behind these tax shields, they’re fine, but it’s the person opening up, you know, the craft brewery down in, you know, Portsmouth that’s trying to raise $400,000 to do it and might make $1 million in the sale of his company. He’s going to pay higher taxes because – so it’s this sense of responsibility, play it forward, if you will. If we really want to leave the system better off than we found it…
Dan: …and guys, we live in a democracy. That’s the thing I like to remind everybody. Your actions have consequences because people see this and they think, you know… And so live that way. Be responsible. Back to what Raj said, be responsible. So stakeholders, whatever you want to call it, I just like to kind of bring that up, and it does make people uncomfortable, and I don’t never want to make it personal. I just kind of want to call out our better selves, if that makes any sense.
Raj: And it’s interesting that that racket effect that you talked about, right, everybody wants to be in the 75th percentile of what we pay our leaders, and that just becomes a – and we don’t do that with employees, right? We don’t say we want to be in the 75th percentile for our frontline people, right? I mean…
Dan: Yeah, right.
Raj: What can the market, what can we – I’m reminded of HEB which is another great company in Texas.
Dan: Great company, great customer of ours. We love those guys.
Raj: Yeah, and they’re – it was founded by the grandmother of the current CEO, Charles Butt, founded by Florence Butt, and his dictum to his people is please pay our people as much as possible, not as little as possible.
Raj: Right? Figure out a business model where we can pay them well, and I think they recently distributed billions of dollars’ worth of stock, and it’s a private company still, to their employees, and they have lower prices than Walmart, and of course employees are paid much better and customers are proud and, you know, delighted to be affiliated with that company. So it brings up for me this question that we often talk about our fathers and their influence, but for a lot of conscious leaders, I think their mothers also had a significant influence on them.
Raj: And so if you want to talk about that?
Dan: Oh, and I did a disservice if I didn’t say both. I know I quoted my dad a couple times. My mother was in so many ways the conscience of our family in her quiet way. She became a guidance counselor in my high school, which is a little awkward, when I was a sophomore in high school, for 22 years, and the people I ran into over my life telling me that my mom changed their lives for the better because she cared – She would cry telling us stories about people and kids and she just wanted to help people. And so – and I remember my parents kind of taking on a couple of, you know, family of Laotian immigrants back in those days, it was brutal what they had to get away from and what they had to do with here, and just do it very quietly. That’s just kind of what they did quietly. And I think one of the benefits for my career versus if I had stayed in banking is one of the – brewing is, you know, we make beer. We got a raw material in the front door, we have a production process, manufacturing facility, distribution business. We also have sales and marketing and finance and administration, et cetera, but we have an incredibly diverse workforce, and I’m not just talking, you know, colors and faiths and et cetera, but it’s more blue – as much blue collar as white collar.
So I’m just constantly around people from absolutely all walks of life and backgrounds and making very different amounts of money and confronting the challenges life has to offer as opposed to if I had stayed in banking, I might have interacted with the administrative staff on occasion, but other than that, I would have been, you know, in the bubble, if you will. Again, there’s nothing wrong with any of that other than I think asking people to be aware of the limitations of their circumstances and I was saying this to my wife last night. I had been reading an article about in the New Yorker about poverty in Alabama. And I said, “This is why I’m so happy I get this magazine because my gosh, this is in America in 2020.”
Dan: “Did you know anything like this existed?” And so, I – and in this day and age, where everyone gets your news from their own echo chamber on the left and the right it’s, you know, the shutdown, the great sound of all of our minds closing to each other is pretty scary stuff. So I think that’s a real benefit being in a diverse company.
Timothy: Yeah. Well, you know, it’s interesting we get into this whole question of the board and what’s the role of the board. It raises an interesting side issue of what do we mean by ownership? So what I love about the ESOP community is we have a very clear distinct idea about what ownership means, and often, not always, but often it then translates into the culture. We have a culture of ownership.
Timothy: We’re going to post the Harpoon video that you put out about your employee owners because I think it was so cool, but it’s a very distinct idea about what ownership is. Then we shift over to the other side and we say, “Well, you know, State Street, Vanguard, they’re the biggest owners of “public” companies with their index funds.”
Timothy: And now you’re sort of having an interesting discussion of like well what do we mean by ownership when we have index funds and mutual funds and, you know, I’m really not involved. And yet, I have a board, and the board now is making these decisions, but their idea of what ownership is is to me at least confused.
Dan: Yeah. No, that’s especially tied to index funds like that, it’s like it’s all just trigged by, you know, algorithms. That’s interesting. Yeah. Ownership, you know, when we became an ESOP, I remember we had very good advisors on it. The people in the community, they were wonderful, Alex Moss from Philly had brought up and talked about how important it is to educate people because we all understand – we all have a concept of ownership, you know, from business school or what, our experiences owning running companies or advising directors, but you know, to our guys working on the canning line, we’re delivering beer and trucks around Boston ownership to them. It’s like, “Well I know John Henry owns a Red Sox. He’s a rich guy up in,” you know… It doesn’t come naturally to them at all, and so – and as I said, “I’m not looking for you to be up at 2:00 in the morning worried about the stuff I’m worried about.”
Dan: That’s my role, but I do want you to all develop a sense of what it means to this ownership, this idea that your decisions, your actions day in and day out have an impact on you.
Dan: And so we’ve taken real time to do that, and again, that is not a light switch going off. That is examples over months or years where people are like, “Okay, so if I – that idea that I had that could save us a penny a case, okay, which if we do two million cases a year, $200,000, whatever, multiply it times eight, our multiple, wow, that could have over a $1 million impact on the value of our company divided by $100,000,” whatever. You start to drill down that idea of what it means and how you individually can impact the value of your retirement account.
Dan: Pretty powerful. I mean Jim Collins, the Flywheel guy, I love the Flywheel analogy because I think in business, it is absolutely, it’s a great model for how many of us it takes. It’s really hard to get it going, but my goodness once you get that going and working together, it can be a beautiful thing, and that’s ownership.
Raj: That’s the tangible sort of intrinsic aspect, right, the financial dimension, but there’s also the intangible. What does it mean to take ownership of something, right? It’s responsibility, it’s a sense of stewardship, right? It’s thinking broader. I remember in “Everybody Matters", the book I wrote with Bob Chapman, the CEO, and everybody at Barry Wehmiller saw things like that, right? So when they had a problem with industrial accidents and safety and the finance people brought it up to say, “Our claims, worker’s comp claims are going up and we need to do something about it,” well they framed it as, “We need to keep our friends safe. We need to keep our colleagues safe, right? And what can we do to do that, right?” So each of us, as we’re going around, we see things sticking out that shouldn’t be there, you know, we put it back. We just figure out what we – how we can contribute. We’re looking for ways to contribute.
Dan: We have a small cultural thing that we do that I love, which is back in the early days, we had some rough years, which is great, because I think it builds it into your DNA. We didn’t have any heat or air conditioning in our offices, so at times we’d hold meetings in the men’s room, whatever, but our lawyers at the time, we used a downtown law firm. We didn’t skimp on the legal stuff. They’d allow us to have meetings in their conference, one of their conference rooms. And our lawyer kind of knew how tight things were, so he would – he’d always leave, you know, “All right, we’re all set. Now, you know all the supplies are down in the credenza. I’m going to leave now. See you guys later, and help yourselves to pens and paper,” and we would. And so to this day, you know, 35 years later, we’ve never bought pens at our company.
And because we tell people, it’s like, “If you start noticing, you’ll notice at hotels, conferences, everyone’s giving away pens. Take them.” And every month our CFO gives out the Finance IPA, which stands for the Finance Increased Profits Award. We announce it at our company meeting. Someone had an idea to save this or that, and then at the end of that, he’d give the award is a pen that could be like a Hilton Gardens pen or it could be a Babson College pen or – but it’s from someone and it just I think ties in together really well that personal initiative, kind of our company history, you know, watch your pennies and the dollars will take care of themselves. I just think culturally it kind of works, keeping that aspect of our history alive and promoting ownership.
Raj: So, you know, what I love about what you do and the impact of employee ownership, it kind of addresses what I think is the biggest problem in companies, especially American companies is the caste system. You know, like in India there’s a caste system, you’re born into. You’re either a Brahmin or a warrior or, you know, whatever it is, and I think in the U.S. the biggest caste divide is between the professionals and the salaried managerial class, right, who get the benefits, who get, you know, leadership development opportunities and so forth, and then you’ve got the hourly people actually doing the work.
Raj: Right? And they are typically not college educated, right, and there’s no benefits and there’s no upward trajectory and the turnover is probably in the triple digits and the employee engagement is probably in the low double digits, and it’s the opposite often for the other side. So when you talk about culture, when you talk about engagement, you have to look at it through those two groups, and if you see big gaps, and you will in most companies. You know, that shows that there’s a fundamental disconnect here, right? And I’m sure that in your company, the employee turnover at the frontlines is a fraction of what it is for the large brewers or the large companies in your industry.
Dan: Our turnover is good and gotten better and our engagement has gotten really high. You raise an issue for us, you know, we’re 160, 170 employees, but the diversity that I spoke about of our staffing presents absolutely challenges on developing a culture, and I’ll take some, right now obviously, working remotely. We can’t make beer remotely. Or last week, snow days, I’ve never been a big believer of snow days. I’m old school that way. Tim from Canada, he completely gets that.
Dan: But what your – like snow days, we ask all of our production folks that come in, we got to make beer, but the office staff that’s like, “Okay, you can just work from home,” I mean those are small examples, but they really do present their culture. So, and you would have people in the production force like, “Oh, yeah, no one’s in the office today. They get to work from home. I had to fight my way in,” or even with COVID. Our guys have – I’ve been at work every single day through COVID because our staff has been here.
Dan: Now our marketing, design, sales have not been in obviously, but one fun thing that we’ve done since 1999 that has gone a huge way, at least for me, of breaking that down, and I think it’s really helped throughout our company is we started that year with our annual employee beer culture trips to Europe, and so when employees hit their fifth anniversary and then eight, twelfth and then every five years after that, we take them on an annual beer culture trip. So I will take up to 25 people and we will visit breweries, and we have been, again, since 1999, we’ve done this every year. This is the first year because of COVID, we are all set to go to Ireland, Tim. We’re going up north. We’re going to Dublin and then we’re going to go up to the north and then to Donegal and down to Galway. We’re all set to go the last weekend of April, and that brings together people from every part of the company and throws them together for a week, and it has done so much for now two decades to kind of break down… Now again, a bigger company... But you can probably try to think of ways to do it because, you know, empathy people talk a lot about that. Now caring about someone in their life outside of work is just central to it. And, you know, if you’re traveling with somebody and having beers with them over in the Czech Republic or whatever and creating incredible memories together, that goes a long way towards, you know, saying, I don’t care whether you’re driving a truck or you’re chief marketing officer, it’s, we’re all the same.
Raj: So Dan, I want to come on the next trip, okay? I’ll be an observer and I’ll take notes!
Dan: I know. My wife has been trying. I’m like, “There’s absolutely no way you’re coming…” because that would – A big part of this is that I’m along, I’m fully engaged, and now that I’m really getting old, it’s like I don’t know how much longer I can keep on doing this, because they are, you can imagine what those events are like. Some of these – some of the folks have never left – a lot of them have never been out of the U.S. before. A couple have not flown before.
Timothy: So you gave them their first passport.
Dan: A hundred percent. We had a dairy farmer up here in Vermont who had never flown before that we took to like Hungary. And he had the time of his life, so it’s you create memories like that and we’re in the business that allows you to do it. So let's take advantage of it.
Raj: So, you know, I read somewhere a quote of yours that said, “You bring creativity, variety and romance to beer,” which has largely become commoditized in the U.S., right? And I think it’s probably generally true of many industries that start out with the small craft mentality, but then as they become larger and it’s all about the numbers and efficiencies and economies of scale, they kind of lose their romance. They kind of lose the beauty of business, right? And, you know, I think that’s something we’re looking to get back to, even, you know, in a large company I think we can figure out ways to do that, right?
Dan: Yeah, customer, you know, customer contact has always been central to us. The only space in our Boston brewery that’s been used for the same purposes for 35 years is our old tour room where we welcome – we wanted to, where we located in Boston in the Seaport, it was a six-month delay getting to the space. It was costly, you know, and just had raised our first equity. But we wanted to have a central location because that vision I talked about, going to Europe and these breweries right in the center of time, and Tim, the actual – the first brewery I visited over there was Smithwick’s in Kilkenny. This was before they were purchased by bigger brewers, and it was – and we were the only people on the tour and we told them, you know, “We really just kind of want to go drink.” And they took us to the cave to drink and then they drove us to the train station.
So I had a very personal experience with this wonderful brewery right in the center of town, so that was our vision way back when. And so pre-COVID, we had like 450,000 to 500,000 people a year visiting our two breweries.
Dan: And we would run big festivals. I don’t know, Raj, if you ever went to our Octoberfest, we had between 15,000 and 18,000 a year come to that event. I had our first one in 1990. We’d been doing it for a very, very long time. So I think that connection with consumers, beer affords you that opportunity. You know, if you’re a beer drinker, it’s kind of a bit of a badge, like the beer that you’re drinking says something about you in a way that I think what type of soda you drink, if you drink soda or whatever, doesn’t.
Dan: So I think people do feel that connection to us and our brands, which we absolutely cherish.
Timothy: You also operate in a pretty complicated stakeholder environment, right? I mean, you know, each state having its own laws, you’ve got distribution channels.
Dan: Oh yeah.
Timothy: You know, I’ve done some work with a large distributor in Texas who you probably do business with, and I’m curious, how do you apply that stakeholder thinking in such a really complex world?
Dan: It’s interesting. You know, the fact that you do acknowledge there, a lot of people don’t because the way prohibition was repealed in the U.S. leaving all the regulations up to the state, it is a patchwork. And like there’s franchise laws in most states including Texas and Massachusetts, which means, and you tell people just like we go into a market and we have a wholesaler in certain states, in most states. We can never change. Even if they’re terrible, we can never change, and it’s just the nature of it, but the benefit is that we’re in an industry where actually relationships still matter a lot. You know, whether you’re selling to a bar owner, a restauranteur or store manager, it’s usually an individual who’s making the decision, and yes, they’re going to look at, and depending how big they are, they’re going to look at data.
You know, they’re going to – but if they like you and like your story, they’re going to – they’re maybe going to give you a shot, and it’s great to be in a business where that’s still the case. And down in Texas, we actually have just switched from a very large state-wide to another large state-wide, and we have good relationships with both, and they allowed us to move because we purchased Clown Shoes three years ago and Clown Shoes was with another wholesaler. So we wanted to consolidate, which is why we wanted to move. And Clown Shoes actually had better – the better personal relationships than we did. And so we ended up moving Harpoon and UFO over to the Clown Shoes wholesaler, and it was all based on personal relationships because they liked the brands, they liked us, they liked Greg who’s a Clown Shoes founder, and that’s gratifying. So the sense of stakeholder, that still exists, even as we’ve gone from 100 breweries in the country to 8,500 breweries in the country.
Dan: We’re still able to kind of cut through that to some extent and make sure that the personalities matter.
Raj: There’s a beer called Clown Shoes?
Dan: Yeah. Yeah, that we purchased three years ago. I think the brand was seven or eight years old when we bought them, and actually Raj, you know what, they wanted – they came to us and wanted to sell to us because of our employee ownership model.
Dan: And what they’d heard about the way we ran our business, which is great. And so for us, they were kind of a more esoteric craft brand that Harpoon or UFO had been around for 20 or 30 years, and so it’s been a great – it was a great acquisition for us. We brought all the folks over, and it’s working out really well.
Raj: So that was quite a fork in the road when your partner said he wanted to exit and I think one possibility was a strategic acquisition, which means you would have been merged into one of the larger companies, acquired basically?
Dan: Yeah. He wanted to do – sell to a strategic or private equity, and I think I’ve told you this story again, so not to bore y9ou of how we ended up making the decision that we did to go employee ownership, but it was a real fork in the road.
Raj: That would have been, yeah, losing your soul in the process essentially, right? You just become a brand name...
Dan: Right. And I just, I recognize that I was never in this just for a check. You know, the old saying that your life is the journey. It’s like it is, you know. And so the idea that I’d be driving with a grandchild out on the Seaport some day and say, “Oh we used to have a brewery down here, let me tell you the story.” “But where is it now Grandpa?” “Well, you know, Budweiser’s brewing it out in St. Louis and they let all the people go.” And who knows whether this is going to be successful. I have no idea. We’re trying to prove that, you know, employee-owned independent craft brewing can be successful in a very competitive industry. So there’s a sense of mission to it, and that’s a challenge to all of the employee owners at Mass Bay Brewing Company. It’s like can you rise up and meet this challenge?
Timothy: That’s so core to a lot of what we talk about in terms of great cultures, that there’s some sense of meaning and purpose in what I’m doing. It’s got something that goes beyond the money, it’s something that I believe in, and that unleashes a certain kind of personal power and passion that allows people to go to a different level of contribution in your business than if they were coming in and just sort of hitting the clock and checking in and checking out.
Dan: One hundred percent. That is exactly what we’re trying to do, and that sense of mission I think is crucial to it. And we have a really fun company, fun culture, but a very serious one, and I don’t apologize for that. We’re in the beer business. My god, it should be fun, and for people to be able to realize like you can really love your work, you know, and that we have something special, but it’s going to take a lot of work to keep this going. There’s no question about it, and there’s no rest for the weary. This is not like, oh, we figured it out, we’re done. It’s like, no. Okay, we might have figured out, you know, 2021 with the product lineup we have, but my God, 2022 is not far behind. So that constant sense of reinvention and being up for that challenge, that’s business, right?
Dan: Unless you’re in some very special world where you don’t have to constantly recreate yourself, but – and then finding that match with the people who respond positively to that challenge is what we’re doing, and driving up that engagement so that you, you know, constantly broaden that circle is what I need to be doing.
Raj: Well it’s incredible to me, Dan, with a company with 160 people, the kind of impact you have and the visibility you have and the lives you’ve touched is incredible. It shows the power of business to really make a difference in the world.
Timothy: Well Dan, thank you so much for being both an exemplar of it and an evangelist at the same time. It’s great to hear the story. And we really appreciate it.
Dan: Well next time let’s do it in our beer hall over a few pints. Can we do that?
Raj: Yes. I am just a mile away from there, so I will be there, conditions permit.
Timothy: I have to come to Boston soon, so…
Dan: As soon as you guys clean your act up over there and you can travel to our lovely safe country over here with six times your infection rates.
Timothy: Well thank you Dan and thank you everybody for listening, and whatever channel you’re listening on, remember there is a subscribe button. Feel free to hit that subscribe button, and if you have any thoughts or comments on today’s podcast, please go to theconsciouscapitalists.com. There’s a place there where you can leave a message for Raj and I. And Raj, if people want to hear more about Conscious Capitalism, what should they be doing?
Raj: Yes, please go to consciouscapitalism.org and look for a local chapter near where you are that might be run. We have about 40 of those in the U.S. and about 20 other countries. So, new beginnings in 2021. That’s going to be, I’m sure, an incredible year for all of us coming out of what we have experienced and grown from this year. It’s really been challenging in so many ways, but I think we are coming out of it stronger and with new capacities as we go forward. So we look forward to being with you in the New Year, and thank you again Dan, for joining us today.