by Lee Eisenstaedt
The Power of Giving Employee Owners A License To Act
A conversation with Daniel Goldstein
President & CEO
Folience, Inc. (https://www.folience.com)
Daniel Goldstein leads Iowa-based Folience, a 100% ESOP-owned holding company that invests in profitable businesses with strong management continuity. The company was founded in 1884 and for well over 100 years, it was exclusively focused on its media business. But when Goldstein took the helm in 2016, he was tasked to implement a diversification strategy that has taken the company into a variety of other areas beyond media, including ambulance manufacturing, high-end trailer manufacturing and commercial printing. He also sits on a wide variety of boards of companies from Iowa to Italy.
The tagline of Folience, "Invest In Different," reflects both Goldstein's leadership mindset and his approach to diversification, which he sees as the key to Folience's sustainable growth for the future. To get inside his mindset for success, we sat down with him for a Leading With Courage conversation to learn how he and his team implemented the transformation at Folience, how he's been able to integrate this evolution into a unified culture and his long-term plans for the company's success.
Leading With Courage Academy: Daniel, it’s quite the journey you bring to Folience. What did the path look like to get to this point?
DG: Well, I'll start at the very beginning, in which my first experience in running a business was when I was 18 years old. I had my own house painting business with 23 employees. That was a franchise-like business – College Pro Painters – and an excellent introduction to business. I learned early on that, as the leader and owner of the company, everything was my responsibility. If somebody didn't know how to do their job, it was either that I had selected the wrong person or incorrectly trained him or her. For the better part of the next 20 years, I worked in family offices taking care of the investments, business, real estate, hard assets, philanthropy and family dynamics of multi-generational families. In these roles, I learned what it takes to be an effective CEO, CIO, CFO, board member, etc. I also had a brief stint as a senior managing director with a wealth management firm, where I saw what happens when you have bad governance and poor succession planning.
Then, a serendipitous event brought me to the company which is now Folience, which was at a crossroads at the time. The company had sold one of their major assets, had a great commitment to continue the employee stock ownership plan (ESOP) and knew that they needed to diversify to grow their revenue base. That way, they would no longer be solely concentrated in media for their sustainability as they had been for their first 130 years.
We don’t often speak with leaders who are MENSA members. It shows in your educational background, where you have a variety of degrees in science and technology studies, finance, IT and economics.
I'm a big believer that a general education is an excellent foundation to prepare you for whatever you experience in life. I was exposed to many different educational approaches that supplied me with the hard business and finance dimensions, the societal consequences of decisions made in business, and the sustainability of economic and social programs. All of that was great preparation for being the leader of an ESOP where you have to factor in the importance of financial profitability and the equally important side of culture, communication and engaging all employee-owners.
I do have to say that my path was not any kind of genius on my part. I didn’t have it all put together where I knew what my future was going to be. It was a random walk for a while and then it all kind of finally came together in a more deliberate direction, but not a calculated one from the outset.
During that journey, how did you develop as a leader? What did the various organizations you were associated with do to help you?
It starts, of course, with your family environment. There are parental influences as you're growing up on the emotional and the analytical sides of things. During that time, I was also influenced by being taught to play chess because as you play the game, you’re being strategic and looking several moves down from where you currently are.
On the more academic side, I was supplied with technical, analytical, and writing skills and how to apply them to making good decisions as well as communicating with a team. In my career, I've had role models to follow, positive and negative experiences to learn from and the opportunities to learn as I took on more responsible roles and had to develop teams or individuals.
You’ve mentioned a program that you felt had a gigantic influence on your success from an ESOP standpoint. What was involved with that?
It's a fantastic program sponsored by the Employee Ownership Foundation and held at the University of Pennsylvania (click here to learn more about this unique program). The program develops CEOs of ESOPs and I would not be successful in my role had I not completed that program. Let's just say there are significant differences in how an employee-owned company is run from a non-employee owned company and one needs development to understand and maximize these differences.
Is that program primarily designed for CEOs or is it for anyone in senior leadership?
It is for CEOs, presidents and those that are either on the path to becoming one or are being considered to become one. It is for a person who would be in a leadership role because there are unique challenges and attributes of the person that fills that role. So, this program is designed very specifically to address that role within an employee-owned company culture, beginning with understanding and developing yourself.
Knowing what you know now, what sort of mindset does the leader of an ESOP need to have?
It’s a mindset of distributed leadership, a term that I've chosen to describe how things need to be done. An expectation. But it is not rule by committee. An ESOP is about shared values and vision. It is not about shared control. Employee owners do not get to sit around and vote on what the CEO or any other executive does. You need to have management structures and clear communication channels. Distributed leadership means that nothing is done unilaterally. So, it tends to be towards greater inclusion of those who are going to have real input into a decision and impact on implementing decisions. It tends towards greater transparency. It does not need to be open book management, but it certainly needs to have greater transparency than an old school, autocratic, command and control management structure would have.
Being a leader is not a right or a privilege. It's a responsibility. You are sitting at the table with a greater level of information. The responsibility is that you need to participate. You need to be open. It requires being open to a diversity of opinion, but it needs to be an energy directed towards finding solutions, not just identifying problems and placing blame. Once there is an open discussion in which everybody is encouraged to participate with their best ideas and looking for the best solutions, there needs to be a consensus of ownership and direction to bring to the rest of the organization.
People are looking to be inspired by their leaders and there's a great deal of responsibility in that. I tell people that I work for the 570 employee-owners of Folience. Now, technically, I report to the board. In truth, however, I don't get up in the morning thinking, “What will the board think?” I get up in the morning and think, “What will all of my 570 bosses think?” Because those are people that I'm working for. And that’s the idea of distributed leadership.
Daniel, you’ve talked about the concept of “distributed leadership” as it applies to an ESOP. Was distributed leadership something you needed to introduce at Folience or was it already present in the culture when you joined?
It was certainly not present. It's something which I brought here. Our company came out of the newspaper and television business and had a style of management common to newspapers, which is a notoriously autocratic, male-dominated and aggressive approach. I cannot live in that universe and would never want to have that around me.
So, it was a deliberate and difficult transition to move away from that. Quite frankly, several people did not navigate that transition well, which was ultimately good for them and good for the organization that they did not remain.
From that transition, I developed much more patience than I ever had before. I use the analogy that if you're in the middle of a field of deep mud, you have to just keep plodding forward to move towards the dry land. Because if you try to go faster, you're either going to lose your boots or you're going to fall on your face. So, a difficult lesson was how to have the patience just to plod forward when others may not have seen that we were navigating through deep mud. Some criticized me and wanted me to go much faster at the time. But I refused to concede. We needed to take those more deliberate steps, keep going in a solid direction and I knew we would eventually get there. Certain things just couldn't be pushed too fast.
I've learned to have a lot of patience. The difficulty is that you can't use it all too quickly.
Can you give me an example of where you had to exhibit more patience and perseverance? Particularly in those instances where things were going slower than you wanted in proceeding toward your goals.
Yes. I've got a terrific business partner in our Executive Vice President. When I was first named CEO and president, we were driving somewhere, and I was new to the organization. I was now her direct supervisor and we were still forming our relationship. During the drive, we got into a conversation about culture.
In the past, culture had been approached as a one-off, quick fix that had no follow-up. It was considered a necessary, sometimes detrimental, temporary distraction. I had come in because the company had just sold its primary cash flow business. They had a strong balance sheet, but they were in a negative cashflow situation which meant it was just a matter of time until they ran through their assets.
Consequently, my main focus at that moment was to replace the cash flow and get the company back to a stable income statement. My partner in this effort was mortified. I kept saying that I can't be thinking about culture – not when we need to stop the bleeding right now. I needed that little bit of trust and patience from everyone around me. Even though we had a toxic culture that was destroying the organization, it just had to go on for only a little bit longer because we needed to stop the bleeding and let the patient heal. Then we could, and would, work on the culture, which, eventually, we did. With outstanding people to successfully navigate this transition, we've been able to get both cash flow and culture back to being on equal levels of importance. You can't have a profitable business if you don't have a culture because it's not going to stay profitable. And you can't have a business that's got great culture if it doesn't have financial profitability because eventually, it's going to go out of business.
We've been able to get back to having the proper, healthy balance between them and my business partner has regained faith in my grounding for the importance of culture.
Were you, during that time, measuring employee engagement to see what was going on with your people? How did that change after you enjoyed that greater balance as a company that you’re referring to?
At that exact moment? Absolutely not. When I finally got the artery to stop gushing blood and could give some focus to the culture, then metrics were a very fundamental part of how we were going to develop a lasting and significant cultural shift.
So, as we set out to implement some programs focused on the development of employees, we started with engagement surveys. We do ours twice a year. The first one was a great baseline that showed just how much of a wonderful opportunity there was to improve. The good news is that as we went forward, every single indicator has shown an improvement and together, they've become a tool that is part of the exercise of getting employees to take ownership of the things that need to be improved. Why should we be developing them, how do we improve them? As employee-owners, what are we all going to do to make our ESOP better and more profitable? How are we going to make this a safer and more enjoyable place to work?
When I moved into a family office position with an ultra-high net worth family that I held for almost four years, my predecessor said, here's some advice: “Don't be wowed by big numbers and don't be jealous.” What advice do you give someone going into an ESOP leadership position for the first time?
It is twofold.
No matter your experiences, you can always learn and develop. Being a huge proponent of that ESOP CEO program at UPenn I mentioned, the first thing I would say is to go do that program. You're going to get so much out of that and develop a vast network. You'll also be plugged into the national ESOP associations.
You need to implement your own adaptation of distributed leadership. Engaged employee ownership starts at the top with the CEO showing that they are not going to keep all of the control, all of the information, all of the power. One of the best ways to manage is to get out of the way.
When you start to learn how to do that, you're going to be amazed and marvel at how wonderfully other people can step up. It makes you so much more able to do your job because you're relying on other people who are more expertly skilled in certain areas. I don't need to be a part of every decision. I don't even need to know all the decisions that are made. And that's where I think you start to really be effective and make an impact as the CEO of an employee-owned company.
You've talked about this “command and control” structure you walked into here. Were you the first leader to come in and break with that tradition or had there been other ones who laid the path?
No. The company had been under the control of the family owners and going into its fourth and fifth generation. Even though there was a non-family member as CEO, right up until when I started, the board of the company was entirely controlled by the family. So, during my first week working for the company, there was an awkward moment when we had a board meeting in which the family resigned from the board. The bottom line was: Family command and control was finally broken after over 130 years. At the time that the family left the board, the last family member who worked for the company also left that position. At that moment, there was no longer any family control, family management or even a family-member employee.
In the midst of this incredible moment of change, where, for the first time in Folience’s history, there were no longer any family members on the board or working as employees, you were trying to move toward a culture of what you refer to as distributed leadership. You didn't have to be involved in everything, which was probably different than what everyone had been used to from leadership. You weren't making the decision in all cases. How did you navigate that treacherous road ahead?
It always starts with developing yourself. I set up my executive leadership team and it took quite a bit of time to change behaviors. We had to spend significant time developing people so we could get to the point where we could lay down some non-negotiable expectations. Those expectations included accountability, a demand to participate and independent thought focused towards solutions. Once the executive team has reached a decision, it would be owned by the executive team. We would not tolerate the development of factions of people who wanted to deliberately sabotage the direction of the company. As I’ve said before, some people couldn’t navigate that and had to leave the organization because they weren't going to support the direction or didn’t have the skills or temperament necessary to exhibit the leadership expected of them.
Fortunately, beyond that, you get to a point where there's greater trust and collaboration. You move from an ineffective, divided team to a high-performing, united team. And that's when the magic starts.
Daniel, you've seen plenty of evolutions that a company can make, including while in your current role at Folience, where you made significant changes to a company that's over 130 years old. That's not easy for a leader to navigate and come out looking fantastic on the other side. If you were to look at the list of Leading With Courage Academy's nine blind spots that can derail a leader's career (click here for the list), is there one of them that you've seen most often?
Failing To Honor The Organization's Culture is big. At Folience, we were a fifth-generation family-controlled media company. Then we transitioned to 100% employee ownership. We then transitioned to a diversified holding company of manufacturing and media that acquires businesses and transitions them from the owner to a new generation of managers within a structure of employee ownership.
What I find is that I often have to show gratitude to the past, but at some point, you have to move on. At times, moving on will feel to some like you're not honoring the past, but in reality, you're building on it to create a different culture.
Then, once you have a healthy culture, failing to honor the organization's culture is going to tear the place apart. That's why I have in our board guidelines that the members, as a whole and as individuals, must commit to honoring the principles of employee ownership because it starts at the very top. If the board doesn't believe in employee ownership, then the organization is doomed. We captured this thinking in something we call the License To Act.
What does that entail?
They're literally these license-sized cards that are given to every employee-owner and it says, “Employee Owner License To Act.” It’s not about the card, but about the messaging of their rights and responsibilities. Every employee is expected to participate in their ownership. It’s a simple as saying if you walk by a piece of trash, pick it up. If you see a problem, do you just say something about the problem or do you work on solutions to correct the problem? That's honoring the organization's culture. You can't become an effective employee owner if you are blind to what's around you.
Engagement across every level of the organization creates a culture of accountability, distributed leadership and success. It eliminates single points of risk and perpetuates systemic continuity that becomes greater than the contribution of any individual.
You also need points of reference outside of your colleagues, including outside your company, in your community, professional organizations, national ESOP associations and more so that you aren’t Coming In With The Answer, another one of the de-railers of leadership you list here. Insularity often causes complacency and risks derailing innovation. You have to practice active listening and recognize your own biases.
In a position such as yours, leaders often try to do too much or say, “I’ll just do it myself.” How have you confronted that in leading Folience?
It goes back to the concept of distributed leadership. I know there's absolutely no way I can do everything, know everything and decide everything. That's why I push decisions out to the people who are most qualified to be making those decisions. You always need to do that when it comes to innovation, whether it's technology and production, safety policies or better ways to structure open benefits. This type of alignment is one of the great benefits of employee ownership. It's amazing to always have a line of sight from every employee-owner to the success of the company.
Being an employee-owned company speaks to the fact that you have a strong responsibility to work towards a winning strategy. That's what my 570 bosses are expecting of me. Instead of overpromising, you need to be realistic and patient. Sometimes you have to tell people that we’ll get there – it’s not going to be tomorrow, but we're headed in that direction. In the interim, here's what you can expect and what you can expect when we do get there. Consistency will create trust, over time, and inconsistency will destroy trust immediately.
So, our License To Act program is really about the fact that you have to work towards solutions. It's not a license to complain. We have banners around the company that say, “Today I am the difference.” And it’s true. Each and every day.
What are you doing to ensure that you continue to grow and develop as a leader? It's easy to get insulated. And you mentioned that you're a lifelong learner. What do you do to continue to grow and develop?
I spend a lot of time talking with people, putting myself into situations where I'm going to be stretched as well as taking advantage of opportunities to learn and share. To me, sharing is also a form of learning. In order to share something, you need to be able to explain and communicate at a level that others will understand.
Outside of the company, I've joined several boards within the employee ownership field, such as The ESOP Association, the Employee Ownership Foundation and the Employee Ownership Expansion Network.
In addition, I’m very active in nonprofits, like a 140-year-old organization here in Cedar Rapids called Tanager Place that addresses the mental health of children. And I’ve stepped up my work with the American Heart Association.
When you look at the landscape of ESOP leaders today, what do you see as the biggest challenge facing them?
In a word: Apathy. And I mean apathy on the part of both the leaders and the employee-owners. The breakdown is often as follows:
1/3 of people will be engaged
1/3 of people will go along for the ride
1/3 of people won’t engage at all, maybe going so far as to sabotage
The first third describes a group of employee-owners who are going to be devoted, passionate drivers of change. They are never-ending sources of energy and ideas.
The next third of the people might pay a little bit of attention, but they're really just about getting their job done. You need them too because they’re solid performers. They'll participate. They’re just not going to necessarily be driving things.
The last third don’t get what you’re trying to do and often they don’t want to get it. They don't trust change and see engagement as not being part of their job. You can’t spend too much time on this group while forgetting the groups on top of them, but you certainly cannot let this third poison the culture.
You are one of the most enthusiastic leaders I've encountered in reference to ESOPs. You see a tremendous impact not only within the company walls but outside of it. Can you elaborate on that?
Yes, I am very committed to employee ownership. I think it's astonishing that I never really knew anything about it before I got into this. It's better for individuals, better for their families, fair for their communities and better for the country. That is why I work actively and passionately to increase awareness to spread access to employee ownership across the country. It's just a better deal for so many people that they can own a stake in their financial future. It works with a capitalistic model to lessen income and wealth inequality.
There is a tsunami of businesses that need transition and I'm working with others to help increase the number of those businesses that will become employee-owned because that will keep jobs in communities. Plus, it will transition from the wealth being held in a very small number of hands to a broader distribution of individuals who are becoming employee-owners in their company.
And, anything I do is with teams of really bright people who inspire me to be better.
Last question, when you retire, what would you like to hear the master of ceremonies at your retirement party say about you?
He did no harm. And he made an impact.
Fully engaged employees who are present, energized and focused on a common purpose. A business that’s growing rapidly and is more profitable. A pipeline of talent bursting with people who are better prepared for everything you throw at them next. Sound appealing? The best way to make phenomenal operational and cultural change a reality is by implementing the leadership assessments, workshops and succession planning process from Leading With Courage Academy. Learn more about how we can help you achieve your objectives by contacting us at 312.827.2643 or emailing Hello@LWCAcademy.com.