During his years as an underling, Comsonics Inc. President Warren Braun first noticed the flaw in American management that later led him to begin putting ownership of his blockbuster company in the hands of his employes.
"I've always had a tremendous feeling . . . companies were throwing away a lot of talent by not allowing employes to participate" in management and ownership, said the founder of this telecommunications firm, which currently is thriving under the aegis of an Employe Stock Ownership Plan.
Braun the employe became Braun the boss in 1965 when he and his wife launched an engineering consulting firm from the basement of their family home. "We started out with the idea we'd have something for our retirement," Braun explains.
That modest enterprise evolved into Comsonics, a company that makes accessories for the cable television and telecommunications industry. Comsonics had sales more than $4 million last year and a hard-charging growth rate over the past five years of 269 percent. It was named one of the nation's top 500 fastest-growing, privately held companies in 1982 by Inc. Magazine.
It also has grown into a pioneering management effort in which employes are decision-makers and own roughly 40 percent of the company stock under an Employe Stock Ownership Plan (ESOP).
"I've always had the idea that participatory management and participatory ownership was something that would work, that the two should go hand-in-glove," Braun said.
Braun was given the opportunity to test this hypothesis in 1974, when Congress passed the Employee Retirement Income Security Act. That legislation eased the way for ESOPs, and Braun wasted no time in establishing such a plan for his company that very year.
Under Comsonics' ESOP, Braun plans eventually to relinquish all of the stock he owns in the company he founded and whose business is booming. "I could have maximized the return to myself, but that's only financial return," Braun said. "Fulfillment comes from working on things and seeing them accomplished and seeing others' lives enhanced because of it."
ESOPs are among the fastest-growing employe benefits in the country, according to the Employee Benefit Research Institute. Currently, more than 4,000 such plans are in operation, providing a new form of compensation for more than 6 million employes. The institute says, however, that ESOPs account for less than 1 percent of all defined contribution plans, partly because they were so recently created.
ESOPs differ from other profit-sharing programs in that employes acquire an ownership interest in their company. The Comsonics version of the plan is distinguished by the fact that it invests primarily in stock owned by the employer rather than in stock issued by the company expressly for employes to buy.
Comsonics' business is designing accessory devices for cable television systems and repairing cable television equipment. It also acts as a consultant in all phases of cable television installment, from mapping to field support.
Additionally, Comsonics devotes considerable effort to research and development, which has resulted in devices such as the soon-to-be-marketed "scents system." The device emits a bleep when a cable televison station is malfunctioning and can save repairmen the time and trouble of climbing every potentially malfunctioning pole when trying to locate a station with a problem.
The 61-year-old Braun is a large man with a crewcut who mixes a Midwestern accent with the demeanor of a Southern gentleman. An award-winning engineer, he keeps a copy of a book entitled "The Mind of the Strategist, the Art of Japanese Business" on his desk for easy reference. He reads passages from the book aloud to a visitor.
"I sincerely believe that part of what people earn by doing their jobs is the right to participate in the ownership of the company," he said.
"If you can't live what you say, then it's a pretty hollow message."
To establish the ESOP, Comsonics' board of directors took a portion of the company's earnings and bought a block of stock, about 29 percent, from the company treasury, Braun said.
Later, the board borrowed a lump sum of money and bought the additional treasury stock. With the board's third purchase of stock, it began to buy out Braun's stock. At the end of the company's fiscal 1982-83 year, which ended July 31, the employes owned about 130,400 shares of Comsonic stock.
Braun, the only director on the board to own stock, controls the remaining 60 percent (204,100 shares). He predicts the employes will own all of the stock within six or seven years.
The Comsonics board of directors sets aside a certain portion of each year's earnings to purchase stock for the employes. Stock ownership is directly proportional to each worker's salary, exclusive of commissions and overtime. Currently, about 60 workers out of the company's 94 own stock.
To keep the ESOP in the hands of permanent employes, ESOP members must be at least 24 years old and have worked at Comsonics for at least a year. Employes who leave Comsonics can retain ownership of their stock, but the company has the right of first refusal for two years if they decide to sell the stock.
In 1974, Comsonics stock was valued at 92 cents per share by an outside appraiser. Last year, it was valued at $3.37 per share. The company estimates this year's value will be $4.01 per share.
The company also provides other employe benefits, including term life insurance, full hospitalization and tuition reimbursement programs. If the company's profits exceed the budgeted predictions for the year, 50 percent of the earnings above the forecast goes into employe profit-sharing.
"I can say . . . the corporate growth is bigger, is healthier, provides a way in which people can participate and provides levels of productivity that you don't get" in traditionally managed and operated companies, especially those firms in the high technology field, Braun said.
In addition to owning stock, Comsonics employes participate in goal-setting and decision-making.
The key to a successful company, Braun says is to "let the employes, those closest to the scene, originate objectives . . . and upper management coalesces these objectives so it is profitable for all."
After establishing the ESOP, all Comsonics employes, exclusive of Braun, gathered to thrash out company objectives. These objectives--entitled the "roles and missions"--are posted throughout the one-story, U-shaped building that houses the company.
Implementing his management and ownership theories took hours of time and effort on everyone's part, Braun said, admitting that the first year he feared it had "landed on the floor . . . with a dead thud.
"I knew if you wanted participatory management, you had to retrain the employes, because, unfortunately, our school system doesn't teach people to be entrepreneurs," he said. He sought to bridge this gap by hiring a management consultant to work with employes.
They had to learn to understand the constraints surrounding decisions, he said. For instance, every employe, beginning at the supervisor level, learns to read a financial statement and to analyze it. Division managers try to align finances with their functions, Braun said.
Each year, Comsonics employes establish a new plan of operation and routinely monitor the plan throughout the year. The exchange of ideas and information among employes at the same level on the corporate ladder as well as up and down that ladder is frequent and encouraged.
The top-level executives--managers and vice presidents--meet in monthly sessions to evaluate company performance and analyze financial results. Braun does not participate in these "peer" meetings.
Supervisors meet in a similar monthly session, then the two groups hold a joint meeting. Employes consult with their supervisors as often as three or four times a day, in informal fact-finding, problem-solving sessions, Braun said.
"As a consequence of this, my role in managing this company is very different than the normal directory-type management in most companies ," Braun said. "I am guiding, not directing."
Not only is the company profitable, but employes say they are happy with their jobs. Sandra Munns, assistant to Braun and supervisor of secretarial support services said, "I certainly feel my self-worth has increased."
Munns contrasted this with her other work experience, in which she said she was "treated as a second-class employe. You're there to do a job and you keep your opinions to yourself."
Braun cites the 3 percent annual employe turnover rate as one sign of employe satisfaction.
"People take their jobs, I think, very seriously. When the company fails, they feel a personal failure," he said.
Braun says many executives have expressed interest in the participatory management and ownership at Comsonics, butthey back off, he says, when they realize it means resigning some of their perceived authority.
Participatory management and ownership does not mean executives shed their responsibilities, Braun says.
"You actually have a greater responsibility. You must work around the greater freedom given to employes to show them something they're doing isn't working to the best benfit of their goals."
Despite these reactions, Braun predicts that the concepts in management and ownership in which he has so much faith will become prevalent in business within the next generation.
"Everybody is going to be a leader," he says. Teamwork is the key, with a "team captain to coordinate and maximize the efficiency of interrelationships and increase the performance of every individual."
He says the Japanese already teach these ideas in their educational system, which gives them their edge over American business.
Citing Kenichi Ohmae's "The Mind of the Strategist," he says the Japanese emphasize group harmony while discouraging individual heroics. They teach their children, first of all, that they must work or starve, Braun says. Secondly, the children are taught that the more intelligent among them must use their talents to ease the way for the slower ones.
"I believe until we learn this lesson, we are not going to be able to compete successfully" against the Japanese, Braun said.