HDR’s Employee-Ownership Model Makes the Difference

Two things can make or break your future: the company you keep and those who keep your company.

For the latter, a broad-based Employee Stock Ownership Plan (ESOP) can translate into numerous benefits. It’s the model HDR has followed for decades, after buying back its firm from a French engineering conglomerate in the mid-’90s. Today, HDR is the largest employee-owned company in the engineering-architecture industry, with more than 14,200 employees, annual revenue approaching $4 billion, and over 200 offices in 15 countries.

The company employs professionals with design and technical expertise responsible for improving roadways, runways, railways and waterways. The firm provides solutions for clients and communities in both the built and natural environments across various specialties. Aside from common demands for engineering and architecture projects, HDR employees are tagging endangered whales, conducting radiocarbon dating on Native American artifacts, surveying the Grand Canyon with drones, reducing contaminated water in silver mines, designing the first all-mass timber acute care hospital in North America, and are now involved in the infrastructure for launching rockets into outer space.

The immense team of teams that make up HDR, committed to “do things right to make great things possible,” have at their core an employee-centric, client-focused care driven by shared ownership. Its leadership fosters a collaborative environment, recognizing that each employee-owner has a stake in the company’s success. As a 100% employee-owned company, HDR promotes a culture of accountability, where every individual understands that their choices can influence the success of the entire organization.

In 1996, Dick Bell led HDR’s buyback as its CEO, a long and arduous task that involved sacrifices by a group of initial employee investors. “Employee ownership was the only program that I really thought would make sense,” Bell said. “We kept working at it and on a plan that would make sense for all.”

HDR’s workforce was approximately 1,600 at the time, and as its leaders have noted, the real excitement occurred when about 1,000 of those employees decided to buy into the firm. That shared mentality continues today. “HDR has a family culture, and if you want to invest in the company, you have that opportunity,” Bell said.

The mutual ethos that employees are in it together is what makes HDR attractive to clients, as well. Since the buyback, 70 firms have chosen to join HDR due to its culture and expanding opportunities.

“I often share with those outside of HDR that everybody you meet who works there — first and foremost — is thinking about what they can do to help you be successful,” said HDR Chairman Eric Keen. “That’s not common among a lot of firms.”

John Henderson found that to be true first as a client of HDR and now as the firm’s current CEO.

“There’s something special about a team where employee-owners know they will receive the benefits of their hard work. It makes us all want to work harder, serves as an engine for growth, and establishes an aligned commitment for our success as well as our clients’ success. It’s a fun place to be when everybody’s working hard and growing together.”

An ESOP is a qualified retirement plan in which a trust owns company stock for the benefit of employee-owners; the model is the most common form of employee ownership in the United States. The National Center for Employee Ownership (NCEO) reports there are 6,358 unique companies with an ESOP in the U.S, with plans that cover nearly 15 million participants and hold more than $1.8 trillion in total assets.

In general, ESOP companies such as HDR have proven to be more stable during recessions, as well as during the coronavirus pandemic, according to multiple studies reported by the NCEO. These companies also tend to have employees with greater retirement savings compared to non-ESOP firms.

Another study, reported by the Employee-owned S Corporations of America (ESCA), showed that employee-owned companies outperform their non-employee-owned counterparts in both good times and bad times.

HDR’s S-Corp KSOP [a 401(k) combined with an ESOP] provides a platform where employee-owners can share in the collective success of the firm, allowing them to invest capital in HDR stock on a pretax basis, which HDR buys back as employees retire. “I believe this structure is the best of both worlds, where we contribute shares through matching and discretionary contributions, along with allowing employees to make the decision to invest in the company with their funds,” said Galen Meysenburg, HDR’s chief financial officer.

The ownership mentality across all levels within HDR has proven to be a catalyst for quality. “I believe it has helped drive the historical growth and success of HDR, as everyone is working towards the common goal of growing the value of our retirement portfolios as a collective team,” Meysenburg said.

This positive impact extends to employee retention. A study by the NCEO, supported by ESCA, found that ESOP companies experience voluntary turnover at roughly one-third of the national average.

The employee-focused culture at HDR has also led to the development of a unique philanthropic program, the HDR Foundation. While many companies may write a check to address a financial need in their community, HDR’s program goes a step further. The foundation is funded primarily by employee donations and awards grants to charities in which employees serve as volunteers or advisors. Grants go to qualified organizations that align with HDR’s areas of expertise: education, healthy communities and environmental stewardship. To date, the foundation has provided over $14 million in grants to more than 700 organizations.

As HDR’s track record can attest, when the company you keep and those who keep your company are the same, it’s better for all.