Effective Methods for Communicating Financial Information The ESOP Association 17 th Annual Multi-State ESOP Conference September 20, 2012 Alex Moss | Praxis Consulting Group Jim Stefano | Synergy Global Solutions

The Big Picture: Alignment Drives Performance 1 September 20, 2012Multi State ESOP Conference | Communicating Financial Information Strategy Leadership Culture High Performance

Agenda for Today Part 1: Why Open the Books? What company financial information do / should you share with employee-owners? Why? Part 2: How Can You Do It Effectively? Case study Sample Exercises 2 September 20, 2012Multi State ESOP Conference | Communicating Financial Information

What are Your Burning Issues? ? 3 September 20, 2012Multi State ESOP Conference | Communicating Financial Information

Part 1: Why Share Financials? Legal requirements Research: employee ownership and company performance Your company goals 4 September 20, 2012Multi State ESOP Conference | Communicating Financial Information

Individual Owners ESOP Governance… and Opportunity 5 September 20, 2012Multi State ESOP Conference | Communicating Financial Information ESOP Trustees select Leadership Team Board of Directors appoint and oversee elect hire and oversee Shareholders Employees CEO / President hire and oversee ESOP Participants when meet eligibility requirements are represented by ESOP Committee: Promote Ownership

Praxis Employee Ownership Performance CycleTM 6 September 20, 2012Multi State ESOP Conference | Communicating Financial Information

We Know It Works: Sample Research Findings Dramatically lower job loss during Great Recession: ~4:1 Improved worker productivity Increased sales growth rate Reduced employee turnover Substantial individual account balances Better retirement benefits: ESOP + other 7 September 20, 2012Multi State ESOP Conference | Communicating Financial Information

It Takes More Than Just Stock OwnershipParticipation Improved Performance 8 September 20, 2012Multi State ESOP Conference | Communicating Financial Information

Discussion Question 1: Link to Your Strategic Goals What are your strategic business objectives? What impact do you expect ownership to have in improving your company? How do you want employee owners to act, based on their increasing business knowledge? What information do you need employee owners to understand? Why? 9 September 20, 2012Multi State ESOP Conference | Communicating Financial Information

Discussion Question 2: Current Status How well do your employee owners understand the business and the financials? What impact has this had on your business so far? What works best today: think about… A specific company leader who did it right A specific employee-owner who demonstrated that they get it Impact of employee initiatives on performance – operating metrics, profitability, stock value 10 September 20, 2012Multi State ESOP Conference | Communicating Financial Information

Discussion Question 3: Future Vision Imagine that its Fall 2015, and you are back at this conference sharing your achievements over the past couple years What have you accomplished? Leadership initiatives Employee actions The Gap: what do you need to do more of in your company to achieve this vision? 11 September 20, 2012Multi State ESOP Conference | Communicating Financial Information

Case Study: Synergy Global Solutions 12 September 20, 2012Multi State ESOP Conference | Communicating Financial Information

Synergy Global Solutions Overview Corporate Headquartered in Victor NY. Sales Offices are in Buffalo, Rochester, Syracuse and Albany regions Operations Center located in Buffalo, NY Employees 100% Employee owned (ESOP) Synergy Global Solutions has been providing Managed Information Services for over 41 years. Synergy began as an Online Service Bureau providing a host of application services in Our 2012 Annual Sales were $56 million. Our managed service business has grown to include providing network monitoring and help desk services. Premier provider of IT Services to a wide range of customers. 13 September 20, 2012Multi State ESOP Conference | Communicating Financial Information

Sample ESOP Finance Subcommittee Meeting Note: during the session, we showed actual data from a recent Synergy meeting. This data is company confidential and is not included here. Please contact Jim Stefano with any follow up questions on this element of the presentation.Jim Stefano 14 September 20, 2012Multi State ESOP Conference | Communicating Financial Information

Questions: Today What are the key themes that you share? Why do you choose to share this info (vs. less detail, more detail, or different info)? How much of this info is shared with the workforce as a whole? How do you think about & manage confidentiality? What do your people understand most easily, where have they struggled (if at all)? What training and support do you provide? How do you rotate new members onto the committee? 15 September 20, 2012Multi State ESOP Conference | Communicating Financial Information

Questions: Past & Future How has it evolved? If we attended a subcommittee meeting 5 years ago, what would have been different? What changes did you make or see along the way? Whats your future vision? What will be the same / different 5 years from now? Why? What challenges do you anticipate along the way, among shop-floor employees, managers, or customers? 16 September 20, 2012Multi State ESOP Conference | Communicating Financial Information

Appendix: How? What are the Pieces? Context Setup Initial planning Initial education: building a knowledge foundation Operational implementation Games and other ongoing tools Process improvement initiatives Evaluation and continuous improvement Future adjustments 17 September 20, 2012Multi State ESOP Conference | Communicating Financial Information

Context: Its a Whole Process Foundation: Leadership vision for how ownership should contribute to achieving strategic business objectives Making it work: 4 categories of activities Training, initial and ongoing – teach the rules Communication – show the score Incentives – share the win Participation mechanisms – let em play 18 September 20, 2012Multi State ESOP Conference | Communicating Financial Information

Initial Education: Sample Goals To engage employees in learning about our business To build awareness of The connection between your actions, the outcomes for our company, and your rewards Business and financial terms, so that you can be effective consumers of financial information Pay for performance, and the stock component of this in particular How the ESOP works, especially in relation to other incentives and stock plans Balance between social responsibility and business objectives To create readiness and knowledge necessary for future implementation 19 September 20, 2012Multi State ESOP Conference | Communicating Financial Information

Common Approaches Focus on financial statements Start w/ dollar bill, carve up Profit & Loss, Balance Sheet, Cash Flow Case studies of where the numbers come from and how the statements relate to each other Examples Companies Commercial product example: the Accounting Game / Lemonade Stand 20 September 20, 2012Multi State ESOP Conference | Communicating Financial Information

Praxis Template Outline Initially: 3 sessions, 2½ hours each, 1x / month Session 1: Our Business, and How We Make Money Session 2: How You Benefit through Profit Sharing, Ownership, Retirement Plans, Other Incentives Session 3: Factors That Drive Our Stock Value, and What You Can Do To Affect It Future: additional sessions and continuing follow-up at departmental and corporate levels 21 September 20, 2012Multi State ESOP Conference | Communicating Financial Information

Agenda for Session 1 Income & expenses: the personal view Our business: the flow Our Profit & Loss statement (P&L): tracking whether and how we make money What if? scenarios: the impact of changes on our profits and stock value 22 September 20, 2012Multi State ESOP Conference | Communicating Financial Information

Exercise 1: Personal Income & Expenses Income Expenses 23 September 20, 2012Multi State ESOP Conference | Communicating Financial Information

Exercise 1: Personal Income & Expenses Two rounds Round 1: Personal, your home budget Round 2: Our Company Questions Where does the money come from? Where does it go? If theres coming in than going out: what can you do with it, and how/when will you get it back? If not: what can you do about it? Who decides, and why? How does this relate to value and wealth? 24 September 20, 2012Multi State ESOP Conference | Communicating Financial Information

Exercise 2: The Flow of the Business Your basic business process: what are the steps? The exercise List functions & attach employee names Compare notes, pick 1 company [Make photos, big enough to handle: ~ 11x17] Put them in order Relate to the P&L 25 September 20, 2012Multi State ESOP Conference | Communicating Financial Information

Other Exercises in Session 1 Product P&L: big enough to count, small enough to understand Whole company P&L: sum of the parts What if scenarios: effect of operating improvements on the bottom line, hook to ongoing games 26 September 20, 2012Multi State ESOP Conference | Communicating Financial Information

Agenda for Session 2 ESOP & Benefit Sharing Overview: create it, share it How: Profit Sharing, Ownership, Retirement Plans, and Other Incentives Rules: how they work Valuation: what all these plans could be worth to you 27 September 20, 2012Multi State ESOP Conference | Communicating Financial Information

Agenda for Session 3 Our business strategy Our value proposition: why people buy products / services from us Our Strategic Plan: where we are headed Our stock value How the market / appraiser values our stock How you affect the value Where to from here What we want you to do: operating challenges & opportunities What other information you will receive: future education & communications Wrap up & graduation 28 September 20, 2012Multi State ESOP Conference | Communicating Financial Information

Other Sample Exercises Constructing the Balance Sheet Developing specific performance improvement targets Linking performance targets to the financial statements to individual rewards Reinvesting profits: Board of Directors exercise Profits, book value and market value Affect of investments, acquisitions, other growth strategies – long term risk & reward Future value illustrations – for ESOP, Profit Sharing and/or other contingent benefits 29 September 20, 2012Multi State ESOP Conference | Communicating Financial Information

Keeping the Process Alive Core education/training program Targeted topics for leadership and/or local issues More big picture – our business strategy, and why More details – unit performance & improvement goals Repeat for new employees Adjust for new business / economic realities Regular communication of performance issues and results Participation structures so employees can use new information and knowledge to improve performance Integration with other short and mid-term incentives Follow up: Getting Your Company Ready for an ESOP: the Ownership Culture Perspective 30 September 20, 2012Multi State ESOP Conference | Communicating Financial Information

Effective implementation requires: Accountability: whose job is it to oversee / insure success? Development: who will design it? Trainers: who will teach it? How will they learn? Reinforcement: link to ongoing distribution of key financial data Repetition: how often? Revision / continuous improvement: incorporating new learning and keeping it fresh over time 31 September 20, 2012Multi State ESOP Conference | Communicating Financial Information

Praxis Principles for Effective Business Literacy Development Simple Concrete Interactive Enjoyable Strategically integrated Developmental Just-in-time 32 September 20, 2012Multi State ESOP Conference | Communicating Financial Information

Discussion / Q&A Any unanswered questions? What makes this hard? Other best practices in your companies? 33 September 20, 2012Multi State ESOP Conference | Communicating Financial Information

Contact Info Jim Stefano President Synergy Global Solutions Victor, NY Alex Moss Principal Praxis Consulting Group Philadelphia, PA September 20, 2012Multi State ESOP Conference | Communicating Financial Information