April 18, 2018 1:15 PM, EDT

Nussbaum Transportation Begins Employee Stock Ownership Plan

Nussbaum TransportationTT file photo

Brent Nussbaum, CEO of Nussbaum Transportation, the trucking company his father started in 1945, says the best way to keep the firm family-owned for the next generation and to retain good people is by having his employees become part owners.

Beginning April 16, the Hudson, Ill., carrier gave 35% of ownership to employees through an employee stock ownership plan, known as an ESOP. Any employee on the payroll as of Jan. 1 is eligible immediately, and future employees become vested after 1,000 hours of employment.

“My father, Alden Nussbaum, who started the company, used to comment if you take care of your people, everything else will take care of itself,” Brent Nussbaum, 61, told Transport Topics. “I don’t know that I could retire from this company and watch another company take it over, and change it, after the strong culture we have built for the last 75 years. Why not preserve the heritage of this company? I don’t want to see Nussbaum become part of a larger carrier.”

Nussbaum said that before announcing the ESOP, some employees were speculating that after he retired the company would be sold and merge with a larger carrier.

“I really enjoy this business, and a lot of people talk about retirement. I enjoy what I do on a day-to-day basis, and I have told our guys don’t expect me to go away anytime soon,” he said. “As long as I can contribute to Nussbaum, I intend to stay as a leader.”

Nussbaum’s son Brendon also works at the company as an account manager.

Nussbaum Transportation is 40 miles east of Peoria. It provides dedicated carriage and irregular route trucking throughout the contiguous 48 states, operating 350 trucks and 800 trailers. With 450 employees, 360 of whom are drivers, the company concedes it has struggled with driver turnover, like many trucking firms have.

Nussbaum said his company’s 2017 turnover rate was 29%, well below the industry average of close to 90% annually. With regard to the other 90 employees, the rate is less than 5% a year, mostly because of retirements.

He said the company’s average driver earns at least $60,000 a year, and  the top 10% of drivers make more than $72,000. Nussbaum also offers bonus and incentive programs, and even allows family members — or a driver’s dog — to go on trips.

Even before implementing the ESOP, Nussbaum said by aggressively trying to keep its veteran drivers, and significantly reducing the turnover rate, the company’s insurance carrier reduced its vehicle insurance premiums by 20% during the past two years.

“We think our culture keeps people here, but what we would like to do is to add to it and say ‘hey, we value you as an employee, we want you to stay long term,’ ” he said. “This is something by which if you stay long term, you’ll have a very nice nest egg if you retire from here.”

The company said it will continue to provide the full range of benefits it has for many years, including its 401(k) retirement plan. “We’re not taking away the 401(k); this is like having a second pension, really, one that has the potential to be significant, especially if they stay 25 or 30 years.”

The Oakland, Calif.-based National Center for Employee Ownership says in the past 45 years, ESOPs have grown from zero to 9,910, covering 15.5 million people, and the total assets are worth $1.4 trillion. ESOPs also can provide significant tax benefits for companies, because in most cases the stock and cash contributions are tax deductible.

As the labor market becomes more competitive in many industries, as it has in trucking, economists say companies such as Nussbaum Transportation are taking a cue from the technology sector, which routinely provides ESOP programs to keep its best people.

“How do you hold onto your talent is the key,” said Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University in Atlanta. “And, if you’re not a publicly traded company, you make the employees with a stock ownership the profit partners. And if they’re the profit partners, the chances you will have much turnover will be much lower, and you also retain very good employees this way. Give them stock options, and [the employees] have some skin in the game.”

Nussbaum said: “By being too focused on the bottom line, instead of your people, that has created huge trust issues in our industry. Our people are really, truly the most important aspect of our business.

“I tell our people, our drivers, that our customers are not No. 1; you are. The customers are really No. 2; if I have no drivers, I have nothing to offer them.”