From Marine Corps to CEO of a $750M Employee-Owned Contractor

Ben Nichols is a third-generation Marine and Naval Academy graduate who led combat engineers in Afghanistan and served with the Navy Seabees before finding his way into construction. Today he is president and CEO of Harkins Builders, a 100% employee-owned general contractor approaching $1 billion in revenue. He joins Chuck Mazzanti to discuss construction ESOP leadership, a succession plan that deliberately skipped a generation, and how Harkins funds repurchase obligations while tripling revenue. His core lesson: an ESOP rewards long-term, stable growth that never outruns your people or your reputation.

About Ben Nichols and Harkins Builders

Ben Nichols is president and CEO of Harkins Builders, a general contractor founded in 1965 and headquartered in Columbia, Maryland, with offices in Philadelphia, Richmond, Raleigh and Charlotte. Harkins became employee-owned in 2001 under its second owner, Blase Cooke, and today is 100% owned by roughly 350 employee owners. The company builds multifamily, affordable and senior housing, federal and state projects, and commercial work, with revenue near $750 million. Ben joined Harkins in 2016 to lead its federal contracting group and was selected as CEO through a three-year succession planning process.

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Learn more about Harkins

What We Covered

Blase Cooke's decision, while facing terminal cancer, to turn Harkins into an ESOP so his people could retire as millionaires
Ben's path from the Naval Academy to leading combat engineers in Marjah, Afghanistan, and commanding Seabees
His first construction job: renovating the president's medical suite at Walter Reed
How Harkins ran a three-year succession process with nine candidates and chose to skip a generation
Why employee ownership has to be explained four or five times, in four or five ways, before it lands
How Harkins markets the ESOP internally with quarterly lunch and learns, anonymized account statements and stories from 40-year employees
Maryland's procurement preference pilot for ESOPs and the Department of Defense sole-source pilot
Why being employee-owned is a talking point in every project interview, and the myth that ESOPs cannot make fast decisions
How stock contributions of 10% of compensation and dividends of about a third of profits help fund repurchase obligations
Growing from roughly $250 million to $750 million in ten years without outgrowing the company's reputation
When a contractor should not become an ESOP, and the best reason to do it

Key Takeaways

An ESOP is governed like any well-run company, with officers, a board and normal decision-making. The idea that employee-owned firms cannot act quickly is a myth.
Repetition is the communication strategy. If you have not explained the ESOP four or five times in four or five different ways, people have not heard you yet.
The most persuasive ESOP education comes from long-tenured employee owners sharing what their accounts have become.
Repurchase obligations are a planning exercise, not a growth ceiling. Harkins keeps cash flowing into the plan through dividends so much of the repurchase activity happens inside the ESOP.
An ESOP rewards long-term, stable growth: faster than inflation, but never faster than you can develop people and protect your reputation.
An ESOP is a poor fit for a company with too few employees for age diversity, an unstable backlog, or an owner whose client relationships and leadership walk out the door at closing.
The strongest reason to choose an ESOP is the one Blase Cooke gave in 2001: giving the people who built the company a real share of what they built.

Full Transcript

Ben Nichols: As he was going through terminal cancer, he brought all the employees together. I wasn't there at that point in time, and I unfortunately never got to meet Blase, but I understand from so many others that were there at that meeting, he said, guys, I want to turn this into an employee-owned company. And the reason I want to do that is I want every single person that's sitting in this room today to not have to work again in retirement.

Ben Nichols: And to be millionaires when you retire after a full career at Harkins Builders. And from what was told to me, everybody kind of looked at each other and were like, okay, all right, we'll see, we'll see about this. But it's come true over and over and over again. It's been such an incredible program.

Chuck Mazzanti: Welcome to the Construction ESOP Collective. I'm Chuck Mazzanti, Senior Vice President at Christensen Group Insurance, and this is the show where we explore the wins, challenges, and real-world lessons of employee ownership in construction. Each episode brings insights from CFOs, former owners, and employee owners who are building something bigger together. Let's get into it.

Chuck Mazzanti: Today I'm joined by Ben Nichols, president and CEO of Harkins Builders in Columbia, Maryland. Ben is a third-generation Marine and Naval Academy grad who led combat engineers in Afghanistan and served with the Seabees before finding his way into construction. He joined Harkins in 2016, came up through its federal contracting group,

Chuck Mazzanti: and was chosen to lead the company through a deliberate succession plan that skipped a generation. Today, Harkins is a 100% employee-owned general contractor, closing in on a billion dollars in revenue. We talk about the legacy of Blase Cooke, who turned Harkins into an ESOP so his people could retire as millionaires, how Ben keeps the ownership culture alive across 350 employee owners,

Chuck Mazzanti: and why he believes an ESOP is built for long-term, stable growth.

Chuck Mazzanti: Ben Nichols, it's great to have you on the Construction ESOP Collective.

Ben Nichols: Yeah, great to be here, Chuck. Thanks for inviting me on.

Chuck Mazzanti: Yeah, no, I'm super grateful. Actually it was Stacey Holsinger that introduced us, and you were on their podcast, The Morning Huddle. So LinkedIn keeps paying me back in spades, connecting me to great people such as yourself, Ben.

Ben Nichols: That's right. Well, it's really cool. It was fun being on Stacey's podcast, and I guess I did a good enough job on there that she referred me over to you, so that's pretty cool.

Chuck Mazzanti: Yeah, no, you did a great job. It was a great, great podcast. So I'd like to do a ten-thousand-foot overview of Harkins Builders. You guys are in Columbia, Maryland. If you could tell the audience who is Harkins, the type of work you do, if you self-perform anything, union, non-union, geographical scope.

Ben Nichols: Sure thing. So we are a general contractor. We've been around since 1965. About 350 people. Right now we're doing close to three quarters of a billion in revenue and have a growth trajectory that's really aligning right with our five-year strategic plan, where I think we could hit that billion-dollar threshold before 2030, which is really exciting. We do a little bit of everything. We're from five offices: Philadelphia,

Ben Nichols: Columbia, Maryland being the headquarters, Richmond, Virginia, Raleigh, North Carolina, and Charlotte, North Carolina. I came up out of our federal contracting division, of which you never know what type of project we're going to get in the DOD space and the state contracting space. So it's been pretty cool to bid a bunch of different types of projects and execute a bunch of different types of projects. And then a big piece of our business, going back to

Ben Nichols: when we first started, has been the multifamily market. So across all of our regions, doing a lot of multifamily, whether it's affordable housing, market rate, senior living, or even renovation. So pretty well diversified and an awesome company doing a lot of different things.

Chuck Mazzanti: That's awesome. And then within that, do you guys self-perform anything, or are you a hundred percent paper GC?

Ben Nichols: Yeah, we don't self-perform any major trades. We have a handful of folks on board in finish carpentry to help out with any scope gaps or things like that and closing up a job strong, but we're not self-performing any of the major trades at this point.

Chuck Mazzanti: Got it. That makes sense. And in the small stuff that you do, is there any union workforce or all non-union?

Ben Nichols: No union workforce across our projects. We certainly use union trade partners and non-union trade partners, but it's kind of a merit shop philosophy: the best contractor for the right reason gets the job when we're looking at subcontracting work.

Chuck Mazzanti: A hundred percent. Great. All right. So I think we have a good overview of Harkins, started in 1965. When did you guys go ESOP?

Ben Nichols: We went ESOP in 2001, and that was our second owner, a gentleman named Blase Cooke, who is just a titan of Baltimore City for many different reasons. Amazing person. Every time I go out in Baltimore City and I go to any type of business event, to this day, people will tell me about Blase Cooke

Ben Nichols: and what he meant to the community from a philanthropy standpoint, or what he meant to them from a personal mentorship, or whatever it might be. So it's pretty cool to be in the same lineage as somebody like Blase. And so when Blase, in that early 2000s timeframe, unfortunately got cancer, and as he was looking at what to do,

Ben Nichols: as he was going through terminal cancer, he brought all the employees together. I wasn't there at that point in time, and I unfortunately never got to meet Blase, but I understand from so many others that were there at that meeting, he said, guys, I want to turn this into an employee-owned company. And the reason I want to do that is I want every single person that's sitting in this room today to not have to work again in retirement

Ben Nichols: and to be millionaires when you retire after a full career at Harkins Builders. And from what was told to me, everybody kind of looked at each other and were like, okay, all right, we'll see, we'll see about this. But it's come true over and over and over again. It's been such an incredible program. So we certainly thank Blase's vision, and our founder before that, Tom Harkins, for what we have today.

Chuck Mazzanti: Wow. Yeah, I mean, sounds like an incredible guy by all accounts. And then you said it was terminal cancer, so even on his way out to the next life, setting up the people that helped him build the company. I think that's quite the legacy.

Ben Nichols: Yeah, it sure is. Really is.

Chuck Mazzanti: Wow. Now for you, Ben, can you tell the audience kind of your come-up? It's my understanding that you were a Marine and you did a tour in Afghanistan. So I'd love to get into your come-up in terms of that part of your story.

Ben Nichols: Yeah, sure thing. I even happen to be wearing my Marine Corps polo for you today as well. The Marine Corps has been a huge part of my life. I'm actually a third-generation Marine, believe it or not. So my grandfather was a Marine, my father was a Marine. I was born on Camp Lejeune in North Carolina while my dad was on active duty in the Marine Corps. So when I look at my early childhood and I look at all the mentors and the people that I really admired, my father

Ben Nichols: and his friends that were Marines, I certainly just looked at them as the ultimate role models, the way that they spoke and the way they carried themselves, and from an early age that's what I wanted to do when I grew up. So I was lucky enough to get an appointment to the Naval Academy and got to wrestle at the Naval Academy for all four years and study ocean engineering, of which I'm doing none of now,

Ben Nichols: but it's still a pretty cool major. And upon graduating from the Naval Academy, I became a Marine Corps officer. As a Marine Corps officer you go through about nine months of training. About six months of that is just basic infantry officer training at The Basic School, and the Marine Corps prides itself that no matter what you do in the Marine Corps, you're either going to learn how to be an infantryman

Ben Nichols: first or an infantry officer first, depending on if you enlist or become an officer. So six months of running around in the woods in Quantico, Virginia, fighting fake battles. And then I went to combat engineer school at Camp Lejeune for my follow-on training, which was my specific job in the Marine Corps. And when people ask me what a combat engineer does, and it doesn't matter what degree you had in school, anybody can be a combat engineer, but you're basically doing

Ben Nichols: engineering support for the infantry in a combat environment. And as a Marine, my job in Afghanistan, ultimately leading as a platoon commander, was looking for IEDs as well as building small patrol bases to allow the Marine battalion that I was attached to to spread out its forces and drop 15, 20 Marines in each of these

Ben Nichols: spaces throughout the cities that we were in, to really lock down the city and have Marine elements operating and getting to know the local population in Afghanistan. So that was my experience in the Marine Corps, and a pretty awesome experience doing that. Any questions on that before maybe we talk about the Seabees?

Chuck Mazzanti: Yeah, well, first of all, thank you for your service. And second of all, what year were you in Afghanistan?

Ben Nichols: Yeah, I was in Afghanistan in 2010 and 2011, and I was with Second Battalion, Ninth Marines, and that was the infantry battalion that my engineer platoon deployed with. And my job was being the platoon commander for 44 Marines, as well as being the staff officer for the battalion commander for anything engineering related in

Ben Nichols: the battle space of Marjah, Afghanistan. So when we got to Marjah, the previous battalion had done the push and invasion into Marjah. And Marjah was the Taliban stronghold at the time. It's a rural area that has a ton of farm fields, and the crop that everybody grows out there is opium.

Ben Nichols: And the farmers are not doing anything illicit. It's just that is the cash crop that they're growing. But the Taliban were basically taxing the opium trade, and that's how they were funding a big chunk of their operation. So our job was to go in there, figure out who was Taliban and who was not Taliban as the battalion, and try to provide

Ben Nichols: stability and win the hearts and minds of the local population. And to do that, you really had to spread your forces out, because we got there and our battalion of a thousand Marines was in three major positions. Think 300 Marines plus at each of those positions. And by the end of our deployment, we had spread out that battalion into 17 different positions. And the combat engineers and our platoon were really the main effort to making that happen.

Chuck Mazzanti: Wow, that's incredible. Well, yeah, thank you for your service, and then I'd love to transition into the Seabees.

Ben Nichols: Yeah, so my second tour of duty. I remember being in Afghanistan, and in the Marine Corps you get three years in each duty station that you're at. And my duty station at that time was Okinawa, Japan, from which we deployed to Afghanistan. And as I was looking at the slate of openings of places that I could go, I saw a place called Port Hueneme, California. And I remember looking it up and seeing it in between Santa Barbara and

Ben Nichols: Los Angeles. And I was like, that sounds pretty cool. Let's throw our name in the hat for that. And I don't know that I even really knew what the Seabees were at that point in time, but I'm so glad it worked out that way. I mean, I love the Marine Corps, but it was awesome to be with the Seabees. And the Seabees are the Navy's construction force. They were huge in World War Two when we did the

Ben Nichols: island-hopping campaign. The Marines would invade an island and the Seabees would be right behind them, building an airstrip and building out all the infrastructure you need to maintain a force. And in many ways, the Seabees are the Marine Corps' robust construction element that the Marine Corps just doesn't have, because it's not really in the Marine Corps' mission. So with the Seabees, I was basically a Marine Corps liaison, and they

Ben Nichols: treated me like gold. It was amazing to be a part of their battalion. They allowed me to be a company commander, commanding 150 Seabees, and ultimately with the Seabees we would do construction projects on base in Port Hueneme as part of our training. We would be building gazebos, renovating offices, building roads and sidewalks

Ben Nichols: to keep the construction skill set fresh for the Seabees, of which they have electricians and welders and carpenters and engineering survey folks. They're like a little general contractor, a little hundred percent self-performing general contractor, and it's pretty neat to see what they can do. We ended up deploying back to Okinawa, Japan, and then on a second deployment went to Rota, Spain.

Ben Nichols: And in each of those deployments, what the Seabees do is they break out small detachments of maybe fifteen or twenty Seabees. While we were in Okinawa, Japan, we sent Seabees all over Southeast Asia. And when we were in Rota, Spain, we sent these Seabee detachments all over Africa and Eastern Europe. And we were doing humanitarian service projects in the areas where we were sent. So

Ben Nichols: for instance, we built a footbridge in the Philippines. In Africa, we were digging water wells and building schools. So you name it, whatever that population needed, the Seabees were a force for good, helping to win hearts and minds and allowing the US to have some influence in areas of interest through the Seabees' humanitarian efforts, which was a pretty cool mission to be a part of.

Chuck Mazzanti: That's amazing. How much of the Seabees, I'm assuming there's some elements of construction in active combat areas, or is it more peacetime? Is there any kind of conflict-type stuff where the Seabees are watching their heads while they're doing construction?

Ben Nichols: Hundred percent. So the Seabees' motto is "We build, we fight." And the battalion that I was attached to had done an Afghanistan deployment previously, I don't know, a year or two prior. They just weren't in the rotation to go back to Afghanistan in the time that I was there. But the Seabees were constantly getting deployed to the Middle East and doing big construction projects to support

Ben Nichols: combat operations. So when they go out, they go out with all the gun trucks you'd expect them to have, and every Seabee's got their weapon slung behind their back while they're doing construction projects.

Chuck Mazzanti: Wow. Well, then you come back to the US and do some construction, and that makes it seem like it's vanilla compared to what you and some of your teammates probably saw. That's incredible.

Ben Nichols: Two different environments for sure.

Chuck Mazzanti: Yeah, I'm a huge military buff, listening to podcasts, documentaries, and before I came across you I never heard of the Seabees. So I think that's going to open up a lot of people's eyes.

Ben Nichols: Well, make sure you check out an old World War Two movie. I think it's called The Fighting Seabees, and it's famous. I was forced to watch it as I joined the Seabees, and it's a pretty good flick, so check it out.

Chuck Mazzanti: Going to. Awesome. Now I got my weekend movie picked. So now you transition out of the Seabees. How do you end up at Harkins?

Ben Nichols: Yeah, as I was getting out of the military, I was thinking about what am I going to do in the civilian world, and I looked at some different options. But ultimately I was like, all right, what is the best translation to what I've been doing? And clearly it was construction. Whether I was a combat engineer in the Marine Corps or the time I spent with the Seabees, it was all construction-adjacent work and leading people and planning operations and then executing those operations.

Ben Nichols: So I just started networking, really, in the Maryland area, because I knew I wanted to be back home where my family was. And I found a small company that was doing all federal contracting. They happened to have a leader of that construction company be a Naval Academy grad and a former Seabee officer. They call them Civil Engineer Corps officers, CEC officers.

Ben Nichols: And I was able to connect with him through that network, and ultimately found an opportunity being a quality control manager out in the field on a project at Walter Reed National Military Medical Center. It was Bethesda Naval Hospital at the time. And my first job ever in construction was renovating the president's medical suite, which is half

Ben Nichols: residential wing of the hospital and half full-on hospital, everything from a medical clinic just to look at the president or other VIPs using it, all the way to full-on surgical rooms. And you basically can run the country from this wing of the hospital too. So a pretty amazing project to be thrust into on my first project ever after

Ben Nichols: leaving the military, but super fun, very complex projects. I got to see the elements of high security along with medical care all wrapped up in the one project.

Chuck Mazzanti: Yeah, that's insane. I'm assuming you needed some good security clearance to be able to be on that project.

Ben Nichols: Luckily, I mean, I had a security clearance anyway, but this one didn't actually require a security clearance per se. A lot of construction projects like that don't require everybody that works on them to have a security clearance. So it just depends on the project.

Chuck Mazzanti: Got it. Okay. And then where'd you go from there?

Ben Nichols: From there I did a bunch of different federal contracts with that company that I was with and ended up spending three years there. I was really blessed to be able to transition very quickly from a quality control manager to a project manager, and I had some really good mentors within that company. That company was actually part of a larger company.

Ben Nichols: It was a construction subsidiary. And the larger company, after three years of me being there, even though that construction company had been around for 20 years, decided to get out of construction. So I got to be part of the team that was closing out a construction company, which is a challenge in and of itself, for the larger company, which was more of an engineering company. So after doing that for three years, I found my way over to Harkins Builders

Ben Nichols: in our federal construction group. And my role was project executive leading that team. Luckily Harkins had three decades' worth of federal construction expertise and a real team that was chasing those projects. And I got to integrate into that team and lead that team. We had a number of years of really good growth and good team building within that sector. And

Ben Nichols: a few years down the line, Harkins was going through succession planning, knowing that they had an executive team where a large portion of them were getting ready to retire, and notably the CEO and COO, the number one and number two folks in the company, were both retiring within a year of each other. And I think they kind of just threw me in the mix of succession planning along with eight other Harkins

Chuck Mazzanti: Wow.

Ben Nichols: young executives or seasoned project managers, and the company made a really concerted decision to skip a generation and to give their next leadership team a longer run leading the company. And after three years of working together as a succession planning group, amongst my peers, working on a strategic plan together, they shifted us around into different elements of the company and had me do

Ben Nichols: a stint with our estimating department and a stint with human resources, all while doing my normal job leading the government team. And after three years of doing that, I'm blessed that they picked me to lead the company, and even more blessed that all eight other people are still within the company at Harkins and doing amazing things. We've just got a really great, cohesive leadership team that

Ben Nichols: is driving growth and driving a great culture. So I've got to pinch myself all the time. Just couldn't be more lucky in that regard.

Chuck Mazzanti: I have to assume when they're looking at it and they're weighing the decision, it had to be, all right, well, Ben's obviously sharp, but he also did a tour in Afghanistan, then was part of the Seabees. I think your pedigree behind you probably gave them a little bit of reassurance. Like, if he could do that stuff, he's obviously been successful at Harkins. He's got the pedigree to steer the ship, and obviously that was the right decision

Chuck Mazzanti: by them, and you answered the bell. So congrats on that. So if we could rewind a little bit. You join Harkins. How old are you at that point, about?

Ben Nichols: Let's see. Yeah, I was in my early thirties at that point when I joined Harkins. I'm now in my early forties, so I've been at Harkins ten years.

Chuck Mazzanti: Okay. So it was like 2016-ish?

Ben Nichols: 2016 I got to Harkins.

Chuck Mazzanti: Okay. So I want to focus on 2016, Ben. You're joining Harkins, you've got experience in construction. What, if anything, do you know about employee ownership?

Ben Nichols: I didn't know anything about employee ownership at that point in time. It was something I learned about during the interview process at Harkins. But I truly think it's one of those things you need to hear like five times and have it explained to you five times before you really grasp what it means and what it can do. And I don't think I fully grasped that until maybe my first full year at Harkins.

Chuck Mazzanti: Yeah. Well, and it's a super interesting perspective, right? Because as you guys continue to grow, you're going to have potential new hires, like, you keep saying this ESOP stuff's so great. Like, is it? And you have the benefit to say, hey, I was in your shoes too. It sounded good, but I really didn't know, is it too good to be true or whatever. And now, ten years later, you could say, hey, this is what it's meant to me personally.

Chuck Mazzanti: So it's not just giving lip service. I think your perspective is super interesting, and I think it has to carry weight as you guys grow with new employees.

Ben Nichols: For sure. And one of our values that we really hold dear is communication. If you haven't told somebody something four or five times in four or five different ways, they haven't heard you yet. And that's true of the ESOP. So we make a really good concerted effort and pull in our marketing department to internally market the ESOP to our employee owners, and

Ben Nichols: probably one of the best ways of doing that is having them hear the stories of the people that have been here 40-plus years. Many of them are very open with sharing what their ESOP accounts are worth at this point, and that's pretty eye-opening for some of the folks that are younger in the company that haven't been here too long, to see what that can grow to. And I'm really

Ben Nichols: cognizant to tell them when I hear those stories, I say, well, just imagine what that's going to look like with inflation alone in thirty years when that ESOP account is yours. Inflation alone should close to double that over that time period. And you're going to have growth in the company and share price growth. So it should be much more than what those people are experiencing now, which is unbelievably life-changing

Ben Nichols: values in their ESOP to help them retire with wealth that they're going to be able to give back to their children.

Chuck Mazzanti: Yeah, I mean, it's story after story. I'm early on in this podcast journey, and we're also an ESOP-owned company, and I go to the NCEO and ESCA and ESOP Association, different conferences, but the same story continuously comes up: not only does it make a huge difference in the employee owners' lives, to take care of them and their family and help with their legacy, but then it keeps the wealth in their communities too.

Chuck Mazzanti: And so it's not for everyone, it's not easy, and we'll get into some of those things in a couple minutes here. But when done correctly, I mean, look at the political environment. It's hard for either side of the aisle to come together. And on ESOPs, they come together. So I think that speaks volumes, that when done appropriately, it's just a win-win-win for the company, the employee owners, and the communities they serve.

Ben Nichols: Yeah, fully agree. One cool thing that happened in the state of Maryland last year was they introduced a pilot program where ESOPs would have some preferential procurement preferences at certain Maryland state agencies. And it isn't a price preference, it's a quality preference, because they realize that ESOPs have really good retention, have really good cultures, and they want to do business with more ESOPs, which is really, really cool to see.

Chuck Mazzanti: Yeah, isn't there, I still have to track this down, but I thought with the Department of Defense, or I guess the Department of War now, there's some preferential treatment for ESOPs too, but I don't know if it's capped at a certain size for maybe follow-on work. It doesn't have to be rebid. I don't know if you're familiar with that.

Ben Nichols: I am familiar with that. I know the state of Maryland looked at that program as well as they were implementing their law. But yeah, I think it's a pilot program that DOD at the time, Department of War now, put out. And it makes ESOPs eligible for sole-source awards in a similar way that 8(a) or minority-owned companies, socially disadvantaged companies, are eligible for sole-source awards too. But the ESOP has to self-perform forty percent

Ben Nichols: of the contract that they're awarded sole source through the government.

Chuck Mazzanti: Got it. So that's the caveat. Well, thank you. I knew it was there. I didn't know the intricacies. So thanks for clarifying that, Ben. With the work that you do, have you seen that Harkins being 100% employee-owned has been the tiebreaker? Because construction's super competitive, right? You guys obviously have the history, you've been around since 1965, your reputation precedes you, but

Chuck Mazzanti: do you see it where you're in a neck-and-neck battle with maybe some of your biggest competition, and all things are equal, and they say, hey, you know what? The fact that you guys are employee-owned kind of nudged you in getting a job.

Ben Nichols: Absolutely, yes. It's something that we talk about at every single project interview that we go to with a client as we're chasing work. And I think once explained well, it's a huge value add, because I do think people that don't understand ESOPs may say, I don't know if I want to work with an ESOP, their leadership won't be able to make decisions, which is a complete fallacy and myth,

Ben Nichols: because an ESOP is run just like a public company would be run, with a slate of officers and a board of directors and normal business decision-making and fast decision-making, depending on the company. But there's nothing inhibiting an ESOP from making effective decisions in business because we're an ESOP. That's a complete myth.

Ben Nichols: And then when you talk about the better retention that you see in an ESOP, a client has a better feeling that the project manager and superintendent that they're going to be working with, who have been with the company a long time and are so bought into the company's culture, are going to be there throughout the length of the project. And just the fact that they're contributing

Ben Nichols: to a company that is sharing wealth and making the community a better place because they're sharing wealth in a more effective way, I think means a lot to many clients. So yeah, I think it makes a big difference as you're competing for projects.

Chuck Mazzanti: Yeah, you bring up a really good point. Because we talked offline before we started this, and I told you my understanding of ESOPs before I came over to Christensen Group, and now being a hundred percent ESOP, and you talk to ten different people on what an ESOP is, you're going to get ten different responses. So your point is well noted that you can't just say, hey, we're an employee-owned GC, do work with us. You really have to be deliberate on how you communicate that message

Chuck Mazzanti: to your prospective customers and clients to make sure they understand it. And then also put yourself up, maybe even above other ESOP-owned companies. Because again, there's really well-performing ESOPs and then not so much. And so you want to make sure that you position yourself in the upper echelon of even the ESOP contractor community. And the other thing that I think is super cool is

Chuck Mazzanti: you as a general contractor, you're setting the tone for the whole project, right? You're the quarterback for that whole project. So every other sub that comes on, you guys are instilling that employee-owned culture, on top of obviously being a top-tier GC and having the project run smoothly, on time, on budget. But all the other trades are probably kind of like, I heard about ESOPs, but now I'm doing work with Harkins and

Chuck Mazzanti: they're not holding payments. They're a pleasure to work with. The project's getting done seamlessly, as best as it can, it's still construction, of course. But I don't know, it's just a great example to show what employee ownership looks like on the job site, I have to assume.

Ben Nichols: Yeah, I think inside an ESOP, people truly feel like owners in the company. And when they truly feel like owners in the company, they are way less inclined to make a short-term decision that's going to benefit their own self-interest. And they're way more inclined to think long term and say, in this challenge that I'm facing right now,

Ben Nichols: what's the best decision for the company, and what's going to increase the company's long-term reputation? Even if it means taking a short-term hit to the financials, what's the right decision to advance this long-term relationship or advance Harkins' reputation? And we beat that drum all the time, and I see our people buy into it wholeheartedly and continue to make those decisions. And it's a cool thing, and something I hear all the time

Ben Nichols: is, you talk to a client that maybe just recently got introduced to Harkins, and they're like, yeah, I met one person at Harkins and they were great. Then I met another person at Harkins and they were great. And then the fifth and sixth person that I met at Harkins, they're all great. It's like, how are you guys doing this? And I get that story all the time, which makes me so happy, and which means our culture's in a really good place, and we're doing the right things, and people are buying into that ownership culture.

Chuck Mazzanti: Yeah, no, that's great. And you started at Harkins in 2016, so ten years later, what were you guys in revenue roughly when you first started in 2016, do you recall?

Ben Nichols: Yeah, probably 250 million, if I had to guess.

Chuck Mazzanti: And now you're three quarters of a billion.

Ben Nichols: Now three quarters of a billion, with a really good chance to crest a billion dollars before 2030.

Chuck Mazzanti: So if it's okay with you, I'm going to put you on the spot. When you guys hit a billion, I'm having you back on as a celebratory episode.

Ben Nichols: Let's make it happen. Agreed.

Chuck Mazzanti: Can't wait. Okay. So, and I think that's proof, right? You hit one of the biggest fallacies on ESOPs, people thinking there's too many chiefs, right? Like, no, it's very well structured. I would argue more structured than some privately held

Chuck Mazzanti: companies. You have to have the governance and the board of directors, and it still has to be a very well-performing business, construction or otherwise. And then the ESOP just adds another layer to make sure it's structured. But the other thing is people say it inhibits growth, right? Because now you're paying people with the repurchase obligations and so on and so forth. So I kind of want to land the plane on that, but

Chuck Mazzanti: clearly you guys are an example that you went from 250 million to now three quarters of a billion. And all the while, I mean, you went ESOP in 2001. So I'm sure in the past five, ten years you've had some serious repurchase obligation events that were capital calls, right? You had to pay those people out. And clearly it's not inhibiting growth. So I'd like for you to dig in on that, if you don't mind.

Ben Nichols: Yeah, certainly, as part of your governance, you have to do those repurchase obligation studies and be able to look down the line at where you think your projected growth is going, and you can get a good idea of how the share price is going to move associated with that. And you have a good idea of when your people are going to start diversifying or taking distributions once they retire and leave the company. So when you look at all those things,

Ben Nichols: you need to plan for it and need to make sure that you're constantly feeding the ESOP with cash so that you can meet those repurchase obligations. One way we do that is paying dividends to our shareholders. So in addition to everybody getting 10% of their total compensation in stock value each year, all the shareholders are paid about a third of our profits in dividends, and we're constantly pumping cash into

Ben Nichols: the ESOP. So that way you can do a lot of those repurchase obligations within the ESOP, because people that aren't retiring have cash accounts in addition to their stock account and are purchasing that stock from the people that are distributing and diversifying inside the ESOP. So that's an important thing to pay attention to, and look down the line and make sure that you're staying healthy from a cash perspective to deal with those things. But it's certainly not something that's insurmountable.

Ben Nichols: It takes a little bit of planning.

Chuck Mazzanti: Yeah, a hundred percent. And I'm assuming at this stage you guys have done both the repurchase obligation study, but then you also have the sustainability study that's a little bit more extensive, and you're kind of balancing both of those.

Ben Nichols: Exactly. And we have an ESOP committee that is constantly in tune with that, and that's part of their collateral duties, to keep those studies going and keep an idea of where we're going to be. When you think about ESOP growth, you need growth. Growth gives opportunity to people, and that's what increases the share value and really can generate wealth. One thing that I love about the ESOP is that

Ben Nichols: it really promotes long-term, stable growth, which I think is a great way to run a company, because it enables you to grow at the same pace that you can develop people and maintain your reputation. I don't think the ESOP really incentivizes you to do explosive growth in the short term,

Ben Nichols: because then you end up really having trouble with some of those repurchase obligations, and you're basically investing into that short-term growth. Within an ESOP you have people that are getting ready to retire, and when you're putting in those big investments you're kind of taking away from their potential dividends and potential earnings through the ESOP.

Ben Nichols: And then you have people at the beginning of their journey that are going to look at a long-term growth cycle. So if you're investing in growth, you're maybe benefiting the people earlier in their career while taking away some value from people at the very end of the line. So you've really got to take a balanced approach when it comes to growth and grow at a long-term, stable rate that's always more than inflation,

Ben Nichols: but that doesn't outgrow your reputation. And I think if you do that, you're taking care of everybody on the ESOP spectrum, whether they just joined the company or whether they've been here for forty years.

Chuck Mazzanti: Yeah. Well, and the fact that you're saying slow and steady growth, but that doesn't mean single digit, because you didn't do single digit to go from 250 million to three quarters of a billion in ten years. So I think you guys are a perfect example of how you could still have really good growth, you could get to that billion mark and beyond, but do it sustainably.

Chuck Mazzanti: And so that's just proof, one of the many reasons why ESOPs, if done correctly, could be great. And it's funny. I don't know if you know Sessa Sheet Metal Contractors in Baltimore, but I'll connect you guys. So Bobby Sigmon, I hope I didn't butcher his last name. They're an ESOP sheet metal contractor, and I had him on just this last episode, and he made a really good point:

Chuck Mazzanti: when they're talking to the older guys and gals that are looking to retire, and how they're building the culture, it's, hey, you want to make sure that you're helping the younger generation, because they are your retirement plan. If you don't have that good diversity of ages in the ESOP plan and it starts getting top heavy, you need that fresh youth to prop it up. So his sound bite, which I thought was great, was, hey, you're training your retirement plan.

Chuck Mazzanti: And so it's kind of a self-policing or self-correcting system if everyone understands the mechanics of it.

Ben Nichols: Yeah, I fully agree with that. It makes perfect sense.

Chuck Mazzanti: Yeah. So when I'm talking to other newer ESOP contractors, or even people that I'll call ESOP curious, everyone seems to be like, how do we get the workforce, the employee owners, to really understand the benefit that they have? Because we tell them, you're employee owners now, or maybe you're four or five years in, and the balances aren't that big yet.

Chuck Mazzanti: And the workforce is kind of like, they're just giving us lip service. So what advice would you give them, or even maybe what advice would you give your 2016 self, to really get people bought in to understand the benefit?

Ben Nichols: Yeah, I think you've got to just really be relentless in your communication internally around the ESOP. The best thing is those stories from the people that have been there forty years and the love they have for the company and what the ESOP has done for them in terms of the share price value that they now have in their ESOP account. And then use your marketing team to create videos that

Ben Nichols: showcase some of those stories. We do ESOP lunch and learns on a quarterly basis where our ESOP committee sits down, and in the main office here we have lunch, and then on the job sites they're ordering lunch and they're tuning in remotely, and it's an opportunity to talk about the ESOP. We'll take some ESOP accounts and have the name blacked out and show how that

Ben Nichols: ESOP account has grown over time, and use an example of somebody who's been here five years and 15 years, 20 years, all the way up the line. So people can really understand what that ESOP account can mean at the end. And I always find that people that have worked for a few different companies and then come to Harkins almost have more appreciation for Harkins than the person that's been here for 30 years, just because they've seen

Ben Nichols: dysfunctional companies, and they come to a place where it's not dysfunctional and the culture is really strong. And they're like, I just can't believe how good this is. When I first got here, I didn't believe how good it was. And I've been here for a year and it's still like that. And so on and so forth. So I think that's a good bellwether for anybody, just to see some people that have spent time at three or four different companies, and

Ben Nichols: they can see what a really good company looks like that is rooted in that ownership culture.

Chuck Mazzanti: Yeah. No, I mean, you guys are deliberate, obviously, and you execute and it's planned. Nothing's done by chance. Everything you guys do is planned out, and that's why you're successful and why you're growing. In terms of the future, we know you're going to get to a billion. So aside from a revenue goal, what's the five-year, let's call it future Harkins? What does it look like? Are you adding different scopes of work outside of what you're already doing?

Ben Nichols: Yeah, obviously a big thing in the ESOP is making sure that we can stand the test of time, so that the ESOP's still as good as it is now fifty years from now, and hopefully way better than it is now fifty years from now. And the people that haven't even yet entered the workforce that are going to be Harkins employee owners one day are going to have a really great career

Ben Nichols: at Harkins because of the decisions that we're making right now. So it's important for us to constantly be doing strategic planning and looking way out down the line at how we protect the company. And I think one of those ways is continuing to be a diverse builder and be building different types of product types. So that's something that's very important to us, so that we can shift, no matter what the economy's doing, and we can build what people are building at that time.

Ben Nichols: And having the right processes and having the right sophistication, whether it's BIM modeling and a project controls team that helps all of our teams with scheduling and VDC, drone programs, and just staying ahead of the curve when it comes to technology and AI. So those things are really critical. And then continuing to grow geographically.

Ben Nichols: It's a big investment every time that we open up a new office in a new geographic territory. And it often takes a seasoned employee at one of our core offices, having that person raise their hand and say, hey, I'd like to take the opportunity to go somewhere else, and then hire a key person from that new local area. And then ultimately it really works well if we can get 50%

Ben Nichols: seasoned Harkins people and fifty percent local hires, so that the culture meshes as well as the local knowledge meshes. And when we do that and we resource it well, I think we find that the geographic expansion works really well. And that's something I think that we have the bandwidth to do every five, seven years, as we have those people that have reached that level of

Ben Nichols: knowledge and wisdom and leadership ability, and the entrepreneurial spirit to say, hey, I'd like to give this a shot.

Chuck Mazzanti: It's super interesting. Marrying someone that's already living, breathing, and the beneficiary of the Harkins culture and the ESOP benefit they've received, and helping them kind of launch a new market. We found the exact same thing for us. We had a guy who's just a great guy, his name's Joe Blee. He was in our Minnesota office, which is our headquarters, and he was just,

Chuck Mazzanti: quite frankly, sick and tired of the winters, Minnesota winters. So he's like, I want to go to Kansas City. And so he launched our Kansas City office. And now we have dozens and dozens of employee owners there. And it was him being able to say, hey, this is legitimate, and bring that culture from Minnesota at the time to Kansas City. And now that office is flourishing. So it's interesting to hear that's kind of your guys' model as well.

Ben Nichols: Mm-hmm. It's a great way to do it.

Chuck Mazzanti: Awesome. Well, as we wind down, I like to play devil's advocate and then bring it back to why it's good. But why shouldn't a contractor, you know, it's the silver tsunami, right? In the next 10 years, we keep hearing these statistics that people have to have some sort of succession plan, whether they like it or not, whether it's transition to their kids, sell to private equity, sell to a competitor, a strategic,

Chuck Mazzanti: do an asset sale and close up the doors sometimes. So I think more and more people are ESOP curious, but the last thing we need is people doing it if it's not the right fit. So in your opinion, being in it for the better part of 10 years now, when shouldn't a contractor go ESOP?

Ben Nichols: Yeah, I think it's probably very similar no matter what company you are, when an ESOP probably isn't a great fit. You have to have a certain number of employees, and maybe that number's a hundred or more, to enable you to have that age diversification that we talked about. So you have a good mix of people at the early part of their career, the middle part of the career, and towards the end of the career,

Ben Nichols: so that you can get that cycle of employee ownership: as people are retiring and distributing, other people are then buying those shares and getting that cycle going. And you certainly have to have a stable business that has a long-term, stable backlog and an ability to continue that backlog and continue those profits coming in. Because if you have an owner that's leaving,

Ben Nichols: and maybe they're a single owner that doesn't have great leadership underneath them, and they're the key person with client engagement, if the company's taking out a loan to pay that person so that they can go then retire, and you don't have people that are ready to continue to run the company, that's a recipe for disaster, because then the company can't pay off the debt it took

Ben Nichols: to go into the ESOP in the first place. So those are probably some of the big things to look out for to make sure, is an ESOP the right move for you.

Chuck Mazzanti: Yeah, no, continuity is a huge piece. I always tell people, if you're just looking for a check, and you close the transaction and you're off to Florida, if you don't have the right leadership team that could sustain you leaving overnight, it's probably not the right fit, amongst the other reasons you highlighted, which I agree with. On the flip side, let's say I'm a Chicagoland general contractor doing a hundred million in revenue, and I've got 150 employees, and I'm

Chuck Mazzanti: trying to figure out what I want to do in the next five years. And I've got private equity hitting me up. And I've got a strategic competitor wanting to buy me, but to be honest, I don't like him. So I don't want to sell to him, but his offer's good. And then I listen to the Ben Nichols podcast and this ESOP stuff sounds pretty good. Why should I go ESOP?

Ben Nichols: I think there's some tax advantages to becoming an ESOP. I wasn't in those shoes like Blase was, but there's probably some pretty good tax advantages to becoming an ESOP. But the best reason is you're setting your people up for an opportunity to have a really significant piece of the pie when it comes to ownership.

Ben Nichols: And just like Blase said, he was giving his people an opportunity to spend a career at Harkins Builders and never have to think about working in retirement, no matter what position they held in the company. And time and time again, last time I checked, it was probably several years ago, we had over 40 people with over a million dollars in their ESOP account. And I know that's much more than that now. Blase said he wanted everybody to be a millionaire through the ESOP

Ben Nichols: when they retired after spending a career here. And that's come true countless times. So I think those are the reasons: just giving your employees that opportunity and setting them up for long-term success. I think that's your biggest driving point if you're an owner in those shoes and have the opportunity to pursue that ESOP model.

Chuck Mazzanti: Yeah. Well, I think if we were able to talk to Blase and say, what do you think Ben's doing, I think he'd be super proud of what you've done. And way to give him credit, because if it wasn't for him making that decision, you guys aren't an ESOP. And so his memory's living on, that's for sure. Sounds like a great guy, and I think you're doing right by him. So I really appreciate you coming on, Ben.

Chuck Mazzanti: Before we sign off, how can people get a hold of you?

Ben Nichols: You can find me on LinkedIn, or my email is all over the place. So feel free to send me an email. It's bnichols at harkinsbuilders.com, and I'd be happy to answer any questions that anyone might have on the ESOP construction world.

Chuck Mazzanti: Awesome. Well, thank you for coming on, Ben. I think our audience is definitely going to get an ESOP education. It was super entertaining as well. And I got my movie picked out this weekend. So I appreciate you coming on and hope to talk to you soon.

Ben Nichols: Welcome, Chuck. Nice talking to you too.

Chuck Mazzanti: All right then. We'll see ya.

Chuck Mazzanti: Thanks for listening to the Construction ESOP Collective. If this was useful, follow the show and share it with a colleague. Join the conversation with me, Chuck Mazzanti, on LinkedIn and find all episodes at constructionesopcollective.com. Until next time, keep building ownership one conversation at a time.

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Questions about how any of this applies to your company? Email Chuck at cmazzanti@constructionesopcollective.com and we can talk it through.