'It Does Kind of Open Their Eyes'
Mike Keesee, right, and Carl Brown, of Total Solutions Group.
In a recent conversation, Mike Keesee, CEO of Total Solutions Group, talked about why he and Carl Brown decided to open their books and adopt an Employee Stock Ownership Plan—and what difference that has made in their efforts to recruit and retain employees and to pursue acquisitions of other businesses.
Loren Feldman
Welcome, Mike. I appreciate your taking the time to do this. First of all, tell us a little about Total Solutions Group. What do you guys do?
Mike Keesee
The Total Solutions Group is an architectural and structural engineering company located here in Maitland, Florida. We’ve been in existence since 1993. So we’re in our 32nd year, operating here in Florida. Our primary business model is working with high volume production builders. We also deal with custom home remodeling, as well as structural engineering, and commercial products for our builder clients throughout Florida and the Southeast.
Loren Feldman
And what’s the range of services you provide for them?
Mike Keesee
From designing new product lines for them, maintaining their plans for building-permit optimization, and then handling all of their construction needs once the building has started in the field.
Loren Feldman
We’ve been through an unusual few years. How has business been for you of late?
Mike Keesee
Well, you know, being in Florida, we’re highly blessed, okay? People don’t leave Florida. People come to Florida. I was just out at the International Builders’ Show in Las Vegas. And the news is that nationwide, we’re probably gonna see a 5-percent uptick in residential construction, which means Florida will probably be double that just because everybody wants to move here. It’s not for the tax base. It’s for just the sunshine and the beaches. Ironically, in 2020, which should have been our worst year in business due to Covid and shutting down, it was actually our best year, as far as the number of units that we actually put out in the field for our builders to build that year.
Loren Feldman
Why did that happen?
Mike Keesee
We have no idea. And it’s just, I mean, the only saving grace was, that building and those people working with builders, were considered essential businesses. And so, that kept us even though we just moved into a brand new office, here in Maitland.
Loren Feldman
That’s near Orlando, right?
Mike Keesee
It’s right near Orlando. That’s right, exactly, outside of Orlando. And we just moved into a brand new office, only a month later. Nobody’s in the office, because of Covid, so we had a big scramble there because we had not been having people work remotely. So it was a firing line to be able to get everybody up and running. And we had a few people, probably about a third of people would come in on a rotating basis just so they could get the work done and have the engineering group be able to sign and seal the products going out the door at that time. But like I said, that was the best year we’ve ever had as far as putting number of units in the marketplace.
Loren Feldman
Were you prepared for a sharp drop off?
Mike Keesee
We were. As a matter of fact, when we saw it, we went to our group and had already put in place a stay on wages and actually asked everybody to be able to take a reduction in wages at that time, which they did—because they all knew what was going on. And then ultimately, at the end of the year, we were able to give that back to our employees because we didn’t have to use it.
Loren Feldman
When did you realize that business wasn’t going to fall off the way you feared?
Mike Keesee
By the time we got to half a year, and we’d exceeded the year before. Every quarter we said, it’s weird, but hey, we’ll take it.
Loren Feldman
No complaints.
Mike Keesee
No complaints whatsoever. No, sir.
Loren Feldman
Were you affected by the Great Resignation and the labor shortage and all of that that followed the early days of the pandemic for a lot of people?
Mike Keesee
No, we weren’t affected. We haven’t had anybody leave us. We still have people that are more liberally taking days off to quote-unquote work from home. We’ve had issues with trying to set up a good work-from-home policy in place. One, because we don’t want to lose employees, but there’s really nowhere else they can go that offers really full-remote work for the type of stuff that we’ve been doing here. And I think a lot of it might have to do with basically that our culture that we have here, you know, they won’t be here. But yet, they’re still taking time off, meaning working from home.
Loren Feldman
Can you give us a sense of what percentage of your people are spending some time working from home? And what percentage are in the office full time?
Mike Keesee
Oh, it’s only probably 2 to 3 percent. Now, coming out of Covid, after that first year, we probably were about 20 percent at that point, but we kind of kept saying, Look, we need you in office. We can’t have culture with you not being in office.
Loren Feldman
Can you give us a sense of how big the business is?
Mike Keesee
So we have a staff of roughly 80 employees, between all of our five departments that we have.
Loren Feldman
And have you been growing?
Mike Keesee
We have, actually. Our size has doubled in the last three years. We’ve actually—so a little history on that: Total Solutions Group has really started out as two different companies. One was Keesee Associates, which handled all the architecture and production design. And FDS, which is Florida Design Solution, was our engineering company that we had. So we had two qualified subchapter-S corporations. And then when we went to move toward the ESOP—because my business partner, Carl Brown, and I both own a little bit of both companies—we decided to use the Total Solutions Group as a holding company, and then make the Keesee side and the FDS side, sub-Qs. So, in June of 2020 is when we brought both companies into one building together, to ultimately let everybody go home, and then bring them back in. And then, last November, we acquired another competitor. B&A Design Group out of Sanford, Florida, came on board with us as well. So that’s helped contribute to the growth.
Loren Feldman
And during the last couple of years, has it gotten harder to hire people as you’ve grown that quickly?
Mike Keesee
Yeah, it has been. My son manages a recruiting company. And I would like to think that we would get first choice and most people that come through.
Loren Feldman
I bet you do.
Mike Keesee
I hope so. Maybe he’ll listen to us one day. But it is tough, okay, because a lot of the larger architectural firms, they do let their people work remote. We’ve got a good group right across from us that we do some joint ventures with, and they’re probably running at 50 percent staff level. And I just attribute that that they don’t have the same culture that we have in our office with everybody. And so, we know that happens out there. Their people just have that ability to be able to stay home, and they let them have at it.
Loren Feldman
Have you had to take steps to improve your hiring rate, in terms of wages, or anything else?
Mike Keesee
Yeah, this costs us more money to hire people now. Which it really shouldn’t in the industry, but people are using that little carrot out there that if you come with us, you can be remote, yada, yada, yada. And so we just try to bring them in and talk to them about our culture, and how we run our business with open book management. And one of the big questions we ask most of the recruits that we get in here is, “Has any other company that you ever worked for—or other companies that you may have interviewed with—actually showed you a P&L every Tuesday during their huddle.” And of course, the answer to that is no. And so we let them know, you get to know the health of our company every week. You don’t have to guess whether we’re making money or not making money. So we would think that kind of helps on our recruiting side.
Loren Feldman
How much value do you think potential recruits put on that transparency? I guess you probably have a waiting period toward becoming an employee owner.
Mike Keesee
Well, yeah, there’s a vesting period in that, but, and even a short-term, 90 days or so before they can participate in our company-wide bonus plan that we have, but It does kind of open their eyes. You know, you see them taken aback a little bit when we tell them that we’re actually showing them a P&L. So we think it has a little bit to do with it. So, yep.
Loren Feldman
How about when you’re talking about somebody who has an offer to work somewhere else remotely? Do you have a sense of—is there a price that you could put on that? How much more do you have to pay to convince somebody to come into an office?
Mike Keesee
I don’t know that answer, Loren, but I’ll tell you that we did have one applicant come in last year for us, a very, very talented architect. And we put her through the whole interview process, and then, of course, told her about open book management and our bonus plan and how we operate. And she was still pretty adamant about working remote. And we just said, Well, you know, that’s just not gonna happen. But she’s been here for a year now. So, she saw the value, and she was smart enough to understand the total value that coming to work for us and what value that has to the long term.
Loren Feldman
Tell me about the ESOP. When did you make the decision to go in that direction? And what drove the decision?
Mike Keesee
In 2014—I have a buddy up in Ohio—he called me up and said, “Hey, have you ever heard of the Great Game of Business?” And I said, “No.” Okay, he says, “Well, order the book.” Okay. So we ordered two books, one for me, and one for Carl. And we started reading it. So then in 2015, we went to an SRC experience in Springfield, [Mo.]. We know very well what days it was. It was the 5th and 6th up there, January. It was also the two coldest days they’ve ever had in Springfield.
And so we went through that, and that’s always a topic at SRC: ESOPs. I had already been thinking about my exit strategy from the company. And so, we went through the whole deal. And then we started practicing Great Game in 2015, and it was always a topic because we had all of our top management read the “Great Game, “and then the shorter version that [Steve] Baker and [Rich] Armstrong wrote. And so then we could hear mumblings among the tribe that, “Well, we keep hearing this ESOP thing.”
And so in 2018, that’s when we decided to bring together the two companies and formed the Total Solutions Group. And Carl and I just basically gave up 5 percent of the company to start the ESOP for the employees at the time. So it was a non-leveraged deal, 5 percent. So we wanted to start them out, so they could start learning the language and deep dive into all the idiosyncrasies of what it takes to be an ESOP. So, that started it right there.
Loren Feldman
With both the ESOP and also the decision to open your books, I think it’s something that a lot of companies do to try to solve a problem. Even just opening your books is a challenging thing to do. You don’t literally just open a book. It involves education, it involves work, it involves process. And if everything’s going well, I think a lot of companies choose not to go down that route. Were you looking to solve a problem?
Mike Keesee
Well, part of the problem is that most business owners, when it comes around to bonus time, it’s more like, who’s the celebrity in the house? You know, who do they like more than the other guy. They really don’t have a metric in place to really be able to—you know, Joe’s been here for 10 years, but Amy’s been here for five. But I like her better than I like—that sort of mentality kind of goes around. I know, because we did the same thing. So, playing the Great Game, and using the metrics that Jack [Stack] teaches. We were able to put a bonus system around the Great Game of Business that everybody wins. So that was part of our reason to go that route.
Loren Feldman
And did you see it have an impact? Did it change behavior?
Mike Keesee
Definitely, definitely. I mean, and it would even change the behavior to the point where if one employee would come to us and go, “Hey, we need to talk about this guy sitting next to me. You know, he needs to pick up the speed a little better. And he needs to learn more. He needs to do something else.” So it kind of started that whole coaching about, we’re one team. We all need to work together, to hit the common goal.
Loren Feldman
You said that when it came to the ESOP, you started small. Have you gone further in that direction?
Mike Keesee
We went 100 percent in August 2022. So that was our full launch into that. It didn’t go quite as planned, because right there, in 2020, if you remember, interest rates were starting to run up. We had a financial institution that was going to work with us. And when it came down to a due date, they came back to Carl and me and said, “Well, the interest rate’s moving and getting out of whack. You guys are gonna have to sign personal guarantees for that, because it was a no-personal-guarantee deal at the time. And so we had already made the decision that, if that was going to be the case, that we would just hold the note ourselves. So we just blew them off. And then we ran the deal ourselves, and still are. And people ask me, Well, why would you do that? Well, in hindsight, luckily—knock on wood right now—we haven’t had any issues come out of it. But with both of us still working in the company, if we had gone into a Great Recession, we would have had the ability to keep the company afloat by pushing notes to the rear end or doing something creative ourselves, not relying on a bank that might try to call a note halfway through the recession.
Loren Feldman
So for those who aren’t familiar, you and your partner essentially are serving as the bank. You lend the money to the ESOP trust, and they’re paying you back, I assume?
MIke Keesee
Yes.
Loren Feldman
And what you’re saying is, if you did go through a difficult period, you could stop the payments and not worry about dealing with a bank that wanted to collect this money.
Mike Keesee
Right. Exactly. Exactly. I mean, let’s be upfront. That’s what this podcast is about. We’re collecting interest as well, just like the bank would. So it’s a win-win for both.
Loren Feldman
And that’s an interesting point, because a lot of owners who consider this option deal with the question of, Well, am I leaving money on the table by doing an ESOP? Did you and your partner feel as though you left money on the table by doing the ESOP?
Mike Keesee
Oh, no, we’re far better off now than what we would have been if we’d done the deal on our own. We had a strong team behind us. I don’t know if you’ve heard of a gentleman by the name of Phil Hayes, the ESOP guy.
Loren Feldman
I have. He has been a guest on this podcast.
Mike Keesee
Good, good. So Phil was and still is with an accounting firm that we use here in Orlando. And he helped us make this deal go as good as it did. We had a good trustee out of Kentucky, and they negotiated, and it all kind of fell in place. And we got good value. You know, the valuation company looked at us and saw that we were positioned well with what we do throughout the Southeast. So it all came together very well for us.
Loren Feldman
You mentioned an acquisition. Tell me about that. When exactly was that, and what did you buy?
Mike Keesee
So, the community that we work in is very open. Most of us are friends, because there’s enough work to go around. And there’s a company up in Sanford, BNA Design Group, that’s been long-term competitors, 20-plus years. And when the recession hit in 2008, we were both about the same size and number of employees. And coming out of that, in 2010, we were excited. We’re going to continue to grow. Because directly in 2008, we went from 50 employees to five employees when that hit. So we started growing back up, and he decided that they would keep their firms small. And recently, last year, we were out having lunch, and he said he’s gonna think about growing his business again. And I said, Well, I can help you grow quickly. And so after a few months of negotiation, we came to terms and we purchased his assets and him and all of his employees came over to our side. So it was just kind of one of those being in the right place at the right time. And he had a need, and we had opportunity.
Loren Feldman
So I’m guessing his business was not an ESOP.
Mike Keesee
His business was not an ESOP.
Loren Feldman
And what did that mean for the acquisition? Did being an ESOP make it easier or harder for you to execute the transaction?
Mike Keesee
Yeah, I don’t know the answer to that, Loren. You know, we ran it through Phil. We ran it through our trustee. We ran it through our independent board members, and all the numbers seemed to be right. And so it just turned out to be a good deal for everybody all the way around.
Loren Feldman
And when you told the former competitor that you were buying that you could help them grow quickly, What did you mean by that?
Mike Keesee
Just be part of a larger organization, because there were things that he wanted to do. And for him to be able to do those things, he’s gonna have to have an outlay of money to be able to have the resources to make changes and stuff. And coming on board here, we already had all that stuff. And so, he’s on board now, and his team’s on board. And he’s excited, because what he did was, he took one of my jobs, which was primarily business development. And he and I had both about the same sales theory and style. So, that worked out well, worked out very well.
Loren Feldman
How did the mix of the cultures go? It must have been a little bit of an eye-opener for the other company walking into an open book and an ESOP business.
Mike Keesee
It was. There were a lot of questions, and a lot of concerns really. But we assured them that life here was going to be just as good or better than life where they were, and so far to date, it’s worked out real well.
Loren Feldman
One thing I’ve learned is, for people who do open their books or even take the next step and go ESOP, it’s easy to assume that this is something that, Why wouldn’t an employee welcome this? Of course, they would want to know the financials. Of course, they would want to be an employee-owner. But that’s not always the case. Employees sometimes, they’re skeptical. They don’t understand exactly why this is being done. Some even feel as though they’re being handed an extra job to do: I have my specific specific role. I don’t need to handle the financials too. That’s your job. Why are you foisting that off on me? Was there anything like that, that you had to deal with?
Mike Keesee
Well, so here’s the funny part about that. So we have six different generations in our office, kay? So, the older generations, they understand the importance of what the ESOP can do for them. The newest generations, they’re a want-it-now generation, right? You know, what can I do today? So they don’t really see the value. They hear about the value. I don’t think they really see the value yet. And that was one reason why I said we turned over to 100-percent ESOP fairly quickly, so they can start seeing that value and actually get a share certificate to hold on to and that sort of stuff.
Loren Feldman
But you’re talking about people who, if you gave them the choice, would say, Yeah, I’d rather have a 10-percent raise today than think about something that’s going to pay off when I retire.
Mike Keesee
Exactly. Now, the unfortunate part is, we can’t do that. We can’t pick and choose, because there’s rules about that sort of stuff. But no, what’s really funny is that when we went to the ESOP, we had to change our accounting method. Okay. So, for 30 years, Carl and I was under cash basis. Then, turn it over to the ESOP, we had to move over to the accrual basis. And so that kind of changed the way our scorecards look and our books look and everything else. And so we had a fairly simple scorecard, fairly simple Tuesday P&L, and then all the employees wanted to start, Well, gee, I’d like to see more numbers, understand more numbers. So, our CFO decided that he would put together a nice big spreadsheet, show them all the numbers. It only took about two weeks, and they go, Can we go back to our short scorecard we used to have?
Loren Feldman
That’s that education that’s required as well. You can’t just throw numbers at people. One of the concerns I’ve heard from ESOP’s is that it does create a situation where potentially you could be the acquisition, and you give up some control over that. And I’ve talked to some owners who’ve chosen the ESOP route who say they worry a little bit. They’d gone 100 percent ESOP, and they’re very happy that they did. It’s worked out well. But they’re proud of what they created. They think they’ve created a special place to work, and they want it to remain that. And they wonder, could it happen that a future generation of owners might be hit with an offer, that they either don’t want to refuse or, given the fiduciary relationship, may feel they can’t refuse? Have you thought about that at all? And is that a concern?
Mike Keesee
Yes, we thought about it. I’m not gonna lie to you. But we also put the ESOP in place because that was like a reward, to help protect our legacy. We had people here that were vested on day one, because the way that we rolled out our program was we gave a three-to-one year on the vesting. So we want to make sure that those employees that have been with us over the number of years were rewarded for their loyalty throughout that. And so, like I said, we want to protect the legacy because we’ve had many offers to purchase us. And we said no, because we know exactly what will happen at that point. People will lose their jobs, or they’ll bring in different management and people won’t like it, and that sort of stuff. But what happens down the road? I can’t worry too much about that. You know, it’d be up to them.
Loren Feldman
My thanks to Mike Keesee of Total Solutions Group—and to our sponsor, the Great Game of Business, which helps businesses use an open book management system to build healthier companies.
Loren Feldman is editor-in-chief of 21 Hats. Once a quarter he interviews a practitioner of open-book management with the help of the Great Game of Business, which suggests business owners to interview but plays no role in the reporting or editing.
