Being their own bosses

Chroma Technology employees also own the company

Jan 17 2009
David P. Greisman, Sentinel Staff

Whereas some companies grapple with the idea of employee ownership — of employees buying into the company’s philosophy, of workers investing their efforts in the company’s success — one Vermont business operates under a different system.

At Chroma Technology Corporation in Rockingham, employee ownership means just that. The employees — all 88 of them — own the company.

The firm, which makes filters and lenses, primarily for microscopes, set up shop in 1991 with six employees, its co-founders, including chief executive Paul Millman.

Millman had previously worked for a company that made similar products.

“I wondered why I was doing a great deal of the work that was making a great deal of money for my employers, but was not benefiting from that,” Millman said. “I thought that if people were going to work and make the profits, they should benefit from it. There’s always the downside, that you would suffer from it. We haven’t suffered from it yet.”

Instead, Chroma has grown, from six employees to 17, then to 23 and 30 and so on, all co-owners, all with stock in the company, and all with equal shares in the profits.

But with “employees” and “owners” being interchangeable terms, Chroma occasionally operates under a not-so-delicate dance — between workers who might want to make a certain decision, and their fellow employees on the board of directors, who might disagree.

“As much as I would like to sometimes, you can’t just say, ‘Do it because I said so,’ ” Millman said. “You sort of have to justify to people why you think this is a better way to do things. That’s not to say that every decision is open for a negative vote. Sometimes you say, ‘Guys, you just gotta do it because we think it’s in the best interest of the company.’ ”

While it can sometimes be painful to share responsibility for the company, Millman said he thinks it is the best way for business.

“I don’t think that one person can run a company,” Millman said. “We hear stories about great business geniuses: Bill Gates, Steve Jobs, any number of people who are credited with creating a company. I’ve never met one person who knew enough in a company about all aspects of the company to run it on his or her own.

“I certainly don’t,” he said. “I know a fair amount about how to sell stuff. I know nothing about how to make stuff, how to do the finance, keep the books. I know precious little about the human resources laws and obligations and procedures. So while I think I’m pretty good at what I do know, I’m very good at what I don’t know. That is, I know that other people have to do it.”

In the beginning, that meant, say, that one co-founder would be in charge of finance while another made decisions about insurance and health care. But as the company grew, the form of governance changed, as did the pay structure.

Chroma once had a town-meeting style of decision-making, though some choices were made outside of meetings, Millman said.

“We graduated from the town meeting to a number of experiments in representative government, but they didn’t work,” Millman said. Instead, Chroma now has a steering committee that organizes and oversees production.

“That’s not to say I haven’t gotten into conflict with them. I have,” he said. “I come from anti-authoritarianism. I’ve been forced to embrace some concept of authority, which is contrary to my sense of what things ought to be like but is not contrary to my experience. This is actually necessary.”

With the steering committee, supervisors or shop foremen are not needed, Millman said.

“Our approach is: You know what we need to do; make sure it happens, and don’t depend on me to figure out how to do that,” he said. “But if it’s not happening, you can be assured someone is going to say, ‘It’s not happening. Let’s make it happen.’ ”

Initially, all employees, no matter what they did, earned the same amount: $30,000, which was both the minimum and maximum yearly salary, though Millman said some people took lower salaries to help the company.

As the company’s profits grew, so, too, did the pay, Millman said. A person in his or her first year would earn $35,000, while a fifth-year employee would pull in $52,500. Those numbers later changed in an effort to keep long-term employees, with the first-year employee earning $37,500 and a 10th-year worker pulling in $75,000.

New recruits would soon be allowed to come in at a higher pay-step.

“That worked really wonderfully for a long time until we realized that our top salary was insufficient to attract people to what the world calls ‘skill’ positions,” he said. “They were salespeople, applications scientists, et cetera.”

Now, workers are broken into a four-tiered salary system, with the bottom tier ranging from $37,500 to $72,500 a year and the top-tier coming in between $60,000 and $97,500, Millman said.

Though the pay is now different, everyone still gets a say, Millman said.

“There are regular meetings in each department,” Millman said. “They meet with the steering committee, they meet on their own, to make decisions about how to do their work. The company meets at least once a month to talk about where we’re going, what the trends are. Those meetings tend to run three hours.

“That’s a fair amount of time during the week,” he said. “We have an expectation that people are going to participate in making decisions that make them work better. if it takes a number of hours away from the work week in order to make them more productive in the future, it’s worth that.”

Forms of employee-ownership arrangements are worth it to fewer than 40 companies in Vermont, ranging from smaller worker cooperatives to large businesses, according to Ursula Jones, spokeswoman for the Burlington-based Vermont Employee Ownership Center.

“Oftentimes, what happens is the founder or owner of the company is thinking about retiring, and that’s often what will trigger this kind of transaction,” Jones said. “They decide they don’t want to sell to an outsider, and they want to keep the company in the community in which it’s founded.

“Sometimes it’s a way of acknowledging the work of their long-term employees and giving back to them, and also a way of preserving their legacy,” she said. “They may not want to see their company chopped up, sold off or closed down.”

Seventeen years after helping found Chroma, Millman is still with the company. Seventeen years into the experiment, he is still preaching the benefits of employee ownership.

“I’m always intrigued by the business gurus who say, ‘What you want is for employees to act like the owners,’ ” Millman said. “I say I want my employees to act because they’re the owners.”

David Greisman can be reached at 352-1234, extension 1439, or dgreisman [at] keenesentinel [dot] com.