Kaiser Permanente making a push for small businesses to become employee-owned

Kaiser Permanente has joined forces with Project Equity and Obran on a new initiative focused on employee ownership.

Business Resiliency through Employee Ownership aims to educate the health system's suppliers about employee ownership and support those firms in transitioning to such a model, in which the majority of a company's shares are owned by employees, the health system said this week.

The program offers two pathways that suppliers could pursue to transition to employee ownership: an independent shift backed by Project Equity or a conversation via acquisition by Obran.

Employee owners of businesses report 33% higher median income and 53% longer median job tenure, Kaiser Permanente said. Businesses in these models report 8.5% higher profit margins and are between three and four times more likely to retain workers.

Elizabeth Eldridge, director of sustainable sourcing, impact spending, at Kaiser Permanente, told Fierce Healthcare that the program "aligns with our social equity work" as it can grow business ownership in traditionally marginalized communities, improving their economic well-being.

"We are leveraging our purchasing power and focusing on our vast diverse supplier network to support and encourage employee ownership, which in turn, contributes to the overall success and resilience of our communities," Eldridge said.

The health system also began this initiative in an effort to assist businesses struggling to rebound from the pandemic, with the hope that boosting up those companies will also bolster the communities in which they operate.

Hawaii-based Courier Corporation is the first company making the switch through the Business Resiliency program, Kaiser Permanente said. CEO Nick Smallwood said that the proposition, received through a cold call from Obran, was immediately intriguing.

Smallwood said he spent six months learning more about how an employee-owned model would work and chose to move forward in partnership with Obran, according to the health system's blog post.

“As an entrepreneur, if there is a legacy I can leave, it’s that my employees, their families, and my community as a whole are thriving because of what we built,” said Smallwood. “Enabling my employees to become owners of our business will make us stronger.”

In Courier Corporation's case, Obran agreed to acquire the company at a fair market rate and then extend the option to employees to become owners in the business. As of late April, about half of employees have joined the collective, Kaiser Permanente said.

The health system said that four additional firms have expressed interest in transitioning to an employee-owned model so far.

“We’ve seen that the acquisition part can work,” said Ije-Enu N. Udeze Nwosu, executive director of Kaiser Permanente’s impact spending program, in a statement. “Now we look forward to seeing more companies transition to employee ownership, and the increase in productivity, community empowerment, and wealth creation that comes with it.”