Around ten years ago I founded ECA Solar, since then we’ve remained stubbornly independent without any outside investors or board members. As the business has grown, I have decided to share over fifty percent of the free cash available after taxes for distributions with employees. It may be customary to distribute 10-15% with a Company’s profit share or ESOP, but 50% is unusual given they are employees, not investors who have contributed to the capitalization of the business. I have strong feelings about incentives and think about them often. Ultimately, I think incentives are the true way to create wealth and reward performance. It is one of the unique features of our Company that differentiates ECA SOLAR from other platforms in community solar and D.G. markets. Charlie Munger often speaks of the power of incentives who stated “show me the incentives and I will show you the outcome.”
How it works? In short, if I elect to take an owner’s cash distribution; then the other team members simultaneously participate on a pro rata basis. Its simple, aggressively transparent and unified. Some years there is more cash available; some years there is less. Of course the distributions are after tax distributions. Importantly, it is not based on some arbitrary EBITDA projection or random Megawatt threshold set in a smoke filled board room. The central question is whether there is free cash available for distribution? By no means is the program perfect and it will inevitable change and evolve over time.
Naturally, if someone elects to leave the organization they will no longer participate in this Company incentive program. Their previous units can be re-distributed or reserved for future talent. This has resulted in a very strong retention rate. Our talent acquisition remains a source of pride. Our team members are sincerely motivated to bring on the best and brightest, which lift their own boats and the Company’s in the process.
I have had friends and competitors in our space ask why on earth I would give a 50% distribution of the after-tax cash that is available? Have I lost my bloody mind? Employees are critical to our success at ECA, many of which have become close friends and confidants. I enjoy watching people I am close to share in the success of ECA SOLAR; especially the most tenured who have loyally served the organization. Ultimately, I believe our incentive program will make us more successful and serve as a competitive advantage in a crowded space. This is especially true as an independent organization. It is the secret weapon that gives team members the extra juice to raise the bar and lean in. Our culture is central to who we are but it all sits on the shoulders of the incentive program which shares the promising upside and future we have carved out.