From Ownership Structure to Ownership Mindset: Lessons from HFA Enterprises

When HFA Enterprises converted to 100% employee ownership on Halloween 2022, it committed to a fundamentally different way of governing and running a company. In a recent NCEO webinar, Ryan Ray and Dave Wilgus of HFA joined NCEO board member and moderator Howard Kaplan to share what they've learned. Their story offers a practical look at what it takes to build governance that actually serves employee-owners.

Starting with "Why ESOP?"

HFA began in 1990 as a small architecture firm in Bentonville, Arkansas. Over three decades, it grew into a 600-person enterprise spanning architecture, engineering, construction, and operations across seven offices, including a subsidiary in Mexico. By 2015, Dave and Ryan had become owners, and by the time they began exploring a transition, roughly 85 people held some form of ownership stake.

Ownership succession was a real challenge. An internal sale wasn't financially viable, and a sale to private equity didn't align with their commitment to preserving the company's culture and independence. As Dave put it, the goal was building "an organization that's strong and healthy enough to last for many generations to come." That mission pointed clearly to an ESOP. The transaction closed roughly six months after the board first convened to explore it in April 2022, a pace they credit to assembling an experienced advisory team early on.

One candid takeaway: the due diligence process forced a level of organizational discipline they hadn't previously had. Gathering every historical document and financial record was, as Ryan described it, like "having a whole other job on top of your job." But it left the company far better organized for every valuation and reporting cycle that followed.

Building a Governance Structure from the Ground Up

Before the ESOP, HFA had advisors but no formal board governance. As one outside advisor bluntly told them over dinner: "You guys don't have board meetings, you just have refined ownership meetings."

The ESOP transaction changed that. As part of the deal, the trustee required two independent directors to be seated within specified timeframes. Rather than treating this as a compliance checkbox, HFA used it as a design opportunity. They identified the skill gaps on their board, such as ESOP governance experience and financial expertise, and recruited accordingly. The result was two independent directors with complementary strengths: one with deep experience in governance structures and ESOPs, and another with a financial background and a disposition toward flexibility.

Ryan took on the board chair role not by default but because his colleagues recognized his skill for structured project management. He approached governance as he would any major project: establishing committee charters, formalizing policies (investment, unsolicited offers, and others), and building a board book process that distributes a comprehensive, paginated PDF to all members two weeks before each meeting. The agenda goes out a month in advance. Six-hour quarterly meetings are devoted to substantive discussion, not to reading documents aloud.

Howard underscored the significance of this preparation: "Independents must read the materials before they go in. You don't want it to be explaining—you want it to be a point where you have questions and answers."

The Difference Between an Ownership Structure and an Ownership Mindset

Dave made a distinction that resonates well beyond HFA's walls: having an employee ownership structure and having an employee ownership mindset are "distinctly different things." The ESOP structure itself is a vehicle. The mindset is the culture it can enable when leaders are intentional about it.

At HFA, that mindset shows up in how they talk about the company. They emphasize "employee-owned, people-powered" as a dual message: employee ownership speaks to the collective, while "people-powered" speaks to what each individual brings. Their culture code aspires to a "people-first culture of empowerment where talent thrives." They recently launched a company-wide ideas platform to crowdsource continuous improvement suggestions, with more than 600 ideas submitted so far.

Succession Planning as an Ongoing Practice

With three of the original five majority-shareholder directors now retired or stepping back, succession planning has moved to the center of HFA's board agenda. Their approach involves bringing internal leaders on as board advisors in a structured tryout that lets candidates demonstrate whether they can shift from their day-to-day operational perspective to a true director mindset. Two internal advisors joined the board this year, each having gone through a formal nomination committee interview process.

Ryan described the dual track they're pursuing: developing internal advisors as potential future directors while simultaneously conducting a parallel search for additional independent directors to fill identified skill gaps. The company's board guidelines call for seven directors, with at least three being internal, ensuring leadership continuity while maintaining independent oversight.

This post covers only the first half of a wide-ranging session. The full replay goes on to cover how HFA structures communication between the board and its employee-owners, their deliberate shift to a virtual-first company culture and what that means for maintaining cohesion, how board evaluations function as a built-in accountability mechanism, and hard-won lessons about incentive plan design at the time of the transaction (including one structure they're actively unwinding today). The session closed with a Q&A where audience members raised questions on term limits, board succession, and what it looks like to bring governance transparency to the broader employee owner base.

If these topics are relevant to your organization's ESOP journey, the full replay is available on the NCEO website. NCEO members can access this and every Tuesday webinar as part of their membership, along with a full library of publications on ESOP governance, board structure, and culture. Learn more about NCEO membership.