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The partners at Charter Construction had long agreed on a plan for when company president Peter Saladino retired. But as that time drew nearer, they began to wonder if the transition strategy that had worked when company founder Frank Firmani passed the leadership reins to Saladino was still the right one for the Seattle-headquartered company.

鈥淚t was becoming more difficult to find the next person to buy in as the value of the company grew,鈥� said partner Eric Jackson, who also serves as vice president in charge of Charter’s Oregon operations.

After examining a list of possible ways the transition could be structured, Saladino, Jackson and their third partner, Brian Johnson, reached a decision. Late last year, Charter Construction announced it had started the shift to an Employee Stock Ownership Plan, or ESOP.

Switching to an employee-owned model is gaining popularity as a choice for companies, especially those in the manufacturing and construction industries. More than 7,000 U.S. companies 鈥� with more than 13 million total employees 鈥� were identified by the National Center for Employee Ownership as operating as ESOPs in 2015. One-third of those companies were in the construction and manufacturing industries, according to an analysis of the NCEO data conducted by the University of California, San Diego.

For Charter, the model offered several benefits, starting with providing a way to attract and retain high-quality workers. About 40 percent of the company’s profits each year end up going to taxes, Jackson said. With an ESOP in place, that money would go instead into a trust overseen by an independent trustee. The trust would purchase company stock that would then be distributed among eligible employees. The more time employees spent with the company, the more shares they would acquire 鈥� along with becoming fully vested.

The decision to move to an ESOP model was just the first step in the process for Charter. Approximately one year before announcing the change to its approximately 230 employees, the company brought in law firms with expertise in ESOP transitions, whose lawyers then held in-depth interviews with Charter’s partners and other key employees to determine whether an ESOP was the right approach for the company.

The lawyers wanted to make sure, for example, that the partners weren’t using the ESOP as a way to step away from the company quickly. Fully implementing an ESOP model within a company can take at least five years 鈥� even as many as 10, Jackson said. A company looking at a one- or two-year transition window may not be a good candidate.

In the case of Jackson and Saladino, although the two men can see their retirements on the horizon, Jackson said they’re both still several years away from leaving their positions with Charter.

The lawyers also were looking at whether an ESOP approach fit with the company’s culture. For Charter, that was an easy question to answer.

鈥淭reating employees like owners, it was something we were already doing, so it felt like a natural transition,鈥� Jackson said.

Because the ESOP model can be complicated at first, Jackson said it’s important to give employees time to 鈥渨rap their minds鈥� around the concept.

鈥淭he most important thing during a transition to an ESOP is to minimize change,鈥� Jackson said. 鈥淵ou need to give employees time to realize that nothing really changes. They’re just going to eventually have a huge financial benefit in addition to their paychecks.鈥�