Jessica Kriegel:
This is my favorite episode of Culture Leaders. To date, it all started a year ago when I saw this video on YouTube. Take a look.

Imagine you wake up on a random Wednesday in the middle of your life and everything that you’ve ever wanted to do in your life, you can do nothing. All because you can work and you did things the right way and someone held up their word deep.

Alright? It’s a little different than what we normally get together. Anybody want to have an owners meeting?

Pete Stavros:
You do have some news to share, and the news is we found a new owner for the business.

Pete Ros is here. He is the co-head of the private equity firm, KKR.

I mean, the performance of the company and the growth and value was astonishing. This is beyond our wildest dreams in terms of how well this business performed. It is huge collection of lots of little things that the workforce did. Again, they did it. They earned it, made this company more than triple, almost four X their profits, and so shouldn’t everyone participate? That’s the simple philosophy.

Pete Stavros:
So logical question would be what does this mean for you financially? Because you’re all owners in this business. You guys ready to get into it? Yeah. Even our newest colleagues are going to get a meaningful payout of $20,000. Well, if you think that was good, hold on to your hats. If you joined last year, the payout is 40,000. So for this cohort, the payout is one and a half times annual pay. So the average payout is $70,000. For this deal, I was shocked. I was standing next to my nephew who just started, remember looking at him and hugging him, and

Pete Stavros:
This is two and a half times your annual pay. Three and a half times four and a half times five and a half times your annual pay. For this last group, the payout is six and a half times. It’s truly emotional. I’ve never seen anything like that in my life. The excitement, the tears, the goosebumps, just she excitement. Everybody was in shock. Honestly.

Pete Stavros:
First thing is we’re prepaying for financial coaching for everyone. We want to make sure that you guys understand your payout, understand your tax situation, you know how to invest the money, and it gets put to the best use possible. Who can’t believe it? I mean, but it’s good to know that you work for a good company and put your time in. They do help you out as well. Where else have you seen this? Many men and women hugging, shaking, crying, sharing stories of how we started out here, what we do every day coming into this company, try to make it better for everybody. It brings the extra oomph to every person that works knowing that their own workmanship. You see, everything’s gone up. Just other companies need to do this.

Dr. Jessica Kriegel:
Every cent that we get back, we earned.

Pete Stavros:
I’ve never had anything like this happen to me in my entire life. It’s life changing for everything.

Pete Stavros:
I wish that every company could see what this has done. Every dream that I’ve ever had in my life I can do now. It doesn’t just change my life, it’s going to change the whole community.

Dr. Jessica Kriegel:
Today I got to sit down with Pete Stavros, the co-head of Global Private Equity at KKR, and also the chairman and founder of the nonprofit Ownership Works, whose mission is to increase prosperity through shared ownership at work. This is a mission that is near and dear to my heart. We talk a lot about creating a culture of ownership and a culture of accountability and how culture drives results. Well, Pete is doing something that will significantly move the needle, not only on creating a culture of ownership to drive results at work, but we’ll move the needle on improving lives for people everywhere. If only we will take a listen to what it is that he and the team at Ownership Works and KKR are doing. We dove deep in this interview talking about what is required to change the beliefs about leaders around shared ownership. One of the keys he says, interestingly is CEO empathy. He’s working on something called Empathy Gyms for CEOs in his portfolio companies. This was such a rich conversation. I hope you will share it. I hope you will share it with everyone in your network so that we can help peek, get the word out about the power of employee shared ownership. Take a listen. So Pete, welcome.

Pete Stavros:
Thank you for having me.

Dr. Jessica Kriegel:
What is your why?

Pete Stavros:
I think there’s a couple things. One is at the level of an individual company, there’s just so much opportunity to not only do good things for workers, but to make the company stronger. Something like 30 to 40% of the employees at just an average company are quitting every year. As you

Dr. Jessica Kriegel:
Know, wait, 30 to 40% of employees are quitting at an average company.

Pete Stavros:
Yeah, the quit rate, it bounces around a lot, but it peaked recently at 40%,

Speaker 6:
Which

Pete Stavros:
Would imply just an average company is turning over its whole workforce every two and a half years. And as you know, 70% of Americans don’t like their job as measured by Gallup.

Dr. Jessica Kriegel:
I think it’s even higher now. Did you just see there’s a recent Gallup poll that says that we are at a 10 year low for employee engagement?

Pete Stavros:
Yeah, I believe it.

Dr. Jessica Kriegel:
Yeah.

Pete Stavros:
So whatever, two thirds of Americans, something in that range are financially illiterate. There’s all of these issues in the workforce that if addressed are not only good for workers but can make company cultures stronger. And of course, the wealth creation opportunity of ownership really strikes at the Achilles heel of capitalism, which is, I think it was Churchill talked about the unequal blessings of capitalism relative to the equal misery of socialism. The problem with our system is all the rewards are piled up in the bank accounts of relatively few people and broader ownership would strike at the heart of the problem.

Dr. Jessica Kriegel:
So employee ownership is your why.

Pete Stavros:
Employee ownership, I guess is my what. Okay. What is

Dr. Jessica Kriegel:
The why?

Pete Stavros:
And the why is all the opportunity I mentioned to do both good things for workers and good things for companies.

Dr. Jessica Kriegel:
Okay, so this started early for you, right? I mean, my research shows that you’ve been thinking about this for a long time, maybe inspired by your dad. Tell us about your dad. How did this become so crystal clear to you so early?

Pete Stavros:
It never did. I’m almost embarrassed to say all these things happened in my life, and yet it’s not like I was setting out to go make employee ownership some kind of broad reality. It was a little bit of a random walk. So certainly as a kid, my dad was an hourly construction worker. He paved roads for a living at a union shop. Maybe there were a hundred workers at this construction company in suburban Chicago, and there was massive conflict between owner and worker, and my dad brought all this home to the dinner table. So really wanted my sister, and I’d understand if you’re an hourly worker, it’s hard to build wealth. I think at the time he was making $15 an hour. Nobody listens to you as an hourly worker. So you have no voice in your work and you have no incentive. If you’re paid by the hour as half of Americans are, you have a disincentive for productivity.

Speaker 7:
You

Pete Stavros:
Want more paid hours. So it started with my dad planting this seed of wouldn’t it be great to have profit sharing or ownership or something to align workers with their companies and could help companies and workers alike. So my dad was kind of the original employee ownership advocate, at least in my family.

Dr. Jessica Kriegel:
Was he talking about employee ownership?

Pete Stavros:
He was

Dr. Jessica Kriegel:
At the dinner table saying, you know what would be great?

Pete Stavros:
He was a little bit more focused on profit sharing to be honest. And there were real discussions in his company about long tenured employees working their way into a share of the

Dr. Jessica Kriegel:
Profits.

Pete Stavros:
Never happened, but my dad was a driving force behind that idea in his little construction company. Now again, I did not leave home thinking this is the answer and I’m going to go do something about it. My parents didn’t go to college. I didn’t have much of a direction. It’s like I wanted to go to Wall Street. Truth is the only job I got was out of college, was at the old SMN Brothers, and I just wanted to get a good job and be financially secure as fast as I could. What ended up happening was by happenstance, I did end up at an investment firm and they had me, one of the first things I worked on was, it’s called an esop. I don’t want to get into the gory, nerdy details of it, but it’s a tax structure that gives companies a tax incentive to share ownership with workers inside of that company, which is called Gleason Corporation in Rochester, New York were hourly workers with million dollar ESOP accounts. And I was just blown away by that. What I saw when I went to business school, in your second year of business school, you get a chance to study kind of whatever you want. And I partnered up with a finance professor named Josh Lerner at Harvard, and we went way deep into the history of ESOPs.
Why did Congress pass this law to encourage ownership? What happened with it? Why were ESOPs more common? And so we published a paper together on that. This is now 20 some years ago. And then you really got to fast forward to when I got my first leadership position at KKR in 2010, I was running our industrial investing business. That was the first time I started experimenting with ways of sharing ownership with workers. And again, I wish I could tell you there was some grand plan. The reality was we had not been very active in manufacturing investing. I certainly had no experience and I was astonished to see the state of the workforce and in all of the things we tried, one of the things was what if everybody was an owner? Could we then try and shift the culture into a healthier direction? Because all of the aggregate data we mentioned around quit rates and engagement scores, all of that’s worse the further you go into our economy and into an individual company. So you think about a manufacturer, sometimes 80% of the workforce are frontline hourly employees and plants. They’re really unhappy. So those averages understate the problem.

Dr. Jessica Kriegel:
So the first time I heard about you, I saw YouTube video, the Garage Door Company, and you’re on stage in a factory telling people about how they have earned this life-changing wealth by being an owner in the company over time and people are in tears. I mean, it’s such a moving video somewhat. John phrase sent it to me. I watched the video and I was like, I got to get to know this guy. What’s going on? Why doesn’t everyone know about this? Why doesn’t everyone know about this?

Pete Stavros:
I don’t know. I always feel like I talk about this to the most embarrassing extent. I’m always surprised how little people have heard about what we and others are trying to do. It’s not just us. I think people don’t like clickbait is more negative stories. Human beings tend to be drawn to crises and negativity. And so if there’s a positive story, probably not as popular, which maybe makes it less of an attractive story for reporters. Look, I’ll also say we’re still early in this. So we at KKR, I’ve been at this 15 years. The nonprofit that my wife and I started has only been around three and a half years. We’re getting going. The old ESOP movement I mentioned from the seventies has kind of petered out. There’s still some great work being done in the ESOP world, but it’s not the big boom that it once was. So I think we got a lot of work ahead of us. We got to prove out the business case. We got to continue spread the word. To your point, get CEOs excited about this as an idea because it is still relatively unknown. I’ve done some polling and focus group work just broadly across the country to understand how people feel about ownership, employee ownership. Three in a hundred Americans even know what we’re talking about right now.

Dr. Jessica Kriegel:
How many?

Pete Stavros:
Three and a hundred, 3%.

Dr. Jessica Kriegel:
Oh wow.

Pete Stavros:
So 97% of the country still has no idea that this is a

Dr. Jessica Kriegel:
Positive. They don’t even know it’s an option.

Pete Stavros:
Don’t even know it’s an option. The positive side is once educated on the idea, it’s overwhelmingly positive, the feelings towards it, across the political spectrum, people who lean Republican view it as, Hey, it’s great for workers and it’s not a giveaway. You got to work to get it. And people who are more progressive view it as a way to attack income inequality.

Dr. Jessica Kriegel:
So I’ve been consulting for, let’s call it 15, 20 years now. I’m not going to do math in my head right now, but I feel that most of the time what CEOs are saying behind closed doors is people just don’t want to work anymore. Everyone is just so entitled and they’re lazy and they don’t want to work. And so this I feel is a structural way, not just in, let me get them all jazzed up with a team building that gets them excited about working for what lasts three days. This is a way to actually incentivize productivity where people are bought in that buy-in culture, the culture of ownership, it’s so obvious. It just feels like so obvious. And yet there’s CEO resistance to the idea, even though this seems like the silver bullet that they’ve been looking for. What’s the resistance?

Pete Stavros:
There’s lots of, I would say, objections to the idea. And I think many of them are fair CEOs. I’ll start with the most fair one are overwhelmed. So CEOs will sometimes say to me, take one of our own CEOs. Holy cow, Pete, you’ve already got me on the hook to double earnings to reduce my carbon footprint, reduce water utilization and energy consumption, add diversity into the workforce and on and on and on and on and on top of all of those priorities. Now you’re saying make everyone an owner, drive employee engagement, teach financial literacy, communicate very transparently about the business, the business plan, the financials. I can’t do it all. So I’d say that’s one. And we can come back to maybe some of the retorts to some of the objections, but that’s a very fair common one.

Dr. Jessica Kriegel:
They feel like it’s another project.

Pete Stavros:
Yes,

Dr. Jessica Kriegel:
Right.

Pete Stavros:
I would say second, there’s a feeling that it’s an investment for which the payoff is very long-term. So we’re living in a short-term economy, quarterly earnings, even longer term investment firms in public stocks are often looking for 12 to 18 month, maybe two year paybacks. Sometimes these culture shifts. You would know better than anyone take a decade. One of our best case studies, Ingersoll Rand, the quit rate dropped 90% and the engagement scores went from the 20th percentile to the 90th, took 10 years. So a lot of CEOs are like, I won’t even be around 10 years.

Dr. Jessica Kriegel:
If they don’t turn it around faster, they will be replaced. And so what’s in it for them?

Pete Stavros:
And then you get into, workers will never understand ownership, so they won’t value it. Workers just want cash. They doesn’t even want stock. It’s a long list of things to work through. Maybe to get to some of my feelings about the objections on the, Hey, CEOs are overwhelmed and they’ve already got such a long list of priorities. I think if we can get them to understand that if you do a great job on these last few things I mentioned, ownership, engagement, get the quit rate down, teach financial literacy, all your other priorities will be easier.

Dr. Jessica Kriegel:
I think it’s not a project. It has to be a way of being. It is a way of being. Because if it’s a way of being, then it influences how people think and act and everything gets easier and lighter. There’s something I’ve been trying to figure out that I feel like you answered for me, which is the natural paradox of capitalism in corporations. That number one complaint that we hear from CEOs is, my people are working in silos. I need these departments to collaborate more, collaborate, collaborate. But competition is incentivized in capitalism, even internally, competition, right? Because if the company is a pyramid and I’m at the bottom and I want to go up, I have to beat out the people who are my peers and the way I beat them out as I information hoard and I look better than them. And so the system is not incentivized for collaboration. And everyone’s scratching their head saying, why aren’t people collaborating? This is the solution. It changes the system to make it easier to do all the things they’re trying to do. Do they not see that and say, or there’s got to be the CEOs who hear about this and say, oh my goodness, sign me up. I’m so excited.

Pete Stavros:
A hundred percent.

Dr. Jessica Kriegel:
And what is the differentiator in the type of person that makes the choice that this is, I’m all in versus that sounds like a lot of work.

Pete Stavros:
So this is something we are studying. Let me just, this is a slight tangent, but it gets at your question. When we roll out these ownership programs and we provide all of these tools to CEOs around how to communicate, educate, drive, engagement, et cetera, sometimes it is a majority of the time, but it’s nowhere near a substantial majority. The culture shifts. It takes years, but you see quit rates go down and engagement scores go up. The rest of the time nothing happens. And so we have been studying what is going on. It’s the same program. And even when companies are very similar, you get two totally different outcomes. And what we’re honing in on is leadership. And initially what I saw anecdotally was there were categories of leaders who did a good job in changing the culture. And it kind of gets to the type of person who’s drawn to this, and I’m embarrassed to admit this, but this is really what was going through my head years ago. Immigrants are better, they’re more empathic,

Speaker 8:
They’re

Pete Stavros:
Better at driving these cultural shifts. Women, people who grew up poor people of deep religious faith.

Speaker 8:
There

Pete Stavros:
Was this constant, these categories of people, the common thread being they tended to be more empathic. These are huge generalizations and a little bit embarrassing to admit, I commented on this at a conference at one point, and a professor at Stanford named Jamil Zaki reached out and said, I study empathy and I’d like to understand what you’re talking about. And so I explained, well, if I can find a CEO who’s a great operator, who’s a woman or someone of deep religious faith, my experience is they do a better job of making employees feel trusted, respected, included in building these ownership cultures. And he said, so wait, your solution is you’re just going to look for religious people or immigrants. And I said, I’m embarrassed to say that’s been a flag in my mind. And he said, well, the good news for you is empathy is a variable trait.
And I said, I don’t believe that a 55, 60-year-old CEO, who’s a fully baked human being can become more empathic. He said, there’s 50 years of research proving it. It’s not like debatable. That’s a fact. So empathy ends up being something that we think we’re still proving this out is really important to creating the kind of culture we’re shooting for. And what we’re working with Stanford on is how we train CEOs on empathy. So right before the holidays, we had a bunch of our CEOs in town and we worked with the financial health network to go teach them about the life of their frontline workforce. So go open up a loan, go get a payday loan, open up a small dollar checking account and savings account, and do all of these things that people living on the financial edge are doing. We’re doing things like that. We’re also having our leaders do frontline work. We are developing with Stanford empathy gyms to teach people to enhance their empathy. And what we’re trying to prove out is we can move, empathy can also be measured, which also shocked me. So we’re hoping we can prove you can move empathy, and then we’re hoping that the correlation is actually causation and we can see better employee outcomes.

Dr. Jessica Kriegel:
Do you have to want more empathy?

Pete Stavros:
Great question. It’s the most important thing. You have to want to, there’s

Dr. Jessica Kriegel:
The problem.

Pete Stavros:
What the psychologists, the researchers would say is actually you have to believe it’s a variable trait. That’s the most important thing. If you think it’s fixed the way I used to, it’s like the Carol Dweck growth mindset.

Dr. Jessica Kriegel:
If

Pete Stavros:
You don’t have the growth mindset as it relates to empathy, very tough to move it.

Dr. Jessica Kriegel:
Okay, so let’s say I believe that it’s variable and yet I don’t see its value. Can I still move it?

Pete Stavros:
That’s a great, I don’t know.

Dr. Jessica Kriegel:
Yeah. Well, we’ll ask the Stanford professor to figure that out, right?

Pete Stavros:
I know.

Dr. Jessica Kriegel:
Go to the empathy gym.

Pete Stavros:
Yeah.

Dr. Jessica Kriegel:
Okay. So what I’m trying to understand is where is the culture going right now? If we zoom out beyond corporations necessarily, and you see this is where the question’s coming from. I was talking to the CEO of a big company yesterday, and she’s going to be on this, I’m not going to say her name. And she was saying, the problem with collaboration today is we have these huge shifts happening, unexpected, unpredictable shifts happening. For example, tariffs who owns tariffs at the company, there isn’t the tariff department, right? Tariffs is something that we all now have to grapple with together because it affects the finance team, it affects legal, it affects production, it everyone is affected by that. And so right now we have to come together more quickly and people just don’t know how. So let’s say they’re incentivized to come together more quickly because they have employee ownership and they’re all wanting to win and they’re all excited. And we have empathy, for example. Where is the culture going and being able to, we’ve got AI tools, people are working from home. I mean, the nature of work is shifting so rapidly. How are you seeing that affect the effectiveness of this or not?

Pete Stavros:
Well, I can tell you, maybe I’ll tell you what we do internally,

Dr. Jessica Kriegel:
Because

Pete Stavros:
We have an ownership culture. Everyone at our firm is an owner, and collaboration is at the core of our DNA. It’s like when we talk about our culture, collaboration is at the center of it. So yes, you need the foundation of common ownership. That helps a lot. But when we hire people, we are screening heavily for collaboration. One of the ways we do it, it’s like what Ritz Carlton does to attract service-minded people. You come to a career day and they beat you over the head with service

Speaker 6:
And

Pete Stavros:
People opt out. They’re like, this is not for me. If you interview with us, you’re going to hear 20 times from 20 different people about how the DNA of this place is. We collaborate, we work together. We’re not a star culture. We always do what’s good for the firm. That’s not for everyone. How you get reviewed is based on how well you collaborate, how you get promoted, how you get compensated. It’s got to be from the start of your career to the end of your career, collaboration has to be at the heart of how you are evaluated, which is I think we’ve done a good job of, and we talk about it constantly throughout. I’ve been here 20 years, there’s not a year that goes by that we don’t talk about collaboration incessantly at the management across the whole firm. So look, we also don’t allow work from home. I know that’s a contentious idea. The belief is we just can’t train our young people as effectively if they’re at home. We think to be a part of the culture, you got to be here or in one of our major offices. That’s also not for everyone.

Dr. Jessica Kriegel:
Yeah, it isn’t for everyone. I mean, does it limit you in the ability to, well, I guess you’re KKR, right? So KKR has plenty of people who want to work there. You’re one of those companies that has the brand that will attract the talent wherever you are. Smaller organizations maybe don’t have that luxury. Do you believe in work from home for all of your portfolio companies too?

Pete Stavros:
We are very careful not to mandate something like that to our companies. If you tell a CEO what to do, then that CEO is not accountable.

Speaker 6:
It’s

Pete Stavros:
Like, yeah, I’m doing what KKR told me to do. So we are very careful on something like that. And a lot of our companies have very lenient work from home policies. And if it works for them and they can build the kind of culture that we want and get the performance that we want that, that’s fine. It wouldn’t work for us.

Dr. Jessica Kriegel:
Right. Okay. So beyond ownership, what do you believe are the best culture traits for an organization to succeed regardless of industry?

Pete Stavros:
There’s so many things that we look at. I’m a big believer in an internal fill rate. I am not a believer. And again, not everyone agrees with me. I’m not a believer in lateral hiring. I think that’s a sign of an unhealthy culture. We used to do a lot of lateral hiring at senior levels, didn’t work. And I think it’s a poor signal. Just imagine you’re a mid-level person. You’re waiting for your shot. A seed opens up and bam

Speaker 7:
Right

Pete Stavros:
Above you, someone gets hired in. So when we’re evaluating cultures, we’re looking for high internal fill rates. We’re looking for low quit rates, high engagement scores, if it’s relevant to the company, high worker safety, financial stability of the workforce. So there’s a bunch of metrics that we’re looking at when we’re evaluating the health of an organization beyond the metrics, it’d be hard for me to say in a media company that’s highly creative, it’s this. And in a maybe less creative manufacturing old line industrial business, it’s the same general characteristic. So I would probably veer towards these harder metrics that maybe traveled across industries.

Dr. Jessica Kriegel:
Yeah, we partnered with Stanford last year to do research on this, and the number one culture trait that drove financial success was adaptability. The ability to shift from one thing to the next thing, whatever those things are. So actually it’s not getting stuck in we are the integrity company or we are the people first company. It’s actually being able to switch from integrity to people first or people first to detail focused. That’s the sweet spot.

Pete Stavros:
Yeah. Interesting. I mean, the world’s changing so fast. It makes

Dr. Jessica Kriegel:
Sense so fast.

Pete Stavros:
And you were talking about where the culture is headed, where I hope the corporate culture is headed is more of an orientation towards people in part because it’s going to be required. There’s people, as you say, the labor force participation rate we all know is not where it needs to be. There’s a lot of people sitting on the sidelines. There’s low disengagement. Productivity’s been, we’re now seeing a little bit of a bump in productivity, but it’s been not great for a long, long time

Dr. Jessica Kriegel:
In America. Wait, productivity has been not great

Pete Stavros:
For a long time Recently. It’s picked up,

Dr. Jessica Kriegel:
Right? Tell me more about that. I feel like productivity has been growing consistently.

Pete Stavros:
Very low rate. Economists would love to see 2% plus productivity, which we’re now, we’re right around there for

Dr. Jessica Kriegel:
The first time. Are you talking about the GDP? Not worker productivity.

Pete Stavros:
I’m talking about GDP relative to hours worked.

Dr. Jessica Kriegel:
Okay. And that is not,

Pete Stavros:
Has been disappointing for forever.

Dr. Jessica Kriegel:
Really.

Pete Stavros:
Yeah.

Dr. Jessica Kriegel:
Does it feel that way?

Pete Stavros:
Does it feel that way? I does it feel that way? To me personally, I feel like we’re doing more per hour constantly.

Dr. Jessica Kriegel:
Right. That’s what I’m kind of getting at. I feel like the energy or the perception, the sentiment is that we’re doing a lot more with a lot less these days. I

Pete Stavros:
Kind of depends on how productive it is. I mean, one of the conversations we always have is activity versus progress. Sometimes there’s a lot of activity at companies without

Dr. Jessica Kriegel:
A lot of, okay, that’s the distinction.

Pete Stavros:
Without a lot of tangible progress,

Dr. Jessica Kriegel:
There’s a lot of activity happening. It’s more and more activity, maybe more zoom calls than ever before. But the production, the outcomes from those zoom calls have not

Pete Stavros:
Increased. That’s what the economic data would indicate.

Dr. Jessica Kriegel:
Yeah. Yeah. Okay. So how would someone describe you as a leader that works for you and your team? You personally?

Pete Stavros:
Gosh, me personally, I think people would say, I don’t know.

Dr. Jessica Kriegel:
Give it your best guess.

Pete Stavros:
I think people would say as a leader, I would say I’m a combination probably of demanding, but highly empathic. I score very high on empathy.

Speaker 6:
You

Pete Stavros:
Do? Yeah. But I think I’m also pretty demanding. And empathy has, there’s different components of empathy. I think there’s some things I’m very good at and some things I’m less good at. I’ll give you an example. One of compassion is a component of empathy, like genuine concern for other people. I have that very high. There’s this separate component of empathy around catching other people’s feelings. I am good at sensing how someone else is feeling, and I absorb that in some situations. I’m less good at taking your other person’s perspective, which is a component of empathy. So I’m not off the charts positive in all of it, but overall I tend to be more empathic. But like I said, I’m also probably pretty demanding to work for.

Dr. Jessica Kriegel:
So would you describe yourself as a transparent leader? Do you share a lot of information with your team?

Pete Stavros:
Big time. Probably too much.

Dr. Jessica Kriegel:
Okay. Too much. I’ve been really interested in this lately because I think that the corporate communications has started to take over to some extent CEO authenticity. What I mean by that, I’m interviewing CEOs all the time for this, right? And I have a lot of CEOs who we sit down, we have a great conversation, and then corporate comms comes in and says, well, wait a minute. I don’t know about that word. And can you cut this section? And this doesn’t feel right. And they want to create a very neat package. And even if you, on investor calls, you see CEOs reading and it’s these bullet points that they have to make sure on town halls, it’s on a zoom call and everything is so preplanned that there’s a lot less room for organic interaction even in a group setting. And it’s become that Now the CEOs feel like these play action robots. They’re like cardboard cutout leaders, and it’s because of liability issues. People are afraid of what would put my foot in my mouth. And then these viral moments where CEOs say something on a zoom call and a social blows up, and now they’ve been disgraced, but there’s something about transparency that makes me want to follow you as a leader. And so that is with employee ownership, transparency is really important. I mean more transparency than average probably, right? But it’s risky. How do you balance that?

Pete Stavros:
I probably don’t balance that super well. I probably veer towards the side of maybe taking a little bit of risk in terms of being too transparent. I think being a leader, building trust is critical. And I could build trust with you in different ways. I could commit myself to an action and then you would see me do what I said I was going to do and that would build trust.
Or I could be very transparent and open with you and share openly what’s going on with the business, how we’re doing, what the risks are, and that can also build trust. And I think great leaders do both in a controlled way, and I could maybe do a little bit of a better job on the controlled way side because I’m a very open person, which scares our comms department sometimes. But as it relates to employee ownership, so transparency. See, if you’re going to do this the right way and you make someone an owner, they’re going to have expectations of you. They’re going to have expectations to see the financial statements, to understand the business plan. Okay, well, you share the financial statements and an hourly worker in a manufacturing plant who makes $22 an hour just saw that the company makes $200 million of annual profits, that’s a risk. You’re going to have some very tough conversations after they first see that information. I would take that risk. I’m a big fan of treating everyone like adults. Yeah, the company makes a lot of money. It’s owned by these investors. The good news is you’re now an owner too. You’re participating on that side of your balance sheet in a way that you never did. But there’s going to be people who say, I don’t care. This is unethical. I should be making $50 an hour if the company makes 200 million a year.
So I would veer towards jumping off the ledge and taking the risk. I think with that comes some risk.

Dr. Jessica Kriegel:
Well, and I suppose the requirement to educate, because a lot of it is you share the financials and people have no idea what they’re looking at, or they’ll see something and misinterpret what that means and then make some assumptions and then make decisions based on false assumptions. I mean, I worry about creating fear in the workforce or losing people because they see, oh, we’ve had a couple bad quarters. Does this mean that my job is at risk? Maybe I’m going to go look for a job. I still think that the transparency in the face of that risk is positive,

Pete Stavros:
And there’s risk the other way. People aren’t dumb if volumes are down in the manufacturing plant. They’re like, oh god,
Something bad could happen here. I think stepping into the breach with information is positive, but there’s risks on both sides. If you don’t communicate, I think people will fill that void with their own narrative. If you communicate. I understand that could also raise some concern, but part of it also is how you set expectations. If day one you say, we’re making everybody an owner and you are going to hear the good and the bad and the ugly all the way through, I’m not going to hold anything back, so I’m going to treat you like an adult. I think you get more than you lose, get more than you risk by a lot. I’ll give you an example. One of our companies has made it a point to share major corporate information with the employee base before the public. Like all of the employees, if there’s an acquisition or divestiture or whatever, and I can’t tell you the mileage that CEO has gotten out of this because people come up to him and say, I’ve never worked at a company. I’m an hourly worker. I’ve never been told information and been trusted to keep it quiet. The ceo EO will say, stay off of social media.
You can tell

Dr. Jessica Kriegel:
You’re not allowed to share this.

Pete Stavros:
And then a week later they share it with the public and that has blown people away. So did it take, it was a risk. People could have run off and posted it or told their friends or call the reporter or who knows what, but there was also a big benefit of that idea of trust.

Dr. Jessica Kriegel:
Yeah, I used to be A-C-H-R-O and it was a technology company and the company at an executive meeting, the CEO tells everyone, okay, guys, we’re going to have layoffs, so let’s spend the next couple months figuring out how many layoffs, where the layoffs are going to be. We’re going to figure this out. And I made the choice at that time to break the executive seal of silence, which is almost an assumed seal of silence. And I told my entire team, I was like, we’re going to have layoffs, guys, so you’re at risk. I don’t know how many layoffs we’re going to have. I don’t know when, but I’m going to keep you informed about this as we go. Which some people criticize that because it did create fear. I mean, there were people on my team who started to panic a little bit, am I going to lose my job? Maybe? And then what ended up happening, some people found new jobs, and then by the time it was time to choose, I didn’t have to do any layoffs. My team had naturally attrited and the people who stayed, they were so grateful for having been informed and the people who left, they were so grateful for having been informed. And you ask any of those people today, would they follow me to a company? Now they

Pete Stavros:
Would

Dr. Jessica Kriegel:
Because they knew that I was willing to entrust them with information. But that choice does not get made. I mean, that choice does not get made hardly ever out there because we’re afraid, well, what if we lose the wrong people? But it feels unfair because free market capitalism has to work both ways, employees and owners, and I feel like what you are doing is encouraging that kind of, we’re treating people like adults. We’re all in this together. If we’re all in this together, then we’re actually all in this together, and it doesn’t push people down. So you’re making a pitch right now to the CEO who’s now piqued his interest or her interest and they’re thinking, maybe I’ll look into this. What is the compelling, the most compelling argument you can make for seriously go do this or seriously call ownership works. Call us. We’ll help you.

Pete Stavros:
I would say the most compelling pitch is to share employee testimonials, videography, where that person, that leader can see the moments where a worker’s life is changed

Speaker 8:
Or

Pete Stavros:
Hear from a worker who says, God, my wife and I were in debt up to our eyeballs. We thought there was no way out so much. So we had decided we just couldn’t afford a family. We closed that door and this employee ownership program, we got out of debt and now we have kids. There’s really people getting off of antidepressants from getting out of debt, communities being changed, all of that, and people hearing it firsthand as opposed to reading data, I think is the most compelling thing. Beyond that, our experience is not only do these programs when they’re done effectively change the feeling deep in the organization, but sometimes the biggest impact is at the top

Speaker 8:
Where

Pete Stavros:
Leaders reorient their whole mission towards, I’m not just here to serve customers in a unique way and double our earnings or whatever, but internally, I’m here to lift up thousands of people. That is really powerful. I mean, I can’t tell you how many leaders I’ve seen just in the rollout of an ownership program and everything that goes with it. Just when they’re announcing this is what’s going to happen, get emotional. They can see in their workforce. Sometimes it’s the first time people have ever felt acknowledged or respected. Ownership in this whole program is the ultimate form of trust and respect. I trust you enough to share all this information with you and I respect you enough to make you an owner. And when that happens, there’s just a switch that goes off in leadership and people say, God, I’m jumping out of bed because senior executives, let’s be honest, are doing just fine, both typically financially and in their feeling towards their work, but once it becomes this much greater mission, the financial concerns kind of fall away for senior people. And we’ve had so many senior people come to us and say, I want to give some of my equity to more junior folks,
And then the mission orientation really takes off.

Dr. Jessica Kriegel:
Is this how we save capitalism?

Pete Stavros:
I don’t think there’s any one thing that could save capitalism, but I think this is, to me, the most logical and biggest step forward we can take. When you think of all the reasons for worker discontent and the biggest problem of capitalism being the unequal sharing of rewards like this really strikes at the heart of it. And then there’s an opportunity on top of shared ownership to build this kind of culture that also benefits companies. So there’s a business case. Some of the problems with all the pleading with Corporate America to do this differently or do better is good intentions don’t scale. Business cases scale. And so if we can show, yeah, this is great for workers, it’s going to energize the senior leadership team and there’s this compelling business case, I think that’s how we take a big step forward. It’s not going to solve all of our problems, but I think it’s going to have a meaningful impact.

Dr. Jessica Kriegel:
And is this bipartisan, both sides bought into the idea theoretically when they learn about it?

Pete Stavros:
Yeah. If you go back to that polling data, it’s popular across the political spectrum. It is slightly more popular with progressives who really gravitate towards the potential to build wealth for workers. But conservatives look at it as a populist idea, good for workers. That is also not a government handout. You got to work to get it. So it is popular across the political divide.

Dr. Jessica Kriegel:
It was written about in Project 2025 positively. It said, oh, we’re looking at this. This could be an interesting way to drive results in business. And also, I mean, I was surprised to see it written about

Pete Stavros:
In there. Correct, and it was also on Harris’s platform,

Dr. Jessica Kriegel:
Right?

Pete Stavros:
So when she announced her economic opportunity platform in Pittsburgh, she talked about worker ownership. So it was on both sides. We had something to do with that. We spent a lot of time in dc.

Dr. Jessica Kriegel:
Has the Trump administration said anything about this?

Pete Stavros:
I don’t want to say,

Dr. Jessica Kriegel:
Okay,

Pete Stavros:
We’re working hard on trying to make political progress.

Dr. Jessica Kriegel:
Okay, got it. So what’s your 10 year vision for employee ownership?

Pete Stavros:
Let’s see. 10 year vision is, well, let me just maybe describe what we’re doing and then what this amounts to over time. I don’t know, but there’s the nonprofit push. Okay, so there’s this ownership works nonprofit that is here in New York. As you know, we’ve got almost 40 full-time employees,

Dr. Jessica Kriegel:
Which is run by Annalisa Miller,

Pete Stavros:
Run by Annalisa Miller,

Dr. Jessica Kriegel:
Who

Pete Stavros:
Is fabulous. She’s fabulous,

Dr. Jessica Kriegel:
She’s outstanding,

Pete Stavros:
And we are going to take that global, so we’ll be announcing in the next 18 months, overseas offices in a few key countries. The goal is to get this across the major companies in Asia and Europe. So obviously China is at the moment its own animal, but if we can get Japan and India and then in Western Europe, we can get Germany, UK, and France, and then you have the US and Canada for most global businesses, that’s going to account for the majority of their employees.
So there would be these nonprofit local offices pushing worker ownership and proving out this business case. We’d then be following that with a policy push. So in the US it’s digging up these old ESOP laws which provide the tax incentives for companies to provide workers with ownership. We’ve already gotten questions from foreign governments where we’re opening up the nonprofit office saying, Hey, what’s the policy agenda to support this? And if we could have a harmonization of policy ideas across those major countries, then you could see this explode. That’s really the big vision. Is that 10 years? Is it 20 years? I don’t know.

Dr. Jessica Kriegel:
Right. So the third, you have a second nonprofit then that you’ve just opened, which is focused on the policy.

Pete Stavros:
Correct.

Dr. Jessica Kriegel:
Trying to make it simpler.

Pete Stavros:
Trying to make it simpler. In a nutshell, the tax incentive isn’t quite working in a lot of cases, so it needs to be tweaked, and the ambiguity in the law leads to litigation where the government says, Hey, did you do this the right way? We want to clear up some of the ambiguity.

Dr. Jessica Kriegel:
How do your KKR partners respond to this? Those that are maybe not involved in this? Do they look over and say, wow, this is interesting, or what are you doing? Are you distracted? What’s their,

Pete Stavros:
They love it. And to be fair, we’ve been at this 15 years, so this has been a gradual process of allowing our different partners who work in different industry verticals, who work in different countries to experiment with this. We didn’t come in and say, Hey, do this and do this this way. Then again, we can’t hold people accountable. So people have had lots of time to experiment, and this has slowly spread across industry verticals in the US and then we’ve done this in Chi Minh, and we’ve done this in Tokyo and all over Western Europe, so there’s been enough time, and we’ve done this now with 62 companies over the last 15 years, and we’ve got enough data to show it’s working that everybody is, I would say, highly bought in, and it’s also consistent with our culture. I mentioned KKR. Everyone’s an owner. A lot of what we’re talking about, we practice

Dr. Jessica Kriegel:
Internally. Yeah. I got to go and work with one of your companies that has adopted employee ownership, and I got to meet with the executive team and talk to them, and there was a team building pickleball game the night before I did my workshop. And so what I like to do is I go and talk to the frontline workers behind the executive’s back to find out what the real pulse on the street is. And so I went to a frontline worker and I said, Hey, what’s the culture like here? And I got an answer I have never heard. Usually people will say, oh, it’s nice. Everyone here is very friendly. Or they’ll say, oh, they’re working us to the bone. They talk about a feeling, and what this person said was, culture is what you make it. Culture is a choice, and we choose a great culture here.

Pete Stavros:
Interesting.

Dr. Jessica Kriegel:
Isn’t that fascinating? That is the most ownership mindset answer to that question I have ever heard before.

Pete Stavros:
Yeah, that’s cool.

Dr. Jessica Kriegel:
It was very cool, and it was unique mean to have a frontline employee saying, I’m going to take accountability for culture by making that a choice. That’s what accountability is. It’s making a personal choice to focus on what you can control to drive results.

Pete Stavros:
Yeah. Well, you really impressed the CEO at that company. I got a note saying, not only was she phenomenal in the actual work, but she showed up at a pickleball game to get to know our frontline foot. I couldn’t believe she went to the pickleball game, so

Dr. Jessica Kriegel:
That made an impression. Yeah, he was my pickleball ball partner. I have only played pickleball once before and before we were in the Uber on the way over, and he said, who’s going to at pickleball? I said, I’m excellent. I totally pretended. That’s cool. I was actually better than him, so I won’t

Pete Stavros:
Tell him.

Dr. Jessica Kriegel:
I hope he watches. No, he knows. He knows I was better than him. Well, thank you so much. I have one last question. This is my favorite question, and it is, what is something that you don’t get asked about very often in these types of interviews that you wish you were asked more often?

Pete Stavros:
I would say that’s a great question. I guess I wish we were asked more often about why it doesn’t work when it doesn’t work. Meaning you give ownership to workers. All of these tools are given to executives. What happens when it doesn’t work out? Because I think that conversation does two things. It acknowledges how hard this is to create these ownership cultures, and then it brings this lessons learned mindset, which is I think what we need

Speaker 8:
As

Pete Stavros:
We kind of together all figure out how to do this well, we’re in the third inning of figuring out how to create these ownership cultures. I wish I could tell you 15 years in, we figured it out. We have not, and we need more experimentation, more collaboration, more workshopping, sharing what’s worked and what hasn’t. And I think there’s maybe too much of a, oh, this is so obvious. If workers ownership done,

Dr. Jessica Kriegel:
That’s where I’m at. Must be easy. Why isn’t everyone doing this, Pete? Yeah, it’s very hard. Yeah. Okay. And so one follow up question to that. What are the most important tools that ownership works or your team at KKR provides to help ease that load?

Pete Stavros:
There’s a lot. I would say one of the most important tools is understanding, this is going to sound kind of almost stupid, but how to solve cultural problems. So a lot of times when I talk to leaders and I may bring up, Hey, your turnover rate at your company’s 50%, if we could solve that, imagine if you weren’t rehiring your whole workforce every two years, what that could mean. What’s the plan? And they’re like, God, let me get the HR leader. Or they’ll say, that’s the way the economy’s rigged. Pete in our sector, this is average. What we try and help is bring tools to solve issues like that. Okay, well, how would you solve a similar problem that was more operational, like scrap reduction. You’d get a lot of data, you’d do a preto analysis, you’d root cause the key issues. You’d have action plan against those root causes, and then you’d relentlessly measure your progress. Bringing that problem solving mindset to cultural challenges and issues is one of the tools

Dr. Jessica Kriegel:
That

Pete Stavros:
We try and help leaders utilize.

Dr. Jessica Kriegel:
Well, I guess that’s why I got so excited and interested because what we do, the thing, I think the word culture is so problematic because that conjures image of woo woo, trust, fault, pickleball, all of the kind of ideological, touchy feely stuff, which feels like a distraction from business results. We’ve actually noticed, I mean, culture partners have been in business 35 years. We’ve noticed we’ve had to shift from talking about culture to talking about results, even though the product is exactly the same, but to evangelize the transformation and the change that can happen and the impact it can have on business. We can’t really use the word culture because people say, oh, that’s hr. We don’t talk to hr. We talk to CEOs. And yet people see culture partners the name, and they think, oh, we’ll call them for some pickleball facilitation.

Pete Stavros:
Yeah. If we can get, let’s say A CEO just changed one thing, which was the engagement survey. They’re going to do the survey. They’re going to transparently share the results, even if they’re terrible.

Dr. Jessica Kriegel:
So

Pete Stavros:
Everyone’s going to see it,

Dr. Jessica Kriegel:
Which is hard to get them to do. Usually they say, can you share everything except for that part?

Pete Stavros:
And then let’s say they did the Pareto analysis on what the big issues were,
And if they just pre-committed themselves, so the results come out, they figure out the big problems, and they say on these three things, you’re going to see action in six months. And then if they did, it did what they committed themselves to do, which is important to pre-commit yourself because then you can use an opportunity to build trust. Even after two cycles of that, people will start to say, something’s going on. This is different. This doesn’t seem like business as usual. They’re being transparent with me. We all know some things aren’t working. They’ve highlighted the big three things that aren’t working and they’re taking action on it. I’m actually going to, by the way, I didn’t fill the survey out last time. I figured no one was going to listen, but now I’m going to start speaking up. Somebody’s listening, things are changing. Even that one thing can have a huge impact.

Dr. Jessica Kriegel:
It’s funny, if there was one magic key for us, it’s something we call the results pyramid, and it’s very simply results come from actions. And that’s where most people stop. They know, oh, we got to get a result, so let’s do this, and if that didn’t work, we do this. And that’s the action trap where you get caught in the rat race of activity that burns us all out and creates all of this discontent and overwhelm and doesn’t necessarily lend to increased productivity. In terms of results, what we say is, if you want to really create sustained behavioral change, you have to get at what drives action. And that’s people’s beliefs. And when you can shift their beliefs and their mindset, which usually is through experiences, well, then you can really, you’re cooking with gas and employee ownership is an experience. To become an owner is an experience that has a massive impact on beliefs. I think it is one of the most powerful ways to transform mindset, to create action that you want to see to get results. So I am rooting for you. I’m so grateful that someone with your position, with your power, with your influence is caring about this and is carrying the torch and is making as much noise as you are. I’m a huge fan and I’m so grateful that you’re doing this work.

Pete Stavros:
Oh, thank you. Look, there’s, first of all, a lot of people working on it. And as I said, there’s a business case to be had. We don’t need to convince CEOs do better or do this. It’s the right thing. It is the right thing, but also there’s a huge payback. If you do it well,

Dr. Jessica Kriegel:
It’s going to drive results. It will. And you are just gathering those case studies one by one. Eventually, you’re going to have enough that it’s going to be definitively declared that this does improve profitability. And that’s the point when everyone’s, it’s going to become, it’s going to be that tipping point

Pete Stavros:
Probably. I hope so. We’re rolling out a new ownership program every other week right now. So think about it, the other side of this where we’re exiting companies every other week where thousands of workers are getting large distributions on their equity. That’s going to be special.

Dr. Jessica Kriegel:
That’s going to be special.

Pete Stavros:
Yeah. These take years to mature. So we’re a long way from that, but it’s coming.

Dr. Jessica Kriegel:
Yeah. Well, I can’t wait. I’ll be watching.

Pete Stavros:
Okay.

Dr. Jessica Kriegel:
Thank you, Pete.

Pete Stavros:
Thank you so much.