Six years after I graduated from Medill in 1983, a devastating turn of events suddenly set the course for the next three decades of my life. My mentor, fashion powerhouse Kezia Keeble, was diagnosed with breast cancer. In her final stages, with us at her bedside, she turned ownership of her New York-based international PR and events company, KCD, over to me and my business partner Julie Mannion.
This was one of the most generous and elegant acts that could be made by an employer. Julie and I were now company-owners, at the helm of a multi-million-dollar agency with our own staff of 20 to manage, working with clients like Gianni Versace, Marc Jacobs, and Tommy Hilfiger. As two 29-year-old employees, our immediate reaction reflected the very question that drives our industry – what’s next?
We would go on to steer the company through the changing landscape of fashion as part of an industry that is always searching for the new. Through the excess of the ’80s, minimalism of the ’90s, globalization, the crash in 2008, and the onslaught of digitization, the agency radicalized repeatedly and maintained its leadership in the industry.
Evolving the Agency
Fast-forward to 2011. KCD has grown to three international offices, over 80 clients, five divisions, and 100 employees worldwide. The average tenure of our worldwide senior management is 15-plus years, providing a solid group of loyal leaders who fully realize the agency’s core values.
As the company continued to grow, Julie and I could not just rely on our previous successes, as there was now a real need for long-term, strategic planning. We were faced with a big question: How do we take our employees and agency into the future and take ourselves toward our retirement years?
This was not an easy question. I began a journey of professional self-discovery to determine what was next for my company. We were at the height of our growth, so the obvious answers came first: MERGE! SELL! Thus, I began a grueling, two-year mergers and acquisitions \process. Contrary to what I had thought, there was no pot of gold at the end. We had three suitors, but each fell through for various reasons. Most importantly being that none of the suitors felt quite right. Our instinct was that in the potential M&As, there would be a “culture clash” between our companies, and we couldn’t fathom sacrificing our core values. We needed another option.
I remembered my 29-year-old self. We wanted to give back to our employees like Kezia had given to us. In 2015, our company opted for a highly-regarded solution that is probably not as well-known as it should be – an Employee Stock Ownership Program (ESOP). This is a unique tax-qualified retirement benefit plan designed to motivate employees through equity or stock ownership funded by the company, rather than in publicly traded companies and mutual funds. An ESOP also provides a means for transfer of ownership, from owner management to an employee-owned culture, and it qualifies for tax advantages under the Internal Revenue Code and Department of Labor.
Transforming the Business with ESOP
The ESOP has prompted a major transformation of our business since its 2016 implementation. It is a complex financial and legal transaction, but well worth going through the grueling implementation process for the outcome it eventually brings:
– Our new employee-owners now pay more attention to potential new clients and the bottom-line, as they want to increase profitability;
– As there is no cost for employees to join (companies fund plans through tax benefits), the ESOP program is in high standing at our company;
– Our ESOP plan has proven to be a key recruiting tool – we offer ESOP after one-year at the company;
– The ESOP purchased our owner’s interest in the company, allowing us to recognize our long-term value from the company as we continue to grow.
Timed with the ESOP, we mounted a two-year strategic support plan to fuel our EBITDA growth. Julie and I both became co-chairmen of KCD and named nine partners worldwide from our valued, tenured senior management team. After moving the agency to a larger headquarters in New York, we opened several revenue-generating showrooms in our offices worldwide and shifted the roles of our “publicists” to “talent and brand managers,” a strategic internal restructuring that was a direct response to the changing role of PR in fashion. KCD’s employees and our public relations services are now extending into the entertainment and technology verticals.
Forward-thinking is imperative in the fashion industry as it thrives off of the questions “what’s new?” and “what’s next?” While KCD always thinks ahead from a fashion standpoint, we were able to mirror this mentality within our own company walls. We are now first-movers in both external and internal directions, and as always, we continue to break new ground.
Studies by the National Center for Employee Ownership have shown that ESOP companies significantly outperform companies that do not offer these opportunities, and programs like this have a positive impact on the workplace. I can tell you first-hand that the morale at our office is at an all-time high. Whether you are a wide-eyed 29-year-old or a 50-some-year-old workhorse, the future is clear and bright. Kezia would have been proud.
Written by Ed Filipowski, Co-chairman of Luxury Fashion Services Firm KCD Worldwide
Edited by Nicolette Magbuhat, Medill IMC Class Of 2018