Ten years ago, South Mountain Company, John Abrams’s design-build firm on Martha’s Vineyard, was already a viable business. After a few years of doing good work that was sometimes unprofitable (one friend called the money-losing jobs ‘subsidized housing for the rich’), Abrams had learned how to turn a profit. He liked his work, did it well, and was making money. Yet he made a change that many contractors would consider radical: he converted his wholly owned S corporation into an employee-owned company. This decision, rooted in ethical conviction rather than financial necessity, ultimately transformed the firm’s trajectory. The story of this transition offers valuable insights for builders and contractors considering alternative ownership models. Understanding the History Construction New England Stone Walls reveals a region rich in building tradition, and South Mountain’s approach to employee ownership continues that legacy of innovation in construction business practice.
The Employee Ownership Decision
Why Abrams Made the Switch
John Abrams founded South Mountain Company as a design-build firm on Martha’s Vineyard, an island with a year-round population of approximately 15,000. In the early years, the company focused on delivering quality residential design and construction services, building a reputation that let it draw business almost exclusively from its small home market. The company was profitable, the work was satisfying, and the future looked bright. But Abrams saw something missing.
‘Sharing ownership draws more fully on the intelligence and creativity that lie within the employees,’ Abrams later explained. He recognized that a traditional top-down ownership structure limited the company’s potential. Employees who had no stake in the business had less reason to contribute their best ideas or care deeply about the company’s long-term health. Abrams believed that spreading ownership would unlock capabilities that a single owner could never access alone.
The Transition Process
The conversion did not happen overnight. Abrams started by sharing ownership with just two other people. From there, the circle expanded to three, then four. Over the course of a decade, the employee-ownership structure matured, and today South Mountain has nine owners out of a total workforce of 20 employees. Several more are nearing the five-year tenure that makes them eligible to buy in. Each step of the transition was deliberate, allowing the company to develop governance practices alongside the growing ownership group.
How Employee Ownership Works at South Mountain
Buy-In Structure and Requirements
Employee ownership at South Mountain is not an automatic benefit. The company has established clear criteria that all prospective owner-employees must meet:
- Work for the company for a minimum of five years, during which the employee shares in profits without owning equity
- Demonstrate an intention to stay with the company for at least 10 additional years
- Purchase shares at a price that starts just over $8,000 and increases by roughly 8% per year
Once purchased, ownership brings three distinct benefits: a vote on the company’s board of directors, an increased share of profits, and a portion of the company’s equity. If an owner leaves employment for any reason, the company buys back those shares at fair market value.
Board Governance and Decision Making
South Mountain’s day-to-day operations follow a fairly traditional structure. Abrams serves as president and manager, handling sales, client contact, design oversight, and special projects. Reporting to him are three designers, an office manager, a computer specialist, two woodworking shop employees, two carpentry crews with foremen, and a two-person crew handling smaller jobs and maintenance. What makes the structure unusual is the layer of governance above the president.
The nine owner-employees make up the company’s board of directors, which holds the authority to promote, demote, or fire any employee including Abrams. The board meets monthly to make key decisions about employment, profit-sharing, the type and number of future projects, and major equipment purchases. They also decide on unusual projects, major financial commitments, and when to accept new owners. While a simple majority vote suffices for any decision, virtually all decisions are reached by consensus.
‘I haven’t so much lost control as spread it around,’ Abrams said. ‘And thereby increased the total amount of control we have. I couldn’t properly look after this whole company by myself; together, we can. And this way, I don’t have to be right all the time. I can share tough decisions with others.’
The Results of Employee Ownership
Growth in Scale and Revenue
The financial results of the transition speak for themselves. Before the switch to employee ownership, South Mountain had 10 employees and grossed around $1 million per year. Ten years later, the company employs 20 people and grosses around $3 million annually. The company has turned a profit every year and has never laid anyone off.
‘There’s no way to know how we’d have done otherwise,’ Abrams acknowledges. ‘But I sincerely doubt we’d have done anywhere near as well as we have. We just wouldn’t have got the same commitment or quality of work from everyone.’
A comparison of the company’s trajectory before and after the transition shows the impact clearly:
| Metric | Before Employee Ownership (1987) | After 10 Years (1997) |
|---|---|---|
| Number of employees | 10 | 20 |
| Annual revenue | $1 million | $3 million |
| Number of owners | 1 (Abrams) | 9 |
| Profitability track record | Viable but inconsistent | Profitable every year |
| Layoff history | Occasional | None |
Employee Perspectives on Ownership
Equity in the company has proven valuable for employees who have left. The last person to depart sold shares she had purchased for about $5,000 for more than $40,000 after enjoying a good salary and excellent benefits throughout her tenure. However, most owner-employees cite non-financial benefits as their primary motivation for buying in.
‘Since buying in,’ said owner-employee Peggy MacKenzie, ‘I feel a deep-seated interest in just about everything that happens around here.’ Another owner, Pete Ives, cited job security and ‘a pride in telling people I’m part-owner of such a well-honed company.’
The benefits of employee ownership extend beyond individual satisfaction. Companies ranging from software startups to heavy industry have found that giving employees shares in both profits and management consistently raises productivity and profitability. Large statistical studies across multiple industries confirm this pattern. For instance, the strategy turned General Motors’ Fremont, California facility from one of the auto industry’s worst performers into one of its best.
Lessons for Construction Companies
Key Considerations for Employee Ownership
The South Mountain Company experience offers several lessons for contractors considering a similar path. The model may not suit every firm, but the principles that made it work are worth studying:
- Start small and expand gradually. Abrams began by sharing ownership with just two people and grew the ownership circle slowly over a decade. This allowed the governance structure to mature alongside the ownership group.
- Set clear buy-in criteria. The five-year waiting period ensures that only committed, long-term employees become owners. The rising buy-in price rewards early participants while keeping the program accessible.
- Build consensus decision-making practices. Although only a majority vote is required, South Mountain’s board reaches virtually all decisions by consensus. This preserves the collaborative culture that makes employee ownership effective.
- Maintain a buyout mechanism. The company’s policy of buying back shares at fair market value when an owner leaves provides liquidity and prevents ownership from becoming a trap.
Is Employee Ownership Right for Your Firm?
Not every construction company will benefit from employee ownership. The model requires an owner willing to share both control and profits. It demands transparent financial management and a culture of collaboration. For firms that meet these conditions, however, the potential rewards are substantial. As Abrams discovered, sharing the reins does not mean giving up the business. It means building a stronger, more resilient company that can thrive beyond the contributions of any single individual.
For builders interested in exploring alternative business structures, an Open Floor Plan for a New England Farmhouse Renovation shows how openness and flexibility in design translate to better outcomes, just as openness in ownership structure can transform a construction business. Similarly, Preparing Historic Homes Exterior Paint Field Lessons Coastal demonstrates the careful, collaborative approach that New England builders have refined over generations. And an Open Floor Plan for New England Farmhouse exemplifies how thoughtful design adapts to the unique character of the region, much as South Mountain adapted its ownership structure to fit its particular culture and goals.
The South Mountain story proves that employee ownership can work in the construction industry. By sharing the reins, Abrams did not diminish his own role or financial outcome. His salary, benefits, and equity in a growing company have all improved compared with what he would have had as a sole owner. More importantly, he built a company where 20 people share a sense of purpose, where the work is consistently excellent, and where the business continues to grow stronger every year.