HADLEY — Renting a postal machine for processing and sending out letters and packages added a level of convenience for the operations of Paragus Strategic IT, an information technology service company.
But a receptionist for the company recently determined that the postal machine was not a necessity, and that sending her to the post office to pick up stamps would cut expenses by $600 a year.
It was a money-saving idea that got to Paragus CEO Delcie Bean’s desk, but may have never reached him, if the receptionist, like the more than 40 other employees at the company, were not invested in its financial success through the launch of an Employee Stock Ownership Program earlier this year.
On June 8, the 30-year-old Bean, who founded the company as a teenager, transferred 40 percent of the company, with a value of $1.6 million, to the program, often referred to as an ESOP.
Bean said the ESOP shows commitment to the employees, and matches a long-standing philosophy at Paragus around common success and giving everyone a voice in how the company is run.
“Our motivation was to make the future about equality, and enhancement of the Paragus culture and behavior,” Bean said. “In a lot of ways, it was very natural for us to end up in this position.”
Bean said he always has promoted the idea of Paragus doing excellent work. “We’ve always asked what would it take for Paragus to say ‘We’re the best at outsourcing IT,’” Bean said.
Paragus is headquartered in a building at 112 Russell St. that opened in 2014, tucked between the Franklin-Hampshire Juvenile Court and the Norwottuck Rail Trail. There the company shows how its culture is different from others.
There is a bathroom called the “Game of Throne,” which takes its design cues from the HBO television series “Game of Thrones.” On one wall, there is a large illustration of a baby and Post-It notes with ideas for improving the company attached to the diaper.
Employees may start firing Nerf Darts back and forth at any time, and the break room includes a bar with four local beers on tap starting at 4:30 p.m.
Paragus has 137 clients, and has been adding about 18 a year, Bean said. “For most of our customers, we are their entire IT department,” Bean said.
Paragus offers four levels of service through an annual contract: reactive, such as help desks and ordering new computers; proactive, including security and monitoring for problems; strategic, including understanding how technology and information can enhance a business and the products in which it should invest; and projects, such as a refresher of technology every four years.
Most clients have their headquarters in the region, generally bounded by Worcester, the Berkshires, Brattleboro, Vermont, and Hartford, Connecticut. That means being able to interact with clients in person, Bean said.
“We have a strong belief in building a physical presence with our clients,” Bean said. “We are trying to replicate what they would have if they had an in-house IT department.”
To do this face-to-face interaction, each client has a team. Paragus has three-person teams in each of the four disciplines, and they are assigned 15 to 20 accounts. Since each person wears only one hat, and people work on the team with which they are most closely aligned, this ensures clients are getting expertise.
“One thing Paragus has been good at is focus,” Bean said. “Our goal is to have everyone do work they love and are great at (for) as close to 100 percent of the time as possible.”
And in the building, the open-floor plan allows work to be done collaboratively. “People sit within high-fiving distance of each other,” Bean said.
The creation of the ESOP comes as Paragus continues to see growth, about 25 percent a year, according to Bean. It achieved $4.8 million revenues in 2015, and is projected to have $5.6 million in revenues this year, and expects to end the year with 52 employees.
The decision to offer employee stock was made 2 ½ years ago at a retreat.
Bean determined that the employees’ interests were aligned with his and that it could make the company more profitable. “It’s a gamble that says 100 percent of Paragus owned privately would be worth less than retaining 60 percent,” Bean said.
He has no interest in selling Paragus. “This company is one that I want to see continue to grow and thrive and service its employees and customers,” Bean said.
The structure, design and implementation of the ESOP took the full 30 months since its announcement.
Bean said there was an enormous amount of minutiae, including setting the share price, determining how stock would be awarded and how it would be purchased, hiring a lawyer to design the plan, and naming trustees to represent it and a plan administrator to oversee it. Bean said the company’s bank, lawyers and accountant had to learn how the ESOP works.
Bean said he did not expect a change in behavior in employees overnight, but already “people are thinking and reacting like owners,” learning about profit and loss, how they play a role in the bottom line of the company, and that a dollar saved is more important than a dollar earned.
“That’s a journey that will take years to get right,” Bean said.
Dave DeRicco, a client-support team leader at Paragus, said employees are already focused on how to provide great service. The ESOP, he said, gives them incentive to do better for both their clients and for Paragus.
“I think for a lot of people this changed the tone. You’re not just working for someone else,” said DeRicco, who has been at the company for four years.
“It does make you more cognizant of the importance of your work, not only on your clients, but on the company,” DeRicco said.
Ben Branch, a professor of finance at the Isenberg School of Management at the University of Massachusetts, said companies that start ESOPs should result in a greater commitment from their employees.
“The benefit to the employee is it gives employees more of a stake in the company. It gives them more incentive to add value,” Branch said.
Bean said retaining talent should be easier for Paragus going forward. “Turnover is very expensive and disruptive,” Bean said.
An ESOP also may be an incentive for new employees. “We’re aiming to use this as a big part of our recruitment strategy,” Bean said.
Once a year the employees will receive a statement showing how much their share is worth. This increases over time and that worth could eventually be more than $100,000, becoming a sizable piece of a retirement plan that supplements the existing 401(k) program.
Just before the ESOP became a reality, Bean appointed Jim Young, then the operations manager, as president of the company, responsible for day-to-day operations.
But the idea is not to change the company too much. As an Amherst Regional High School freshman in 2001, Bean started what was then known as Vertical Horizons, entirely focused on fixing computers. It merged with Valley Computerworks in 2005 and was renamed Paragus in 2011. It moved into its new building in October 2014.
With the ESOP behind him, Bean said he will spend the coming months, including 2017, examining the right strategies for continuing to grow and add more staff.
Bean said he is not sure how the company will adjust to more growth, observing that the office has only 53 desks. While he has room to put an addition onto the building, and could get this permitted, he is exploring whether more people could work from home for part of the day, or whether a second location is a possibility.
Either way, Paragus won’t change. “The idea is for us to expand embodiment of the space, but still ingrain the culture of who we are,” Bean said.
Scott Merzbach can be reached at smerzbach@gazettenet.com.
