Foldcraft Co.: Transformational Journey

1. Foldcraft Co.: Transformational Journey Steve Sheppard Chair and CEO, Foldcraft Co. (Retired) CEO, Winds of Peace Foundation (Current)

2. Introduction • Incorporated 1948 • 100% Employee-Owned S Corp • 350 Members • 4 Wholly-Owned Subsidiaries • 2006: $50MM Consolidated Sales • Companies, Products, Services • Transformational • Values-Based

3. Foldcraft Business Objectives • Grow Equity By 12% Per Year • Diversify Our Business • Manifest Employee Ownership • Improve Competitively and Globally Simple….But How?

4. I. Welcome to the Reality of Employee Ownership

5. What if…? • We could substantially increase the involvement and satisfaction of our employees, and in the process afford better benefits, twice the retirement income of comparable companies and higher wages? • We could increase productivity at our company by an average of 5.3% annually? • There is a “magic pill” that could boost our investment rate of return by 2.7% every year? • There is an initiative that can increase sales, employment and sales/employee by 2.4%? • We could increase the likelihood of the longevity of our firm by 15.2%? • There could be a strategy that would better assure our firm would continue operating independently? • We could eliminate corporate income taxes?

6. What if…? • We were working for the benefit of ourselves and our co-workers, not some absentee owners? • We had the opportunity to create real wealth through owning equity? • We could buy into owning a company without investing any of our own money? • We woke up one day and realized that we really will become old and retire some day? • We had the opportunity to create twice as many retirement bucks as the average worker?

7. What’s Different in an ESOP? • Expectations • Opportunity for Wealth-Building • Covenant With Each Other • Corporate Culture Introspection • Wider Focus on Employees • Engaging, Teaching, Communicating, Understanding the ESOP

8. Ownership “Magic” • Opportunity for Culture Shift • Holistic Development • Participation • Ownership

9. Stewardship • Membership in an organization means that we have chosen and accepted this playing field. This choice and acceptance becomes our contract. Our desires for compensation, self-expression, participation…whatever we want from a place…are viable only so long as we can commit to the mission, results, constraints, principles, difficulties of the larger institution. If we cannot support these requirements and boundaries, then we should leave. Stewardship offers more choice and control in exchange for a promise….

10. What I Promise to You: *Open Book Management *Member Involvement *Stewardship *Servant Leadership *Listening *Vision *100 Best Companies *Change *Opportunity

11. What You Promise to Me: *Partnership *Commitment *Participation *Attitude (Courtesy, Respect) *Body, Head, Heart *Change *Self-Management *Peer Pressure *Desire to Be All That You Can Be

12. ESOP Noteworthy • Outstanding Employee-Owner in America, 1993 • Outstanding Employee-Owner in Minnesota, 1993, 1994,1996 • Outstanding Employee-Owned Company in Minnesota, 1996, 1998 • Outstanding Employee-Owned Company in America, 1998

13. Foldcraft Statistics • 47/200 Participants Own 6-Figure Accounts • The Average of Those 6-Figure Accounts Is More Than $160,000 • 30/47 Accounts Are Owned By Non-Managers • 19 Accounts Are Owned By Factory Participants, 11 By Office • Average of ALL 200 Accounts Is More Than $75,000

14. CORPORATE WELLNESS: I NTELLECTUAL S OCIAL E MOTIONAL S PIRITUAL O CCUPATIONAL P HYSICAL

15. II. Open Book Management: Chapter and Verse • Chocolate Chip Cookies • The Great Game of Business • The School Desk Company • The ESOP Huddle • Weekly Closes • Individual Profit/Loss Statements • White Boards, Hour-by-Hour Charts

16. Industry Week publishes “Kaizen Blitz” 9/97 1st Foldcraft Shopfloor Event 8/98 Participate in Pella Event 6/98 Pella Visit 5/98 III. Foldcraft’s Lean Journey

17. Unleashing Ownership Potential • Kaizen Teams • Inside and Outside, All Members • Intense, Focused, Accountable (25%-50%-40%) • Educate, Facilitate, Elucidate, Celebrate • Cara’s Story

18. Foldcraft’s Lean Journey 1st Foldcraft Kaizen Event Results: • The Vent! • 25% Productivity Increase • 66% WIP Reduction • 50% Floorspace Reduction • Proved to ourselves that it could be done

19. Tool & Die Becomes Process Build Foldcraft Acquires Baker Furniture Kaizen Comes To Baker 4/02 4/02 5/02 Foldcraft’s Lean Journey

20. Process Lead-Time 66% • Floorspace 42,000 sq. ft. • Productivity 240% • Claims 48% • On-Time Ship 95.2% 99.3% Results Achieved ‘98-Present: • Significant product expansion • Insourcing previously purchased items

21. Foldcraft’s Lean Journey Kaizen Continues Every Day, Every Hour! • Monthly Events • Point Kaizens • HOT Lab Work • Public Events • Hour-by-Hour Charts • White Boards • Etc.

22. Does It Make A Difference? • Competition (Falcon) • Customers (YUM!) • Acquisitions (Millwork) • Share Appreciation • Distributions

23. Cross Boundaries • Transformational • Educational Travel • Third-World Realities • Broadening Member Thinking • Educating Re: Diversities • Global/Cultural Sensitivities

24. Foldcraft Foundation • Established 1997 • Funded by Foldcraft • 10% Pre-Tax Profit • Separate Member Board • Global Focus

25. IV. The Global Context • Winds of Peace Foundation • Martha Valle Valle • Honduras ESOP • Organizational Workshops

26. Q & A

27. Why It’s Important • Wellness IS ESOP • The Have’s and the Have-Not’s • Equity Ownership • Life Is Short