Choices: 'Why I Share My Profits With My Suppliers'

A product is only as good as the people who help you make it. Which is why Shawn Askinosie opens his books to his cocoa-bean suppliers—and gives them a cut.
Ghostwriter: The Open Organization, Red Hat
February 25, 2014

In OPEN Forum's newest series, Choices, we ask entrepreneurs to open up about some of the tough decisions they've had to make—in their own words.

Every year, Shawn Askinosie makes pilgrimages to some of the hottest, most humid, and poorest regions on the face of the Earth: San Jose Del Tambo, Ecuador; Davao, Philippines; Puerto Cortes, Honduras; and Tenende, Tanzania. As founder of Askinosie Chocolate, a renowned small-batch chocolate manufacturer in Springfield, Missouri, Askinosie visits the farmers who supply him with the cocoa beans he uses to make the 26 metric tons of chocolate his 14-employee company sells every year.

But these aren't just suppliers to Askinosie, who began making chocolate in 2005 after ending a 20-year career as a criminal defense attorney—they're his business partners. Through a profit-sharing program that he calls “A Stake in the Outcome,” Askinosie visits his suppliers to give them their cut of the business’s success, as a way to help ensure he’s getting the best quality product possible.

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Shawn Askinosie in his factory in Springfield, Missouri

Here, Askinosie explains how he made that choice:

"I have long been a believer in the principles of open-book management and The Great Game of Business, which talks about how you can build a better company by being more transparent with your employees. That dates back to meeting my fellow Springfield resident, Jack Stack, the CEO of SRC Holdings. Our kids were friends and I would see him at soccer matches. Eventually, he became a friend and mentor and I went to a seminar at SRC and got hooked by the concept.

"I first began applying the concepts of financial literacy, transparency, and ownership within my law office, where everyone, including the paralegals, earned a share of the firm’s profits. I borrowed the name A Stake in the Outcome from Jack, which is the name of his second book. I remember one time when a paralegal took a call from jail from someone who wanted me to represent them, and she just kept bugging me to get out of the office because she understood that a new client meant new revenue for the firm that she would share in. That’s what this is all about.

"After I decided to end my legal career, I was searching for inspiration about what to do next. Ultimately, after making many desserts, I decided to start Askinosie Chocolate. In doing so, I began applying the same open-book principles I had used before, inside our factory. We also committed to creating a program we call 'direct trade,' in which we source our cocoa beans directly from the farmers in the four countries we currently work with. It’s beneficial for the farmers because they get to keep most of the money rather than paying middlemen in the supply chain. We also pay more than Fair Trade prices. In many cases, we wire the money directly into bank accounts we have helped the farmers set up.

"How cocoa beans are harvested can directly influence how they taste—especially in our chocolate, because we only add sugar to them. If they aren’t dried properly in the sun, for example, the beans can become moldy and useless. In order for us to make the best chocolate, the beans must be fermented perfectly. So that’s when the light bulb went off for me. I began to think about how we could create some financial incentives to help ensure our farmers shipped us the kinds of beans we needed.

"I wanted to find a way to pay farmers bonus payments based on the success of the product they helped create. We wanted to create a link where the farmers would equate better-quality beans with more profits—especially because we don’t blend our chocolate from different suppliers. Each batch of chocolate can be tied directly back to a single source. So we created a system where farmers would get a percentage of final sales of 'their' chocolate.

"But it wasn’t easy to find farmers we could work with, because many governments don’t allow profit sharing with farmers. But I used the skills I developed as a lawyer to find people who didn’t necessarily want to be found or to talk with me. We’ve since learned over the years about how to make the process cleaner and more efficient. That’s why I travel so much to visit our farmers. For example, it takes me 45 hours door-to-door to get to the Philippines. It takes even longer to get to Tanzania.

"When we explained what we wanted to do at first, the farmers couldn’t grasp the concept of profit sharing even though I had translated my books into the local language for them. But they had no earthly idea of what I was talking about, which could be true for many American workers as well. I had my translators telling me that my farmers might not be able to understand financial information, that it wasn’t going to work. But I was committed to doing it.

"When I eventually handed over the farmers’ share of the profits—in cash—everything finally came together. They were like, 'Oh, now I get it.' It’s amazing how crystal clear this concept becomes once you hand someone money. It’s not a life-changing amount of money, like winning the lottery or enough to buy a jet or something. But it is significant and appreciated. It gives our farmers something to be proud of and recognized for.

"I will also admit that the results were disappointing at first. Not all the farmers made the connection between better beans and more profit. But we’ve kept at it for seven years. I often say that creating our direct-trade program has been the most complicated and stressful endeavor that I have encountered in my professional career—including representing clients at murder trials. At least with a trial, you can resolve the case. With this, it never ends. It requires constant attention because the moment you take a relationship for granted, the ground moves and you lose whatever you were working toward. At the same time, it’s a very rewarding process and it has definitely impacted the quality of our chocolate for the better.

"I believe in this open-book model because I think it provides a lot of answers to empowering farmers in the developing world and letting them improve their lives by giving them control and responsibility for whatever product they are supplying. I think it's one way to bring the world out of poverty. I don’t think it will happen in my lifetime but I think it’s the way we need to go."

Darren Dahl is an entrepreneurial writer who writes about small businesses and even teams up with them to write books as a ghostwriter.

Photos from top: Shutterstock, Courtesy of Shawn Askinosie

Ghostwriter: The Open Organization, Red Hat