Author and organizational psychology-trained, certified executive coach Michael “Dr. Woody” Woodward describes ownership best: “When you own something, you treat it differently. You form a psychological connection that creates a feeling of responsibility.”
So, it only makes sense that the Employee Ownership Foundation’s 21st Annual Economic Survey of ESOP (employee stock ownership plan) Companies showed employee ownership benefited organizations across the board. In fact, 93.3 percent of surveyed respondents report that creating employee ownership through ESOPs was a good business decision, benefiting their company. And 76 percent saw a positive impact on employee productivity, 70.5 percent reported increased profits and 76.2 percent noted a boost in revenue—all as a result of ESOPs. This e-newlsetter will take a look at employee ownership and discuss ways it may be beneficial to your company. Keep reading to find out more.
Could your organization benefit from becoming an ESOP company?
Let’s start by defining ESOP. In essence, an ESOP provides employees with an ownership interest in the company they work for through stock. ESOPs are considered to be a defined contribution plan, similar to other retirement plans; they often come at no up-front cost to the employee; and like other employer-sponsored retirement accounts, they vest over time. Approximately 10.3 million Americans, or about 10 percent of the private-sector workforce in the United States, participate in ESOPs and they span all industries and companies of all sizes. The number of companies embracing ESOPs in Canada is much lower, according to Canadian consultancy ESOP Builders Inc., but it is on a steady incline. And for good reason: here are some things ESOPs can do for your company:
- Enhance performance: When employees recognize that increased profits equate to an increase in their own bottom line, they are likely to gain a little extra motivation to do well. As stated above, ESOP companies see greater productivity—partially because everyone is an owner. It is important to keep ownership top-of-mind so employees are always aware that their contributions to the company are also contributions to their personal wealth. Promote this concept throughout the workplace with banners and posters imprinted with the message: “Proud to be employee-owned and operated.”
- Increase efficiency: Often times, companies lose money due to unnecessary waste and rework. Employee owners are more likely to take notice of waste and take a stand to prevent it. ESOP employees may even be more apt to demonstrate penny-wise practices, such as turning off lights when leaving a room or reporting a leaky faucet to maintenance. You might find them brainstorming ways to improve processes in an effort to reduce waste. Encourage this conduct and thank employees who partake with words of gratitude and a small acknowledgement. Dollar-sign pens or stress relievers make fun thank-yous.
- Recruitment: ESOPs are a great benefit you can promote as part of your employee benefit package. According to the American Management Association®, only about one in three American employees believe they will be financially prepared for retirement—and Canadians are in the same boat, according to a new study by the Conference Board of Canada. Yet, the National Centre for Employee Ownership tells us that ESOP balances, on average, are three to five times higher than defined contribution plans. If you’re offering an ESOP, promote it when scouting for new employees. Make sure your recruitment package highlights you are an ESOP company and drill down about how ESOPs benefit employees. Mark this section of your benefit book with a book band-it to ensure it stands out. Or, if you participate in job fairs or career expos, imprint the benefits of being employee owned on retractable banners and giveaways, such as puzzle cubes or reusable tumblers.
Remember, to own something is to feel a sense of responsibility for it. And employees who feel accountable for their organization’s success are sure to do right by it.
Woodward, Michael. “Why Employee Ownership Matters.” Fox Business. N.p., 25 Feb. 2013. Web. Retrieved 16 Oct. 2014. <>.