|
Keys to Success
Put in a stock plan for your employees and – Presto! – knowing that they will gain financially if the company performs well, they will apply themselves with renewed diligence and the company’s performance will soar. Simple and easy, right?
We’re afraid not. In fact, the history of employee ownership is littered with the experiences of well-meaning but poorly informed business owners who consulted a lawyer, put in a stock plan, and were disappointed to see very little change in terms of employee behavior and business results. So, do these experiences suggest that employee ownership really won’t boost a company’s performance after all?
Not at all. While these examples of businesses that got little return for putting in a stock plan are real, there are many more examples of companies that were transformed in the most positive ways – business results among them – after putting in a stock plan. What accounts then, for the fact that employee stock ownership was successful in improving business performance at some companies but not at others?
Expert research and the Beyster Institute’s twenty years of experience in this field both point to the same conclusions. Success with a strategy of employee ownership springs from three critical factors:
- Provide ownership interests that are large enough to be important to participating employees. Employee ownership is not a symbolic exercise. An employee who owns $200 of his company’s stock will not be galvanized to action by the goal of doubling the company’s stock price, nor will that kind of stake be enough to raise his hackles when he sees a fellow employee goofing off on the job. Neither will he think twice about leaving for a new job that offers a 10 percent pay increase. To generate real commitment, the program must offer the opportunity for an employee to take himself and his family to a new and better economic level. Not overnight, but in the long run.
- Build a company culture in which employee-owners will feel, think and behave like owners. A paper stock certificate and an announcement memo will not by themselves transform how an employee relates to his company and behaves at work. As we say at the Beyster Institute, if you announce a new stock plan, then send everyone back to work as usual, you will get results as usual. Real owners know what’s going on at the company, and have a say in what should be done. To bring an employee ownership program to life, therefore, stoke the information pipeline so employee-owners can follow the action and stay in the know. Consult with employee-owners before making decisions that will affect them (no, this doesn’t mean putting everything to a vote). Give and expect a higher level of responsibility for producing results. In all the little ways that matter, turn your company into a “we” company, rather than the conventional “we-they” company in which the hired help and the people who run the place see themselves as separate from each other.
- Educate the employee-owners so that they understand what the business needs to do to be successful, and how they can best contribute to that goal. In conventional companies where employees have little stake in the company’s financial performance, no one really expects employees to take expense reductions and revenue gains to heart, so management doesn’t bother to train employees about how those factors drive the stock value. Employees that own significant interests in their company, however, do have a reason to care So take advantage of that! But caring is not enough. To produce real results, employees must be trained to understand how company expenses and sales impact the value of their equity. Motivated employees can then use that knowledge to positively impact financial results.
|
|
