Just about every ESOP company wants to have employees who think and act like the employee-owners. Compelling research and decades of experience show that employee ownership is in fact a powerful tool to improve corporate performance – but only when companies have “ownership cultures” in which employees think and act like owners. There is a lot more to that than being nice to customers, cutting down on waste, coming to work on time, and even working hard on the job.
An effective ownership culture, research shows, is one that generates lots of ideas from a well informed and highly involved workforce. Companies that have these high-involvement, idea-generating cultures generate an incremental 6% to 11% added growth per year over what their prior performance relative to their industries would have predicted.
- Creating an ownership culture involves at least these six elements:
- Provide a financially meaningful ownership stake, enough to be an important part of employees’ financial security.
- Provide ownership education that teaches people how the company makes money and their role in making that happen.
- Share performance data about how the company is doing overall and how each work group contributes to that.
- Train people in business literacy so they understand the numbers the company shares.
- Often (but not always) share profits through incentive plans, profit sharing, or other tools.
- Build employee involvement not just by allowing employees to contribute ideas and information, but by making that part of their everyday work through teams, feedback opportunities, devolution of authority, and other structures.
Creating high engagement cultures is hard work, but it is work that pays off. We know of very few companies that backed away from these systems once they started them, although they are often changed. It’s common to start with one system, then find as people get used to that, their skills and confidence rise to a level where a different system is needed.
High engagement cultures have been repeatedly shown to be the most effective intervention a company can create to improve performance. But go to an NCEO conference and witness the enthusiasm and energy coming from managers and employees of these companies and you’ll learn something else—they are also the most fun way to run a company.
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