5 Key Traits of Successful Employee Share Ownership Plans

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5 Key Traits of Successful Employee Share Ownership Plans


5 Key Traits of Successful Employee Share Ownership Plans

By , April 11, 2016

Imagine if your employees were as focused, driven, and motivated about your business as you are – imagine if they came up with new ideas and cost savings regularly and imagine if they were as interested in profit as you. Sounds like Utopia but it is possible and in fact it is happening with businesses that effectively use Employee Share Ownership Plans.

The research tells us that businesses that combine employee ownership with a participative management style grow 8-11% per year faster than they otherwise would have.

Employee Share Ownership Plans are a great way to:

  • Attract, retain and motivate key employees.
  • Improve business performance – profitability, staff retention, productivity.
  • Build an internal succession plan for staff and business owners.

“Employee ownership is a different way of thinking about business. It targets long-term sustainability by recognising that employee/owners are more committed to developing innovative products and processes. The result is competitive advantage and lasting success – in good times and bad.” 
– Sir Stuart Hampson, Former Chair of the John Lewis Partnership, the largest ESOP in the world with over 80,000 employees in the plan

There is no one-size-fits-all structure and designing an appropriate ESOP will involve consideration of your businesses current performance. In any case, the following simple rules should apply to successful Employee Share Ownership Plans:

1. Be Simple – well thought out and easy for all staff to understand
2. Be Applicable – applies to all staff consistently (although you can choose to offer greater reward to particular levels or staff or for particular relevant outcomes for which employees have control)
3. Be Transparent – communicated clearly and without ambiguity. All performance indicators must be able to be measured objectively and progress communicated regularly
4. Be Reliable – once communicated, should not change often
5. Be Supported – the system must be supported by all company owners, board and management

Craig West

Craig West

Managing Director | Succession Plus

Craig West is a strategic accountant who has over 20 years’ experience advising business owners. His background as a CPA in public practice, provided invaluable experience in the key issues of concern to business owners. Following 6 years of study to gain two masters degrees, Craig focused on Capital Gains Tax (CGT) for business sales advising on strategic management of tax issues. This experience formed a very strong view that business owners (and often their advisers) were unprepared and unaware of the steps required to prepare a business for exit.

Craig now acts as a strategic mentor for mid-market business owners and has written four critically acclaimed books on employee incentives, succession planning, asset protection and exit strategies. Craig has conducted numerous seminars and keynote presentations throughout Australia & internationally, including adviser education programs for the Institute of Chartered Accountants and CPA Australia.