5 Key Traits of Successful Employee Share Ownership Plans
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